Estimated Target of Indian Shares during May-July 2010:
Share Name Target during May-July 2010 Share Name Target during May-July 2010
Natco Pharma Rs.250/- Sesa Goa Rs.450/-Gitanjali Gems Rs.375/- NMDC Rs.750/-PSL Rs.480/- GMDC Rs.280/- Bartronics India Rs.450/- Deccan Gold Rs.90/-NHPC Rs.70/-
Siemens Rs.1600 Reliance Inds Rs.3000/- L & T Rs.3000/- ONGC Rs.1600/- BHEL Rs.2800/- SBI Rs.2850/-
Tata Steel Rs.850/- Jindal steel Rs.1000/-Maruti Rs.1950/- Hero Honda Rs.2150/-
Strong & Weak futures
This is list of 10 strong futures:
Orchid chem, Bharat Forg, Jindal Saw, IOB, Hindalco, Sesa Goa, Bajaj Auto, HCC, Lic house & State Bank Of India.
And this is list of 10 Weak futures: TV-18, Finance Tech, Dish TV, Cipla, MTNL, Triveni, GVK Power, Idea, ITC & Rural Elec.
Nifty is in Up trend
stocks that are in news today:
-IOC plans Rs 4,000 crore investment in pipelines to cut transportation cost: BL
-Jindal Cotex to list today, issue price at Rs 75 share
-Thinksoft Global IPO opens today, offer of 36.5 lakh shares, price band Rs 120-130 per share
-Euro Multivision IPO opens today, offer of 88 lakh shares, price band Rs 70-75 per share
-CR Pradhan says disinvestment of Nalco not in pipeline
-NSE F&O: Kingfisher still in curb
-Tata Motors to set up its first assembly facility in UK
-Man Industries explores options to set up factory in US for $100 million – BS
-Maytas Infra in talks to rope in a strategic
-Omnitech eyes overseas buys, deal size in the rage of $20-30 million
INTRADAY calls for 22nd Sep 2009
+ve Script, Sector : Cement, Auto, IBSEC,Aptech,Ashokley
BUY 3IInfo-90 for 98-103+ with sl 88
BUY RELInfra-1243 for 1265-1272+ with sl 1230
BUY IRB-216 for 229+ with sl 212
BTST CALLS,,,
BUY BHARTIArtl-442 for 475-479+ with sl 429 [BTST-442]
BUY Nifty-4976 for 5025-5033+ with sl 4930 [BTST-4950]
BUY MARUTHI-1639 for 1665-1679 with sl 1622 [BTST-1640]
Breakout Calls
BUY BHARTIArtl-442 for 497-507+ with sl 429
BUY M&M-885 for 999-1125+ with sl 837
Expected Breakout
BUY ULTRATEC-785 above 810 for 890+ with sl 790
Positional
BUY Orbitcorp-203 for 240+ with sl 192
NIFTY FUTURES (F & O):
Below 4967 level, expect profit booking up to 4948-4950 zone and thereafter slide may continue up to 4930-4932 zone by non-stop.
Multiple Hurdles at 4988 & at 4993-4995 zone. Cross above these levels, rally may continue up to 4999 level and thereafter expect a jump up to 5010-5012 zone by non-stop.
Cross above 5016-5018 zone, can take it up to 5034-5036 zone by non-stop. Supply expected at around this zone and have caution.
On Negative Side, rebound expected at around 4924-4926 zone. Stop Loss at 4907-4909 zone.
Short-Term Investors:
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.
BSE SENSEX:
Lower opening expected. Profit Booking should happen.
Short-Term Investors:
Short-Term trend is Bullish and target at around 17281.17 level on upper side.
Maintain a Stop Loss at 16119.95 level for your long positions too.
POSITIONAL BUY:
Buy TATA METALIK (NSE Cash)
Expect uptrend in this scrip.
BUY Orbitcorp-203 for 240+ with sl 192
NIFTY FUTURES (F & O):
Below 4967 level, expect profit booking up to 4948-4950 zone and thereafter slide may continue up to 4930-4932 zone by non-stop.
Multiple Hurdles at 4988 & at 4993-4995 zone. Cross above these levels, rally may continue up to 4999 level and thereafter expect a jump up to 5010-5012 zone by non-stop.
Cross above 5016-5018 zone, can take it up to 5034-5036 zone by non-stop. Supply expected at around this zone and have caution.
On Negative Side, rebound expected at around 4924-4926 zone. Stop Loss at 4907-4909 zone.
Short-Term Investors:
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.
BSE SENSEX:
Lower opening expected. Profit Booking should happen.
Short-Term Investors:
Short-Term trend is Bullish and target at around 17281.17 level on upper side.
Maintain a Stop Loss at 16119.95 level for your long positions too.
POSITIONAL BUY:
Buy TATA METALIK (NSE Cash)
Expect uptrend in this scrip.
Profit booking up to 107 level will be healthy. Keep a Stop Loss at 105 level for your long positions too.
Expect a target of 111 level on upper side. If crosses & sustains above 114 level then uptrend may continue.
Buy AUTOLINE INDS (NSE Cash)
Expect uptrend in this scrip.
Profit booking up to 141 level will be healthy. Keep a Stop Loss at 137 level for your long positions too.
Expect a target of 149 level on upper side. If crosses & sustains above 152 level then uptrend may continue.
Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,778.86. Down by 41.34 points.
The Broader S&P 500 closed at 1,064.66. Down by 3.64 points.
The Nasdaq Composite Index closed at 2,138.04. Up by 5.18 points.
Indian foreign exchange market closed on yesterday for a public holiday.
Interesting findings on web:
The Dow industrials and the S&P 500 index closed lower on Monday as a decline in oil and
other commodity prices hurt energy and materials stocks. But the Nasdaq ended higher, buoyed by a broker's upgrade on the biotechnology sector.
Stocks ended off their worst lows of the day helped by gains in the tech and health sector.
The three sectors at the forefront of the market's now six-month rally - energy, materials and financials - all pushed lower Monday with Chevron, Potash and American Express pacing only the third decline in 12 sessions for the Dow Jones Industrial Average and Standard & Poor's 500.
The Dow Jones Industrial Average finished the trading day at 9,778.86, down 41.34 points (0.42 percent).
The S&P 500 closed at 1,064.66, down 3.64 points (0.34 percent).
The NASDAQ Composite finished at 2,138.04, up 5.18 points (0.24 percent).
For the year:
The Dow is up 1,002.47, or 11.4 percent.
The S&P is up 161.41, or 17.9 percent.
The Nasdaq is up 561.01, or 35.6 percent.
Stocks sputter after hitting records
Wall Street churns, as the six-month market advance hits some turbulence. Dow falls after ending last week at a nearly one-year high.
Falling commodity prices and financial shares dragged on blue chips Monday, keeping the market choppy after a more than six-month advance.
Stocks managed to hit fresh 2009 highs Friday as investors continued to shake off calls for a September selloff. But with the major indexes up substantially since March, stocks are vulnerable to a pullback, analysts said.
Since bottoming at a 12-year low March 9, the S&P 500 has gained 58% and the Dow has gained 50%, as of Friday's close. After hitting a six-year low, the Nasdaq has gained 68%.
Stocks have risen during those 6-1/2 months due to slowly improving economic news and extraordinary amounts of fiscal and monetary stimulus. But analysts say that the run has been too much, too soon.
"The biggest challenge in the next few weeks and month is going to be corporate earnings," said Kevin Mahn, managing director at Hennion & Walsh.
He said that the profit reports as a whole are likely to be less upbeat than what some investors are looking for. "I think the disappointing earnings will be a validation that the recovery hasn't really started."
This could provide the catalyst for a modest pullback of 5% to 7% that would then bring back in buyers who have been waiting for a selloff to provide an in at lower levels.
U.S. stocks fell, pulling the Dow Jones Industrial Average down from an 11-month high, on speculation a six-month rally has outpaced prospects for profit growth.
The Dow's decline didn't come as a surprise to many market pros.
Stocks have gone too far, too fast, and are due for a retreat, Pimco's Bill Gross said this morning on CNBC.
"We think the market ... is due for a pullback or setback only because it's gone so far and economic growth cannot go so far," Gross said.
The Dow ended within 200 points of the 10,000 mark last week, its best weekly performance in two months. The last time the Dow breached 10,000 was early October.
Applied Materials [AMAT 12.66 -0.37 (-2.84%) ] shed 2.8 percent after Caris downgraded its rating on AMAT to "average" from "buy," citing concerns about the chip-equipment maker's market share after a recent management shake-up.
Bank of America Corp. lost 2.2 percent on a report that it may drop a loss-sharing agreement with the government. Halliburton Co. helped lead declines in 33 of 40 shares in a gauge of energy companies as crude slid below $70 a barrel, while Newmont Mining Corp. declined as metals fell. Lennar Corp. dropped 3.1 percent after the homebuilder's loss doubled.
"The stock market is vulnerable," said Keith Wirtz, chief investment officer at Fifth Third Asset Management Inc., which oversees $20 billion in Cincinnati. "There's a large crowd expecting a pullback after such a strong spike. We've gotten beyond the idea that the economy is less bad. People want to see evidence of whether companies can actually start to grow."
The S&P 500 rallied 2.5 percent last week as increases in retail sales and industrial production signaled the economy is improving. The 58 percent rebound in the benchmark index for U.S. equities from its 12-year low March 9 through last week pushed valuations to almost 20 times the reported earnings from continuing operations of its companies, the highest level since 2004, according to weekly data compiled by Bloomberg.
U.S. stocks are overvalued following the S&P 500's steepest rally since the Great Depression, economist David Rosenberg said.
"The market is being really fueled here by technicals and momentum," Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview on Bloomberg Television. "It's overshot the fundamentals. I'm a little nervous, at least over the near-term."
"The S&P 500 in the short term just looks overbought, but we are still very much in the sweet spot for risk assets, mainly equities," said Kelli Hill, a portfolio manager with Ashfield Capital Partners. "You have continued low interest rates, no inflation and slow top-line growth. Given that scenario, it is the ideal environment for growth equities."
Partly confirming some of Hill's comments, stocks had opened materially lower as a pick-up in the dollar led to a decline in metals and oil prices and subsequent shares of energy and materials companies. Those sectors, however, picked up late in the session and helped stocks pare some of their morning declines.
Equities remained lower even after the Conference Board said its index of U.S. leading economic indicators rose in August for the fifth straight time, capping the longest stretch of gains since 2004 and signaling a recovery is under way. The gauge of the economic outlook for the next three to six months rose 0.6 percent, in line with forecasts, after a revised 0.9 percent rise in July.
The global economy has probably hit bottom and the U.S. may have emerged from recession at the end of July or in August, Paul Krugman, the Nobel Prize-winning economist, said at a seminar in Helsinki today.
Leaders from the Group of 20 nations meet in Pittsburgh this week to balance reviving the global economy with increased financial regulation. President Barack Obama said in an interview with CNN yesterday that "the jobs picture is not going to improve considerably, and it could even get a little bit worse, over the next couple of months."
The Dow Jones Stoxx 600 Index of European shares slid a second day, losing 0.8 percent. A 54 percent increase since March 9 drove valuations on the gauge to 47 times reported profit, the highest level since June 2003, weekly Bloomberg data show. The MSCI World measure is valued at almost 28 times profit, also the most expensive level since June 2003.
Energy producers in the S&P 500 lost 0.9 percent.
Halliburton, the world's second-largest oilfield-services provider, fell 2.5 percent to $27.45. Exxon Mobil Corp. lost 0.6 percent to $69.57, while ConocoPhillips dropped 1.4 percent to $46.15.
Newmont Mining, the largest U.S. gold producer, fell 1.2 percent to $44.41.
Alcoa Inc., the largest U.S. producer of aluminum, slipped 0.9 percent to $13.94 as the metal fell 1.7 percent. Aluminum production is likely to outpace demand for the next six to 12 months and will "become less bearish" rather than turn bullish, Max Layton, an analyst at Macquarie Bank Ltd. in London, said in a report. Potash Corp. of Saskatchewan dropped 4.2 percent to $93.09 after the company said profit this year will be $3.25 to $3.75 a share instead of the previous forecast of $4 to $5. The new forecast missed analysts' estimates.
Mosaic Co., North America's second-largest crop-nutrient producer, decreased 5.2 percent to $51.41. Intrepid Potash Inc. tumbled 6.4 percent to $24.11.
Bank of America led financial shares more than 0.9 percent lower for the biggest decline in the S&P 500 among 10 industries. The largest U.S. bank is near an agreement with the U.S. Treasury Department and Federal Reserve to drop a tentative loss-sharing accord designed to complete the acquisition of Merrill Lynch & Co., the Wall Street Journal reported, citing an unidentified person familiar with the matter.
The Charlotte, North Carolina-based bank also failed to meet a deadline today to provide documents to a House panel about its purchase of Merrill Lynch, said Jenny Rosenberg, a spokesman for the House Oversight and Government Reform Committee, in an e-mail today. Anne Finucane, the bank's chief marketing officer, will meet tomorrow with House Oversight and Government Reform Committee Chairman Edolphus Towns, the bank announced.
Potash, Amex Lead Decliners.
Helping the Nasdaq outperform the other two indexes, Google (Nasdaq) rose 5.54, or 1.1%, to 497 after Citigroup raised its third-quarter estimates for the Internet-search giant.
In addition, NetApp (Nasdaq) gained 88 cents, or 3.6%, to 25.63, after it was raised to conviction buy from neutral by Goldman Sachs. Goldman said it expects the data storage systems seller will benefit from pent-up demand for hardware, and particularly storage, which should lead to a spending snapback.
Moody's Investors Service ratings business was threatened with sanctions by New York and Illinois regulators for its initial decision not to attend a meeting of the National Association of Insurance Commissioners on Thursday. Moody's reversed that decision on Monday morning but still closed down 1.35, or 5.7%, at 22.24.
Shares of for-profit education companies rose Monday after a report on the sector from the Government Accountability Office was better than the market's dire expectations. Notably, ITT Educational Services gained 12.35, or 12%, to 115.61, while Apollo Group (Nasdaq) increased 5.72, or 8.3%, to 74.74.
Among the decliners, Dow financial stocks American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) all declined.
Coca-Cola (KO, Fortune 500), McDonald's (MCD, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500) were among the Dow's other losers.
Dow component Caterpillar said Monday that global machinery sales through retailers fell 48% in the three months to end August, compared with year-ago data. Caterpillar closed down 96 cents, or 1.8%, at 52.46.
Medical-device company Zimmer Holdings rose 1.56, or 3.1%, to 52.68. Bernstein Research raised its stock-investment rating on the company to outperform, saying Zimmer is "now moving beyond its recent share declines and is entering into a favorable product cycle, which should drive near term mix growth and share recovery."
Wynn Resorts [WYNN 68.67 -0.49 (-0.71%) ] fell 0.7 percent as the casino operator is reportedly set to increase the size of its Hong Kong IPO for its Macau casino assets, as it seeks to raise about $1.6 billion.
News Corp. [NWS 14.27 -0.05 (-0.35%) ] took a shot across the bow at Facebook, announcing the beta rollout of an application that allows users to sync their MySpace status updates with their Twitter feed, so that the update will automatically appear in both places without having to type it twice. News Corp. said it plans a global rollout of the app in a few weeks. News Corp. shares fell 0.4 percent.
Bank of America fell 2.2 percent to $17.25. JPMorgan Chase & Co. declined 0.9 percent to $44.55. American Express Co. had the biggest decline in the Dow, dropping 2.9 percent to $33.76.
Lennar declined 3.1 percent to $16.02. The third-biggest U.S. homebuilder said its net loss for the three months through August widened to 97 cents a share from 56 cents as revenue tumbled 42 percent. The average estimate by 14 analysts in a Bloomberg survey was for a loss of about 51 cents a share.
"We've come a long way from the March lows," said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. "The rally has fairly priced in an improving economy. Investors are now waiting for revenue growth." Perot Systems Corp. soared 65 percent to $29.56, while Dell Inc. slid 4.1 percent to $16.01. Dell offered to buy Perot for $3.9 billion in cash, or $30 per share, as the second-largest personal computer maker undertakes its biggest purchase ever to compete with International Business Machines Corp. and Hewlett- Packard Co. in computer services.
Never before have U.S. companies piled up cash faster compared with interest costs than they are now, setting the stage for a surge in mergers and acquisitions. As the economy emerges from the recession, cash flow may rise from the $1.5 trillion reported by the Commerce Department for the year ended in June, according to data compiled by Credit Suisse Group AG and Bloomberg.
Celgene Corp. and Amgen Inc. led a gauge of health-care companies 0.7 percent higher for the biggest gain among 10 S&P 500 groups.
Celgene rallied 5 percent to $55.19 after the global biopharmaceutical company was raised to "outperform" from "neutral" at Robert W. Baird & Co. Inc. The 12-month share target price is $65.
Amgen, the world's largest biotechnology company, rose 2.5 percent to $62.31. after saying its bone-strengthening drug denosumab delayed the development of fractures and the need for surgery in patients with cancer that has spread to the bone about as well as Novartis AG's Zometa, a study found.
American International Group Inc. jumped 21 percent to $48.40 for the biggest gain in the S&P 500. Terms of the insurer's government rescue package, revised three times in the past year, would be eased again under a proposal being pushed by the leader of the House Oversight and Government Reform Committee.
Wal-Mart Stores Inc. had the steepest advance in the Dow, rising 1.6 percent to $50.91. The world's largest retailer was initiated with an "overweight" recommendation and a price estimate of $61 at HSBC Holdings Plc, according to an e-mailed report.
Wal-Mart led a gauge of nine food and consumer staples retailers to an 0.8 percent advance, the biggest among 24 industries. Costco Wholesale Corp., the largest U.S. warehouse, rose 1.8 percent to $58.58.
General Electric Co. rose 1.6 percent to $16.76. Morgan Stanley lifted its share-target for GE by 12 percent to $19, citing an improvement in the company's risk profile.
The Fed will keep its target rate for overnight loans in a range of zero to 0.25 percent at its two-day policy meeting starting tomorrow, according to all 91 economists surveyed by Bloomberg News.
"The Fed is on hold for a very long time," Pacific Investment Management Co. strategic adviser Richard Clarida said in an interview with Bloomberg Television in New York.
For Potash, off $4.05, or 4.2%, to $93.09, the drop came as the fertilizer giant reduced its 2009 per-share earnings guidance, citing lower-than-projected sales volumes due to continued slow demand and limited restocking by fertilizer distributors around the world.
Oil,Gold & Currencies:
Crude oil for October delivery tumbled 3.3 percent to $69.70 a barrel on the New York Mercantile Exchange.
Gold fell for the third straight session as a rebound by the dollar reduced demand for the precious metal as an alternative investment.
The dollar climbed 0.8 percent against the yen and strengthened 0.2 percent versus the euro. The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners, increased 0.3 percent.
The dollar weakened for the first time in three days against the euro on speculation Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The greenback fell versus 14 of the 16 major currencies after a spokesman for Canadian Prime Minister Stephen Harper said the leaders meeting in Pittsburgh on Sept. 24-25 will discuss "a framework for balanced and sustainable growth," including reform in deficit and surplus countries. New Zealand's dollar rose toward a six-week high against the yen after a government report showed the current-account deficit shrank to the narrowest in more than four years.
"There's talk that world leaders may seek to address the U.S. imbalances," said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly traded bank. "This may lead to weakness in the dollar."
The U.S. currency dropped to $1.4715 per euro as of 11:31 a.m. in Tokyo, from $1.4680 yesterday in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6253 per pound from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
New Zealand's dollar strengthened 1.2 percent to 65.80 yen, after earlier climbing to 65.81 yen, the highest level since Aug. 10. The so-called kiwi rose 1.4 percent to 71.71 U.S. cents. Australia's dollar advanced 0.7 percent to 86.87 cents.
Structural Reform
Policy makers need to promote a "sustained growth track and facilitate global adjustment, as well as structural reform which will need to be undertaken in both deficit and surplus countries," Dimitri Soudas, a spokesman for Harper, told reporters yesterday in Ottawa.
The U.S. trade deficit widened in July and imports gained by a record 4.7 percent, the Commerce Department said in Washington on Sept. 10. The gap between imports and exports increased 16 percent, the most in more than a decade.
The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners including the euro and the yen, fell 0.3 percent to 76.514.
The U.S. currency also weakened as gains in Asian stocks spurred investors to buy higher-yielding assets.
The MSCI Asia-Pacific excluding Japan Index of shares climbed 0.7 percent. The Australian dollar-U.S. dollar exchange rate had a correlation of 0.98 with the MSCI in the past year, according to data compiled by Bloomberg. A reading of 1 would mean the two moved in lockstep. Japan's financial markets were closed today for the second of three consecutive public holidays.
'More Positive'
"Risk sentiment seems to be slightly more positive, with equity markets higher," said Lee Wai Tuck, a foreign-exchange strategist at Forecast Pte in Singapore. "It's dollar-selling" against major currencies, he said.
Benchmark interest rates are as low as zero in the U.S. and 0.1 percent in Japan, compared with 2.5 percent in New Zealand and 3 percent in Australia, attracting investors to the South Pacific nations' assets.
New Zealand's dollar rose for a second day versus the yen after Statistics New Zealand said the current-account deficit shrank to NZ$10.61 billion ($7.57 billion) in the 12 months ended June 30, from NZ$14.57 billion in the year through March. The median estimate in a Bloomberg survey was for a NZ$13.3 billion shortfall.
The annual deficit was 5.9 percent of gross domestic product, less than the 7.4 percent forecast by economists, and the least since the period ended September 2004.
"That's the best number since September 2004 in GDP terms -- a significant improvement," said Imre Speizer, a market strategist at Westpac Banking Corp. in Wellington. "Appetite for risk is pretty subdued and till we get out of the FOMC meeting it will be hard for the global rally to take another step up."
Bonds:
Treasury two-year notes were little changed as traders prepared for tomorrow's $43 billion sale of the securities, the first of three auctions this week totaling $112 billion. The 10- year note yield rose two basis points to 3.49 percent. It earlier declined as much as five basis points.
What to expect:
The Federal Reserve, meeting Tuesday and Wednesday, is likely to hold short-term interest rates steady at historic lows near zero.
Also Tuesday, the Federal Housing Finance Agency (FHFA) releases its July home price index. Prices are expected to have risen 0.5% after rising 0.5% in June.
Reports on housing and consumer sentiment are due later in the week. On Thursday, the Group of 20 leading developed and emerging countries will meet in Pittsburgh to discuss the global economy in the wake of the recession.
We'll also get a new round of Treasury auctions that starts Tuesday and will provide a read on demand for U.S. debt. Plus, readings on durable goods, consumer sentiment and home sales.
TUESDAY: Two-year auction; two-day Fed meeting begins
WEDNESDAY: Weekly mortgage applications; weekly crude inventories
THURSDAY: G-20 summit begins; weekly jobless claims; existing-home sales; seven-year auction; Earnings from RIM
FRIDAY: Durable-goods orders; consumer sentiment; new-home sales; Earnings from KB Home
Asia:
Asian stocks rose for the first time in three days after Citigroup Inc. raised Samsung Electronics Co.'s price estimate and Morgan Stanley lifted its rating on companies that make automobile batteries.
Samsung Electronics, the world's largest computer-memory chipmaker, rose 2 percent, as chip prices also climbed to their highest level in more than a year. LG Chem Ltd. and Samsung SDI Co. gained more than 5 percent in Seoul after being raised to "overweight" at Morgan Stanley. STX Pan Ocean Co., South Korea's biggest commodity-shipping line, rose 8.3 percent in Singapore after securing its largest contract.
The MSCI Asia Pacific excluding Japan Index added 0.4 percent to 390.97 as of 10:34 p.m. in Tokyo. Markets in Japan, Malaysia, Indonesia and Pakistan are shut for holidays. The gauge that includes Japan has rallied 67 percent from a five- year low on March 9, lifting the average price of its stocks to 1.6 times book value from 1.03 at this year's trough.
"Valuations at this juncture are not cheap," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. "However, if underlying levels of economic activity can continue to improve and profitability continues to grow, that should be sufficient to sustain current market levels."
South Korea's Kospi index gained 1 percent, while Hong Kong's Hang Seng Index added 0.3 percent. The Shanghai Composite Index fell 0.4 percent.
Australia's benchmark S&P/ASX 200 Index lost 0.1 percent. Babcock & Brown Infrastructure Group Ltd., a Sydney-based investor in energy and transport assets, slumped 5.6 percent after its board expressed concern over a new recapitalization proposal.
Valuation Concerns
Futures on the U.S. Standard & Poor's 500 Index gained 0.2 percent. The gauge fell 0.3 percent to 1,064.66 yesterday on speculation a six-month rally has outpaced prospects for profit growth, even as an index of U.S. leading economic indicators rose for the fifth straight month.
"We are never out of the woods," said Donald Gimbel, senior managing director of Carret & Co., which manages $1.5 billion in assets. "One has to buy quality companies that aren't overvalued. It sounds simple, but it takes work to find stocks that meet our strict criteria."
Samsung Electronics gained 2 percent to 814,000 won in Seoul. Citigroup raised its price estimate to 1,030,000 won from 900,000 won on expectations earnings will benefit from growing demand for computer-memory chips, according to a note yesterday.
Separately, the price of the benchmark computer-memory chip climbed 1.1 percent yesterday to the highest level since Aug. 27, 2008, according to Dramexchange Technology Inc.
STX Pan Ocean
LG Chem climbed 8.1 percent to 240,000 won, while Samsung SDI jumped 5.5 percent to 173,000 won. Morgan Stanley upgraded the companies from "equal weight" in a report that said they may sign additional auto battery contracts.
STX Pan Ocean surged 8.3 percent to S$14.40 after winning a 25-year contract to move iron ore for Vale SA to China from Brazil. News that the two companies were in talks boosted STX's shares in Seoul by 8.2 percent yesterday. The Singaporean stock didn't trade yesterday because of a public holiday.
The MSCI Asia Pacific Index's six-month rally has been driven by better-than-estimated economic reports and corporate earnings. Of 648 companies on the gauge that reported net income for the latest quarter, 225 beat analyst predictions, compared with 138 that missed.
The index has now recovered to levels last seen before the collapse of Lehman Brothers Holdings Inc. a year ago. The ensuing credit crisis caused more than $1.6 trillion in losses at financial institutions and helped drag economies globally into recession.
Babcock Infrastructure slumped 5.7 percent to 5 Australian cents. The board of the Sydney-based company, which is also weighing a transaction with a potential cornerstone equity investor, said it has "a number of concerns" as to whether legally and commercially a proposal submitted by Royal Bank of Scotland Group Plc can be executed.
The Japanese Nikkei is closed for a bank holiday.
HSI 21527.16 +54.31 +0.25%. (08.36 AM IST).
Hong Kong shares moved modestly higher in early trade Tuesday, with airline stocks among the top gainers. The benchmark Hang Seng Index rose 0.7% to 21,618.2, while the Hang Seng China Enterprises Index tracking locally listed mainland Chinese firms gained 0.5% to 12,482.6. China Southern Airlines Co. /quotes/comstock/22h!e:1055 (HK:1055 2.62, +0.09, +3.56%) /quotes/comstock/11i!chkif (CHKIF 0.34, +0.01, +1.52%) jumped 4% in the wake of an upgrade from Goldman Sachs, with carriers China Eastern Airlines Corp. /quotes/comstock/22h!e:670 (HK:670 2.68, +0.01, +0.37%) /quotes/comstock/11i!cheaf (CHEAF 0.33, -0.01, -1.49%) moving up 2.6% and Cathay Pacific Airways Ltd. /quotes/comstock/22h!e:293 (HK:293 12.94, +0.40, +3.19%) /quotes/comstock/11i!cpcaf (CPCAF 1.62, +0.04, +2.54%) 2.9% higher. Over in Shanghai, stocks booked slightly milder gains, with the Shanghai Composite up 0.3% at 2,976.5.
Hang Seng Index opens 83 points higher on Tue
Hong Kong stocks rose on Tuesday morning, with the benchmark Hang Seng Index opening 83 points higher at 21,556.
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 73 points higher at 12,491.
China Life Insurance<601628><2628><LFC> increased 1.27% from the previous closing to HK$35.9. Ping An Insurance<601318><2318> rose 1% and opened at HK$65.6.
SSE Composite 2967.01 2953.14 2982.90 2936.41 -0.47. (08.39 AM IST).
China's key stock index opened down 0.4 percent on Tuesday, with financial shares soft while sentiment was hurt by worries over a slew of fund-raisings after the stock regulator approved another four second board IPOs.
The Shanghai Composite Index opened at 2,956.129 points, after closing up 0.15 percent on Monday with retailers helping to reverse earlier sharp losses.
The stock regulator said late on Monday that it had granted approval for another four firms to go public in China's Nasdaq-style second board to be launched soon on the southern Shenzhen Stock Exchange, following news 10 companies to be listed would take subscriptions from investors this Friday.
China's top travel agency also set the price range for its upcoming Shanghai listing at a high valuation.
China International Travel Service Corp aims to raise up to 2.6 billion yuan ($381 million) for an expansion, much more money than previously targeted.
And Guoyuan Securities fell 2.13 percent to 20.25 yuan after saying on Tuesday it had won the China Securities Regulatory Commission's approval to go ahead with a plan to raise up to 10 billion yuan in a new stock offer.
Chinese stocks open 0.37% lower on Tue
Chinese stocks opened slightly lower on Tuesday morning.
The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,956.13 points, down 0.37% or 10.88 points from the previous closing.
The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.49% or 59.39 points lower at 11,985.82 points.
CSRC reviews group listing proposal of Hebei Iron & Steel.
Irico Display Devices to raise RMB 3.5 bln via private placement.
China Minmetals to issue RMB 3.5 bln in medium-term notes.
Chigo's net profit hits RMB 135.8 mln in H1.
Shandong Huatai Paper to issue 100 mln shares.
Genzyme to build R&D center in Beijing.
Cheung Kong sees strong sales in Celestial Heights Phase Two.
Melco Int'l to sell 43.24% stake in Value Convergence.
Carlyle takes minrity stake in China's Yashili Group.
China Int'l Travel Service sets price range for Shanghai IPO.
China Dev't Industrial Bank may tie up with CDB.
Capital Research and Management cuts stake in Hongkong Electric.
Best Solar's 130-MW thin film plant to start production this year.
RBS appoints 3 senior executives in China.
KWG Property acquires land in Guangzhou for RMB 465 mln.
Guoyuan Securities gets CSRC's approval to issue 500 mln shares.
Market Insider: Politics May Trump Economy for Stocks
The Fed's two-day meeting starts in Washington Tuesday, as President Obama and other world leaders gather in New York.
Traders are watching both, as well as the meeting of G-20 leaders in Pittsburgh later in the week.
"The risks this week will be more political than economic," said Boris Schlossberg of GFT Forex. "The market is expecting too much out of the Fed. I don't think the Fed will be a dollar positive. I don't think the Fed will lift (economic) expectations any more than it has already, and I don't think the Fed will put a hard time table on exiting its easing strategy."
The dollar rose Monday, as stocks and other risk assets moved lower. "We had a little bit of a flutter this morning with worries about G-20," said Schlossberg. "There was rhetoric out of Europe about capping bankers compensation regardless of whether the U.S. supports it or not."
"The markets don't want to see increased regulation of the financial sector just as the economy appears ready to take off so there was a lot of skittishness this morning," he said. Financial regulation and compensation are expected to be topics of discussion.
Stocks drifted Monday, after looking set for a serious sell off at the open. Tech tipped the tape though, pushing Nasdaq to a higher close (up 5 at 2138), while the Dow and S&P 500 were slightly lower. The Dow was off 41 at 9778, and the S&P slipped 3 to 1064. Dell's [DELL 16.01 -0.68 (-4.07%) ] announcement it was buying Perot Systems for $3.9 billion helped sentiment.
"When it (the Dow) was down 85, everybody thought 'this is going to be it," said Tim Smalls of Execution LLC. "Then all of a sudden, tech reversed." Smalls, like other traders, said he expects to see funds continuing to step in to buy.
"We are a week away from the end of the quarter. You're going to get a big dose of index chasing pretty soon," he said.
Commodities mostly fell Monday, with oil tumbling 3.2 percent to $69.71 per barrel. "Oil prices declined in sympathy with the rising dollar, which shook off the comment that Iran was going to use the euro for its reserve requirements," said Michael Fitzpatrick, vice president of energy at M.F. Global.
Fitzpatrick said declining crude is a short term phenomena. "I don't think it's going to make a big reversal here. I think it will be higher into the year end."
The dollar Monday gained slightly against the euro, finishing at $1.4674 per euro.
Fed Ahead
The Treasury market ended Monday just slightly higher as investors await the Treasury's auction of $107 in notes this week. On the agenda Tuesday are $43 billion in two-year notes, scheduled to be auctioned at 1 p.m. Traders expect the auction to go smoothly.
The Fed will issue its statement Wednesday. The Fed is not expected to move interest rates but its comments are being watched closely.
"We are expecting some information from the Fed that first of all suggests their recognition of stronger economic activity," said Zane Brown, head of fixed income strategy at Lord Abbett. He also expects some moderate adjustment of the Fed's comments about the Fed funds target rate. The Fed has said it would keep rates low for an extended period.
"Maybe they drop 'extended period' or modify it somehow to recognize the need for an exit strategy," he said, emphasizing he doesn't expect to see rates change soon.
Brown also said the Fed could indicate it will slow the pace of its purchases of agency debt and mortgage securities. He said it is unlikely the Fed would put a specific date on the program's end but could indicate it will discontinue it sometime in 2010.
Credit Uncrunch
As traders turn their attention to auctions in the government debt market, they've been buzzing about the high level of issuance in the corporate debt market.
"We're likely to continue to see corporate issuance especially in the high yield area. Granted, there is not a lot of lending activity from banks, but companies are happy to lock in what they see as low yields," Brown said. New data this week shows banks continuing to pull back from lending.
"Demand really exceeds supply when it comes to high yield deals that have been priced over the last few weeks," he said.
"...If we believe as (Fed Chairman) Bernanke said that the recession is over, then we should be narrower than 1000 basis points and should be around 800 basis points, where we are today," said Brown.
Autumn in New York
World leaders descend on New York City this first day of autumn for the U.N. General Assembly. On Tuesday, President Obama meets with President Hu of China. He also speaks at UN Secretary General Ban Ki-Moon's climate change summit and hosts a working lunch with African Heads of State. He will also speak at former President Clinton's annual Clinton Global Initiative summit.
President Obama and Iranian President Mahmoud Ahmadinejad speak at the U.N. Wednesday.
What's Up in Washington
The Senate Finance Committee begins marking up the health care reform bill Tuesday. Vice president Joe Biden weighs in on the health care debate with a speech to the National Association of Insurance Commissioners.
FHFA housing price data is released at 10 a.m.
Corporate News
Intel [INTC 19.53 -0.03 (-0.15%) ] holds its developers conference in San Francisco, and just a few companies report earnings, including CarMax [KMX 19.33 0.27 (+1.42%) ] and Conagra [CAG 22.33 0.01 (+0.04%) ].
China CIC Takes 14.5% Stake in Commodity Firm Noble
Trading firm Noble Group said on Tuesday that Chinese sovereign wealth fund CIC bought a 14.5 percent stake in the firm for $850 million, giving China more exposure to global commodities markets.
The deal follows on from a cooperation pact between CIC and commodity trader Glencore, as China pursues resource firms to give it trading leverage and access to the raw materials needed to feed its economy.
Noble is the only major global commodity trading house with a public listing, compared to privately-held but bigger rivals such as Glencore, in which sources said CIC has concluded a cooperation agreement.
Noble said in a statement it had agreed to sell 573 million shares to China Investment Corporation at S$2.1137 per share, an 8 percent discount to its last traded share price of S$2.30.
The placement consists of 438,000,000 newly issued shares by Singapore-listed Noble and 135,000,000 shares from trusts associated with the interests of Noble founder and CEO Richard Elman, Noble said.
"The newly issued shares will provide the Noble Group with additional capital to pursue strategic investments in key agricultural markets globally," Noble said in the statement.
Noble's shares have been halted for the past week, when it said it was in talks with an unidentified investor for a major stake.
The deal gives CIC exposure to a mix of Noble's hard assets and trading acumen, and shows big emerging market governments and state companies are pursuing resource firms that give them trading leverage in global markets as well as access to the raw materials they need to feed their economies.
The small direct stake by CIC in Noble means the wealth fund is likely to play a hands-off role in the running of its business, while maintaining a role as financial investor. But the pact with Glencore will help CIC get more deeply into commodities trading, industry watchers and analysts say.
The placement is subject to approval of the respective boards of directors of Noble Group and CIC and final legal documentation.
Shares Have Doubled
Merrill Lynch acted as placement agent to Noble and JPMorgan advised CIC.
Founded by Richard Elman in 1987 with $100,000 in savings, Hong Kong-based Noble has expanded into a global empire that includes operations from sugar and ethanol in Brazil, soy crushing facilities in China and coal mines in Australia.
Noble has more than 100 offices in over 40 countries across five continents. It has more than 4,000 customers worldwide and employs about 4,800 people.
BofA's Growing Legal Woes Could Bring Shakeup at Top
Bank of America CEO Ken Lewis has survived troubled acquisitions, massive credit losses and two government bailouts, but experts question whether he can survive a series of investigations.
Lewis and other senior bank executives face intense scrutiny from regulators, state attorneys general and Congress over whether they failed to disclose key information about Merrill Lynch's financial health and bonus plans before Bank of America bought the brokerage.
"It comes to a point that the company is so completely distracted by the legal fight it can't focus on the business," said Tony Plath, banking professor at UNC-Charlotte who follows the bank closely. "This is becoming a significant impediment to management's job."
A Bank of America [BAC 17.25 -0.38 (-2.16%) ] spokesman said the board fully supports Lewis, but did not elaborate further. At a Monday meeting, the bank's directors were expected to discuss legal options if he is charged with civil fraud, The Wall Street Journal said.
In the latest in a series of investigations and lawsuits, the Securities and Exchange Commission said Monday that it will "vigorously pursue" its case that Bank of America violated federal securities laws. The SEC says Bank of America failed to provide investors with complete and accurate information about the bonuses to be paid by Merrill Lynch to employees.
"We will use the additional discovery available in the litigation to further pursue the facts and determine whether to seek the court's permission to bring additional charges in this case," the SEC said in a statement.
A House of Representatives panel gave the bank until noon Monday to provide additional information about its purchase of Merrill Lynch—a deadline that Bank of America missed.
The panel said the bank cannot use attorney-client privilege to withhold details of the deal from Congress.
Bank of America released this statement to CNBC Monday afternoon on the investigation:
"We are working with the committee on a plan to provide them with the information they need. Anne Finucane, a member of our executive management team, will meet with Congressman Towns tomorrow to discuss how we can meet their needs without violating attorney-client privilege."
And New York Attorney General Andrew Cuomo's office is considering filing civil charges against Lewis, Whatever Cuomo and other investigators decide, legal issues can drag on for years, and companies often cut ties with executives to minimize such distractions, according to corporate governance experts.
"Whether a management change happens depends on the size of the distraction," said Karen Brenner, a business professor at New York University specializing in ethics and corporate governance. "Legal issues can ebb and flow, but the company is dealing with a great deal of pressure now."
Brenner said while it is early to assume the pending legal issues will quickly force wholesale management change, such changes are not unprecedented.
Some investors are already getting restless. Michael Nix, co-chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates, said the firm is considering selling its 100,000 Bank of America shares because of short-term performance and long-term litigation worries.
"We'll still be talking about these lawsuits three to five years from now," Nix said. "A lot of people will get pulled into this thing."
Bank of America shares were down 2 percent at $17.28 in Monday afternoon trading.
Abrupt Ends
For chief executives embroiled in corporate and legal turmoil, tenure can end quickly. In a matter of weeks, Ken Thompson went from holding Wachovia's [WB 5.68 0.14 (+2.53%) ] two top positions to being ousted altogether.
He lost the chairmanship in May 2008 and was let go as CEO the next month. The then-board cited a series of missteps, including the ill-timed purchase of Golden West Financial.
Lewis has made his share of missteps, too. His purchases of Countrywide Financial and Merrill Lynch have created big headaches for the bank, even if they pay off in the long run. The bank has been bailed out twice by the government, more than any other U.S. bank apart from Citigroup [C 4.43 0.17 (+3.99%) ].
A Deal Gone Bad
On Sept. 15, 2008, Lewis called the accord to buy Merrill Lynch a "great opportunity for our shareholders." A year later, the bank's stock is down 55 percent from its 52-week high of $39.50, which it hit on Sept. 18, 2008.
U.S. Judge Jed Rakoff has rejected a proposed $33 million settlement between Bank of America and the Securities and Exchange Commission to resolve allegations the bank failed to properly disclose its control over $3 billion in bonus payments Merrill Lynch made to employees before the deal closed on Jan. 1 this year.
Meanwhile, New York's Cuomo early last week subpoenaed five current and former Bank of America directors in a continuing probe to discover what the board and management knew about Merrill Lynch's losses and bonuses during the merger process.
Nix said the ouster of Lewis would be par for the course in the beleaguered financial sector. "A lot of bank CEOs are going the way of the dodo," he said.
Cadbury CEO Admits Some Synergies With Kraft: WSJ
The head of chocolate maker Cadbury, which is facing a possible takeover by U.S. food giant Kraft Foods, said there were some "complementary elements" in the two companies' portfolios, according to a Wall Street Journal report.
Still, Cadbury [CBY 50.82 -0.84 (-1.63%) ]Chief Executive Todd Stitzer, in an interview with the newspaper, said the British company's shareholders still reject the deal at the 9.7 billion pound ($16 billion) price offered by Kraft [KFT 26.75 0.02 (+0.07%) ].
But Stitzer's comments to the paper suggested some softening in tone from Cadbury, which has rejected the potential deal as undervaluing the company.
"I would never say there's not some strategic sense in these businesses coming together," Stitzer told the Journal.
Also on Monday, the Financial Times reported that Cadbury had asked the U.K. Takeover Panel, a body that regulates takeovers, to ask Kraft to make a formal proposal or walk away for six months. The paper sourced its information to people close to the matter.
Stitzer's comments to the Journal included the criticism, voiced earlier this month by other Cadbury executives, that the confectioner's business does not mesh well with the Kraft "conglomerate."
"I completely respect the fact that we would be attractive to someone else, but the world of large conglomerates has passed," Stitzer told the paper.
But Stitzer said that in areas such as Europe, and emerging markets like Brazil, Russia and China there were "clear combinations of either routes to market or complementary elements of the confectionery portfolio."
Cadbury, the maker of Dairy Milk chocolate and Trident gum, has rejected the proposal as undervaluing the firm, and sources have recently said that it will take weeks before Kraft could potentially make another move.
On Sept. 7, Kraft launched a cash-and-stock bid for Cadbury that was originally worth 10.2 billion pounds, or 745 pence per share. But a drop in Kraft shares and a weaker dollar has subsequently lowered that sum to about 709 pence.
Such a takeover would create the world's largest confectionery group.
Cadbury's Chairman, Roger Carr, has called the prospect of merging into Kraft's portfolio of brands "unappealing."
"Under your proposal, Cadbury would be absorbed into Kraft's low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company," Carr wrote in a recent letter to Kraft CEO Irene Rosenfeld.
Kraft, the world's second-largest food company, has stated it would not need to sell off any of its high-profile operations like Oscar Mayer hot dogs nor Maxwell House coffee in order to fund its bid.
And analysts believe the company could, if needed, bid as high as 12.3 billion pounds ($20.1 billion) to seal the deal, all without losing its investment grade rating on its debt.
Cadbury is some eighteen months into a four-year plan designed to cut costs and improve performance. The plan includes targets for annual sales growth of 4 to 6 percent, mid-teen percentage operating margins by 2011, strong dividend growth and better returns on capital.
A Kraft spokeswoman declined comment.
Oracle restructuring tab may top $300 million
Oracle Corp., the corporate software giant that's seen sales decline as businesses scaled back on spending amid the downturn, said Monday that it may incur over $300 million in restructuring charges this fiscal year -- a significant increase over prior periods.
Oracle /quotes/comstock/15*!orcl/quotes/nls/orcl (ORCL 21.53, -0.04, -0.19%) posted fiscal first-quarter results last week that included a 14% decline in new software license sales. However, the company also effectively clamped down on costs, and delivered a profit that met Wall Street's expectations.
Oracle said in a Securities and Exchange Commission filing Monday that it recorded $48 million of its annual restructuring plan in the first quarter of fiscal 2010, and expects "to incur the majority of the approximately $300 million that is remaining" over the following three quarters.
Oracle's restructuring expenses for its last fiscal year ended in May were $117 million, an increase from $41 million in the prior year. Restructuring expenses amounted to only $19 million in the year before that, according to public filings.
Oracle describes its restructuring costs as "typically comprised of severance costs, costs of consolidating duplicate facilities and contract termination costs."
The Redwood Shores, Calif.-based company disclosed last week in its financial results that it had 84,639 employees at the end of the first quarter, a drop of more than 900 from the end of the prior period. See related story.
An Oracle spokeswoman declined to comment.
Wall Street has generally applauded Oracle's ability to cut costs, while relying on dependable software maintenance revenue in order to help it deliver profit, even in tough economic conditions.
In a research note published after Oracle announced its results last week, Jefferies & Co. analyst Ross MacMillan lauded the company's ability to implement tight "operating expense control."
MacMillan has a buy rating on Oracle shares and a $26 price target.
Oracle shares closed Monday down slightly at $21.57. The shares have risen less than 10% in the past three months, lagging behind the more than 20% growth generated by the Nasdaq Composite Index /quotes/comstock/10y!i:comp (COMP 2,138, +5.18, +0.24%) over the same period.
Chinese regulators approve Hebei steel merger: reports
Chinese regulators have signed off on a merger to create one of nation's largest steel mills, the companies involved said Tuesday.
Tangshan Iron & Steel Co. /quotes/comstock/28b!e:000709 (CN:000709 7.17, -0.29, -3.89%) will absorb fellow mill Handan Iron & Steel Co. /quotes/comstock/28c!e:600001 (CN:600001 5.24, -0.23, -4.21%) and ferroalloy producer Chengde Xinxin Vanadium & Titanium Co. /quotes/comstock/28c!e:600357 (CN:600357 7.64, -0.18, -2.30%) , according to reports citing statements from the companies.
All three firms are listed units of state-owned Hebei Iron & Steel Group -- already the world's fourth largest maker of steel, according to Reuters.
The Hebei group was formed in June 2008 from the merger of Tangshan and Handan, Dow Jones Newswires reported, and Tangshan is expected to rename itself Hebei Iron & Steel after the merger.
Dow Jones said the move will form China's largest steel producer, though Reuters said the resulting company will rank second, behind Shanghai Composite component Baoshan Iron & Steel Co. /quotes/comstock/28c!e:600019 (CN:600019 6.80, -0.10, -1.45%)
The Chinese government has sought to consolidate its fragmented steel industry, as it seeks to bulk up bargaining power in iron-ore price negotiations with global iron giants such as Brazil's Vale and Anglo-Australian miners BHP Billiton and Rio Tinto, Reuters said.
Shares of Tangshan and Handan dove 2.4% and 2.9%, respectively, in early Tuesday Shanghai trade, but Chengde Xinxin stock climbed 1.3%. Rival Baoshan was off 0.9%, while the Shanghai Composite slipped 0.5%.
Fed's Cumming Says Changing Incentives Needed to Avert Crisis
Christine Cumming, the second- highest ranking officer at the Federal Reserve Bank of New York, said efforts to avert another financial crisis should begin by changing incentives for risk-taking by investors and employees.
"There are many lessons to be learned from this crisis about knowing what you have and understanding the risk," Cumming, the bank's first vice president, said today in response to a question during a panel discussion in New York. "Changing the incentives" is important, she said.
About 28 of the largest bank holding companies, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., would be required to submit pay policies for approval to the Fed's board under the central bank's plan to regulate bankers' compensation, according to people familiar with the matter. The plan is aimed at preventing a repeat of the worst financial crisis since the Great Depression, which resulted in more than $1 trillion of bank writedowns and losses.
"We have to start right in financial institutions themselves and the major investors," Cumming said, when asked about the penalties needed to curb risk-taking.
"How much risk do they take? How much pay do they receive? When? How soon? How early? These are big questions the international community is wrestling with," said Cumming, who is the New York Fed's No. 2 officer behind President William Dudley.
Cumming has been at the New York Fed for three decades and was named first vice president in February 2004.
China's economy to grow by 8.2% in 2009: ADB
China's economy rebounded stronger than expected and is now forecast to expand by 8.2 percent in 2009,the Asian Development Bank (ADB) said in a report released Tuesday.
The Asian Development Outlook 2009 Update forecast that a surge in bank lending and fixed asset investments would push growth 1.2 percentage points higher than ADB's forecast in March.
The expected maintenance of the government's fiscal stimulus and a moderate recovery in the international economy in 2010 would lift China's growth rate to 8.9 percent in 2010, the report added.
"The massive fiscal stimulus announced last year and the aggressive monetary easing in 2009 has softened the blow of the global slump on the economy," said Jong-Wha Lee, ADB's Chief Economist, in a press release.
The ADB report said major drivers of growth in 2010 will be infrastructure investment, construction, and an expansion of consumption. With only a moderate recovery forecast for the international economy, net exports are expected to make only a minor contribution to growth.
The main risks to the outlook, the report said, is a significantly weaker recovery in the international economy than currently foreseen, and, on the domestic front, an earlier than expected exit from the government's fiscal stimulus package, and concerns that the flood of bank lending, if maintained for too long, could trigger another round of severe monetary policy tightening that would pull growth down again.
Krugman says world economic recovery will be slow
The Nobel-winning economist Paul Krugman said in Helsinki on Monday that the global economic downturn has probably hit bottom, but the recovery will be slow, local media reported Monday.
Speaking at a forum organized by the Finnish Innovation Fund, Sitra, Krugman said that technically the economy began to recover at the end of the summer, but the growth mainly resulted from some temporary factors and the base for a steady economic growth hasn't been established yet. He also added that unemployment could worsen for up to a year and a half, despite growth.
Krugman also pointed out that as Germany, France and Japan have seen signs of recession ending in the second quarter, it shows that many large economies in the world have passed through the most difficult times. And the recession in the United States could end in late July or August as the slight quarter-on-quarter reduction in the April-June period indicated.
Commenting on Finnish economy, Krugman said that the recession in the country could last for quite some time, but Finland could see growth relatively soon although there will be a long period of slow growth.
INVESTMENT VIEW
Anantraj Industries: Real Estate Makes A Comeback
BSE 515055; CMP Rs 145.15, PO: Rs 262
Huge land bank at prime locations in NCR drives value
Anant Raj Industries (ARIL) has access to a high-quality land bank of 988 acres, either solely or through its subsidiaries or by way of joint developments (ARIL's share is 801 acres). This translates into total developable area of ~83 mn sq ft (ARIL's share is 66 mn sq ft). Over 90% of the land is within NCR, with ~446 acres in Delhi. We believe possession of a large land bank at prime locations is a significant value driver for ARIL, differentiating the company from other North India-based developers.
Healthy balance sheet with net cash of INR 7.4 bn at FY10E end
The company has a healthy balance sheet with cash balance of INR 8.9 bn and net cash of INR 7.4 bn at the end of FY10E. Out of the total INR 1.5 bn debt, INR 0.4 bn is in the form of convertible debentures and the balance INR 1.1 bn is for the IT Park in Manesar. Also, the company's unpaid land cost is at a minimal INR 0.8 bn. Thus the company stands to be in a comfortable position in terms of cash flows.
Strong cash flows due to annuities and high-value residential launches
ARIL is developing a portfolio of leased assets on which it will earn consistent revenues on an annuity basis. While this strategy is capital intensive, ARIL has regularly monetised its assets over the past three years, keeping its balance sheet light. The company is currently generating annualized rentals of ~ INR 0.5 bn, which is expected to increase to INR 1.6 bn by FY11E end. We also expect it to generate net cash of INR 12.3 bn mn from sale of its two high value residential properties.
Outlook and valuations
We expect ARIL to generate operational cash flows of INR 13.3 bn over next four years from sale of its residential projects and INR 1.6 bn annually from lease revenues by FY11E. We value cash from residential projects (~0.83 mn sq ft) and capitalised value of leased assets (~1.7 mn sq ft) at INR 19.9 bn.
Besides, ARIL has a land bank of 63 mn sq ft in prime locations, spread across residential (29%), commercial (2%), IT/SEZ (58%), and hospitality (11%) divisions. We value each of these segments at INR 9.4 bn, INR 0.6 bn, INR 18.2 bn and INR 8.9 bn respectively. We have valued hotel business at INR 8.2 bn. On an SOTP basis, we value the land bank at INR 65.6 bn and the company at INR 77 bn.
This translates into a per share value of INR 262.
(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.)
Don't borrow to buy gold
Returns from gold have improved in the past five years; yet, borrowing to invest in the yellow metal is not a good idea.
The purpose of gold purchase should rule the funding option you choose.
India is one of the largest importers of gold and the craze for yellow metal has not subsidised despite its price hitting a high recently.
With the marriage season setting in, banks have started to offer personal loans to investors wanting to buy gold jewellery, at interest rates ranging from 15-30 per cent.
Does taking a loan to buy jewellery make any sense? Not really due to two reasons.
One: While gold has managed to improve its returns in the past five years and has generated about 15 per cent annualised return from 1999-2009, it has seen its returns dip to as low as less than 5 per cent in some periods.
You may be interested to know that gold prices hovered at $850 an ounce in 1980. It is now just at over $1,000 an ounce. This data clearly shows that unless you buy on dip the returns can be abysmally low.
Two: Unlike stocks, bonds or even real estate, gold does not bring in any regular income or returns to its holder. In fact, holding gold jewellery will carry a cost, if you have to house it in a bank locker.
Instrument of Choice
To incur interest outgo of 15-20 per cent per annum while buying such an asset cannot be a healthy trend in wealth creation.
One more point worth remembering is that if you buy gold bars from banks, the cost is higher due to purity of the metal. As banks don't buy back the gold, you ought to sell it to your jeweller. He will take the gold at the market price that will be far below the bank's selling price.
Given this backdrop, you should note that banks are offering loans when gold prices are close their record highs.
Even assuming you buy gold coins, bars or biscuits with that money and gold continues to deliver a 15 per cent return, your investment will take years to break even.
Under the circumstances, using the "chit fund" route with gold jewellers makes even less sense as the returns offered by the leading jewellers are less than 10 per cent.
Typically, if an individual saves Rs 3,000 a month at the end of 18 months the maturity value will be Rs 57,850.
The catch here is that if you think that gold prices are ruling high and postpone the purchases, the maturity proceeds may not earn any interest.
Purchase motive
So if you want to celebrate Dussehra or Diwali by purchasing gold, do so through surplus money you have saved from other options.
If you have to make those purchases for a wedding, instead of taking personal loan, consider lower cost borrowing options such as pledging your national saving certificates or life insurance policy, where you can take loans at an interest rate of 10-12 per cent. In those cases, if you pre-close your loans there will be no penal charge.
INDEX OUTLOOK: Pushing the 2009 ceiling
Sensex (16741.3)
It was Nifty's turn to walk away with the laurels as it scaled the 5000 peak last week. The usual bout of doubts assailed market participants thereafter and the index closed slightly below this level. In the absence of any market-moving development, it was the omnipotent liquidity that dictated the market movement.
Volumes were very high and the combined turnover in cash and derivatives crossed Rs 1 lakh crore towards the end of the week. Put call ratio at 1.65 for index options and open interest at Rs 116000 crore means that things are getting overheated in the derivatives segment.
2009 outlook review
Sensex has held steady above 16200 for second consecutive week and it is time to review the Sensex outlook for 2009 that was carried in our December 28, 2008 edition.
The Internet link for this article is,
http://www.thehindubusinessline.com/ iw/2008/12/28/stories/ 2008122851350100.htm
The outlook towards the end of 2008 was extremely bleak and we had expected weakness to persist in the first quarter with a counter-trend rally (B wave) to take off towards the end of this period. But it was hard to envisage a retracement of more than 38.2 per cent of the prior down-move and we had given the most likely movement for the index between 8000 and 13000 for this year with an outer target at 16000.
Now that the Sensex has moved above 16200, the question that is being asked is whether this is still a counter-trend move (B wave of the correction) or are we in a fresh leg of the long-term bull-market.
The strength and magnitude of pull-back in Sensex implies that the bear market could have ended with the 63 per cent decline recorded last year. But it is too soon to usher in a raging bull market. We could enter in to a period of long-term consolidation that can be marked by sharp up-moves akin to that witnessed since March followed by equally strong declines.
The same can be said for many of the emerging market bench-marks. But the Dow and S&P 500 have not shaken off the bear yet.
As mentioned in our 2009 review, the pull-back in Dow in 1930 retraced 50 per cent of the previous decline and this index is yet to reach the 50 per cent mark.
However a strong intermediate term up-trend is currently in progress in Sensex. The faster-than-anticipated end to the recession is resulting in this wave extending and instead of a zig-zag followed by a terminal corrective, we seem to be in for a double zigzag wave with an intermittent X wave.
This wave has the next target of 17886. If market gets unduly exuberant and the third part of the zigzag stretches to its maximum potential, this uptrend can stretch all the way to 20,772.
The analogy that can be applied here is the movement of Sensex between 1992 and 1999. Following a 56 per cent decline, Sensex bottomed in April 1993 and was back at its all-time high by September 1994.
What followed was 5 years of sideways move between 2800 and 4600. That is, we can expect a period of consolidation stretching a few years even if Sensex gets back to January 2008 levels.
To sum up, Sensex is currently in a strong rally and the preferred view is that it can end in the zone between 17,000 and 18,000 followed by a decline of at least 3000 to 4000 points.
But a run-away rally to the previous peak is also possible since third part of any up-move can be quite strong and can throw a few surprises.
Near term view
Short as well as medium term views for Sensex are positive. Next medium term target for the index is 17467 and this view will be marred only on a close below 16000.
Expiry of September series in derivatives segment can cause volatility in the index in the week ahead. It can attempt to move ahead to 17197 or 17417.
Supports for the week would be available at 16320, 16120 and 15940. Fresh purchases should be avoided on a close below the first support. Next medium term target for Nifty is 5166 and a close below 4700 is needed to signal a medium term reversal in this index.
Short term supports are 4840 and 4740 for Nifty.
Global Cues
It was a week in which most global benchmarks surged higher to record fresh 2009 highs. Indices that were struggling with key resistance such as Bovespa, DJ Euro STOXX 50, FTSE, Jakarta Composite, KLSE Composite, Seoul Composite and so on moved above these hurdles starting another leg of the up-move since March. Dow rallied strongly beyond the resistance at 9650 and can now head towards the next target zone between 10350 and 10500. Surprisingly, CBOE VIX moved sideways and closed on a flat note denoting that there was no increase in the level of investor optimism.
Nifty futures to see high intra-day volatility
There was no let down in the momentum last week as Nifty futures crossed the 5000-mark for the first time in 2009.
It closed the week at 4982, well above its previous week's close of 4841.8.
The October Nifty futures closed at 4989.8 but saw a rollover of just 19 per cent in open interest. Nifty October futures' open interest jumped to 61.79 lakh shares (43.37 lakh shares), while September futures' position declined to 2.53 crore shares over the previous week's close 2.78 crore shares. However, some momentum counters such as Ispat Industries, Unitech and Reliance Power saw higher rollovers.
Trading action was mainly centred on a few counters such as JP Associates, SBI, Reliance Infrastructure, Unitech, Tata Steel and Reliance Capital. In terms of sector preferences, banking, metal and realty space continued to witness steady accumulation.
Follow-up
We had presented two strategies: a) Going short on Nifty futures and b) bear put spread between Nifty strikes 4,700 and 4,800. Both the strategies ended in the negative. The strong bullish undertone in the market has the potential to take Nifty futures to 5250 levels.
Outlook
Only a dip below 4700 would negate our view, in which case the Nifty futures could weaken to 4250. That said, 5250 may also pose a strong resistance. With the coming week (shortened one – Monday holiday) being the settlement week for September series, intra-day swings may be quite sharp. We suggest traders exercise caution while trading in derivatives this week.
Option monitor
While 5000-5400 calls were most active in the October month, puts at strikes between 4500-5000 were the most actively traded. This indicates the broad range in which the Nifty is expected to move in the coming month. However, in the short-term the range may well be narrow what with open interest accumulation in 5200 call and 4800 put. In the current month, 5000 call and 4700 put saw the highest open interest positions.
The volatility index ended lower at 25.86 points against the previous week's close of 32.51. The drop in volatility index suggests the confidence of bull operators.
We recommend the following strategies for readers
Consider going long on Nifty futures if it opens on a flat note. In that event, the stop loss should be 4900. Traders can book profits at 5100 and 5250 levels.
Another strategy could be a short straddle. This can be initiated by selling 5000-strike of October call and put which closed with a premium of Rs 168 and 175 respectively. Note that short straddles are limited profit, unlimited risk options trading strategies that are used when one thinks that the underlying securities will experience little volatility in the near term. Maximum profit for this strategy is the premium collected and that is achieved when the underlying Nifty hovers around 5000. The strategy is for high-risk traders only.
FII trend
The cumulative FII positions as a percentage of the total gross market position on the derivative segment as on September 18 decreased to 33 per cent (33.63 per cent). They indulged in alternate bouts of buying and selling despite their strong inflows in the cash segment. Their index futures holding increased to Rs 15,782.57 crore (Rs 14,852.67 crore) and stock futures to Rs 24,894.02 crore (Rs 21,636.08 crore). Index options holding also jumped to Rs 35,467.82 crore (Rs 30,326.94 crore).
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Arvind Parekh
+ 91 98432 32381
