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RIL shareholders take Diwali bonus

Oct 092009

reliance-capitalShares of Reliance Industries erased early gains to close 1% higher on Thursday, as near-term concerns over earnings growth
outweighed the feel-good sentiment arising out of the 1:1 bonus share issue.

The stock witnessed higher than usual volumes on both stock exchanges, but most investors
used the opportunity to book profits for the time being.

On BSE, the stock closed at Rs 2,119.20, up Rs 20 over the previous close, after having touched Rs 2,209 early on in the session. Brokers expect the stock to trade in line with the broad market trend, at least till the run-up to its second quarter numbers.

“Lower refining and petrochem margins and higher capital charges will offset higher volumes from KG-D6 and RPET refinery in 2QFY10,” says a earnings preview note by brokerage house CLSA to clients last month.

“We estimate a 3% Q-o-Q (quarter-on-quarter) rise in RIL and RPET profits to Rs 3,850 crore and see downside risks to consensus FY10 EPS estimates even after the 5% downgrade since June. FY11 earnings are more relevant, but we find Reliance 19-55% more expensive than peers even on these estimates. Clarity on growth projects, inorganic or organic, will be crucial, therefore, to sustain stock performance by keeping the SOTP (sum of the parts) framework relevant,” the note adds.

RIL shares have been performed in line with the market over the past one month. The company’s ongoing legal battle with ADAG over gas supplies, and sluggishness in refining margins are among the key reasons why the stock has performed to the extent that most investors were expecting it to.

According to brokerage house Ambit, RIL’s blended gross refining margin for June-September is expected to be $6.5/bbl compared with $7.5/bbl during the preceding quarter.

“RIL’s profit is expected to grow marginally Q-o-Q, as increase in earnings from higher gas production and merger of the RPL refinery offset the fall in refining margins and petrochemicals’ EBIT,” brokerage house Edelweiss has said in its results preview note. Edelweiss has rated ONGC and GAIL as top picks in the oil & gas sector. Some feel the pull-back in RIL stock could be attributed to the overall weakness in the market on Thursday.

“The (bonus) announcement is particularly significant, after the recent sale of treasury shares by the company. This is because a section of the investors perceived the treasury share sales as a negative event, capping the stock price upside in the short term,” Angel Broking said in a note to its clients. The brokerage has a ‘buy’ rating on the stock.

Credit Suisse recently upgraded its rating on the stock to ‘outperform’ saying relative valuations of the stock were attractive. “While absolute valuations are clearly more demanding now, RIL’s forward P/E is currently at a 10% discount to MSCI India compared with a 55% premium in October 2008. EPS momentum means this discount will expand even if RIL moves with the market,” the brokerage said in a note to its clients last month.
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Asian stocks steadied near three-week lows on Monday

Oct 052009

asian-stock-market1The dollar fell and Asian stocks steadied near three-week lows on Monday afte weaker-than-expected U.S. jobs data heightened investor
caution ahead of the third-quarter corporate results season.

Crude oil prices held below $70 a barrel, and copper prices languished near two-month lows as the weak data showed the pace and scope of economic recovery remained uncertain.

US employers cut 263,000 jobs in September, more than in August and the 21st straight monthly decline, Labour Department data on Friday showed. “While the data was bad and optimism about the US economy may have receded, I do not think market players think that this means that the outlook for the US economy is ruined,” said Hideyuki Ishiguro, supervisor at Okasan Securities’ investment strategy department in Japan. “I think it just means market sentiment has returned to neutral for the time being,” Ishiguro added.

Tokyo’s Nikkei average was barely above breakeven, while MSCI’s index of stocks elsewhere in the Asia-Pacific rose 0.2 per cent by 0300 GMT.

Investors were also wary ahead of the start of the third-quarter corporate earnings season, which kicks off in the United States this week. Cost cutting helped second-quarter results largely beat expectations, but analysts are now looking for more sustainable signs of improving revenues.
With growing jobless numbers putting further pressure on consumer spending, US interest rates were expected to remain low for the foreseeable future, weighing on the US dollar.

In contrast, the Australian dollar rose ahead of a meeting of the Reserve Bank of Australia on Tuesday after two influential columnists wrote that there was a real chance of an interest rate rise this week, sooner than many have been expecting.
The dollar index, a measure of its performance against six major currencies, fell 0.3 per cent, while the euro climbed to $1.4634 after ending at around $1.4575 on Friday.

The greenback, down 14 per cent from its March high, got no fresh support from the Group of Seven finance ministers and central bankers. After a weekend meeting in Istanbul, they broke no new ground on currencies, urging China to strengthen the yuan to help correct global imbalances and saying too much foreign exchange volatility tended to threaten economic stability.

Analysts said it potentially left the dollar open to further weakness.

“It was the usual mantra about FX volatility and disorderly movements in exchange rates which we’ve seen time and time again,” said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

“The market is cautious after the poor US jobs data on Friday. But the overall trend of an economic recovery hasn’t changed and I think investors are using such weaker-than-expected data as an opportunity to take profits,” said Ben Westmore, a commodities analyst at the National Bank of Australia.

US light sweet crude was 5 cents weaker at $69.90, while three-month copper on the London Metal Exchange rose $16 to $5,895 a tonne.
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Asian shares fell on pervious day

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Oct 022009

asian-stock-market1Asian shares fell on Friday as disappointing U.S. manufacturing data raised concern that its economic recovery may not be as fast as
thought, while the dollar remained firm as investors booked profits on gains in higher-yielding currencies. European stock futures were down 0.9 percent while U.S. equity futures were 0.3 percent lower.

Investors were nervous ahead of U.S. non-farm payrolls, due at 1230 GMT, fearing more disappointing news after an Institute for Supply Management report showed manufacturing growth was slower-than-expected in September. Shares in Japan skidded 2.5 percent with carmakers including Toyota and Nissan hurt by a slump in September U.S. car sales. Worries about U.S. economic data overshadowed a surprise drop in Japan’s unemployment rate and helped push five-year Japanese government bonds yields to a four-year low.

U.S. 10-year bond yields fell to 3.15 percent in Asia, their lowest level since May on the back of the weak data. Trade across Asia was quieter than usual with markets in China, India and South Korea closed for public holidays. The MSCI index of Asia Pacific stocks traded outside Japan fell 1.6 percent, although it is still up 56 percent this year, while the Thomson Reuters index of regional shares was down 1.4 percent.

If U.S. non-farm payrolls data shows more than an expected 180,000 job losses, it could renew fears about the strength of the economic recovery and bolster the dollar as a safe haven, traders said. The dollar remained firm after the disappointing manufacturing data, which prompted investors to book profits on the higher-yielding Australian dollar and the New Zealand dollar.
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Asia shares rise

Sep 302009

usstockAsian shares edged higher on Wednesday looking past a surprise fall in US consumer confidence and the Australian dollar jumped to a
13-month high after August retail sales data beat forecasts.

European stock futures pointed to a slight rise in opening trade on the last day of a quarter seen registering the strongest gain in nearly a decade, while US equity futures were up about 0.2 per cent.

China’s main stock market jumped a per cent boosted by the acquisition plans of Industrial and Commercial Bank of China (ICBC), the world’s biggest bank by market value, while the Korean won rose to a near one-year high.

“GDP and earnings are still being upgraded, valuations are not horribly expensive and cash is still zero per cent, we are in a sweet spot,” said Khiem Do, head of the Asia multi-asset group at Baring Asset Management.
Referring to US consumer confidence he said: “It is a volatile data, next month it may be up again and it is very difficult to predict. Its not as if its been falling for months in a row.”

The Aussie dollar, which has been on the uptrend after recent market talk about an imminent rate hike lifted its yield allure, received a further boost as data showed consumers continue spending even as the stimulus programme nears its end.

The data took the currency to a peak of $0.8820 and pushed interest rate swaps to a three-week high as markets priced in a greater chance of a rate increase in November, with increased chances of hike in December as well.

The Shanghai Composite Index rose as much as 1.8 per cent after ICBC said it was bidding to buy Thailand’s ACL Bank for up to $545 million to tap rapid growth in the Thai economy and in trade..

Yet, the benchmark stock index has lost around 7 per cent so far this quarter and is heading for its worst quarterly performance this year, mainly reflecting worries about an oversupply of shares.

South Korea’s won currency rose as high as 1,177.5 to a dollar, a one-year high, forcing foreign exchange authorities to buy the greenback to curb the won’s strength.
Taiwan, which competes with South Korea in exports of a number of goods, including electronics, also saw its currency rise, with exporter deals
and foreign fund inflows boosting the Taiwan dollar to a near one-year high. The currency rose to as high as T$32.157 to the US dollar.

Broadly, Asian stock markets were higher as investors ignored an unexpected fall in US consumer confidence in September, which brought down shares at Wall Street.

The MSCI index of Asia Pacific stocks traded outside Japan was up about 0.4 per cent and is set to post a second straight quarterly gain.

The regional gauge is up 21 per cent this quarter, adding to the second quarter’s 32 per cent gains. Prior to that it had posted six successive quarters of losses.

The Thomson Reuters index for stocks in Asia-Pacific ex-Japan was down about half a per cent.

Japan’s Nikkei average edged up 0.3 per cent in cautious trade, with investors hesitant to actively take positions ahead of a series of economic data releases and at the end of Japan’s fiscal half-year.

Meanwhile, the US dollar fell against the yen towards an eight-month low marked earlier this week as Japanese exporters sold the dollar to settle business before the quarter ends.

Earlier, the dollar had risen on short-covering and as Japanese importers bought dollars. But it soon erased gains as such corporate demand faded.

The dollar slipped 0.4 per cent from late US trade to 89.65 yen, erasing earlier gains to 90.42 yen on trading platform EBS and falling towards an eight-month trough near 88.20 yen hit on Monday.
But to others the dollar’s reversal was not surprising and the broad downtrend for the US currency is still down.
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Europe shares set for rise in 10 years

Sep 302009

asian-stock-market1European shares look set to finish the third quarter with their best performance in nearly a decade on expectations of economic recovery while world stocks also rose strongly though not as much as in the previous period. The pan-European FTSEurofirst 300 index put on 0.4 percent on Wednesday and the MSCI world index added the same, while commodity prices were also firmer but the dollar fell against a basket of currencies.

“We’re ticking higher on the last day of a strong quarter but investors remain a touch cautious ahead of the start of October, always a volatile month, and Friday’s U.S. jobs report,” said Mic Mills, senior trader at ETX Capital in London.

Equities have been rallying hard since early March as investors have become more confident about the prospects for economic recovery.

The European benchmark index is up more than 18 percent in July-September, on course to record its biggest quarterly rise since December 1999. It rose nearly 16 percent in the previous quarter but is still 38.5 percent below its peak in mid-2007.

Global stocks gained 17.6 percent this quarter after rising more than 21 percent in April-June, its best ever quarterly rise, while Britain’s FTSE 100 was set to register its best quarterly gains since the index was launched in 1984.

The corporate outlook has also showed some signs of revival, with the world economy recovering from its worst recession since the 1930s Great Depression.

British retailer Marks & Spencer on Wednesday posted an improvement in its quarterly sales trend and raised its forecast for full-year profit margin, but cautioned 2010 was likely to be a tough year.

Crude prices were higher, rising above $67 a barrel as the dollar eased, while investors are focusing on talks over Iran’s nuclear plans.

Metal prices also stayed firm, helped by the weaker dollar. Gold was poised to post its best quarterly performance since the first quarter of 2008.

The U.S. dollar slipped against major currencies on month- and quarter-end buying lifting sterling and the yen. The greenback was down 0.4 percent at 89.76 yen.

The euro held firm ahead of the European Central Bank’s one-year cash tender results. Attention will focus on the amount of liquidity pumped into the system.

Lacklustre demand would strengthen the ECB’s belief that money markets
are on the mend, But strong demand would mean levels of cash held by banks remain at exceptionally high levels until the middle of next year, unless the ECB takes steps to drain it from the market.

The Australian dollar, which has been on the uptrend after recent market talk about an imminent rate hike lifts its yield allure, received a further boost as data showed consumers continue spending even as the stimulus programme nears its end. The Aussie dollar was up 1 percent at $0.8795.

Yields on benchmark 10-year U.S. Treasuries were up 2 basis points at 3.316 percent, while the 10-year euro zone Bund yield was up 1 basis points at 3.232 percent.
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Nifty pares losses

Sep 252009

bse-sensexUS markets closed in the red and other Asian markets are negative. Asian stocks dropped, dragging the MSCI Asia Pacific Index to its biggest weekly decline in a month, after Nomura Holdings said it will sell new shares and sales of existing homes unexpectedly declined in the US. For the day we expect our market to open down and correct,” said Niket Shah, associate research analyst, Institutional Equity, Religare Capital Markets.

National Stock Exchange’s Nifty was at 4978.80, down 7.75 points or 0.16 per cent. The index touched an intra-day high of 4989.50 and low of 4931.25.

Bombay Stock Exchange’s Sensex was at 16766.97, down 14.46 points or 0.09 per cent. The 30-share index hit a low of 16618.43 and high of 16787.67.

“Trend deciding level for the day is 4969 / 16703. If Nifty trades above this level during the first half-an-hour of trade then we may witness a further rally up to 5034 – 5082 / 16912 – 17043. However, if Nifty trades below 4969 / 16703 for the first half-an-hour of trade then it may correct up to 4922 / 16573,” the Angel Broking note said.

BSE Midcap Index was up 1.08 per cent and BSE Smallcap Index moved 1.30 per cent higher.

Amongst the sectoral indices, BSE Healthcare Index gained 2.74 per cent, BSE Auto Index moved 2.20 per cent higher and BSE Realty Index advanced 0.61 per cent.

BSE IT Index was down 0.67 per cent and BSE Metal Index moved 0.54 per cent lower.

US stocks fell on Thursday as signs of weakness in housing and investors’ worries that authorities might be curbing stimulus efforts too soon sparked caution.

The Dow Jones Industrial Average dropped 41.11 points, or 0.42 per cent, to 9,707.44. The Standard & Poor’s 500 Index fell 10.09 points, or 0.95 per cent, to 1,050.78 and the Nasdaq Composite Index slid 23.81 points, or 1.12 per cent, to 2,107.61.

Stocks in the Asia-Pacific region took a beating following Wall Street cues and a slump in commodity prices. The Nikkei tumbled 2.24 per cent, Hang Seng fell 0.56 per cent and Seoul Composite lost 0.30 per cent.
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Asian shares down,

Sep 242009

equity-negliAsian shares outside Japan fell on Thursday, mirroring investor caution in the United States, while the dollar was steady after the
Fed reiterated interest rates would stay low for a long period.

Japan’s benchmark Nikkei index jumped 1.7 percent after a three-day holiday break, but the rise reflected gains made in the rest of the region at the start of the week.

A 0.8 percent slide in the Dow Jones on Wednesday, however, weighed on the rest of Asia’s markets and the MSCI index of Asia Pacific stocks traded outside Japan was down 1.2 percent.

Shares in Korea fell more than 1 percent with some concern that a strengthening Korean won could hurt export competitiveness.

In Hong Kong, the Hang Seng Index shed 2 percent and new listing Metallurgical Corp of China, a Chinese engineering company and the market’s biggest IPO so far this year, skidded nearly 15 percent below its issue price. Analysts said its price had been too high given an expected slowdown in investment in China’s steel industry.

The dollar was up 0.4 percent against a basket of currencies, reflecting reasonably calm reaction after the Fed upgraded its view of the US economy and indicated it was closer to pulling back on extraordinary stimulus measures while also reiterating a pledge to keep rates very low for a long period.

However, traders said its commitment to loose monetary policy means the dollar could come under renewed pressure soon as it is used to fund carry trades.

“As things stand, the Fed is in absolutely no hurry to even think about normalising policy,” said Stephen Stanley, chief economist at RBS in Greenwich, Connecticut. “This remains a very dovish Fed.”

SONY SURGES, JAL PLUNGES Japan outperformed otherwise weak Asian share markets, although data showing a slump in Japanese exports last month was a further indication that economic recovery will be shaky.

Electronics maker Sony Corp surged 3.3 percent after the company said sales of the PlayStation 3 video game console jumped after a price cut last month, but Japan Airlines plunged 11.1 percent after sources said the struggling carrier might be broken up and public broadcaster NHK reported the airline may seek a public bail-out.

Markets will be eying a two-day G20 summit in Pittsburgh starting on Thursday for further clues on the health of the global economy and when governments might start rolling back support measures for economic growth.

Japanese and Korean government bonds followed US Treasuries higher on the Fed’s dovish stance although gains in Japanese treasuries were capped by a rising equity market.

December 10-year Japanese government bond futures rose 0.13 point to 138.68.

Gold bounced back to around $1,010 an ounce, after sliding to a New York close at $1,007.05. It has been supported by underlying weakness in the US dollar and is now about 1 percent off an 18-month high reached last Thursday at $1,023.85.
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Dollar hits 13-mth low,

Sep 232009

finance3The dollar slid to a 13-month low against a basket of currencies as market players seized on surprisingly strong New Zealand economic
growth data as a reason to push the kiwi dollar higher and dump the U.S. currency.

Even as many commodity prices dipped, the dollar’s drop has boosted oil and metals and lifted resource-related shares around the region. Resource-heavy Australian stocks outperformed other markets in the region.

“It’s a mixture of optimism about global growth and stronger commodity prices, which is particularly good for Australia,” said Tom Elliott, a fund manager with MM&E Capital, which oversees about A$50 million in Australian shares.

Activity was limited, with markets in Japan closed for a third straight day before reopening on Thursday.

Many investors were also waiting for the Federal Reserve’s policy decision later in the day, looking for changes in its post-meeting statement that would acknowledge the economy’s improvement and might suggest more steps towards winding down its emergency measures to support financial markets.

The Fed has already been meeting with primary bond dealers on Wall Street to discuss different methods for absorbing the massive reserves injected into the banking system to stave off the worst financial crisis since the Great Depression.

The MSCI benchmark of Asia-Pacific shares outside Japan was up 0.4 percent, while the Thomson Reuters index of regional stocks edged up 0.1 percent.

Australia’s S&P/ASX 200 was up 1.3 percent on the back of a rise in commodity-linked shares. BHP Billiton the world’s biggest miner, rose 1 percent.

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Weak global markets lon Dalal Street

Sep 222009

dalal-streetShares in India are likely to open weak on Tuesday, following a downtrend in world markets on Monday. Key Asian and European markets

clocked losses on concerns that valuations have become expensive, after the six-month long rally. Shares in Hong Kong, Taiwan and South Korea ended marginally lower, while most markets in Europe were down around 1% or more.

The MSCI Emerging Markets Index – comprising 22 countries – fell 0.7%. According to Bloomberg data, the index is quoting at a price earning ratio of around 21 times trailing 12-month earnings, its highest level in over nine years. Back home, the Sensex is quoting at a 12-month trailing price earning ratio of roughly 22 times, way below the 29 times it was quoting at in January 2008 before the market crashed. Market watchers say foreign fund flows will be crucial for the market to sustain recent gains,
The US Federal Open Market Committee begins its two-day meeting on interest rate policy on Tuesday. Most experts feel rates will be left unchanged. In a recent interview, US President Barack Obama said he did not expect the job market to improve any time soon despite signs of an uptrend. There is speculation that the Fed may discuss cutting back on the economic stimulus package it had unveiled to cushion the impact of the recession.

The index of US leading economic indicators in August rose for the fifth straight time, further strengthening the popular view that an economic recovery is under way. The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6%, in line with what most experts had estimated. The latest rise comes on the back of a revised 0.9% rise in July.

Most of the US macro economic data in the past two weeks, such as retail sales, new home construction, have been better than expected. However, rising unemployment continues to be a cause for worry. There are concerns that a coordinated pullback of the economic stimulus across markets could tighten liquidity, causing a partial pull back of funds from risky assets like emerging markets equities. Crude oil prices fell 2.5% to $70.23 a barrel on the New York Mercantile Exchange. Gold and copper prices too were under pressure. The dollar climbed 0.6% against euro, its second consecutive day of gains.
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Asian shares pull back

Sep 182009

asian-stock-market1Asian stocks retreated from 13-month highs on Friday and commodity prices dipped after data giving a conflicting picture about the
strength of the U.S. recovery stopped investors from extending this week’s rally.

The Bank of Japan deputy governor, Hirohide Yamaguchi, said a positive business cycle was starting and signalled the central bank could soon withdraw emergency support for corporate funding.

But Japanese stocks fell as investors sold shares
of exporters that had run-up sharply while there was also wariness about taking new positions ahead of public holidays early next week. The Nikkei index was down 1.2 percent, breaking a three-day rally.

The dollar benefited as investors globally became more cautious. It held above one-year lows reached on Thursday against a basket of currencies, although analysts said its respite could be temporary.

“We are seeing a bit of a pullback but the broader U.S. dollar weakness remains intact as it turns to be the currency for carry trades,” said Jonathan Cavenagh, currency strategist at Westpac in Australia.

Investors across the region stood back after Asian equities hit their highest level in 13 months on Thursday. While there is growing confidence the global economy is on an uptrend there is uncertainty about the strength of that recovery, analysts said.

Data on Thursday showed U.S. housing starts hit their highest level last month since November, but a rise in the number of Americans drawing long-term unemployment compensation tempered optimism for a sharp rebound in the world’s biggest economy, and the Dow Jones slipped 0.08 percent.

The MSCI index of Asia Pacific stocks traded outside Japan was down 0.7 percent on Friday morning, after surging 80 percent since mid-March.

Japanese government bond futures rebounded as Tokyo stocks fell, but gains were limited ahead of the long holiday. December 10-year JGB futures rose 0.10 point to 138.69.

Gold was holding up, trading at $1,011.95 an ounce, close to its New York close at $1,011.45 after hitting an 18-month high of $1,023.85 on Thursday. Seen as a hedge against potential inflation, gold is likely to stay firm and many market participants still expect it to break through its record high of $1,030.80.

Otherwise, commodity prices slipped on uncertainty about the strength of the global economic recovery and the oil price edged down 47 cents to $72 a barrel.

Weaker commodity markets put pressure on shares of Australian resources companies, such as mining giant BHP Billiton which fell 2.4 percent, and helped push the Aussie dollar below Thursday’s one-year high.

However, shares in Qantas Airways bucked the market, jumping 3.4 percent after positive comments on the carrier from broker RBS.

Shares across Greater China were slightly weaker on concern that recent gains may be overdone.

In Taiwan, the world’s top contract chip maker TSMC, and rival UMC, came under pressure after the island’s new cabinet said it would continue to restrict investments by the chip foundry sector in China.
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