By Leah Schnurr
NEW YORK (Reuters) - Even as credit market strains show signs of easing, a barrage of earnings will steal the spotlight this week as Wall Street looks for a picture of how profits will fare in the face of a severe economic slowdown.
Stock investors will pay close attention to any guidance that comes out of earning season as they shift their focus from uncertainty about a recession to how long a downturn could last and how big a bite it could take out of the bottom line.
When New York trading resumes on Monday, it will be the day after the anniversary of the 1987 stock market crash that happened on October 19, known as "Black Monday." On that date, the Dow fell a record 22.6 percent -- its largest one-day percentage decline ever.
This October, the Dow is down about 38 percent from its record closing high set about a year ago on October 9, 2007.
This week, Wall Street also will watch for whether overnight borrowing costs will continue to ease, signaling that attempts by global authorities to unlock frozen credit markets are taking hold.
"Importantly, there will be statements made by companies about the prospects for business," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York.
"We know that the third quarter was a disaster and the question is: 'What's happening in the fourth quarter and beyond?'"
Some analysts are anticipating that companies will need to cut their forecasts, highlighting that deteriorating growth could continue longer than had been expected.
"The current outlook needs to be adjusted, and it's being adjusted in one direction -- and that's down," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management, in New York.
Market watchers got a taste of earnings season last week, with results from bellwethers such as Google (GOOG.O: Quote, Profile, Research, Stock Buzz), Honeywell (HON.N: Quote, Profile, Research, Stock Buzz) and Intel (INTC.O: Quote, Profile, Research, Stock Buzz).
On Monday, September's index of leading U.S. economic indicators will kick off a fairly light week for data. Wednesday's weekly mortgage market index, Thursday's weekly U.S. claims for jobless benefits and Friday's report on September U.S. existing home sales will be scrutinized for signs of further weakness in the housing and job markets.
NUMBERS NOT BAD, BUT NOT GREAT
Analysts said that while corporate results overall have not been fantastic, they weren't as dire as had been feared. They are expecting to see more of the same this week as earnings season picks up steam.
Among the heavy hitters set to release earnings this week are Caterpillar Inc (CAT.N: Quote, Profile, Research, Stock Buzz), 3M Co (MMM.N: Quote, Profile, Research, Stock Buzz), Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), and McDonald's Corp (MDC.N: Quote, Profile, Research, Stock Buzz) -- all Dow components. In the tech sector, Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz), Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz), Amazon.com Inc (AMZN.O: Quote, Profile, Research, Stock Buzz) and Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) are scheduled to report. These are among the most prominent companies listed on the Nasdaq.
"I would say earnings are not going to be great, but they're not going to be as bad as some of the rumors and fears that were going around last week," said Al Kugel, chief investment strategist at Atlantic Trust in Chicago.
Kugel added that the earnings have provided the backdrop to tempt some bargain hunters back into the market as some buyers start to think that worse results have already been priced into stocks.
At Friday's close, U.S. stocks finished the session lower after a volatile session.
But for the week, stocks rose. The blue-chip Dow Jones industrial average .DJI rose 4.75 percent, its best gain in 5-1/2 years, while the Standard & Poor's 500 Index .SPX gained 4.59 percent, for its best week since February. The Nasdaq Composite Index .IXIC advanced 3.75 percent for the week.
FOLLOW THE MONEY
But analysts said earnings will not entirely run the show, as attention will still be paid to short-term credit markets to see whether recent moves by global central banks to stimulate lending are working.
Major global money rates fell on Friday, underscoring hope that authorities' maneuvers have started to thaw the frozen credit markets.
Overnight borrowing costs for dollars, euros and sterling funds, reflected in the London interbank offered rate, eased, but longer-term lending rates remained high.
A sense that central banks have been able to stop the fallout from the credit crisis that is more than a year old now would return some confidence to a market that has been battered by the fear of more casualties to come.
Analysts said rampant volatility will remain the hallmark of the markets after the record-setting surge last week in the barometer of investor fear, the Chicago Board Options Exchange Volatility Index, also known as the VIX .VIX.
The three major U.S. stock indexes have swung in a wide range every day as investor sentiment has vacillated from one minute to the next.
In addition to existing home sales and the sprinkling of other economic reports this week, investors also will keep their eyes on the Fed.
On Monday, Federal Reserve Chairman Ben Bernanke is scheduled to testify at a House Budget Committee hearing about the economic outlook and the financial markets.
Read more...
Sunday, October 19, 2008
S.Korea joins global rescue, crisis summit planned
By Tomasz Janowski and Elizabeth Piper
SINGAPORE/LONDON (Reuters) - South Korea joined efforts on Sunday to shore up banks and markets pummeled by the biggest economic crisis since the Great Depression which world leaders said called for a coordinated global response.
Authorities in Seoul pledged $130 billion in state guarantees and capital injections hours after U.S. and European leaders said they planned to hold a series of global summits to try to form an action plan.
The crisis has raised fears in the West that many countries could enter recession this year and next, but for China, one country certain it will survive the financial meltdown, the criticism was clear -- it was the West's fault.
The official Xinhua news agency blamed U.S. consumers for fuelling the crisis with reckless spending, saying in an opinion piece from New York: "Many people think that you cannot de-link the consumer concept of 'eating the corn while it is still on the stalk' and this financial crisis which has a deep impact."
The crisis has spread across the world, forcing governments to dig deep to support banks unwilling to lend for fear of losing money. Countries such as Iceland, Ukraine and Pakistan have asked for aid to prop up their economies.
In the Middle East, a newspaper said the United Arab Emirates would inject 70 billion dirhams ($19.06 billion) into long-term bank deposits, and Oman's Chamber of Commerce and Industry called for a cash injection into banks for financing.
REFORM FINANCIAL SYSTEM
U.S. President George W. Bush said on Saturday he would host the first crisis summit, due to be held soon after a November 4 presidential election.
A statement after his meeting with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso at the presidential retreat in Camp David said it would focus on "principles of reform" needed to fix the financial system.
"Later summits would be designed to implement agreement on specific steps," the statement said, adding that other world leaders would be contacted beginning next week.
Bush leaves office in January and a White House spokesman said he did not know whether the newly elected president, either Democrat Barack Obama or Republican John McCain, would be invited to attend the first summit.
Japan, which chairs the Group of Eight, supported the summits, but its finance minister said they would be worthwhile only if they produced concrete results.
"If a summit were to be held, it should come up with a strong action plan or a decision," Finance Minister Shoichi Nakagawa said on Sunday.
RESTORATION OF TRUST
In Seoul, authorities rushed out the rescue plan to bolster local markets plagued by worries that local banks' high level of foreign borrowing makes Asia's fourth-largest economy particularly vulnerable to the 14-month-old credit crisis.
"The government has decided to join in global coordinated efforts to stabilize financial markets and we'll continue to provide pre-emptive, decisive and sufficient measures to this end," Finance Minister Kang Man-soo told reporters.
Analysts welcomed the measures, saying they should soothe local markets. They expected the central bank to trim interest rates as early as next month to prop up sagging domestic demand.
"The government has sent a strong signal to market players in a panic that they will stand as lender of last resort in a crisis," said Hong Sun-young at Samsung Economic Research Institute.
South Korean officials said they were not considering spending public funds on stakes in banks for now, but said could take such steps and offer deposit guarantees if necessary.
Dutch financial group ING is in talks with the Dutch government about a state-backed cash injection estimated to be worth up to 9 billion euros ($12.12 billion), Britain's Sunday Times newspaper said.
Governments around the world have pledged about $3.2 trillion -- about the same as the economic output of Germany -- in schemes that guarantee bank deposits, bank-to-bank lending, and taking stakes in banks to shore up their capital.
That came on top of huge cash injections into money markets and coordinated interest rate cuts to offer some respite to money markets, which seized up on fears of more bank failures after last month's bankruptcy of Lehman Brothers.
European Central Bank Governing Council member George Provopoulos said the measures would gradually ease pressure.
"Everyone's priority at this stage is the restoration of trust in international financial markets," he told Greece's To Vima newspaper.
Fears of the worst global recession since the 1930s have prompted some governments to change spending plans and others to advocate deep reform of the financial system.
In Britain, finance minister Alistair Darling said the government would have to borrow more to fund public spending to generate growth and employment.
"This is a time when you have to support the economy," he told the Sunday Telegraph. "We can allow borrowing to rise."
Spain was the latest country to say it would enter recession next year if the global economy suffered that fate.
Prime Minister Jose Luis Rodriguez Zapatero said the economy should return to growth by the second half of 2009, but was now either in negative quarterly growth or about to enter it.
Japan, the world's second biggest economy already teetering on the brink of recession, is set to slash its economic forecasts this month, Bank of Japan board member Atsushi Mizuno was quoted as saying.
(Reporting by Reuters bureaus worldwide; Editing by Andrew Dobbie)
Read more...
Leading Index Probably Fell in September: U.S. Economy Preview
By Timothy R. Homan
Oct. 19 (Bloomberg) -- The U.S. economic outlook for the next two quarters dimmed in September and foreclosure-driven declines in property values aided sales of existing homes, economists said before reports this week.
The index of leading indicators fell 0.1 percent last month, according to the median estimate in a Bloomberg News survey ahead of a Conference Board report tomorrow. On Oct. 24, the National Association of Realtors may say that home resales rose 1 percent to an annual rate of 4.95 million.
While houses have become more affordable, the boost to sales from lower prices may be short lived as banks make mortgages more difficult to get and concern mounts that values will keep plunging. Add rising unemployment, and Americans are likely to spend less across the board, deepening the economic slump heading into 2009.
``Mortgage defaults and home prices need to stabilize,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``It will take time to slow the vicious cycle of declines in credit markets, housing and the economy.''
The Conference Board's leading index, a gauge of the economy's direction over the next three to six months, has posted only two monthly gains this year.
Seven of the 10 components of the leading index are known ahead of time: jobless claims, stock prices, building permits, consumer expectations, the yield curve, supplier delivery times and factory hours.
The Conference Board estimates the remaining three -- new orders for consumer goods, bookings for capital equipment and the money supply adjusted for inflation.
Recession Forecast
Economists surveyed by Bloomberg in the first week of October anticipated the economy contracted at a 0.2 percent annual pace last quarter and will shrink at a 0.8 percent pace in the last three months of the year. Declines in consumer spending will tip the economy into a recession, the survey showed.
Lower stock prices in September contributed to the decline in the leading index. The Standard & Poor's 500 index averaged 1217 in September, down from 1281.47 in August. The 500 index averaged 1011.91 during the first half of this month.
The Realtors' existing home sales report may show sales improved in September after dropping 2.2 percent the previous month, when the median price declined 9.5 percent from August 2007.
Fewer Closings
A report earlier this month from the agents' group showed 7.4 percent more Americans signed contracts to purchase previously owned homes in August. Economists are anticipating that only a small percentage of those contracts actually closed last month as banks started to shut off credit on growing concern over defaults and foreclosures.
``Elevated inventories and stubborn long-term rates should contribute to a third consecutive month of price declines for existing homes,'' said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York.
Resales have averaged a 4.94 million annual pace this year, compared with a total of 5.65 million in 2007.
The housing slump is showing no indication of abating. Building permits, a sign of future construction, dropped 8.3 percent in September, matching the lowest level since 1981, and single-family home starts fell to a 26-year low, the Commerce Department reported last week.
``The housing market continues to be a primary source of weakness in the real economy as well as in the financial markets, and we have seen marked slowdowns in consumer spending, business investment and the labor market,'' Federal Reserve Chairman Ben S. Bernanke said in a speech last week. ``Credit markets will take some time to unfreeze.''
Job Losses
U.S. companies have cut 760,000 jobs so far this year. The jobless rate in September held at a five-year high of 6.1 percent, the Labor Department said this month.
More firings, particular in the financial field, may be on the way. Hedge funds could cut as many as 10,000 jobs by the end of the year, according to estimates by Options Group, a New York-based financial-recruiting firm.
``It's bad out there,'' Chief Executive Officer Michael Karp, whose firm has tracked hedge-fund hiring since 1995, said last week in an interview. ``Generating returns is not easy at the moment, and as the funds look to cut costs, the best way is to let go of people.''
Bloomberg Survey
===============================================================
Release Period Prior Median
Indicator Date Value Forecast
===============================================================
LEI MOM% 10/20 Sept. -0.5% -0.1%
Initial Claims ,000's 10/23 Oct. 11 461 465
Cont. Claims ,000's 10/23 Oct. 4 3711 3695
Exist Homes Mlns 10/24 Sept. 4.91 4.95
Exist Homes MOM% 10/24 Aug. -2.2% 0.8%
===============================================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Read more...
Fire on North Sea Oil Rig Prompts Evacuation of 34 Crew Members
By Abigail Moses
Oct. 19 (Bloomberg) -- Thirty-four people were evacuated from an oil rig in the North Sea after a fire broke out late yesterday.
The Humber Coastguard transferred 34 of 79 crew members to a standby vessel after a report of smoke in the accommodation area at 10:45 p.m. last night, the U.K. Maritime & Coastguard Agency said in a statement on its Web site today. The fire was later put out and the well head has not been affected, the statement said.
The jack-up rig, called Energy Enhancer, is owned by Norwegian drilling company Northern Offshore Ltd. and was operating on the Esmond field as part of an appraisal for Star Energy Group Plc, Barry Hedges, a spokesman for Star Energy, said in a phone interview.
The rig is located 73 miles east of Whitby, northern England.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Thirty-four people were evacuated from an oil rig in the North Sea after a fire broke out late yesterday.
The Humber Coastguard transferred 34 of 79 crew members to a standby vessel after a report of smoke in the accommodation area at 10:45 p.m. last night, the U.K. Maritime & Coastguard Agency said in a statement on its Web site today. The fire was later put out and the well head has not been affected, the statement said.
The jack-up rig, called Energy Enhancer, is owned by Norwegian drilling company Northern Offshore Ltd. and was operating on the Esmond field as part of an appraisal for Star Energy Group Plc, Barry Hedges, a spokesman for Star Energy, said in a phone interview.
The rig is located 73 miles east of Whitby, northern England.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net
Read more...
Travelodge Joins Aldi to Develop Joint Hotel, Supermarket Sites
By Lenka Ponikelska
Oct. 19 (Bloomberg) -- Travelodge Hotels Ltd., the U.K. budget hotelier owned by Dubai International Capital LLC, has teamed with German retailer Aldi Group to develop joint supermarket and hotel sites in the U.K.
Travelodge will develop a 74-bed hotel above Aldi's store in Newquay, which is expected to open in autumn 2009, Travelodge said in an e-mailed statement today. It is due to open another hotel with 55 beds adjacent to Aldi's site in Middlesbrough at the end of November.
Travelodge will invest 2 million pounds ($3.5 million) in the Middlesbrough project and 2.9 million pounds at Newquay. The hotelier said it will recruit 20 employees for each site.
``By developing sites together with Aldi, we are sending a clear signal that the budget sector in the U.K. is going to make the most of the opportunities presented in the economic downturn,'' Travelodge Managing Director for Development Paul Harvey said in the statement. ``The credit crunch is freeing up sites for development that previously would not have been viable for either of us.''
Aldi, based in Essen, Germany, owns the freehold of both sites and Travelodge will take a lease, according to the statement.
To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Travelodge Hotels Ltd., the U.K. budget hotelier owned by Dubai International Capital LLC, has teamed with German retailer Aldi Group to develop joint supermarket and hotel sites in the U.K.
Travelodge will develop a 74-bed hotel above Aldi's store in Newquay, which is expected to open in autumn 2009, Travelodge said in an e-mailed statement today. It is due to open another hotel with 55 beds adjacent to Aldi's site in Middlesbrough at the end of November.
Travelodge will invest 2 million pounds ($3.5 million) in the Middlesbrough project and 2.9 million pounds at Newquay. The hotelier said it will recruit 20 employees for each site.
``By developing sites together with Aldi, we are sending a clear signal that the budget sector in the U.K. is going to make the most of the opportunities presented in the economic downturn,'' Travelodge Managing Director for Development Paul Harvey said in the statement. ``The credit crunch is freeing up sites for development that previously would not have been viable for either of us.''
Aldi, based in Essen, Germany, owns the freehold of both sites and Travelodge will take a lease, according to the statement.
To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net
Read more...
Bush to Host First in Series of Summits on Financial Crisis
By Roger Runningen and Gregory Viscusi
Oct. 19 (Bloomberg) -- The leaders of the U.S., France and the European Commission will ask other world leaders to join in a series of summits on the global financial crisis beginning in the U.S. soon after the Nov. 4 presidential election.
President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement after meeting yesterday that they will continue pressing for coordination to address ``the challenges facing the global economy.''
The initial summit will seek ``agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future,'' and later meetings ``would be designed to implement agreement on specific steps to be taken to meet those principles,'' the statement said.
European leaders have pressed to convene an emergency meeting of the world's richest nations, known as the Group of Eight, joined by others such as India and China, to overhaul the world's financial regulatory systems. The meetings are to include developed economies as well as developing nations.
``The first task is to stabilize the financial markets in our own countries,'' Bush said in welcoming Sarkozy and Barroso to the Camp David presidential retreat in rural Maryland. ``Given that the world has never been more interconnected, it is essential that we work together because we're in this crisis together.''
Free Markets
He stressed that any steps to prevent future crises must maintain and strengthen the free-market system.
``It is essential we preserve the foundations of democratic capitalism,'' Bush said.
Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global ``early warning'' system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco.
Sarkozy and Barroso, in separate statements, welcomed Bush's offer to host the first summit.
``We want to work hand in hand with the Americans to create the capitalism of the 21st century,'' Sarkozy said. ``The meeting should be held rapidly, perhaps before the end of November. Since the crisis started in New York, maybe we can find the solution in New York.''
Need for Reform
Barroso said an ``unprecedented level of global coordination'' is needed to address market instability.
``The international financial system -- its basic principles and regulations and its institutions need reform. We need a new global financial order,'' he said.
U.S. Treasury Secretary Henry Paulson and French Finance Minister Christine Lagarde also attended tonight's meeting at Camp David.
United Nations Secretary-General Ban Ki-moon today offered to host a summit at UN headquarters in New York City by early December.
The leaders decided to pursue a series of summits because the task was too ambitious to be dealt with in a single meeting, White House spokesman Tony Fratto told reporters later.
It was ``a reasonable expectation'' that the first summit would be scheduled for November though ``not necessarily'' in New York, he said. Fratto didn't name a location and said there are numerous logistics hurdles in bringing together ``a large number of countries in a very short time.''
He said it was ``premature'' to say whether a second summit would be held before Bush left office in three months.
Banking Regulation
British Prime Minister Gordon Brown is pushing for greater cross-border oversight of the global financial system. He has said each of the world's top 30 banks should be under the supervision of a panel of regulators from the countries where those institutions do business.
``The reform of the international financial system is not only necessary to prevent a crisis happening again, it is essential to end the current crisis,'' Brown said on Oct. 16.
Bush, 62, has cautioned that any revamping must not restrict the flow of trade and investment or set a path toward protectionism. The G8 nations are Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. The U.S. hasn't committed itself to the sweeping terms of Europe's agenda, White House press secretary Dana Perino said yesterday.
``There are other countries that are going to have ideas, as well,'' she said.
To contact the reporters on this story: Roger Runningen at Camp David rrunningen@bloomberg.net; Gregory Viscusi at Camp David at gviscusi@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- The leaders of the U.S., France and the European Commission will ask other world leaders to join in a series of summits on the global financial crisis beginning in the U.S. soon after the Nov. 4 presidential election.
President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement after meeting yesterday that they will continue pressing for coordination to address ``the challenges facing the global economy.''
The initial summit will seek ``agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future,'' and later meetings ``would be designed to implement agreement on specific steps to be taken to meet those principles,'' the statement said.
European leaders have pressed to convene an emergency meeting of the world's richest nations, known as the Group of Eight, joined by others such as India and China, to overhaul the world's financial regulatory systems. The meetings are to include developed economies as well as developing nations.
``The first task is to stabilize the financial markets in our own countries,'' Bush said in welcoming Sarkozy and Barroso to the Camp David presidential retreat in rural Maryland. ``Given that the world has never been more interconnected, it is essential that we work together because we're in this crisis together.''
Free Markets
He stressed that any steps to prevent future crises must maintain and strengthen the free-market system.
``It is essential we preserve the foundations of democratic capitalism,'' Bush said.
Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global ``early warning'' system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco.
Sarkozy and Barroso, in separate statements, welcomed Bush's offer to host the first summit.
``We want to work hand in hand with the Americans to create the capitalism of the 21st century,'' Sarkozy said. ``The meeting should be held rapidly, perhaps before the end of November. Since the crisis started in New York, maybe we can find the solution in New York.''
Need for Reform
Barroso said an ``unprecedented level of global coordination'' is needed to address market instability.
``The international financial system -- its basic principles and regulations and its institutions need reform. We need a new global financial order,'' he said.
U.S. Treasury Secretary Henry Paulson and French Finance Minister Christine Lagarde also attended tonight's meeting at Camp David.
United Nations Secretary-General Ban Ki-moon today offered to host a summit at UN headquarters in New York City by early December.
The leaders decided to pursue a series of summits because the task was too ambitious to be dealt with in a single meeting, White House spokesman Tony Fratto told reporters later.
It was ``a reasonable expectation'' that the first summit would be scheduled for November though ``not necessarily'' in New York, he said. Fratto didn't name a location and said there are numerous logistics hurdles in bringing together ``a large number of countries in a very short time.''
He said it was ``premature'' to say whether a second summit would be held before Bush left office in three months.
Banking Regulation
British Prime Minister Gordon Brown is pushing for greater cross-border oversight of the global financial system. He has said each of the world's top 30 banks should be under the supervision of a panel of regulators from the countries where those institutions do business.
``The reform of the international financial system is not only necessary to prevent a crisis happening again, it is essential to end the current crisis,'' Brown said on Oct. 16.
Bush, 62, has cautioned that any revamping must not restrict the flow of trade and investment or set a path toward protectionism. The G8 nations are Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. The U.S. hasn't committed itself to the sweeping terms of Europe's agenda, White House press secretary Dana Perino said yesterday.
``There are other countries that are going to have ideas, as well,'' she said.
To contact the reporters on this story: Roger Runningen at Camp David rrunningen@bloomberg.net; Gregory Viscusi at Camp David at gviscusi@bloomberg.net
Read more...
Sabic Drops 8.7% After Third-Quarter Net Declines
By Glen Carey
Oct. 19 (Bloomberg) -- Saudi Basic Industries Corp., the biggest company in the Persian Gulf by market value, fell as much as 9 percent in Riyadh trading after reporting its first decline in quarterly profit in more than two years.
Sabic retreated 8.7 percent to 86.75 riyals, valuing the company at 260.3 billion riyals ($69 billion). Sabic, which is 70 percent owned by the Saudi government, has dropped 18 percent in the past two days and 48 percent this year.
Third-quarter net income declined to 7.24 billion riyals from 7.4 billion riyals a year earlier, Riyadh-based Sabic said yesterday after the market closed. The chemical maker was expected to report a 6.8 percent rise to 7.9 billion riyals, according to the average of three analyst estimates compiled by Bloomberg.
``What hurts Sabic is the bad economic environment in Europe and the U.S.,'' Laurent Gally, an industry analyst at Dubai-based Shuaa Capital PSC, said today in a phone interview in Dubai. ``Demand for steel is also slowing significantly in Saudi Arabia.''
The global economic crisis may reduce demand for Sabic products after it expanded in the U.S. and China. Last year, it bought the plastics business of General Electric Co. for $11.6 billion. The purchase, the largest by a Gulf-based company, added a network of factories making resins and thermoplastic sheets used in cars, roofs and lighting just as the auto and construction industries cut output.
Expansion
``The expected global recession may lead to a decline in demand for products in most of the international markets,'' Chief Executive Officer Mohamed al-Mady said yesterday.
Sabic's expansion in the U.S. has come at a time when General Motors Corp. and Ford Motor Co. are cutting costs and paring output after each lost at least 17 percent in U.S. sales this year. Debt markets have also seized up as the U.S. housing market suffers its worst slump since the Great Depression.
In Saudi Arabia, Sabic has lowered its reinforced steel prices as of today by 1,245 riyals a ton ($330.72), bringing the reduction to 43 percent since September.
``Some construction companies may not be able to buy the steel because they are having financing problems,'' Gally said. ``The steel division's contribution to Sabic earnings is going to slow significantly.''
Saudi Arabian Fertilizer Co., which is 43 percent owned by Sabic, declined 9.9 percent to 143 riyals in Riyadh, valuing the company at 35.8 billion riyals.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
Oct. 19 (Bloomberg) -- Saudi Basic Industries Corp., the biggest company in the Persian Gulf by market value, fell as much as 9 percent in Riyadh trading after reporting its first decline in quarterly profit in more than two years.
Sabic retreated 8.7 percent to 86.75 riyals, valuing the company at 260.3 billion riyals ($69 billion). Sabic, which is 70 percent owned by the Saudi government, has dropped 18 percent in the past two days and 48 percent this year.
Third-quarter net income declined to 7.24 billion riyals from 7.4 billion riyals a year earlier, Riyadh-based Sabic said yesterday after the market closed. The chemical maker was expected to report a 6.8 percent rise to 7.9 billion riyals, according to the average of three analyst estimates compiled by Bloomberg.
``What hurts Sabic is the bad economic environment in Europe and the U.S.,'' Laurent Gally, an industry analyst at Dubai-based Shuaa Capital PSC, said today in a phone interview in Dubai. ``Demand for steel is also slowing significantly in Saudi Arabia.''
The global economic crisis may reduce demand for Sabic products after it expanded in the U.S. and China. Last year, it bought the plastics business of General Electric Co. for $11.6 billion. The purchase, the largest by a Gulf-based company, added a network of factories making resins and thermoplastic sheets used in cars, roofs and lighting just as the auto and construction industries cut output.
Expansion
``The expected global recession may lead to a decline in demand for products in most of the international markets,'' Chief Executive Officer Mohamed al-Mady said yesterday.
Sabic's expansion in the U.S. has come at a time when General Motors Corp. and Ford Motor Co. are cutting costs and paring output after each lost at least 17 percent in U.S. sales this year. Debt markets have also seized up as the U.S. housing market suffers its worst slump since the Great Depression.
In Saudi Arabia, Sabic has lowered its reinforced steel prices as of today by 1,245 riyals a ton ($330.72), bringing the reduction to 43 percent since September.
``Some construction companies may not be able to buy the steel because they are having financing problems,'' Gally said. ``The steel division's contribution to Sabic earnings is going to slow significantly.''
Saudi Arabian Fertilizer Co., which is 43 percent owned by Sabic, declined 9.9 percent to 143 riyals in Riyadh, valuing the company at 35.8 billion riyals.
To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.
Read more...
Kuwait Averts Refinery Strike After Agreement With Oil Workers
By Fiona MacDonald
Oct. 19 (Bloomberg) -- Kuwait National Petroleum Co., the state-run refiner, averted a strike at its three refineries today after oil workers reached an agreement with authorities on equal rights.
``An agreement was reached at 1:00 this morning and the strike has been stopped,'' Mohammed al-Hamlan, deputy president of the KNPC Labor Syndicate, said in a phone interview today. The refinery employees will resume duty as normal, he said.
Workers had threatened to shut down Kuwait's three refineries and disrupt exports over demands for equal pay and rights as colleagues in the same jobs in other companies under the umbrella of state-run Kuwait Petroleum Corp.
KNPC Deputy Chairman Asaad al-Saad said Oct. 16 the company had an ``alternative plan'' to ensure the refineries and exports suffer minimum impact by the strike.
Kuwait's three refineries, Mina Abdullah, Mina Al-Ahmadi and Shuaiba, have a total capacity of 936,000 barrels a day. Kuwait is the fourth-largest oil producer in the Organization of Petroleum Exporting Countries.
To contact the reporter on this story: Fiona MacDonald in Kuwait at FmacDonald4@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Kuwait National Petroleum Co., the state-run refiner, averted a strike at its three refineries today after oil workers reached an agreement with authorities on equal rights.
``An agreement was reached at 1:00 this morning and the strike has been stopped,'' Mohammed al-Hamlan, deputy president of the KNPC Labor Syndicate, said in a phone interview today. The refinery employees will resume duty as normal, he said.
Workers had threatened to shut down Kuwait's three refineries and disrupt exports over demands for equal pay and rights as colleagues in the same jobs in other companies under the umbrella of state-run Kuwait Petroleum Corp.
KNPC Deputy Chairman Asaad al-Saad said Oct. 16 the company had an ``alternative plan'' to ensure the refineries and exports suffer minimum impact by the strike.
Kuwait's three refineries, Mina Abdullah, Mina Al-Ahmadi and Shuaiba, have a total capacity of 936,000 barrels a day. Kuwait is the fourth-largest oil producer in the Organization of Petroleum Exporting Countries.
To contact the reporter on this story: Fiona MacDonald in Kuwait at FmacDonald4@bloomberg.net
Read more...
Amlak Finance, Tamweel Start Merger Talks With Dubai Government
By Arif Sharif
Oct. 19 (Bloomberg) -- Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates two biggest mortgage companies, are in merger talks with the government holding company that owns a controlling interest in both firms.
``All key stakeholders have reaffirmed their strong support for a potential combination of the two entities,'' the two Dubai-based companies said in a statement posted on the Dubai Financial Market Web site today after commencing negotiations with the Investment Corporation of Dubai.
The two lenders are also working with the government ``to arrange access to liquidity and funding alternatives, to the extent necessary, to fulfill ongoing business plans of the combined entity,'' the statement added.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates two biggest mortgage companies, are in merger talks with the government holding company that owns a controlling interest in both firms.
``All key stakeholders have reaffirmed their strong support for a potential combination of the two entities,'' the two Dubai-based companies said in a statement posted on the Dubai Financial Market Web site today after commencing negotiations with the Investment Corporation of Dubai.
The two lenders are also working with the government ``to arrange access to liquidity and funding alternatives, to the extent necessary, to fulfill ongoing business plans of the combined entity,'' the statement added.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
Read more...
Shuaa Falls After First-Half Loss, Lehman Writedown
By Arif Sharif
Oct. 19 (Bloomberg) -- Shuaa Capital PSC, the United Arab Emirates' biggest investment bank, fell 8.5 percent in Dubai trading after reporting a first-half loss and disclosing an unexpected exposure to bankrupt Lehman Brother Holdings Inc.
Shuaa dropped as much as 9.8 percent in early trading before recovering to close at 2.91 dirhams on the Dubai Financial Market. The benchmark index was up 0.4 percent.
Shuaa had a loss of 371.1 million dirhams ($101 million) in the six months to Sept. 30 compared with a profit of 128.6 million dirhams a year ago, it said Oct. 17. The Dubai-based company wrote down the value of its investments by 400.1 million dirhams due to the decline in global capital markets.
The company also had a write-down of 78.6 million dirhams on structured products and fixed-income securities that were exposed to Lehman Brothers, as well as a one-time provision of 45.8 million dirhams for its investments in brokerage services company Orion Holding Overseas SA, which it bought in February.
``We weren't expecting the exposure to Lehman Brothers and the provision for the Orion Holdings investment, and that was a negative surprise,'' Fadi al-Said, head of equities at ING Investment Management (Dubai) Ltd., said in a phone interview today. ``We know the size of their investment portfolio, and we were expecting the mark-to-market losses.''
Shuaa has equity of 3 billion dirhams and the reported loss can be absorbed within the company's retained earnings of 658 million dirhams, Iyad Duwaji, Shuaa's chief executive officer, said in the company's earnings statement. More than 75 percent of Shuaa's portfolio is invested in Gulf Arab countries and India and the performance of its portfolio outperformed the relevant indexes, it said.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Shuaa Capital PSC, the United Arab Emirates' biggest investment bank, fell 8.5 percent in Dubai trading after reporting a first-half loss and disclosing an unexpected exposure to bankrupt Lehman Brother Holdings Inc.
Shuaa dropped as much as 9.8 percent in early trading before recovering to close at 2.91 dirhams on the Dubai Financial Market. The benchmark index was up 0.4 percent.
Shuaa had a loss of 371.1 million dirhams ($101 million) in the six months to Sept. 30 compared with a profit of 128.6 million dirhams a year ago, it said Oct. 17. The Dubai-based company wrote down the value of its investments by 400.1 million dirhams due to the decline in global capital markets.
The company also had a write-down of 78.6 million dirhams on structured products and fixed-income securities that were exposed to Lehman Brothers, as well as a one-time provision of 45.8 million dirhams for its investments in brokerage services company Orion Holding Overseas SA, which it bought in February.
``We weren't expecting the exposure to Lehman Brothers and the provision for the Orion Holdings investment, and that was a negative surprise,'' Fadi al-Said, head of equities at ING Investment Management (Dubai) Ltd., said in a phone interview today. ``We know the size of their investment portfolio, and we were expecting the mark-to-market losses.''
Shuaa has equity of 3 billion dirhams and the reported loss can be absorbed within the company's retained earnings of 658 million dirhams, Iyad Duwaji, Shuaa's chief executive officer, said in the company's earnings statement. More than 75 percent of Shuaa's portfolio is invested in Gulf Arab countries and India and the performance of its portfolio outperformed the relevant indexes, it said.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
Read more...
Etisalat Shares Rise After Meeting Profit Estimates
By Matthew Brown
Oct. 19 (Bloomberg) -- Emirates Telecommunications Corp. shares rose as much as 5.1 percent in Abu Dhabi after earnings at the United Arab Emirates' largest telephone company met analysts' expectations.
Etisalat added 3.7 percent to close at 15.4 dirhams, after having risen as high as 15.6 dirhams in Abu Dhabi today. The Abu Dhabi Exchange General Index advanced 2.4 percent.
Etisalat's third-quarter net income increased 19 percent to 2.1 billion dirhams ($572 million), the company said yesterday, meeting the expectations of Shuaa Capital PJSC telecom analyst Simon Simonian, who has a ``buy'' rating on the shares with a target price of 26.2 dirhams.
``I'm really happy with the numbers,'' Simonian said in a telephone interview today. ``The subscriber numbers for the U.A.E. were particularly good, so at these levels the stock is very attractive.''
Etisalat's mobile-phone subscribers in the U.A.E. increased 11 percent to 7.05 million from the year-earlier period, the company said. Fixed-line subscribers now stand at 1.36 million and Internet subscribers at 1.08 million.
``They are defending their market share, and as the incumbent they have the bigger, higher-spending customers,'' Simonian said.
The company operates in 18 nations in Africa, Asia and the Middle East with total populations of about 1.6 billion.
To contact the reporter on this story: Matthew Brown in Dubai at mbrown42@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Emirates Telecommunications Corp. shares rose as much as 5.1 percent in Abu Dhabi after earnings at the United Arab Emirates' largest telephone company met analysts' expectations.
Etisalat added 3.7 percent to close at 15.4 dirhams, after having risen as high as 15.6 dirhams in Abu Dhabi today. The Abu Dhabi Exchange General Index advanced 2.4 percent.
Etisalat's third-quarter net income increased 19 percent to 2.1 billion dirhams ($572 million), the company said yesterday, meeting the expectations of Shuaa Capital PJSC telecom analyst Simon Simonian, who has a ``buy'' rating on the shares with a target price of 26.2 dirhams.
``I'm really happy with the numbers,'' Simonian said in a telephone interview today. ``The subscriber numbers for the U.A.E. were particularly good, so at these levels the stock is very attractive.''
Etisalat's mobile-phone subscribers in the U.A.E. increased 11 percent to 7.05 million from the year-earlier period, the company said. Fixed-line subscribers now stand at 1.36 million and Internet subscribers at 1.08 million.
``They are defending their market share, and as the incumbent they have the bigger, higher-spending customers,'' Simonian said.
The company operates in 18 nations in Africa, Asia and the Middle East with total populations of about 1.6 billion.
To contact the reporter on this story: Matthew Brown in Dubai at mbrown42@bloomberg.net
Read more...
Emirates NBD Third-Quarter Net Seen Rising by 50%: Week Ahead
By Arif Sharif
Oct. 19 (Bloomberg) -- Emirates NBD PJSC, the United Arab Emirates' biggest bank by assets, may say this week third-quarter profit jumped 50 percent, helped by benefits from a merger and higher lending in the second-biggest Arab economy.
Net income for the period ended Sept. 30 advanced to 978 million dirhams ($266 million), according to the median estimate of three analysts surveyed by Bloomberg. Forecasts ranged from 753 million dirhams by Global Investment House KSCC to 1.37 billion dirhams from Al Mal Capital LLC. Compared with the second-quarter this year, profit fell 36 percent.
``The bank has benefited from its size, retail footprint and enhanced product offerings - especially in syndicated loans,'' Deepak Tolani, a Dubai-based research analyst at brokerage Al Mal Capital, said in a report Oct. 12. ``We expect a slowdown in loans and deposit growth from the previous quarter although growth will be healthy on an annual basis.''
Emirates NBD was formed a year ago after its controlling shareholder, the Dubai government, merged Emirates Bank International PJSC and National Bank of Dubai PJSC to create the Persian Gulf's largest bank by assets. The combination was aimed at taking on competition from foreign rivals like Citigroup Inc. and HSBC Holdings Plc.
The region's largest lender achieved revenue benefits and cost savings of 200 million dirhams by the end of June as a result of the merger, 61 percent ahead of its 2008 target, the Dubai-based bank said July 22. Its first-half cost-to-income ratio declined to 37.4 percent from 38.8 percent last year.
Investments Hurt
Third-quarter earnings may be hurt by a ``significant downward revaluation'' of the bank's shares and bonds portfolio, the largest among U.A.E. lenders, Raj Madha, an analyst at EFG- Hermes Holding SAE, said in a report Oct. 14. The Dubai Financial Market index fell 24 percent in the third quarter and the Abu Dhabi market by 20 percent. Bond spreads have ballooned, suggesting bond values declined, it added.
Dubai, one of the U.A.E.'s seven emirates, is building projects like the $33 billion Jebel Ali airport that will be the world's biggest, and the $54 billion Bawadi, a Las Vegas-like entertainment strip. Projects like these are boosting demand for loans and propelling bank earnings.
Emirates NBD's loans at the end of June jumped 42 percent from a year ago, just short of industry growth of 49 percent.
In the third quarter, loan growth is estimated to have slowed ``sharply'' and funding costs risen, as the outlook for the banking industry changed ``rapidly'' from ``excess liquidity to a period of restricted liquidity,'' in part due to the global credit crisis, the EFG-Hermes report said.
``Overall, we expect poor third-quarter results,'' Madha said. ``We have concerns about potential losses from its syndicated lending portfolio'' adding to losses from the downward revision of the investment portfolio, he added.
Commercial Bank of Dubai PSC, another U.A.E. lender, said Oct. 15 quarterly net rose 20 percent to 261 million dirhams.
Markets Last Week
Five of the seven Gulf stock markets tracked by Bloomberg rose last week. Saudi Arabia's Tadawul All Share Index, the only measure in the region closed on Thursdays, jumped 11 percent. The Abu Dhabi Securities Market Index added 5 percent and benchmark indexes in Dubai and Oman gained 0.2 percent and 1 percent, respectively. Qatar's gauge also advanced.
Markets rallied early in the week, after the United Arab Emirates made more funds available to the banking industry and on U.S. government plans to invest $250 billion in banks. Dubai's index surged 22 percent in two days.
Gauges pared gains on speculation that the rescue measures won't prevent a global recession, curbing demand for the region's energy exports and slowing foreign investments.
Industries Qatar soared 11 percent to 124.6 riyals. The largest publicly traded company in the Persian Gulf emirate said third-quarter profit rose to 2.6 billion riyals ($714 million) from 1.35 billion riyals a year earlier.
The following is a list of events in the Gulf next week:
Emaar Properties third-quarter results Oct. 19
Al Ahli Bank third-quarter results Oct. 19
Qatar National Cement third-quarter results Oct. 19
International Islamic Bank third-quarter results Oct. 19
Qatar Gas Transport Co. third-quarter results Oct. 19
U.A.E. Middle East Capital Markets conference Oct. 20
World Carbon Emission Reduction Summit 2008 Oct. 20
National Bank of Abu Dhabi third-quarter results Oct. 20
Qatar Telecom to announce third-quarter results Oct. 21
Doha Bank to announce third-quarter results Oct. 21
Emirates NBD third quarter results Oct. 22
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
Read more...
Emaar Third-Quarter Profit Falls on U.S. Writedown
By Shaji Mathew
Oct. 19 (Bloomberg) -- Emaar Properties PJSC, the Middle East's largest real-estate developer by market value, said third-quarter profit fell 3.3 percent as revenue declined and it had a $204 million write-off from its U.S. unit.
Net income dropped to 1.51 billion dirhams ($411 million), or 0.25 dirham a share, from 1.56 billion dirhams, or 0.26 dirham, a year earlier, Emaar said today. That compares with Citigroup Inc.'s estimate of 1.64 billion dirhams.
``Barring write-downs, Emaar earnings are pretty impressive,'' Robert Mckinnon, managing director of equity research at Al Mal Capital PSC, said today in a phone interview from Dubai. ``Going forward it'll be a tough operating environment for real-estate companies although Emaar may weather it by enhancing its recurring revenue in Dubai.''
The global credit crisis, which helped push the Dubai Financial Market Real-Estate Index down 29 percent in the third quarter, may end the emirate's six-year property boom, according to Morgan Stanley. That has encouraged Emaar to become less dependent on the Middle East by developing real estate in countries such as India, Egypt and Morocco.
Emaar wrote down 750 million dirhams related to John Laing Homes in the third quarter, compared with a write down of 165 million dirhams in the preceding quarter. Emaar bought the California-based company for $1.05 billion in 2006.
U.S. Write-Off
``Higher revenues from Dubai operations were offset by decreased revenue from John Laing Homes in the U.S.,'' Emaar said in a statement. ``The write-off was considered prudent in view of the current challenging times for all businesses, especially the financial and real estate sector in the U.S.''
The results were published after the Dubai market closed. Emaar gained 4 fils, or 0.7 percent, to 5.56 dirhams today, valuing the company at 33.9 billion dirhams. Emaar has plunged 63 percent this year, compared with a 59 percent decline in Dubai Financial Market Real Estate Index.
Developers will find it harder to borrow money as property prices in Dubai fall by an estimated 10 percent through 2009, according to Morgan Stanley. Residential property prices will probably peak in the first half of next year before starting to decline thereafter, according to EFG-Hermes Holding SAE.
Growth at Home
``We are very confident of our company's fundamentals and future growth, which is reflected in our decision to pursue the share buyback,'' Chairman Mohammed Ali Alabbar said in the statement. The Dubai-based developer has pledged to start buying 10 percent of its shares this month.
Emaar, the Dubai-based company that's building the world's tallest tower in the emirate, said revenue declined to 4.32 billion dirhams from 4.52 billion dirhams. Other income fell to 191 million dirhams from 318 million dirhams. Its biggest shareholder is the Dubai government.
The company's projects in the sheikhdom, the second largest in the United Arab Emirates, include six hotels, a theme park and 1,200 apartments as part of the Las Vegas-style Bawadi project in the desert outside the city.
``I think generally you will see some revisions downward on estimates on the medium-term to long-term numbers to reflect the changes in the business environment,'' said Ali Khan, head of equity trading at Dubai's Arqaam Capital Ltd.
To contact the reporter on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net.
Read more...
Oct. 19 (Bloomberg) -- Emaar Properties PJSC, the Middle East's largest real-estate developer by market value, said third-quarter profit fell 3.3 percent as revenue declined and it had a $204 million write-off from its U.S. unit.
Net income dropped to 1.51 billion dirhams ($411 million), or 0.25 dirham a share, from 1.56 billion dirhams, or 0.26 dirham, a year earlier, Emaar said today. That compares with Citigroup Inc.'s estimate of 1.64 billion dirhams.
``Barring write-downs, Emaar earnings are pretty impressive,'' Robert Mckinnon, managing director of equity research at Al Mal Capital PSC, said today in a phone interview from Dubai. ``Going forward it'll be a tough operating environment for real-estate companies although Emaar may weather it by enhancing its recurring revenue in Dubai.''
The global credit crisis, which helped push the Dubai Financial Market Real-Estate Index down 29 percent in the third quarter, may end the emirate's six-year property boom, according to Morgan Stanley. That has encouraged Emaar to become less dependent on the Middle East by developing real estate in countries such as India, Egypt and Morocco.
Emaar wrote down 750 million dirhams related to John Laing Homes in the third quarter, compared with a write down of 165 million dirhams in the preceding quarter. Emaar bought the California-based company for $1.05 billion in 2006.
U.S. Write-Off
``Higher revenues from Dubai operations were offset by decreased revenue from John Laing Homes in the U.S.,'' Emaar said in a statement. ``The write-off was considered prudent in view of the current challenging times for all businesses, especially the financial and real estate sector in the U.S.''
The results were published after the Dubai market closed. Emaar gained 4 fils, or 0.7 percent, to 5.56 dirhams today, valuing the company at 33.9 billion dirhams. Emaar has plunged 63 percent this year, compared with a 59 percent decline in Dubai Financial Market Real Estate Index.
Developers will find it harder to borrow money as property prices in Dubai fall by an estimated 10 percent through 2009, according to Morgan Stanley. Residential property prices will probably peak in the first half of next year before starting to decline thereafter, according to EFG-Hermes Holding SAE.
Growth at Home
``We are very confident of our company's fundamentals and future growth, which is reflected in our decision to pursue the share buyback,'' Chairman Mohammed Ali Alabbar said in the statement. The Dubai-based developer has pledged to start buying 10 percent of its shares this month.
Emaar, the Dubai-based company that's building the world's tallest tower in the emirate, said revenue declined to 4.32 billion dirhams from 4.52 billion dirhams. Other income fell to 191 million dirhams from 318 million dirhams. Its biggest shareholder is the Dubai government.
The company's projects in the sheikhdom, the second largest in the United Arab Emirates, include six hotels, a theme park and 1,200 apartments as part of the Las Vegas-style Bawadi project in the desert outside the city.
``I think generally you will see some revisions downward on estimates on the medium-term to long-term numbers to reflect the changes in the business environment,'' said Ali Khan, head of equity trading at Dubai's Arqaam Capital Ltd.
To contact the reporter on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net.
Read more...
U.A.E. Shares Gain on Etisalat Earnings; Saudi's Index Retreats
By Haris Anwar
Oct. 19 (Bloomberg) -- U.A.E. shares rose for the first time in three days as Emirates Telecommunications Corp. reported an increase in third-quarter earnings, boosting sentiment. Saudi Arabia's Index declined.
Etisalat, the largest telecom company in the United Arab Emirates, advanced after saying profit increased 19 percent. Gulf General Investment Co., an investment company, jumped the most since Oct. 14. Emaar Properties PJSC gained for the first time in three days.
The Abu Dhabi Securities Exchange General Index rose 2.4 percent to 3,446.76. The measure slumped 6.5 percent in the previous two days. The Dubai Financial Market General Index added 0.4 percent.
``We can expect a short-lived rally today,'' said Reda Gomaa, portfolio manager at Mashreq Bank PSC's asset-management arm in Dubai. ``Some of the companies have reported good earnings, and that may shift sentiment to the positive side for a while.''
Etisalat gained 3.7 percent to 15.4 dirhams. The company said third-quarter net income rose to 2.1 billion dirhams ($571.7 million) as it added subscribers.
Saudi's Drop
Gulf General added 8.6 percent to 7.98 dirhams. Emaar, the Middle East's largest real-estate developer, rose 0.7 percent to 5.56 dirhams.
Saudi Arabia's Tadawul All Share Index lost 3.8 percent to 6,258.32, bringing the two-day slump to 8.8 percent.
Saudi Basic Industries Corp. dropped 8.7 percent to 86.75 riyals. The biggest company in the Persian Gulf by market value said third-quarter profit fell 2.2 percent from a year earlier, the first annual decline since the second quarter of 2006.
``Sabic earnings have disappointed some investors,'' Faisal Hasan, head of research at Global Investment House KSCC, said in a telephone interview from Kuwait. ``That's causing some selling pressure on the Saudi market. I feel this market has seen a lot of battering these days, and we're getting close to the bottom.''
The Kuwait Stock Exchange Index dropped 2.7 percent and Oman's Muscat Securities Market 30 Index retreated 0.4 percent. In Qatar, the DSM 20 Index advanced 1.3 percent and the Bahrain All Share Index gained 0.4 percent.
The following stocks also rose or fell in the region. Stock symbols are in parentheses after company names:
Al-Khaleej Insurance & Reinsurance Co. (AKHI QD): The Qatari provider of non-life cover surged 5.1 percent to 55.8 riyals after it said nine-month profit doubled to 108.6 million riyals ($30 million).
Oman United Insurance Co. (OUIS OM), the Gulf state's second-biggest insurer, lost 5.2 percent to 0.202 rial as it posted a 27 percent decline in nine-month profit.
Shuaa Capital PSC (SHUAA UH), the biggest investment bank in the U.A.E., tumbled 8.5 percent to 2.91 dirhams after posting a loss in the first half.
United Industries Co. (UIC KK), an industrial investment unit of Kuwait Projects Co., plunged 6 percent to 158 fils after reporting a loss of 200,492 dinars ($752,177) in the third quarter.
To contact the reporter on this story Haris Anwar in Dubai on Hanwar2@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- U.A.E. shares rose for the first time in three days as Emirates Telecommunications Corp. reported an increase in third-quarter earnings, boosting sentiment. Saudi Arabia's Index declined.
Etisalat, the largest telecom company in the United Arab Emirates, advanced after saying profit increased 19 percent. Gulf General Investment Co., an investment company, jumped the most since Oct. 14. Emaar Properties PJSC gained for the first time in three days.
The Abu Dhabi Securities Exchange General Index rose 2.4 percent to 3,446.76. The measure slumped 6.5 percent in the previous two days. The Dubai Financial Market General Index added 0.4 percent.
``We can expect a short-lived rally today,'' said Reda Gomaa, portfolio manager at Mashreq Bank PSC's asset-management arm in Dubai. ``Some of the companies have reported good earnings, and that may shift sentiment to the positive side for a while.''
Etisalat gained 3.7 percent to 15.4 dirhams. The company said third-quarter net income rose to 2.1 billion dirhams ($571.7 million) as it added subscribers.
Saudi's Drop
Gulf General added 8.6 percent to 7.98 dirhams. Emaar, the Middle East's largest real-estate developer, rose 0.7 percent to 5.56 dirhams.
Saudi Arabia's Tadawul All Share Index lost 3.8 percent to 6,258.32, bringing the two-day slump to 8.8 percent.
Saudi Basic Industries Corp. dropped 8.7 percent to 86.75 riyals. The biggest company in the Persian Gulf by market value said third-quarter profit fell 2.2 percent from a year earlier, the first annual decline since the second quarter of 2006.
``Sabic earnings have disappointed some investors,'' Faisal Hasan, head of research at Global Investment House KSCC, said in a telephone interview from Kuwait. ``That's causing some selling pressure on the Saudi market. I feel this market has seen a lot of battering these days, and we're getting close to the bottom.''
The Kuwait Stock Exchange Index dropped 2.7 percent and Oman's Muscat Securities Market 30 Index retreated 0.4 percent. In Qatar, the DSM 20 Index advanced 1.3 percent and the Bahrain All Share Index gained 0.4 percent.
The following stocks also rose or fell in the region. Stock symbols are in parentheses after company names:
Al-Khaleej Insurance & Reinsurance Co. (AKHI QD): The Qatari provider of non-life cover surged 5.1 percent to 55.8 riyals after it said nine-month profit doubled to 108.6 million riyals ($30 million).
Oman United Insurance Co. (OUIS OM), the Gulf state's second-biggest insurer, lost 5.2 percent to 0.202 rial as it posted a 27 percent decline in nine-month profit.
Shuaa Capital PSC (SHUAA UH), the biggest investment bank in the U.A.E., tumbled 8.5 percent to 2.91 dirhams after posting a loss in the first half.
United Industries Co. (UIC KK), an industrial investment unit of Kuwait Projects Co., plunged 6 percent to 158 fils after reporting a loss of 200,492 dinars ($752,177) in the third quarter.
To contact the reporter on this story Haris Anwar in Dubai on Hanwar2@bloomberg.net
Read more...
Pakistan, Facing Debt Default, May Seek IMF Bailout
By Khaleeq Ahmed
Oct. 19 (Bloomberg) -- Pakistan, perceived as the world's riskiest borrower, may seek the help of the International Monetary Fund to avoid default on its debt obligations, said Shaukat Tarin, financial adviser to the prime minister.
The South Asian country may need as much as $6 billion to shore up its foreign-currency reserves after they dwindled more than 74 percent in the past year to about $4.3 billion. Pakistan has $3 billion in debt servicing costs in the coming year. Standard & Poor's, doubting the nation's ability to repay debt, cut the long-term foreign-currency rating on Oct. 6 to seven levels below investment grade, and said it may lower it again.
Pakistan may need as much as $4.5 billion to tide over the crisis and is working on a few plans, including seeking loans from the World Bank, the Asian Development Bank and U.K.'s Department for International Development, Tarin said in an interview today.
``If I don't feel the comfort level with the multilateral agencies and our bilateral friends in three to four weeks, then I'll have to write to the IMF,'' he said via mobile phone. A default is ``out of the question.''
A delegation from Pakistan will meet IMF officials in Dubai tomorrow and Oct. 21 for a ``routine economic review,'' he said. Pakistan has already presented its economic stabilization plan to the IMF, including removal of subsidies, tighter monetary policy and steps toward reducing the fiscal deficit, he said.
``If this plan is acceptable to them, only then we will have the IMF program,'' he said.
Record Low
Pakistan's next interest payment on its dollar-denominated bonds is due in December and the government is scheduled to repay $500 million in February on a 6.75 percent note. Multilateral and bilateral aid may not be timely enough, S&P said on Oct. 6. Surging import costs widened the nation's balance of payments deficit, sending the local currency to a record low last week.
The current economic crisis is the deepest faced by the nuclear-armed nation since 1999, when it came close to defaulting on its debt and reserves plunged to less than $1 billion. Pakistan ended its three-year, $1.5 billion loan program with the IMF in December 2004.
``The balance-of-payments position is grim as some short- term obligations are coming up,'' said Syed Suleman Akhtar, an economist at Foundation Securities Pvt. in Karachi. ``There's been no concrete commitment yet.''
China Rebuff
The global credit-market crisis triggered a capital outflow from emerging markets, with Pakistan's benchmark Karachi Stock Exchange KSE 100 Index losing more than a third of its value this year. The bourse kept trading restrictions in place and sought police protection to thwart a repeat of violence on July 16, when hundreds of protesters stoned the exchange and shouted anti-government slogans.
Pakistan faces the politically unpopular decision to seek an IMF bailout after China rebuffed its neighbor's request for cash, the New York Times reported yesterday. The U.S. and other nations are preoccupied with the financial crisis, and Saudi Arabia, a traditional ally, refused to offer oil concessions, the newspaper said.
China may offer a soft loan of $500 million to the nation, the Financial Times reported, citing a finance ministry official it didn't identify.
Pakistan has sought about $1.5 billion from the World Bank, $1.6 billion from ADB and about 500 million pounds ($864 million) from the U.K.'s DFID, apart from a request for $500 million from the Islamic Development Bank, Tarin said.
Widening Deficits
The South Asian country's balance of payments deficit widened to the quarter to Sept. 30 to $3.95 billion from $2.27 billion a year earlier, while the current-account deficit reached a record $14 billion in the year ended June 30, according to data provided by the government.
Credit-default swaps on Pakistan's $2.7 billion of dollar- denominated bonds outstanding have more than tripled since August to 2,453.7 basis points, according to CMA Datavision.
That means it costs $2.45 million annually to protect $10 million of the country's debt from default for five years. The cost reached a record $3.07 million on Oct. 6.
To contact the reporter on this story: Khaleeq Ahmed in Islamabad at paknews@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Pakistan, perceived as the world's riskiest borrower, may seek the help of the International Monetary Fund to avoid default on its debt obligations, said Shaukat Tarin, financial adviser to the prime minister.
The South Asian country may need as much as $6 billion to shore up its foreign-currency reserves after they dwindled more than 74 percent in the past year to about $4.3 billion. Pakistan has $3 billion in debt servicing costs in the coming year. Standard & Poor's, doubting the nation's ability to repay debt, cut the long-term foreign-currency rating on Oct. 6 to seven levels below investment grade, and said it may lower it again.
Pakistan may need as much as $4.5 billion to tide over the crisis and is working on a few plans, including seeking loans from the World Bank, the Asian Development Bank and U.K.'s Department for International Development, Tarin said in an interview today.
``If I don't feel the comfort level with the multilateral agencies and our bilateral friends in three to four weeks, then I'll have to write to the IMF,'' he said via mobile phone. A default is ``out of the question.''
A delegation from Pakistan will meet IMF officials in Dubai tomorrow and Oct. 21 for a ``routine economic review,'' he said. Pakistan has already presented its economic stabilization plan to the IMF, including removal of subsidies, tighter monetary policy and steps toward reducing the fiscal deficit, he said.
``If this plan is acceptable to them, only then we will have the IMF program,'' he said.
Record Low
Pakistan's next interest payment on its dollar-denominated bonds is due in December and the government is scheduled to repay $500 million in February on a 6.75 percent note. Multilateral and bilateral aid may not be timely enough, S&P said on Oct. 6. Surging import costs widened the nation's balance of payments deficit, sending the local currency to a record low last week.
The current economic crisis is the deepest faced by the nuclear-armed nation since 1999, when it came close to defaulting on its debt and reserves plunged to less than $1 billion. Pakistan ended its three-year, $1.5 billion loan program with the IMF in December 2004.
``The balance-of-payments position is grim as some short- term obligations are coming up,'' said Syed Suleman Akhtar, an economist at Foundation Securities Pvt. in Karachi. ``There's been no concrete commitment yet.''
China Rebuff
The global credit-market crisis triggered a capital outflow from emerging markets, with Pakistan's benchmark Karachi Stock Exchange KSE 100 Index losing more than a third of its value this year. The bourse kept trading restrictions in place and sought police protection to thwart a repeat of violence on July 16, when hundreds of protesters stoned the exchange and shouted anti-government slogans.
Pakistan faces the politically unpopular decision to seek an IMF bailout after China rebuffed its neighbor's request for cash, the New York Times reported yesterday. The U.S. and other nations are preoccupied with the financial crisis, and Saudi Arabia, a traditional ally, refused to offer oil concessions, the newspaper said.
China may offer a soft loan of $500 million to the nation, the Financial Times reported, citing a finance ministry official it didn't identify.
Pakistan has sought about $1.5 billion from the World Bank, $1.6 billion from ADB and about 500 million pounds ($864 million) from the U.K.'s DFID, apart from a request for $500 million from the Islamic Development Bank, Tarin said.
Widening Deficits
The South Asian country's balance of payments deficit widened to the quarter to Sept. 30 to $3.95 billion from $2.27 billion a year earlier, while the current-account deficit reached a record $14 billion in the year ended June 30, according to data provided by the government.
Credit-default swaps on Pakistan's $2.7 billion of dollar- denominated bonds outstanding have more than tripled since August to 2,453.7 basis points, according to CMA Datavision.
That means it costs $2.45 million annually to protect $10 million of the country's debt from default for five years. The cost reached a record $3.07 million on Oct. 6.
To contact the reporter on this story: Khaleeq Ahmed in Islamabad at paknews@bloomberg.net
Read more...
Caisse d'Epargne Board May Oust Top Managers After Its Loss
By Anne-Sylvaine Chassany and Jacqueline Simmons
Oct. 19 (Bloomberg) -- The supervisory board of Groupe Caisse d'Epargne, France's third-biggest consumer banking network, may decide to oust some top managers when it meets today on a 600 million-euro ($807 million) trading loss.
The board will seek to assign responsibility for the loss among the five executives who form the bank's management committee, including Chairman Charles Milhaud, Chief Executive Officer Nicolas Merindol and Head of Finance and Risks Julien Carmona, three people familiar with the situation said today.
A proprietary trading team of about six people incurred the loss on equity derivatives after exceeding authorized limits on size and risk, a Paris-based official at customer-owned Caisse d'Epargne said Oct. 17. The latest banking turmoil in France comes about nine months after Societe Generale SA suffered a 4.9 billion-euro loss from unauthorized bets by trader Jerome Kerviel, prompting questions about its risk management.
``I feel responsible,'' Caisse d'Epargne's Milhaud was quoted as saying today by the French Sunday newspaper Journal du Dimanche. He said the management board's decision earlier this year to stop proprietary trading had not been implemented.
The mutual bank may issue a press release after the board meeting, which will take place at 3 p.m. in Paris, Christine Francoise, a spokeswoman for Caisse d'Epargne said today.
The three people with knowledge of the board's agenda declined to be identified because it is confidential. Milhaud, Merindol and Carmona couldn't be reached for comment after messages left for them with their communications officers Jacques Charbit and Francoise were not returned.
`Absence of Responsibility'
The supervisory board will draw the consequences from the loss, Milhaud said, adding that he was informed on Oct. 13 of a deficit of about 100 million euros.
``We were in effect exposed to much, much more,'' Milhaud was quoted as saying. ``It was urgent to unwind all these trades very rapidly.''
French Finance Minister Christine Lagarde has called for an inquiry, while French President Nicolas Sarkozy said the loss demonstrated an ``absence of responsibility'' at the bank.
In the Societe Generale case, trader Kerviel, 31, amassed 50 billion euros in trading positions, concealed with fake hedges. His eight-person desk wasn't allowed to have positions totaling more than 125 million euros. Investigations into the losses pointed to failures in the risk management and supervision at France's second-biggest bank by market value.
Milhaud today was quoted by JDD as saying that the internal control systems failed at Caisse d'Epargne. France's Central Bank, the country's bank regulator, is investigating the losses at Caisse d'Epargne.
On Oct. 8, Groupe Caisse d'Epargne and Groupe Banque Populaire, which jointly control Natixis, announced plans to merge in a move that would create a network of 8,200 branches in France, second to Credit Agricole SA, and 17.5 billion euros of combined revenue.
Milhaud was quoted as saying he aims to complete an agreement on the merger this year, and that he would like to play an ``active role'' in the new entity.
To contact the reporter on this story: Anne-Sylvaine Chassany in Paris achassany@bloomberg.net Jacqueline Simmons in Paris at jackiem@bloomberg.net;
Read more...
Oct. 19 (Bloomberg) -- The supervisory board of Groupe Caisse d'Epargne, France's third-biggest consumer banking network, may decide to oust some top managers when it meets today on a 600 million-euro ($807 million) trading loss.
The board will seek to assign responsibility for the loss among the five executives who form the bank's management committee, including Chairman Charles Milhaud, Chief Executive Officer Nicolas Merindol and Head of Finance and Risks Julien Carmona, three people familiar with the situation said today.
A proprietary trading team of about six people incurred the loss on equity derivatives after exceeding authorized limits on size and risk, a Paris-based official at customer-owned Caisse d'Epargne said Oct. 17. The latest banking turmoil in France comes about nine months after Societe Generale SA suffered a 4.9 billion-euro loss from unauthorized bets by trader Jerome Kerviel, prompting questions about its risk management.
``I feel responsible,'' Caisse d'Epargne's Milhaud was quoted as saying today by the French Sunday newspaper Journal du Dimanche. He said the management board's decision earlier this year to stop proprietary trading had not been implemented.
The mutual bank may issue a press release after the board meeting, which will take place at 3 p.m. in Paris, Christine Francoise, a spokeswoman for Caisse d'Epargne said today.
The three people with knowledge of the board's agenda declined to be identified because it is confidential. Milhaud, Merindol and Carmona couldn't be reached for comment after messages left for them with their communications officers Jacques Charbit and Francoise were not returned.
`Absence of Responsibility'
The supervisory board will draw the consequences from the loss, Milhaud said, adding that he was informed on Oct. 13 of a deficit of about 100 million euros.
``We were in effect exposed to much, much more,'' Milhaud was quoted as saying. ``It was urgent to unwind all these trades very rapidly.''
French Finance Minister Christine Lagarde has called for an inquiry, while French President Nicolas Sarkozy said the loss demonstrated an ``absence of responsibility'' at the bank.
In the Societe Generale case, trader Kerviel, 31, amassed 50 billion euros in trading positions, concealed with fake hedges. His eight-person desk wasn't allowed to have positions totaling more than 125 million euros. Investigations into the losses pointed to failures in the risk management and supervision at France's second-biggest bank by market value.
Milhaud today was quoted by JDD as saying that the internal control systems failed at Caisse d'Epargne. France's Central Bank, the country's bank regulator, is investigating the losses at Caisse d'Epargne.
On Oct. 8, Groupe Caisse d'Epargne and Groupe Banque Populaire, which jointly control Natixis, announced plans to merge in a move that would create a network of 8,200 branches in France, second to Credit Agricole SA, and 17.5 billion euros of combined revenue.
Milhaud was quoted as saying he aims to complete an agreement on the merger this year, and that he would like to play an ``active role'' in the new entity.
To contact the reporter on this story: Anne-Sylvaine Chassany in Paris achassany@bloomberg.net Jacqueline Simmons in Paris at jackiem@bloomberg.net;
Read more...
New Times Scraps HK$10.3 Billion Argentina Oilfield Acquisition
By Patricia Kuo
Oct. 19 (Bloomberg) -- New Times Group Holdings Ltd., a Hong Kong-based property investor and financial services provider, said it canceled a proposed HK$10.3 billion ($1.3 billion) acquisition of oilfields in Argentina.
New Times plans to renegotiate the deal after an independent valuation found the oil concessions to be worth about $1.5 billion, compared with the $15 billion required under the agreement, the company said in a statement to the Hong Kong Stock Exchange today.
New Times made the announcement after its stock surged 16 percent on Oct. 17, the biggest increase in almost a month.
To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.
Read more...
Oct. 19 (Bloomberg) -- New Times Group Holdings Ltd., a Hong Kong-based property investor and financial services provider, said it canceled a proposed HK$10.3 billion ($1.3 billion) acquisition of oilfields in Argentina.
New Times plans to renegotiate the deal after an independent valuation found the oil concessions to be worth about $1.5 billion, compared with the $15 billion required under the agreement, the company said in a statement to the Hong Kong Stock Exchange today.
New Times made the announcement after its stock surged 16 percent on Oct. 17, the biggest increase in almost a month.
To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.
Read more...
China Will Allow Farmers to Lease, Swap Land to Spur Economy
By Dune Lawrence
Oct. 19 (Bloomberg) -- China's Communist Party will allow farmers to lease and exchange their land, as well as set up markets for such transactions, helping rural residents to raise money and moving the country closer to private land ownership.
The party will also encourage lenders to steer more credit to rural areas, according to a statement distributed by the official Xinhua News Agency.
The government is seeking to boost the efficiency of its agricultural sector and double the earnings of its 737.4 million rural residents by 2020. The average income of a rural resident was 4,140 yuan ($605) in 2007, less than a third of an urban counterpart, according to government statistics.
The move ``will unleash a lot of farmers' wealth hidden in the land,'' said Frank Gong, JPMorgan Chase & Co.'s Hong Kong- based chief China economist, in a telephone interview.
While farmers had limited rights to rent out or transfer land, today's statement lays a strong policy foundation and political endorsement of what was previously a gray area, Gong said. The move will encourage consumption by allowing farmers who move to urban areas to monetize their land and spend the funds in the cities where they live, according to Gong.
China's party leaders, who met Oct. 9-12 in Beijing, have made ``harmonious development'' a cornerstone of their policy, shorthand for addressing income disparity and uneven expansion in the world's fastest growing major economy. Unleashing the economic power of the rural population has taken on added importance as China faces a global slowdown.
``The unstable factors in the international economic environment are clearly increasing, and the impact on China is gradually appearing,'' China's cabinet said in a statement today. ``Our economic development possesses the capacity to resist risk and has strong vitality.''
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, has slumped 66 percent this year. Gross domestic product in the third quarter grew 9.7 percent from a year earlier, according to the median estimate of 12 economists surveyed by Bloomberg News, down from 10.1 percent in the previous three months. The data is due to be released tomorrow. The economy grew 11.9 percent in 2007.
The rural reforms announced today aren't enough to fend off the impact of the global financial crisis in the short term, according to Gong.
``For China to cushion the downside risk from the global financial crisis, I think they need to do more,'' said Gong. ``This is not going to be enough for the next six to 12 months.''
To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.netXiao Yu in Beijing on yxiao@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- China's Communist Party will allow farmers to lease and exchange their land, as well as set up markets for such transactions, helping rural residents to raise money and moving the country closer to private land ownership.
The party will also encourage lenders to steer more credit to rural areas, according to a statement distributed by the official Xinhua News Agency.
The government is seeking to boost the efficiency of its agricultural sector and double the earnings of its 737.4 million rural residents by 2020. The average income of a rural resident was 4,140 yuan ($605) in 2007, less than a third of an urban counterpart, according to government statistics.
The move ``will unleash a lot of farmers' wealth hidden in the land,'' said Frank Gong, JPMorgan Chase & Co.'s Hong Kong- based chief China economist, in a telephone interview.
While farmers had limited rights to rent out or transfer land, today's statement lays a strong policy foundation and political endorsement of what was previously a gray area, Gong said. The move will encourage consumption by allowing farmers who move to urban areas to monetize their land and spend the funds in the cities where they live, according to Gong.
China's party leaders, who met Oct. 9-12 in Beijing, have made ``harmonious development'' a cornerstone of their policy, shorthand for addressing income disparity and uneven expansion in the world's fastest growing major economy. Unleashing the economic power of the rural population has taken on added importance as China faces a global slowdown.
``The unstable factors in the international economic environment are clearly increasing, and the impact on China is gradually appearing,'' China's cabinet said in a statement today. ``Our economic development possesses the capacity to resist risk and has strong vitality.''
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, has slumped 66 percent this year. Gross domestic product in the third quarter grew 9.7 percent from a year earlier, according to the median estimate of 12 economists surveyed by Bloomberg News, down from 10.1 percent in the previous three months. The data is due to be released tomorrow. The economy grew 11.9 percent in 2007.
The rural reforms announced today aren't enough to fend off the impact of the global financial crisis in the short term, according to Gong.
``For China to cushion the downside risk from the global financial crisis, I think they need to do more,'' said Gong. ``This is not going to be enough for the next six to 12 months.''
To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.netXiao Yu in Beijing on yxiao@bloomberg.net
Read more...
China Construction Bank Nine-Month Profit Climbs 48%
By Patricia Kuo
Oct. 19 (Bloomberg) -- China Construction Bank Corp., the nation's second-biggest lender, said profit for the first nine months rose 48 percent.
Net income climbed to 84.6 billion yuan ($12.4 billion), or 0.36 yuan per share, from 57.1 billion yuan, or 0.25 yuan apiece, a year earlier, the Beijing-based bank said in a statement to the Hong Kong Stock Exchange today. The unaudited figures are based on Chinese accounting principles, it said.
The increase in profit is less than the 71 percent jump in net income the bank posted for the first half. The bank's Chief Financial Officer Pang Xiusheng said in August profit and lending growth at the nation's largest mortgage provider will slow in the second half as economic expansion weakens.
China's economy probably grew 9.7 percent in the third quarter this year, the slowest pace in almost four years, according to the media estimate of 12 economists surveyed by Bloomberg News. Growth has slowed for four consecutive quarters to 10.1 percent in the previous quarter.
China Construction said ``various businesses of the group have continued to maintain their trend of positive development,'' in the first three quarters of the year. A change in income tax rate also helped boost profit, it said.
Tighter lending margins and an increase in non-performing loans may cause Chinese banks to report a 7 percent decline in profit in 2009, according to Citigroup Inc.
To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.
Read more...
Oct. 19 (Bloomberg) -- China Construction Bank Corp., the nation's second-biggest lender, said profit for the first nine months rose 48 percent.
Net income climbed to 84.6 billion yuan ($12.4 billion), or 0.36 yuan per share, from 57.1 billion yuan, or 0.25 yuan apiece, a year earlier, the Beijing-based bank said in a statement to the Hong Kong Stock Exchange today. The unaudited figures are based on Chinese accounting principles, it said.
The increase in profit is less than the 71 percent jump in net income the bank posted for the first half. The bank's Chief Financial Officer Pang Xiusheng said in August profit and lending growth at the nation's largest mortgage provider will slow in the second half as economic expansion weakens.
China's economy probably grew 9.7 percent in the third quarter this year, the slowest pace in almost four years, according to the media estimate of 12 economists surveyed by Bloomberg News. Growth has slowed for four consecutive quarters to 10.1 percent in the previous quarter.
China Construction said ``various businesses of the group have continued to maintain their trend of positive development,'' in the first three quarters of the year. A change in income tax rate also helped boost profit, it said.
Tighter lending margins and an increase in non-performing loans may cause Chinese banks to report a 7 percent decline in profit in 2009, according to Citigroup Inc.
To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.
Read more...
Rudd Says Australia to `Act Early, Hard' on Economy
By Iain Wilson and Gemma Daley
Oct. 19 (Bloomberg) -- Australian Prime Minister Kevin Rudd says his government has tried to act ``early and hard'' to ensure the nation's economic growth is sustained at a time when the global financial system faces one of its biggest challenges.
``I want to make sure that I can say to myself that it's been tough, it's been hard, nothing's guaranteed but we've done everything that was logically possible at the time to keep this economy as strong as possible,'' Rudd said during a nationally televised town hall-style meeting broadcast tonight on Seven Network Ltd.'s Channel Seven.
The foray by Rudd, 51, into primetime caps a week in which the prime minister has taken center stage to sell his response to the turmoil roiling global financial markets. Earlier in the week, Rudd made the first national address by the country's leader since John Howard went before the nation in March, 2003, after U.S. forces began an attack on Iraq.
Tonight's appearance on Seven's ``Minding Your Money: An Audience With the Prime Minister'' was billed by the television channel as an opportunity for the Australian public to pose questions to Rudd on how they're supposed to cope with the biggest financial crisis since the Great Depression.
``When you know from what's happening around the world that there's going to be an impact on Australia, the best thing you can do is act early, act decisively, act hard,'' Rudd said when asked by an audience member whether his Labor government had gone far enough to stimulate the economy.
Busy Week
For Rudd, the past week has been a busy one, both in terms of his government's policy response to the financial crisis and for the public role the prime minister has adopted.
Rudd announced on Oct. 12, following a two-day crisis meeting with senior ministers in the Australian capital of Canberra, that the government would guarantee all deposits with institutions for the next three years. The government also promised to guarantee all ``term wholesale funding'' by Australian banks operating in international credit markets.
Two days later, Rudd said Australia will give pensioners, home buyers and families A$10.4 billion ($7.3 billion) as part of a spending package to bolster the nation's economy. Rudd's deputy prime minister, Julia Gillard, later told a Melbourne radio station the government is prepared to spend even more should the need arise.
`Define a Leader'
By the end of the week, Rudd promised at a meeting with some of Australia's most influential business leaders in Sydney to do ``whatever it takes'' to help the nation weather the worst of the spreading financial crisis.
``This will define him as a leader,'' Bob Gregory, an economics professor at Australian National University and a Reserve Bank of Australia Board member from 1985 to 1995, said from Canberra ahead of Rudd's television appearance tonight. ``So far, he has warned people about a crisis we are so far only feeling through the stock market.''
Rudd's appearance on Channel Seven tonight displaced ``The Outdoor Room,'' a gardening show hosted by Jamie Durie; tonight's program also faced stiff competition as it pitted the prime minister up against ``Australian Idol.''
In a lead-in before Rudd appeared alone on a stage adorned with a single chair and a blue-screen background, Channel Seven presenter David Koch dubbed the program an ``Australian television first.''
`Really Concerned'
``I became really concerned about a week or so ago, not because of anything happening in Australia with our banks and our financial system,'' Rudd said in response to the first question of the night. ``I was getting concerned about what was happening overseas and the wash-through effect to us.''
In recent appearances before the public, the prime minister has adopted a candid demeanor when explaining the current financial landscape and Australia's place within it.
During an address to the National Press Club on Oct. 15, the prime minister spoke of a ``day of reckoning'' for credit-rating agencies who had failed to adequately warn about the subprime credit crisis. Rudd had even more criticism for those who had most directly contributed to the crisis, saying ``obscene failures in corporate governance rewarded greed without any regard to the integrity of the financial system.''
Rescue Package
Rudd's A$10.4 billion rescue package will be funded through the 2008-09 budget surplus, forecast in May to be A$21.7 billion. Rudd said the government would release new budget forecasts in November and aimed to ``maintain the budget surplus over the course of the economic cycle.''
The Reserve Bank of Australia in August said the economy would expand 2 percent in 2008, slowing from 4.3 percent in the previous calendar year.
Federal Opposition Leader Malcolm Turnbull has criticized Rudd's response to the crisis, saying the Labor government hasn't fully addressed the ``consequences'' of its rescue package -- notably the impact of the guarantee on bank deposits to the short-term money markets.
``They aren't being transparent,'' Turnbull told ABC TV today, according to a story carried on the Sydney Morning Herald's Web site. ``They're not prepared to discuss the consequences of their actions.''
To contact the reporters on this story: Gemma Daley in Canberra at gdaley@bloomberg.net; Iain Wilson in Sydney at iwilson2@bloomberg.net
Read more...
Oct. 19 (Bloomberg) -- Australian Prime Minister Kevin Rudd says his government has tried to act ``early and hard'' to ensure the nation's economic growth is sustained at a time when the global financial system faces one of its biggest challenges.
``I want to make sure that I can say to myself that it's been tough, it's been hard, nothing's guaranteed but we've done everything that was logically possible at the time to keep this economy as strong as possible,'' Rudd said during a nationally televised town hall-style meeting broadcast tonight on Seven Network Ltd.'s Channel Seven.
The foray by Rudd, 51, into primetime caps a week in which the prime minister has taken center stage to sell his response to the turmoil roiling global financial markets. Earlier in the week, Rudd made the first national address by the country's leader since John Howard went before the nation in March, 2003, after U.S. forces began an attack on Iraq.
Tonight's appearance on Seven's ``Minding Your Money: An Audience With the Prime Minister'' was billed by the television channel as an opportunity for the Australian public to pose questions to Rudd on how they're supposed to cope with the biggest financial crisis since the Great Depression.
``When you know from what's happening around the world that there's going to be an impact on Australia, the best thing you can do is act early, act decisively, act hard,'' Rudd said when asked by an audience member whether his Labor government had gone far enough to stimulate the economy.
Busy Week
For Rudd, the past week has been a busy one, both in terms of his government's policy response to the financial crisis and for the public role the prime minister has adopted.
Rudd announced on Oct. 12, following a two-day crisis meeting with senior ministers in the Australian capital of Canberra, that the government would guarantee all deposits with institutions for the next three years. The government also promised to guarantee all ``term wholesale funding'' by Australian banks operating in international credit markets.
Two days later, Rudd said Australia will give pensioners, home buyers and families A$10.4 billion ($7.3 billion) as part of a spending package to bolster the nation's economy. Rudd's deputy prime minister, Julia Gillard, later told a Melbourne radio station the government is prepared to spend even more should the need arise.
`Define a Leader'
By the end of the week, Rudd promised at a meeting with some of Australia's most influential business leaders in Sydney to do ``whatever it takes'' to help the nation weather the worst of the spreading financial crisis.
``This will define him as a leader,'' Bob Gregory, an economics professor at Australian National University and a Reserve Bank of Australia Board member from 1985 to 1995, said from Canberra ahead of Rudd's television appearance tonight. ``So far, he has warned people about a crisis we are so far only feeling through the stock market.''
Rudd's appearance on Channel Seven tonight displaced ``The Outdoor Room,'' a gardening show hosted by Jamie Durie; tonight's program also faced stiff competition as it pitted the prime minister up against ``Australian Idol.''
In a lead-in before Rudd appeared alone on a stage adorned with a single chair and a blue-screen background, Channel Seven presenter David Koch dubbed the program an ``Australian television first.''
`Really Concerned'
``I became really concerned about a week or so ago, not because of anything happening in Australia with our banks and our financial system,'' Rudd said in response to the first question of the night. ``I was getting concerned about what was happening overseas and the wash-through effect to us.''
In recent appearances before the public, the prime minister has adopted a candid demeanor when explaining the current financial landscape and Australia's place within it.
During an address to the National Press Club on Oct. 15, the prime minister spoke of a ``day of reckoning'' for credit-rating agencies who had failed to adequately warn about the subprime credit crisis. Rudd had even more criticism for those who had most directly contributed to the crisis, saying ``obscene failures in corporate governance rewarded greed without any regard to the integrity of the financial system.''
Rescue Package
Rudd's A$10.4 billion rescue package will be funded through the 2008-09 budget surplus, forecast in May to be A$21.7 billion. Rudd said the government would release new budget forecasts in November and aimed to ``maintain the budget surplus over the course of the economic cycle.''
The Reserve Bank of Australia in August said the economy would expand 2 percent in 2008, slowing from 4.3 percent in the previous calendar year.
Federal Opposition Leader Malcolm Turnbull has criticized Rudd's response to the crisis, saying the Labor government hasn't fully addressed the ``consequences'' of its rescue package -- notably the impact of the guarantee on bank deposits to the short-term money markets.
``They aren't being transparent,'' Turnbull told ABC TV today, according to a story carried on the Sydney Morning Herald's Web site. ``They're not prepared to discuss the consequences of their actions.''
To contact the reporters on this story: Gemma Daley in Canberra at gdaley@bloomberg.net; Iain Wilson in Sydney at iwilson2@bloomberg.net
Read more...
S. Korea Backs $100 Billion in Debt to Calm Markets
By Kyung Bok Cho and William Sim
Oct. 19 (Bloomberg) -- South Korea will guarantee $100 billion in bank debts and supply lenders with $30 billion in dollars to stabilize its financial markets.
The government will provide tax benefits for long-term equity and bond investors, while the Bank of Korea will buy repurchasing agreements and government bonds to boost won liquidity, the heads of the finance ministry, central bank and financial regulator said in a statement from Seoul. Policy makers held an emergency meeting on Oct. 17 to hammer out the plan.
South Korea is struggling with Asia's worst-performing currency, a shortage of U.S. dollars and a stock market that has lost 38 percent this year. The guarantee on bank debts comes after Standard & Poor's said last week it may cut the credit ratings of the nation's largest lenders, which triggered the worst plunge in the won since the International Monetary Fund bailed the nation out in December 1997.
``They have to do that because the market was pushing them by attacking the Korean won,'' said V. Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer (Singapore) Ltd., part of Switzerland's biggest independent money manager for the wealthy. ``They know what the stakes are. The currency could completely careen out of proportion.''
The government and state-run lenders including Korea Development Bank will guarantee as much as $100 billion of external debt taken up by Korean banks from Oct. 20 to June 30 next year, according to today's statement. The guarantee is valid for three years.
`Allay Fears'
South Korea joins countries in Europe, along with Hong Kong and Australia, in providing state backing to banks to help fund lending amid a global financial crisis.
``We will take similar measures to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market,'' Finance Minister Kang Man Soo told reporters in Seoul, at a press briefing with central bank Governor Lee Seong Tae and Jun Kwang Woo, head of the Financial Services Commission.
S&P, in a report released Oct. 15, said South Korea's banks face a more than 50 percent chance the credit crunch could threaten their foreign-currency funding. Domestic lenders have $235.3 billion of foreign-currency liabilities, with about $32.7 billion due to mature in the fourth quarter, according to the Financial Supervisory Service.
Funding Loans
``Korea is one of the few banking systems in Asia where domestic deposits are insufficient to fund loans,'' Moody's Investors Service said in an Oct. 16 report. That's forced them to rely on the wholesale market for about 44 percent of their total funding, with international markets accounting for as much as 12 percent, the ratings company said.
Policy makers decided that a recapitalization of the nation's financial institutions or an expansion of deposit guarantees are ``not necessary.'' Still, the government will ``take proper actions'' should the need arise, according to the statement.
To boost the supply of U.S. dollars in the domestic market, South Korea will provide the banking industry with $30 billion from its foreign-exchange reserves, according to the statement. The government had already promised to supply a total of $15 billion to small firms and the swap market, while the Bank of Korea said on Oct. 17 it will change rules in the foreign- exchange swap market to increase banks' access to funds.
`Vicious Circle'
The U.S. financial crisis is making it more difficult for companies worldwide to secure dollars as banks hoard cash to meet their future funding needs. South Korea's currency and swap markets are experiencing a dollar shortage as local businesses, which expect the U.S. currency to strengthen against the won, don't want to sell their dollars yet.
``Providing dollar liquidity will stop the vicious circle of a shortage of dollars in banks and firms leading to a weaker won,'' said Lim Jiwon, a senior economist at JPMorgan Chase & Co. in Seoul.
Authorities will continue ``smoothing'' operations in the currency market to avoid ``extreme volatilities,'' the statement said.
To encourage long-term investing, the government will give tax benefits to investors who hold equity or corporate-bond funds for more than three years, today's statement said. The breaks include an exemption from taxes on dividends.
South Korea's benchmark Kospi stock index has lost 38 percent this year, heading for its first annual decline since 2002. The measure plunged 9.4 percent on Oct. 16, the biggest one-day fall since September 2001.
South Korea will inject 1 trillion won ($767 million) in Industrial Bank of Korea, the nation's biggest lender to small- and mid-sized businesses, by transferring its equity stakes in the state companies.
``The government has done what it can do at the moment to join global efforts to help stabilize the markets,'' said Seo Chul Soo, a fixed-income analyst at Daewoo Securities Co. in Seoul. ``More steps may be needed if the global markets remain unstable.''
To contact the reporters for this story: Kyung Bok Cho in Hong Kong at kcho7@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net
Read more...
Weekly Review and Outlook Markets Calmed Down but the Worst is Not Over Yet
| Market Overview | Written by ActionForex.com | Oct 18 08 22:41 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The forex markets stabilized last week after world leaders' pledges were followed by solid action plans. The fear of breakdown of the financial markets receded. However, such fear was replaced by the worry of deepening recession in the world economy, in particular after a string of poor economic data were released from the US. Rebound in the stock markets was strong but brief. Dollar and yen retreated but were both supported above key near term levels. The forex markets turned into a consolidation phase and will probably stay there for a while but there is no change in the medium term bullish outlook in dollar and yen yet. As pointed out during the week, the forex markets is closely correlated to the stock markets recently and will continue to remain so. DOW's rebound might be strong but the scale of the prior fall should be taken into perspective when considering the strength of the rebound. Last week's high in DOW was 9,794 and it was still limited below 50% retracement of the near term sharp decline from of 11,867 to 7,884 at 9,876. The current volatile price actions indicate that DOW merely developing into some sideway consolidation pattern, probably a triangle and thus, the down trend is not finished. Similar development will likely be seen in the forex markets too with dollar and yen pairs continuing to consolidate in near term. The rally in dollar and yen will likely resume as DOW breaks out. Looking ahead, two central banks, BoC and RBNZ are expected to cut rates again this week. Bernanke's testimony and BoE minutes will be closely watched as usual. Inflation data from Australia, New Zealand and Canada will be released but will probably have little impact to the markets. Focus will likely be on growth data including PMIs from Eurozone as well as retail sales and Q3 GDP in UK which would probably further solidify the case that the downturn in the global economy is accelerating. But again, the development in the stock markets will have the largest impact in the forex markets as the correlation continues.
Before last week started, European leaders announced a rescue plan that includes state guarantees on bank debts until the end of 2009 with maturities up to five years. The governments are allowed to recapitalize financial institutions by buying bank stakes with preference shares or other instruments. ECB also pledged to look at enlarging access to the system of guarantees to include commercial paper even though it doesn't have the legal power to do so yet. Germany later passed the bank rescue package which includes up to 400b euros in bank guarantees, 5% provision of losses and recapitalization funds up to 80b euros. France will create an entity to assist banks and guarantee limit will be up to 320b euros. Austria implemented a 100b euros rescue plan which provides support to the banking system mainly via guarantees while the government is also allowed to buy shares in Austrian banks. US government follows similar moves in Europe and said it will spend $250b into financial institutions. About half will be used to buy preferred shares of nine of the largest banks including Citigroup, Goldman Sachs, Wells Fargo, JPMorgan Chase, Bank of America, Merrill Lynch, Morgan Stanley, State Street Corp and Bank of New York Mellon group. Another $125b will be used to recapitalize probably thousands of other financial institutions in the country. FDIC will begin guaranteeing most new debts and offer insurance on non-interest bearing accounts used by small business for payrolls. Fed also announced to buy commercial paper on Oct 27. In addition, Fed said that ECB, BoE and SNB will conduct dollar auctions at maturities of 7, 28, 84 days at a fixed interest rate to offer financial institutions unlimited funds in response to demand on dollar loans. UK Government will invest 37B pounds in banks, including RBS, HBOS and Lloyds TSB, to boost their so called Tier One capital ratio to more than 9%. BoE also announced to implement three major reforms to improved market operations. Standing Facilities will be replaced by Operational Standing Facilities starting Oct 20 to "absorb technical problems and imbalances" in money market operations. There will be a discount window facility established that would allow banks to borrow from the government to improve liquidity to commercial banks. A permanent long-term refi open market operations against a wider range of collateral classes will be introduced. SNB extended a maximum of $54b in loans to take over illiquid assets fro UBS so that Switzerland will be able to "weather the economic difficulties" as a result of global economic slowdown. Australian government said it will guarantee all deposit with financial institutions for the next three years and all "term wholesale funding" by Australian banks operating in international credit markets. New Zealand government said it will guarantee retail deposits in New Zealand-registered banks, building societies, credit unions and deposit taking finance companies. BoJ held an unscheduled meeting and decided to leave benchmark interest rate unchanged at 0.5%. Several initiatives were announced to stabilize the Japanese financial markets. The first measure aims at improving liquidity in JGB Repo market as the bank announced it will add floating-rate JGBs, inflation-indexed JGBs and 30yr government bonds to the repo operation. Also, BoJ will lower minimum fee rates applied to the Security Lending Facility from 1% to 0.5% and extend the period of relaxation. Thirdly, the bank will increase the frequency and size of Commercial Paper Repo operations which was previously done on a quarterly basis. Economic data from the US were generally poor. Indeed, Bernanke warned that the turmoil in the financial markets poses a "significant threat" to growth. Recovery is not imminent and will take time. He said that "stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away." Fed's Beige Book confirmed that there is a widespread slowdown in the US economy. All districts reported tighter credit. Several districts noted that lenders had become highly cautious and conservative. Most districts reported declines in consumer spending as consumers turn focus to necessities. Assessment on labor markets remained pessimistic. Manufacturing is still declining in most districts. Headline retail sales dropped much more than expected by -1.2% mom in Sep versus consensus of -0.7%. Ex-auto sales dropped -0.6%, doubled consensus of -0.3%. Empire state manufacturing index deteriorated much more than expected to -24.6. Philly Fed index dropped sharply to -37.5 in Oct. Industrial production dropped sharply by -2.8% mom in Sep, largest fall since 1974, while capacity utilization dropped more than expected to 76.4%. Headline PPI moderated to 8.7% yoy while core PPI climbed to 4.0% yoy. CPI was unexpectedly flat in Sep with yoy rate moderated more than expected to 4.9%. Core CPI was unchanged at 2.5% yoy as expected. TIC capital flow dropped to 14b. Jobless claims dropped to 461k. NAHB home builder confidence index three points to an all time low of 14 last month. Housing starts dropped by -6.3% to 26 years low of 0.82m annualized rate in Sep. Building permits dropped by -8.3% to 27 years low of 0.786m annualized rate. Preliminary reading of U of Michigan consumer sentiments tumbled sharply to 57.5 in Sep. Eurozone inflationary pressures are easing. Data showed HICP in Sep confirmed to have moderated to 3.6% yoy. Germany ZEW economic sentiment deteriorated to -63 in Oct. Eurozone ZEW economic sentiment also deteriorated to -62.7. UK PPI input slowed to 24.5% yoy versus expectation of 19.8%. PPI output slowed to 8.5% yoy comparing to expectation of 8.8%. Core PPI slowed to 5.4% yoy versus consensus of 6.0%. CPI accelerated faster than expected to 5.2% yoy in Sep, with core CPI climbed to 2.2% yoy. DCLG house prices dropped more than expected by -3.4% yoy. RICS house prices balance dropped from -82% to -84%. BRC retail sales showed -1.5% fall in Sep. Jobless claims rose for the eighth consecutive month and pushed claimant count to 2.9% in Sep. Unemployment rate also rose more than expected to 5.7% in Aug. Swiss retail sales was flat yoy in Aug. ZEW economic expectation deteriorated sharply to record low of -91.1 in Oct. Combined PPI dropped more than expected by -0.5% mom in Sep, yoy rate moderated to 3.7% versus expectation of 3.9%. Japanese domestic CGPI dropped -0.4% mom in Se with yoy rate down from 7.2% to 6.8%. Consumer confidence unexpectedly improved to 31.8 in Sep. Trade deficit came in larger than expected at -236b yen. Industrial production dropped -3.5% mom, -6.9% yoy in Aug. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Week Ahead
Bank of Canada and Reserve Bank of New Zealand are both expected to cut interest rates again this week. BoC is expected to cut 50bps to 2.0% while RBNZ is expected to cut 1% to 6.5%. BoE minutes will be featured and should show unanimous vote for the coordinated global 50bps cut earlier this month. Bernanke's will testify at House Budget Committee on Economy on Monday.
The economic calendar in US is pretty light next week. Economic data include leading indicators, house price index and existing home sales. From Eurozone, main focus is on manufacturing and services PMI. UK Q3 GDP and Sep retail sales will be released. Australian PPI and CPI, New Zealand CPI and Canadian retail sales, CPI will also be released.
Note that firstly, inflation are now a lesser threat that recession in the world economy, in particular after commodity prices tumbled in the past few months. Hence, the CPI data will have much less impact to the markets. Secondly, further down side is still expected in the global stock markets which will, in turn, trigger rally in dollar and yen. Though, it could either be European led or US led. And hence, close attention will be paid to growth data from Eurozone and UK which could trigger much volatility in the stock markets as well as the forex markets.
AUD/USD Weekly Outlook
AUD/USD was bounded in consolidation between 0.6330 and 0.7237 last week and such choppy consolidation might continue further. Above 0.7076 will argue that rebound from 0.6330 is extending further to 0.7237 and above. However, upside is expected to be limited below 0.7674/83 cluster resistance (61.8% retracement of 0.8519 to 0.6330 at 0.7683, 38.2% retracement of 0.9849 to 0.6330 at 0.7674) and bring down trend resumption. On the downside, below 0.6495 will bring retest of 0.6330 low and break will confirm that recent down trend has resumed for next long term fibonacci support at 76.4% retracement of 0.4773 to 0.9849 at 0.5971.
In the bigger picture, the strength of the fall from 0.9849 strongly suggests that it's developing into an impulsive fall in at least the same degree as the up trend from 0.4773 to 0.9849. The current interpretation is that first wave of such fall has completed at 0.7802. Second wave correction has completed at 0.8519 and fall from there should represents the third wave decline. In other words, AUD/USD is probably in the middle of such decline only. Any interim correction should be limited below 0.7802 support turned resistance and bring down trend resumption.
In the longer term picture, a long term top is in place at 0.9849 with bearish divergence condition in monthly MACD and RSI. Considering the corrective three wave structure of the multi year up trend from 0.4773 to 0.9849 and the impulsive nature of the fall from 0.9849, the long term down trend could be resuming. Having said that, while some interim medium term consolidation could be seen, the fall from 0.9849 is in favor to extend to retest 0.4773 low at least.
Read more...
Moonves Says $1.8 Billion Cnet Purchase Better Than Buyback
By Michael White
Oct. 18 (Bloomberg) -- CBS Corp.'s $1.8 billion purchase of Cnet Networks will prove a better bet than using the money to buy back shares, Chief Executive Officer Les Moonves said today
The acquisition is already adding to CBS's operating profit and has boosted the New York-based company's ability to distribute content and sell advertising on the Internet, Moonves said at a digital-media conference at University of Southern California in Los Angeles.
CBS is looking for ways to use television programs such as ``Survivor'' and the ``CSI'' crime shows to increase Internet revenue. The company's Web-related businesses, including Cnet, will produce sales of about $600 million and operating profit of $100 million in 2008, Moonves said.
``The job is to go where the money is,'' Moonves said. ``We think there is money in these premium content sites.''
CBS bought San Francisco-based Cnet, owner of sites including TV.com and GameSpot.com, in July. The main Cnet site offers technology news and reviews.
Moonves compared the Internet to cable television. Both, he said, allow advertisers to target specialized audiences.
``We view the Internet perhaps as our cable play,'' Moonves said.
The economic downturn has hurt advertising sales at the company's CBS network and television stations, Moonves said. The company, which gets about 70 percent of revenue from ads, reports third-quarter earnings on Oct. 28, he said.
``Frankly, earnings are not great,'' Moonves said. ``It is a difficult time and I'm aware of that.''
CBS said in July that companywide operating profit will be little changed this year, down from a previous forecast for 3 percent to 5 percent growth.
CBS, controlled by Sumner Redstone, rose 61 cents, or 6.9 percent, to $9.41 yesterday in New York Stock Exchange composite trading. The shares have dropped 65 percent this year.
To contact the reporter on this story: Michael White in Los Angeles at Mwhite8@bloomberg.net.
Read more...
Oct. 18 (Bloomberg) -- CBS Corp.'s $1.8 billion purchase of Cnet Networks will prove a better bet than using the money to buy back shares, Chief Executive Officer Les Moonves said today
The acquisition is already adding to CBS's operating profit and has boosted the New York-based company's ability to distribute content and sell advertising on the Internet, Moonves said at a digital-media conference at University of Southern California in Los Angeles.
CBS is looking for ways to use television programs such as ``Survivor'' and the ``CSI'' crime shows to increase Internet revenue. The company's Web-related businesses, including Cnet, will produce sales of about $600 million and operating profit of $100 million in 2008, Moonves said.
``The job is to go where the money is,'' Moonves said. ``We think there is money in these premium content sites.''
CBS bought San Francisco-based Cnet, owner of sites including TV.com and GameSpot.com, in July. The main Cnet site offers technology news and reviews.
Moonves compared the Internet to cable television. Both, he said, allow advertisers to target specialized audiences.
``We view the Internet perhaps as our cable play,'' Moonves said.
The economic downturn has hurt advertising sales at the company's CBS network and television stations, Moonves said. The company, which gets about 70 percent of revenue from ads, reports third-quarter earnings on Oct. 28, he said.
``Frankly, earnings are not great,'' Moonves said. ``It is a difficult time and I'm aware of that.''
CBS said in July that companywide operating profit will be little changed this year, down from a previous forecast for 3 percent to 5 percent growth.
CBS, controlled by Sumner Redstone, rose 61 cents, or 6.9 percent, to $9.41 yesterday in New York Stock Exchange composite trading. The shares have dropped 65 percent this year.
To contact the reporter on this story: Michael White in Los Angeles at Mwhite8@bloomberg.net.
Read more...
Bush, Sarkozy to Seek Series of Summits on Financial Crisis
By Roger Runningen and Gregory Viscusi
Oct. 18 (Bloomberg) -- The leaders of the U.S., France and the European Commission today agreed to ask other world leaders to take part in a series of summits on the global financial crisis, with the first held in the U.S. sometime soon after the Nov. 4 presidential election.
President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement after a three-hour meeting at Camp David, the presidential retreat, that they would maintain coordinated steps to solve the crisis in the global economy.
``They agreed they would reach out to other world leaders next week, with the idea of beginning a series of summits on addressing the challenges facing the global economy,'' according to the joint statement issued through the White House.
The leaders of the world's richest nations, and other big economies such as India and China, ``will be consulted about the idea of a first summit of heads of government to be held in the U.S. soon after the U.S. elections,'' the statement said.
Bush, Sarkozy and Barroso pledged to seek ``agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future,'' and there would be later summits ``designed to implement agreement on specific steps to be taken to meet those principles.''
The agenda for the first summit will include ideas on how to prevent future crises in a way that preserves the free-market system, Bush said. ``It is essential we preserve the foundations of democratic capitalism,'' he said. Leaders from both developed and developing nations would be included.
Welcome Invitation
Sarkozy and Barroso, in separate statements, welcomed Bush's invitation.
``We want to work hand in hand with the Americans to create the capitalism of the 21st century,'' Sarkozy said. ``The meeting should be held rapidly, perhaps before the end of November. Since the crisis started in New York, maybe we can find the solution in New York.''
European leaders have pressed to convene an emergency meeting of the world's richest nations, known as the Group of Eight, joined by others such as India and China, to overhaul the world's financial regulatory systems.
``We must reform capitalism so that the most efficient system ever created doesn't destroy its own foundations,'' Sarkozy, 53, said yesterday in a speech to Quebec's National Assembly. Sarkozy represents all 27 nations of the European Union.
Regulations
Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global ``early warning'' system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco.
``There is no liberty without some regulation and stability,'' Sarkozy said yesterday in Quebec at a press conference with Canadian Prime Minister Stephen Harper.
EU members on Oct. 16 backed Sarkozy's proposal for a conference, and United Nations Secretary-General Ban Ki-moon today offered to host a summit at UN headquarters in New York City by early December.
The U.S. hasn't committed itself to the sweeping terms of Europe's agenda. Ideas ``have been brought forward by individual countries,'' White House spokeswoman Dana Perino said at a briefing for reporters yesterday. ``There are other countries that are going to have ideas, as well.''
Conditions
Bush, 62, supports an emergency G8 meeting, but has cautioned that any revamping must not restrict the flow of trade and investment or set a path toward protectionism. The G8 nations are Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
British Prime Minister Gordon Brown is also pushing for greater cross-border oversight of the global financial system. He has said each of the world's top 30 banks should be under the supervision of a panel of regulators from the countries where those institutions do business.
``The reform of the international financial system is not only necessary to prevent a crisis happening again, it is essential to end the current crisis,'' Brown said on Oct. 16.
U.S. Treasury Secretary Henry Paulson and French Finance Minister Christine Lagarde also attended tonight's meeting at Camp David.
To contact the reporters on this story: Roger Runningen at Camp David rrunningen@bloomberg.net; Gregory Viscusi at Camp David at gviscusi@bloomberg.net
Read more...
Oct. 18 (Bloomberg) -- The leaders of the U.S., France and the European Commission today agreed to ask other world leaders to take part in a series of summits on the global financial crisis, with the first held in the U.S. sometime soon after the Nov. 4 presidential election.
President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement after a three-hour meeting at Camp David, the presidential retreat, that they would maintain coordinated steps to solve the crisis in the global economy.
``They agreed they would reach out to other world leaders next week, with the idea of beginning a series of summits on addressing the challenges facing the global economy,'' according to the joint statement issued through the White House.
The leaders of the world's richest nations, and other big economies such as India and China, ``will be consulted about the idea of a first summit of heads of government to be held in the U.S. soon after the U.S. elections,'' the statement said.
Bush, Sarkozy and Barroso pledged to seek ``agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future,'' and there would be later summits ``designed to implement agreement on specific steps to be taken to meet those principles.''
The agenda for the first summit will include ideas on how to prevent future crises in a way that preserves the free-market system, Bush said. ``It is essential we preserve the foundations of democratic capitalism,'' he said. Leaders from both developed and developing nations would be included.
Welcome Invitation
Sarkozy and Barroso, in separate statements, welcomed Bush's invitation.
``We want to work hand in hand with the Americans to create the capitalism of the 21st century,'' Sarkozy said. ``The meeting should be held rapidly, perhaps before the end of November. Since the crisis started in New York, maybe we can find the solution in New York.''
European leaders have pressed to convene an emergency meeting of the world's richest nations, known as the Group of Eight, joined by others such as India and China, to overhaul the world's financial regulatory systems.
``We must reform capitalism so that the most efficient system ever created doesn't destroy its own foundations,'' Sarkozy, 53, said yesterday in a speech to Quebec's National Assembly. Sarkozy represents all 27 nations of the European Union.
Regulations
Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global ``early warning'' system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco.
``There is no liberty without some regulation and stability,'' Sarkozy said yesterday in Quebec at a press conference with Canadian Prime Minister Stephen Harper.
EU members on Oct. 16 backed Sarkozy's proposal for a conference, and United Nations Secretary-General Ban Ki-moon today offered to host a summit at UN headquarters in New York City by early December.
The U.S. hasn't committed itself to the sweeping terms of Europe's agenda. Ideas ``have been brought forward by individual countries,'' White House spokeswoman Dana Perino said at a briefing for reporters yesterday. ``There are other countries that are going to have ideas, as well.''
Conditions
Bush, 62, supports an emergency G8 meeting, but has cautioned that any revamping must not restrict the flow of trade and investment or set a path toward protectionism. The G8 nations are Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
British Prime Minister Gordon Brown is also pushing for greater cross-border oversight of the global financial system. He has said each of the world's top 30 banks should be under the supervision of a panel of regulators from the countries where those institutions do business.
``The reform of the international financial system is not only necessary to prevent a crisis happening again, it is essential to end the current crisis,'' Brown said on Oct. 16.
U.S. Treasury Secretary Henry Paulson and French Finance Minister Christine Lagarde also attended tonight's meeting at Camp David.
To contact the reporters on this story: Roger Runningen at Camp David rrunningen@bloomberg.net; Gregory Viscusi at Camp David at gviscusi@bloomberg.net
Read more...
Subscribe to:
Posts (Atom)
Posts
