By Berni Moestafa
Aug. 11 (Bloomberg) -- Indonesian stocks fell to the lowest in almost a year, led by commodity producers, after oil and metal prices dropped on concern slower economic growth will hurt demand.
PT Bumi Resources, Asia's largest thermal-coal exporter, declined to its lowest in more than four months after crude oil slid more than $4 a barrel in New York on Aug. 8, reducing the allure of alternative energy sources. PT Timah, the world's second-biggest tin miner, had its biggest drop in almost seven months.
The Jakarta Composite index slipped 62.01, or 2.8 percent, to close at 2,133.92, its lowest since Aug. 23. More than six stocks fell for each that rose on the benchmark gauge, which has slumped 22 percent this year.
``The ease with which oil dropped $4 on Friday has made people worry that it can decline even further,'' said Winston Sual a director at Jakarta-based PT Panin Sekuritas, which manages about $272 million in assets. Commodity shares ``may not have bottomed out.''
Bumi lost 8.9 percent to 5,150 rupiah, closing at its lowest since April 3. PT Adaro Energy, Indonesia's second-biggest coal miner, slid 3.8 percent to 1,540 rupiah. Oil futures in New York gained 0.7 percent to $116.03 a barrel in after-hours trading, having slumped 4 percent on Aug. 8.
Timah, the world's second-biggest tin miner, plunged 13 percent to 2,600 rupiah, its steepest slide since Jan. 22 after tin for three-month delivery declined 7.2 percent to $19,000 a ton in London on Aug. 8.
The Reuters/Jefferies CRB index of 19 raw materials, including oil and metals, fell on Aug. 8 to a four-month low.
PT Bakrie Sumatera Plantations, Indonesia's third-largest publicly traded plantation company, retreated 8.9 percent to 1,120 rupiah. Palm oil in Kuala Lumpur dropped 3.9 percent to 2,671 ringgit ($806) a metric ton, extending the 2.3 percent slide on Aug. 8.
PT Indofood Sukses Makmur, Indonesia's biggest instant- noodle maker, declined 3.6 percent to 2,000 rupiah, the biggest drop since July 3. Indofood's wheat flour production may decline 10 percent this year on lower demand, Franciscus Welirang, a director at the company said in an Aug. 8 interview.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net
Read more...
Monday, August 11, 2008
Indonesian Stocks Drop to One-Year Low as Commodity Prices Fall
By Berni Moestafa
Aug. 11 (Bloomberg) -- Indonesian stocks fell to the lowest in almost a year, led by commodity producers, after oil and metal prices dropped on concern slower economic growth will hurt demand.
PT Bumi Resources, Asia's largest thermal-coal exporter, declined to its lowest in more than four months after crude oil slid more than $4 a barrel in New York on Aug. 8, reducing the allure of alternative energy sources. PT Timah, the world's second-biggest tin miner, had its biggest drop in almost seven months.
The Jakarta Composite index slipped 62.01, or 2.8 percent, to close at 2,133.92, its lowest since Aug. 23. More than six stocks fell for each that rose on the benchmark gauge, which has slumped 22 percent this year.
``The ease with which oil dropped $4 on Friday has made people worry that it can decline even further,'' said Winston Sual a director at Jakarta-based PT Panin Sekuritas, which manages about $272 million in assets. Commodity shares ``may not have bottomed out.''
Bumi lost 8.9 percent to 5,150 rupiah, closing at its lowest since April 3. PT Adaro Energy, Indonesia's second-biggest coal miner, slid 3.8 percent to 1,540 rupiah. Oil futures in New York gained 0.7 percent to $116.03 a barrel in after-hours trading, having slumped 4 percent on Aug. 8.
Timah, the world's second-biggest tin miner, plunged 13 percent to 2,600 rupiah, its steepest slide since Jan. 22 after tin for three-month delivery declined 7.2 percent to $19,000 a ton in London on Aug. 8.
The Reuters/Jefferies CRB index of 19 raw materials, including oil and metals, fell on Aug. 8 to a four-month low.
PT Bakrie Sumatera Plantations, Indonesia's third-largest publicly traded plantation company, retreated 8.9 percent to 1,120 rupiah. Palm oil in Kuala Lumpur dropped 3.9 percent to 2,671 ringgit ($806) a metric ton, extending the 2.3 percent slide on Aug. 8.
PT Indofood Sukses Makmur, Indonesia's biggest instant- noodle maker, declined 3.6 percent to 2,000 rupiah, the biggest drop since July 3. Indofood's wheat flour production may decline 10 percent this year on lower demand, Franciscus Welirang, a director at the company said in an Aug. 8 interview.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net
Read more...
Aug. 11 (Bloomberg) -- Indonesian stocks fell to the lowest in almost a year, led by commodity producers, after oil and metal prices dropped on concern slower economic growth will hurt demand.
PT Bumi Resources, Asia's largest thermal-coal exporter, declined to its lowest in more than four months after crude oil slid more than $4 a barrel in New York on Aug. 8, reducing the allure of alternative energy sources. PT Timah, the world's second-biggest tin miner, had its biggest drop in almost seven months.
The Jakarta Composite index slipped 62.01, or 2.8 percent, to close at 2,133.92, its lowest since Aug. 23. More than six stocks fell for each that rose on the benchmark gauge, which has slumped 22 percent this year.
``The ease with which oil dropped $4 on Friday has made people worry that it can decline even further,'' said Winston Sual a director at Jakarta-based PT Panin Sekuritas, which manages about $272 million in assets. Commodity shares ``may not have bottomed out.''
Bumi lost 8.9 percent to 5,150 rupiah, closing at its lowest since April 3. PT Adaro Energy, Indonesia's second-biggest coal miner, slid 3.8 percent to 1,540 rupiah. Oil futures in New York gained 0.7 percent to $116.03 a barrel in after-hours trading, having slumped 4 percent on Aug. 8.
Timah, the world's second-biggest tin miner, plunged 13 percent to 2,600 rupiah, its steepest slide since Jan. 22 after tin for three-month delivery declined 7.2 percent to $19,000 a ton in London on Aug. 8.
The Reuters/Jefferies CRB index of 19 raw materials, including oil and metals, fell on Aug. 8 to a four-month low.
PT Bakrie Sumatera Plantations, Indonesia's third-largest publicly traded plantation company, retreated 8.9 percent to 1,120 rupiah. Palm oil in Kuala Lumpur dropped 3.9 percent to 2,671 ringgit ($806) a metric ton, extending the 2.3 percent slide on Aug. 8.
PT Indofood Sukses Makmur, Indonesia's biggest instant- noodle maker, declined 3.6 percent to 2,000 rupiah, the biggest drop since July 3. Indofood's wheat flour production may decline 10 percent this year on lower demand, Franciscus Welirang, a director at the company said in an Aug. 8 interview.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net
Read more...
Stocks in Europe, Asia Gain, Led by BMW; U.S. Futures Advance
By Adria Cimino
Aug. 11 (Bloomberg) -- Stocks in Europe and Asia rose as investors speculated carmakers will benefit from the stronger dollar and higher oil prices lifted energy producers. U.S. index futures also gained.
Bayerische Motoren Werke AG advanced for a second day after Merrill Lynch & Co. said the dollar's rally last week will help ``reduce margin headwinds.'' BP Plc and Total SA climbed as oil rebounded from a 14-week low. UBS AG jumped after maintaining its earnings guidance following a settlement in the U.S., while Commonwealth Bank of Australia rallied as the country's central bank said ``there's scope'' to cut interest rates.
The MSCI World Index added 0.5 percent to 1,364.29 at 12:10 p.m. in London all of the 10 industry groups increased. The dollar last week had the biggest weekly increase against the euro on a percentage basis since January 2005, boosting the value of earnings when converted into the European currency.
``The dollar's gain is a positive element for companies that export,'' said Chicuong Dang, an analyst at Richelieu Finance in Paris, which has $6.2 billion under management. ``It's lifting the market today.''
A retreat in commodity prices last week and better-than- expected earnings from Cisco Systems Inc., Procter & Gamble Co., Societe Generale SA and Royal Bank of Scotland Group Plc helped lift the MSCI World to its first weekly gain in three weeks. Still, the index has lost 14 percent this year on concern accelerating inflation and credit losses approaching $500 billion will stifle profit growth.
Europe, Asia
Futures on the Standard & Poor's 500 Index added 0.2 percent today. Europe's Dow Jones Stoxx 600 Index gained 0.9 percent today, while the MSCI Asia Pacific Index increased 1.3 percent.
Shares in Asia climbed today after the MSCI Asia Pacific Index ended last week at the cheapest relative to its companies' profits since at least 1995, according to weekly data compiled by Bloomberg. The regional benchmark was valued at 10.9 times profit on Aug. 8, down from 17.6 at the end of last year, the data show.
Europe's Stoxx 600 is valued at 11.9 times profit, near the level of 10.8 times earnings last month that was the cheapest since at least 2002, data compiled by Bloomberg show. The S&P 500 is more expensive, with the benchmark for American equities trading at 25.9 times profit. That's the highest since 2003, data compiled by Bloomberg show.
In China, the benchmark stock index fell today to the lowest in 18 months, overtaking Vietnam as the world's worst performer this year, after producer prices rose and Goldman Sachs Group Inc. said the Olympic Games will slow the economy.
Russian Stocks
Russian equities advanced after President Dmitry Medvedev said the military had completed a ``significant'' part of its operations in the breakaway Georgia republic of South Ossetia.
BMW, the world's largest maker of luxury cars, jumped 3.4 percent to 30.42 euros. The company derives more than a fifth of its sales from America.
``We believe BMW has lost over 2 billion euros ($3 billion) in U.S. profits from the U.S. dollar weakness in the past four years,'' Merrill wrote in a report. ``Any, even short-term, U.S. dollar strength helps reduce these margin headwinds.''
Michelin & Cie., which makes 33 percent of its sales in North America, advanced 2.2 percent to 46.75 euros. Hochtief AG gained 5.3 percent to 55.27 euros. Germany's biggest construction company relies on the Americas for 43 percent of its revenue.
The euro traded at $1.5021 after earlier falling to $1.4907, the lowest level since Feb. 26, from $1.5005 at the end of last week.
One-Month Rally
The Stoxx 600 has rallied 9.5 percent from a three-year low on July 15, as declines in the euro and oil eased concern earnings will erode further. The European currency has retreated 5.5 percent against the dollar, while oil has fallen more than $30 a barrel from a record $147.27 on July 11.
Oil has climbed 21 percent this year, while the Stoxx 600 has lost 20 percent in the period.
Analysts predict profit for companies in the Stoxx 600 will drop 2.5 percent this, according to projections compiled by Bloomberg. That's down from 11 percent growth forecast at the start of the year.
BP added 1.4 percent to 527 pence. Total, Europe's biggest oil refiner, climbed 1.2 percent to 48.05 euros.
Oil prices climbed on concern the Russia-Georgia conflict may disrupt crude supplies from the Caspian Sea. Crude for September delivery gained as much as $1.70, or 1.5 percent, to $116.90 a barrel on the New York Mercantile Exchange.
UBS, the European bank hardest hit by the subprime contagion, jumped 3.9 percent to 22.86 francs. The company said Aug. 8 it will buy back as much as $18.6 billion of auction-rate securities and pay $150 million of fines, the largest settlement in a U.S. probe into whether banks stuck clients with hard-to- sell bonds.
UBS
The bank, which will set aside about $900 million in the second quarter to account for the settlement, follows New York- based Citigroup Inc. and Merrill in yielding to regulatory pressure to make investors whole. Following the settlement, UBS said its results would still be ``consistent'' with its guidance.
``This burden is already included in the result around break-even that UBS said it would produce for the second- quarter,'' Georg Kanders, a WestLB analyst wrote. ``We therefore believe that the quality of the second-quarter results is better than anticipated and clearly confirm our `buy' recommendation.''
Commonwealth Bank, Australia's biggest mortgage lender, gained 2.4 percent to A$44.48. Australia & New Zealand Banking Group Ltd., the nation's fourth-largest bank, added 2.5 percent to A$17.78.
The Reserve Bank of Australia said it will have more room to cut interest rates as weakening domestic demand eases inflation.
Ericsson AB, the world's biggest maker of wireless networks, climbed 4.5 percent to 69.8 kronor. Tata Teleservices Ltd. will spend $2 billion in the next two years to provide telephone services based on the global system for mobile communications technology, or GSM, the Press Trust of India news agency reported.
India is Ericsson's third-largest market behind the U.S. and China, the Swedish company said in last year's annual report.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
Read more...
Aug. 11 (Bloomberg) -- Stocks in Europe and Asia rose as investors speculated carmakers will benefit from the stronger dollar and higher oil prices lifted energy producers. U.S. index futures also gained.
Bayerische Motoren Werke AG advanced for a second day after Merrill Lynch & Co. said the dollar's rally last week will help ``reduce margin headwinds.'' BP Plc and Total SA climbed as oil rebounded from a 14-week low. UBS AG jumped after maintaining its earnings guidance following a settlement in the U.S., while Commonwealth Bank of Australia rallied as the country's central bank said ``there's scope'' to cut interest rates.
The MSCI World Index added 0.5 percent to 1,364.29 at 12:10 p.m. in London all of the 10 industry groups increased. The dollar last week had the biggest weekly increase against the euro on a percentage basis since January 2005, boosting the value of earnings when converted into the European currency.
``The dollar's gain is a positive element for companies that export,'' said Chicuong Dang, an analyst at Richelieu Finance in Paris, which has $6.2 billion under management. ``It's lifting the market today.''
A retreat in commodity prices last week and better-than- expected earnings from Cisco Systems Inc., Procter & Gamble Co., Societe Generale SA and Royal Bank of Scotland Group Plc helped lift the MSCI World to its first weekly gain in three weeks. Still, the index has lost 14 percent this year on concern accelerating inflation and credit losses approaching $500 billion will stifle profit growth.
Europe, Asia
Futures on the Standard & Poor's 500 Index added 0.2 percent today. Europe's Dow Jones Stoxx 600 Index gained 0.9 percent today, while the MSCI Asia Pacific Index increased 1.3 percent.
Shares in Asia climbed today after the MSCI Asia Pacific Index ended last week at the cheapest relative to its companies' profits since at least 1995, according to weekly data compiled by Bloomberg. The regional benchmark was valued at 10.9 times profit on Aug. 8, down from 17.6 at the end of last year, the data show.
Europe's Stoxx 600 is valued at 11.9 times profit, near the level of 10.8 times earnings last month that was the cheapest since at least 2002, data compiled by Bloomberg show. The S&P 500 is more expensive, with the benchmark for American equities trading at 25.9 times profit. That's the highest since 2003, data compiled by Bloomberg show.
In China, the benchmark stock index fell today to the lowest in 18 months, overtaking Vietnam as the world's worst performer this year, after producer prices rose and Goldman Sachs Group Inc. said the Olympic Games will slow the economy.
Russian Stocks
Russian equities advanced after President Dmitry Medvedev said the military had completed a ``significant'' part of its operations in the breakaway Georgia republic of South Ossetia.
BMW, the world's largest maker of luxury cars, jumped 3.4 percent to 30.42 euros. The company derives more than a fifth of its sales from America.
``We believe BMW has lost over 2 billion euros ($3 billion) in U.S. profits from the U.S. dollar weakness in the past four years,'' Merrill wrote in a report. ``Any, even short-term, U.S. dollar strength helps reduce these margin headwinds.''
Michelin & Cie., which makes 33 percent of its sales in North America, advanced 2.2 percent to 46.75 euros. Hochtief AG gained 5.3 percent to 55.27 euros. Germany's biggest construction company relies on the Americas for 43 percent of its revenue.
The euro traded at $1.5021 after earlier falling to $1.4907, the lowest level since Feb. 26, from $1.5005 at the end of last week.
One-Month Rally
The Stoxx 600 has rallied 9.5 percent from a three-year low on July 15, as declines in the euro and oil eased concern earnings will erode further. The European currency has retreated 5.5 percent against the dollar, while oil has fallen more than $30 a barrel from a record $147.27 on July 11.
Oil has climbed 21 percent this year, while the Stoxx 600 has lost 20 percent in the period.
Analysts predict profit for companies in the Stoxx 600 will drop 2.5 percent this, according to projections compiled by Bloomberg. That's down from 11 percent growth forecast at the start of the year.
BP added 1.4 percent to 527 pence. Total, Europe's biggest oil refiner, climbed 1.2 percent to 48.05 euros.
Oil prices climbed on concern the Russia-Georgia conflict may disrupt crude supplies from the Caspian Sea. Crude for September delivery gained as much as $1.70, or 1.5 percent, to $116.90 a barrel on the New York Mercantile Exchange.
UBS, the European bank hardest hit by the subprime contagion, jumped 3.9 percent to 22.86 francs. The company said Aug. 8 it will buy back as much as $18.6 billion of auction-rate securities and pay $150 million of fines, the largest settlement in a U.S. probe into whether banks stuck clients with hard-to- sell bonds.
UBS
The bank, which will set aside about $900 million in the second quarter to account for the settlement, follows New York- based Citigroup Inc. and Merrill in yielding to regulatory pressure to make investors whole. Following the settlement, UBS said its results would still be ``consistent'' with its guidance.
``This burden is already included in the result around break-even that UBS said it would produce for the second- quarter,'' Georg Kanders, a WestLB analyst wrote. ``We therefore believe that the quality of the second-quarter results is better than anticipated and clearly confirm our `buy' recommendation.''
Commonwealth Bank, Australia's biggest mortgage lender, gained 2.4 percent to A$44.48. Australia & New Zealand Banking Group Ltd., the nation's fourth-largest bank, added 2.5 percent to A$17.78.
The Reserve Bank of Australia said it will have more room to cut interest rates as weakening domestic demand eases inflation.
Ericsson AB, the world's biggest maker of wireless networks, climbed 4.5 percent to 69.8 kronor. Tata Teleservices Ltd. will spend $2 billion in the next two years to provide telephone services based on the global system for mobile communications technology, or GSM, the Press Trust of India news agency reported.
India is Ericsson's third-largest market behind the U.S. and China, the Swedish company said in last year's annual report.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
Read more...
Value Stock Losers Buffett, Miller Poised as Winners (Update1)
By Michael Patterson and Eric Martin
Aug. 11 (Bloomberg) -- Bill Miller, Martin Whitman and David Dreman, mired in the worst slumps of their careers, are poised once again to trounce the stock market.
If history is any guide, the value investors' emphasis on shares trading at low prices relative to cash flow and earnings will provide returns superior to the holdings of so-called growth managers. Growth investing, which focuses on companies with the fastest projected profit increases, beat value strategies for the first time this decade in 2007 and by 15.5 percentage points so far this year, the widest margin since 1980, according to data compiled by Paris-based Societe Generale SA.
The five prior times since 1952 that growth beat value two years in a row, the latter group recovered and won by 17 percentage points annually on average for seven years, the data from Societe Generale show. Cheap stocks are becoming more attractive because of tumbling commodity shares, which had led the five-year bull market that ended in October, according to Societe Generale's James Montier, voted top global strategist in Thomson Extel's survey since 2005.
Value stocks became a liability as even Warren Buffett's Berkshire Hathaway Inc., the investment vehicle for the richest person in Forbes magazine's 2008 global tally, fell as much as 25 percent from a December record. Miller's Legg Mason Value Trust, which beat the Standard & Poor's 500 Index for 15 years through 2005, lost 27 percent including dividends this year, Bloomberg data show.
`Normally Snaps Back'
``This is one of the worst periods I've seen for value,'' said Dreman, 72, who oversees about $15 billion as chairman of Dreman Value Management LLC in Jersey City, New Jersey. ``The more it underperforms, the more it normally snaps back. The probabilities are very strong we'll have a major upswing.''
The flagship funds run by Miller, Third Avenue Management LLC's Whitman and Dreman are headed for their worst annual performances, data from Chicago-based Morningstar Inc. show, after subprime losses roiled financial markets and sent the S&P 500 into a bear-market decline of more than 20 percent from its October record. Omaha, Nebraska-based Berkshire had its steepest first-half drop in New York trading since 1990.
The investors' stock picks retreated as U.S. companies trading at the lowest prices relative to cash flow trailed the most expensive shares compared to cash flow by 15.5 percentage points in 2008, according to data compiled by Montier and Kenneth French, a finance professor at Dartmouth's Tuck School of Business in Hanover, New Hampshire.
Investments Gone Bad
That's the widest margin that ``value'' lost to ``growth'' on an annual basis since a 28-point gap in 1980 and follows a 4.5-point underperformance last year, Montier said in a July 30 report.
U.S. stock-index futures advanced today as higher oil and gold prices lifted commodities producers. S&P 500 futures expiring in September added 0.2 percent at 11:24 a.m. in London.
Miller, Whitman and Dreman adhere to the investment philosophy pioneered by Benjamin Graham, the late money manager and author of ``Security Analysis.'' Buffett, who attended Graham's Columbia University classes in New York in the 1950s, used the strategy to transform Berkshire from a failing maker of men's suit linings into a $179 billion company by purchasing assets he deemed cheap.
`Dismal Performance'
Berkshire declined this year as Buffett lost money from his stakes in Charlotte, North Carolina-based Bank of America Corp., the biggest U.S. lender by market value, and New York-based American Express Co., the nation's largest credit-card company by purchases. The stocks declined 22 percent and 27 percent, respectively. Buffett, 77, couldn't be reached for comment.
Berkshire posted its third straight quarterly profit decline last week as lower rates pressured results from insurance.
Miller's $9.7 billion Legg Mason Value Trust was dragged down by McLean, Virginia-based Freddie Mac, the U.S. mortgage- finance company hobbled by record foreclosures, and Arlington, Virginia-based AES Corp., a power producer with operations in more than two dozen countries. Investors fled, causing the fund's assets to fall more than 50 percent in the past year. The Massachusetts state pension fund fired Legg Mason last week, citing ``inconsistent'' returns.
``The best time to buy our funds or to open an account with us has always been when we've had dismal performance,'' Miller, 58, wrote in a letter to shareholders two weeks ago. The Baltimore-based investor said he's a ``long-term optimist'' even though ``valuation appeared not to matter'' in recent years.
Adding to MBIA
Whitman's Third Avenue Value Fund returned 958 percent from its inception in November 1990 through July, according to New York-based Third Avenue's Web site. The S&P 500 gained almost 500 percent, including reinvested dividends, during the same period, Bloomberg data show.
The $9 billion fund lost 19 percent in 2008 after Whitman added to his stake in MBIA Inc., the Armonk, New York-based bond insurer that tumbled 54 percent this year. Whitman, 83, couldn't be reached for comment.
Dreman lost 19 percent for clients in his $7.1 billion DWS Dreman High Return Equity Fund this year as Minnetonka, Minnesota-based UnitedHealth Group Inc., the largest U.S. medical insurer, slumped. The fund had outperformed the S&P 500 for seven straight years through 2006.
`Maintain Earnings'
Value may trail growth for another two years as more than $490 billion of credit market losses and asset writedowns at banks prolong the U.S. economy's slump, according to Bruce McCain, the head of investment strategy at Key Private Bank. He favors growth managers, who typically buy shares of companies that increase earnings and sales at a faster pace than peers.
``When you go into periods of slow economic growth, you need to shift your focus to companies that can maintain earnings,'' said McCain, 54, who helps oversee about $30 billion in Cleveland.
Richard Pzena, chairman of New York-based Pzena Investment Management Inc., said declines in commodity producers may prompt investors to switch into value shares.
``The momentum stocks get overdone, and the value stocks get so cheap,'' said Pzena, 49, who oversees about $18.5 billion. ``When it unwinds, the money flows from one direction to the other.''
The S&P 500 Energy Index slid 20 percent from its May record, while the S&P 500 Materials Index fell 17 percent from its peak. The plunge in technology, media and telecommunications stocks after the Internet bubble burst in 2000 led to seven years of value beating growth, according to Montier, 37, the London- based chief global equity strategist at Societe Generale.
``Investors should be a little bit masochistic and accept the pain of lagging,'' said New York-based value investor Jean- Marie Eveillard, 68, whose $24 billion First Eagle Global Fund beat 94 percent of its peers this year. ``They should resist the temptation to move.''
To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.
Read more...
Aug. 11 (Bloomberg) -- Bill Miller, Martin Whitman and David Dreman, mired in the worst slumps of their careers, are poised once again to trounce the stock market.
If history is any guide, the value investors' emphasis on shares trading at low prices relative to cash flow and earnings will provide returns superior to the holdings of so-called growth managers. Growth investing, which focuses on companies with the fastest projected profit increases, beat value strategies for the first time this decade in 2007 and by 15.5 percentage points so far this year, the widest margin since 1980, according to data compiled by Paris-based Societe Generale SA.
The five prior times since 1952 that growth beat value two years in a row, the latter group recovered and won by 17 percentage points annually on average for seven years, the data from Societe Generale show. Cheap stocks are becoming more attractive because of tumbling commodity shares, which had led the five-year bull market that ended in October, according to Societe Generale's James Montier, voted top global strategist in Thomson Extel's survey since 2005.
Value stocks became a liability as even Warren Buffett's Berkshire Hathaway Inc., the investment vehicle for the richest person in Forbes magazine's 2008 global tally, fell as much as 25 percent from a December record. Miller's Legg Mason Value Trust, which beat the Standard & Poor's 500 Index for 15 years through 2005, lost 27 percent including dividends this year, Bloomberg data show.
`Normally Snaps Back'
``This is one of the worst periods I've seen for value,'' said Dreman, 72, who oversees about $15 billion as chairman of Dreman Value Management LLC in Jersey City, New Jersey. ``The more it underperforms, the more it normally snaps back. The probabilities are very strong we'll have a major upswing.''
The flagship funds run by Miller, Third Avenue Management LLC's Whitman and Dreman are headed for their worst annual performances, data from Chicago-based Morningstar Inc. show, after subprime losses roiled financial markets and sent the S&P 500 into a bear-market decline of more than 20 percent from its October record. Omaha, Nebraska-based Berkshire had its steepest first-half drop in New York trading since 1990.
The investors' stock picks retreated as U.S. companies trading at the lowest prices relative to cash flow trailed the most expensive shares compared to cash flow by 15.5 percentage points in 2008, according to data compiled by Montier and Kenneth French, a finance professor at Dartmouth's Tuck School of Business in Hanover, New Hampshire.
Investments Gone Bad
That's the widest margin that ``value'' lost to ``growth'' on an annual basis since a 28-point gap in 1980 and follows a 4.5-point underperformance last year, Montier said in a July 30 report.
U.S. stock-index futures advanced today as higher oil and gold prices lifted commodities producers. S&P 500 futures expiring in September added 0.2 percent at 11:24 a.m. in London.
Miller, Whitman and Dreman adhere to the investment philosophy pioneered by Benjamin Graham, the late money manager and author of ``Security Analysis.'' Buffett, who attended Graham's Columbia University classes in New York in the 1950s, used the strategy to transform Berkshire from a failing maker of men's suit linings into a $179 billion company by purchasing assets he deemed cheap.
`Dismal Performance'
Berkshire declined this year as Buffett lost money from his stakes in Charlotte, North Carolina-based Bank of America Corp., the biggest U.S. lender by market value, and New York-based American Express Co., the nation's largest credit-card company by purchases. The stocks declined 22 percent and 27 percent, respectively. Buffett, 77, couldn't be reached for comment.
Berkshire posted its third straight quarterly profit decline last week as lower rates pressured results from insurance.
Miller's $9.7 billion Legg Mason Value Trust was dragged down by McLean, Virginia-based Freddie Mac, the U.S. mortgage- finance company hobbled by record foreclosures, and Arlington, Virginia-based AES Corp., a power producer with operations in more than two dozen countries. Investors fled, causing the fund's assets to fall more than 50 percent in the past year. The Massachusetts state pension fund fired Legg Mason last week, citing ``inconsistent'' returns.
``The best time to buy our funds or to open an account with us has always been when we've had dismal performance,'' Miller, 58, wrote in a letter to shareholders two weeks ago. The Baltimore-based investor said he's a ``long-term optimist'' even though ``valuation appeared not to matter'' in recent years.
Adding to MBIA
Whitman's Third Avenue Value Fund returned 958 percent from its inception in November 1990 through July, according to New York-based Third Avenue's Web site. The S&P 500 gained almost 500 percent, including reinvested dividends, during the same period, Bloomberg data show.
The $9 billion fund lost 19 percent in 2008 after Whitman added to his stake in MBIA Inc., the Armonk, New York-based bond insurer that tumbled 54 percent this year. Whitman, 83, couldn't be reached for comment.
Dreman lost 19 percent for clients in his $7.1 billion DWS Dreman High Return Equity Fund this year as Minnetonka, Minnesota-based UnitedHealth Group Inc., the largest U.S. medical insurer, slumped. The fund had outperformed the S&P 500 for seven straight years through 2006.
`Maintain Earnings'
Value may trail growth for another two years as more than $490 billion of credit market losses and asset writedowns at banks prolong the U.S. economy's slump, according to Bruce McCain, the head of investment strategy at Key Private Bank. He favors growth managers, who typically buy shares of companies that increase earnings and sales at a faster pace than peers.
``When you go into periods of slow economic growth, you need to shift your focus to companies that can maintain earnings,'' said McCain, 54, who helps oversee about $30 billion in Cleveland.
Richard Pzena, chairman of New York-based Pzena Investment Management Inc., said declines in commodity producers may prompt investors to switch into value shares.
``The momentum stocks get overdone, and the value stocks get so cheap,'' said Pzena, 49, who oversees about $18.5 billion. ``When it unwinds, the money flows from one direction to the other.''
The S&P 500 Energy Index slid 20 percent from its May record, while the S&P 500 Materials Index fell 17 percent from its peak. The plunge in technology, media and telecommunications stocks after the Internet bubble burst in 2000 led to seven years of value beating growth, according to Montier, 37, the London- based chief global equity strategist at Societe Generale.
``Investors should be a little bit masochistic and accept the pain of lagging,'' said New York-based value investor Jean- Marie Eveillard, 68, whose $24 billion First Eagle Global Fund beat 94 percent of its peers this year. ``They should resist the temptation to move.''
To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.
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Bringing Down Bear Began as $1.7 Million of Unsuspected Options
By Gary Matsumoto
Aug. 11 (Bloomberg) -- On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street's devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.
In a gambit with such low odds of success that traders question its legitimacy, someone wagered $1.7 million that Bear Stearns shares would suffer an unprecedented decline within days. Options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million.
Whoever placed the bet used so-called put options that gave purchasers the right to sell 5.7 million Bear Stearns shares for $30 each and 165,000 shares for $25 apiece just nine days later, data compiled by Bloomberg show. That was less than half the $62.97 closing price in New York Stock Exchange composite trading on March 11. The buyers were confident the stock would crash.
``Even if I were the most bearish man on earth, I can't imagine buying puts 50 percent below the price with just over a week to expiration,'' said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. ``It's not even on the page of rational behavior, unless you know something.''
The 5.7 million puts that traded March 11 at the $30 strike price and the 1,649 that traded at $25 were collectively worth about $1.7 million, Bloomberg data show. Each put is equal to 100 shares of stock.
`Lottery Ticket'
``That trade amounted to buying a lottery ticket,'' said Michael McCarty, chief options and equity strategist at New York- based brokerage Meridian Equity Partners Inc. ``Would you buy $1.7 million worth of lottery tickets just because you could? No. Neither would a hedge fund manager.''
During the next four days, New York-based Bear Stearns unraveled in the swiftest investment-banking failure in Wall Street history. Speculation about a cash shortage proved self- fulfilling, causing customers and lenders to demand their money back. Bear Stearns's stock sank 47 percent to $30 on Friday, March 14. That's when the Fed moved to stave off a panic by helping the U.S. Treasury arrange JPMorgan Chase & Co.'s purchase of the company for $2 a share, a price unimaginable to the firm's 14,000 employees and more than 500 shareholders.
In the aftermath, Bear Stearns Chief Executive Officer Alan Schwartz told Congress that the firm was toppled by rumor- mongering and abusive trading. Regulators have begun peeling back trading records, hunting for suspects.
Schwartz and officials at the SEC declined to comment for this story.
Wall Street Seizure
The fire sale of Bear Stearns was the climax of a nine-month credit seizure that started with the failure of two Bear Stearns hedge funds, caused more than $490 billion of losses and writedowns in the banking and securities industry and ousted the CEOs of Citigroup Inc., Merrill Lynch & Co., and UBS AG. Never in its 95-year history had the Fed done so much to rescue Wall Street during its worst financial crisis in at least two decades.
Evidence of any scheme to bring down Bear Stearns is most likely buried in options data, according to former government investigators. Options, contracts to buy or sell shares by a certain date at a specific price, can offer forensic evidence of market manipulation and insider trading, said Brent Baker, a former U.S. Securities and Exchange Commission Enforcement Division lawyer who helped prosecute Anthony Elgindy, the stock- picker convicted in 2005 on 11 counts of securities fraud, wire fraud, extortion and racketeering.
The DNA
``On CSI Wall Street, the options are the DNA,'' he said, referring to the television series, ``Crime Scene Investigation.''
While Bear Stearns executives tried to quash rumors about the firm's insolvency with press releases and television appearances by its CEO Schwartz, the number of $30 Bear Stearns put options held by speculators soared 10,768 percent from Monday March 10 to Tuesday March 11, Bloomberg data show.
On March 11, when the Fed said it planned to make up to $200 billion available through weekly auctions and for the first time lend Treasuries in exchange for debt that includes the devalued mortgage-backed securities that contributed to the credit seizure, one or more unidentified traders requested the Chicago Board Options Exchange list the even deeper out-of-the-money strike at $25.
Bear Stearns also was rocked that week by failed trades, a problem associated with naked short selling. Failed trades in Bear Stearns soared more than 10,800 percent during the week of March 10, according to data released by the SEC.
Stock in Freefall
Bear Stearns fell 11 percent to $62.30 in the first trading day of the week on speculation that the firm had insufficient liquidity, or enough funds to cover any sudden withdrawals. The 58-year-old Schwartz, who was in Palm Beach, Florida, at an industry conference, was puzzled by the rumors, according to people who talked to him. He was told by associates that the firm had no shortage of cash. Clients weren't pulling their money, trading counterparties weren't refusing to do business with Bear Stearns, and short-term credit lines weren't being cut.
To quell the speculation, the company issued a two-paragraph statement at the end of the day, saying its financial position was ``strong.''
Hedge funds, concerned about losing their money, weren't convinced. Eagle Asset Management Inc. moved to other prime brokers, according to Managing Director Todd McCallister. Investors who had credit default swap contracts with Bear Stearns turned to Goldman Sachs Group Inc. and other Wall Street firms, asking them to buy the contracts.
Bankruptcy Put
On Wednesday, March 12, Schwartz appeared on CNBC, live from Florida, saying the company had ample resources to weather the credit crunch. While for the moment, at least, that assuaged concerns in the market, the capital flight began again the next day. Many of Bear Stearns's traditional creditors reduced or halted their lending to the 85-year-old company founded by Joseph Bear and Robert Stearns.
By the end of the day, Bear Stearns's cash was almost depleted and its stock closed at $57. As Schwartz realized the company couldn't function on Friday without access to overnight borrowing, he called government officials, regulators and JPMorgan CEO Jamie Dimon.
After discussions late into Thursday night, the Fed agreed to provide cash through JPMorgan, the second-biggest U.S. bank by market value, because Bear Stearns didn't have direct access to the Fed as a lender of last resort.
Then, on March 14, the CBOE listed a series of put options with less than five days to expiration. The lowest strike price, $5, was more than 90 percent out-of-the-money in what options traders refer to as a ``bankruptcy put.'' Bear Stearns slumped 47 percent that day to $30 in NYSE trading.
`One Tick'
The out-of-the-money Bear Stearns puts point to a raid, said Baker, who's now a securities lawyer whose clients include companies that have filed complaints over naked short selling.
The $25 Bear Stearns puts, and others obtained March 14 involving the right to purchase 630,000 shares at a strike price of $5 by March 22, were ``bizarre,'' according to Haugh, the PTI partner who spent 18 years as a CBOE options-market maker.
John Olagues, who started trading options 30 years ago, said he has never experienced anything like it. Olagues, who runs a New Orleans consulting company called Truth in Options, also manages more than $1 million for a client who had a stake in Bear Stearns, which plummeted 94 percent in value on March 17. The drop prompted Olagues to start pouring over options trading records and call officials at the CBOE.
``In just one tick, the company's share price lost nearly all its value, a steeper drop than Enron's right before its de-listing in 2001,'' said 63-year-old Olagues, referring to the bankruptcy of Houston-based energy trading company Enron Corp. ``I've never seen a stock perform like that in my life.''
Vertical Put
Olagues, who was an options market maker at the Pacific Exchange and then the CBOE from 1976 to 1984, said he knows all about so-called time decay, implied volatility, arbitrage and the complexities of options trading. The former all-conference pitcher at Tulane University, who started his own firm called Truth in Options in River Ridge, Louisiana, in 2003, said he has found options transactions that convince him Bear Stearns was the victim of insider trading.
``I would stake my reputation on that,'' he said.
Olagues said he was able to avoid losses for his client on Friday, March 14. His hedged position -- a so-called vertical put spread designed to absorb losses as great as 50 percent -- made money by the closing bell that day. The hedging failed the next trading day, March 17, when the stock opened at $3.17.
``Nobody prepares for the stock going from $57 to $3 in just two days,'' he said.
SEC Review
Schwartz told the U.S. Senate Banking Committee on April 3 that there are ``lots of reasons why people could have a financial motivation to induce panic'' and ``a lot of trading would point to that.''
Bear Stearns has forwarded options data to the Senate Banking Committee and the SEC, said a person close to the firm, who declined to be identified.
SEC Chairman Christopher Cox told Congress last month that the agency is probing whether illegal trading spurred the collapse of Bear Stearns and the 72 percent drop this year in Lehman Brothers Holdings Inc.'s market value. The inquiry focuses on investors suspected of seeking to profit by intentionally spreading false information about the companies.
The SEC subpoenaed Wall Street's largest firms and hedge funds for trading records and communications, including e-mails. The agency also enacted an emergency limit on so-called naked short sales in Freddie Mac, Fannie Mae and 17 brokerages as it prepares broader rules to thwart stock manipulation.
`Turbocharge' Effect
Naked shorting, which can be illegal, occurs when short sellers who intend to profit from a decline in securities prices fail to borrow stock by the settlement date. Traders can use that method to drive down prices by flooding the market with sell orders.
The strategy can ``turbocharge'' the effect of false rumors on a stock price, Cox said on a July 16 conference call with reporters. The SEC will consider new rules to prevent improper short selling, Cox told Congress on July 24. It also may force investors to disclose ``substantial'' bets on falling stocks, he said.
On Tuesday, March 11, when Federal Reserve Bank Chairman Ben Bernanke attended a luncheon with Wall Street executives at the New York Fed and the CBOE listed its $25 Bear Stearns put option, McCarty of Meridian red-flagged Bear Stearns in his ``MEP Noteworthy Option Activity'' memo.
Big Bets
What got McCarty's attention that day was the volume of put trading in strike prices of $35 and below. Investors bought 84,109 puts at strike prices that would require a calamitous drop to make money, he said.
``Somebody placed some big bets that day that paid off,'' McCarty said. ``The question is did they make it pay off?''
On March 14, when Schwartz sought emergency funding, Bear Stearns opened at $54.24 in NYSE trading. That day, the CBOE listed eight new put options that expired in five days with strike prices that ranged from $22.50 to $5. The lowest was 90.7 percent below the opening stock price.
Gail Osten, a spokeswoman for the CBOE, declined to say who placed the order for the options.
``Nobody in their right mind would buy that put unless you knew what was going down,'' said Ray Wollney, Olagues's partner at Truth in Options. On Friday, March 14, a total of 6,303 of the $5 Bear Stearns puts traded.
Paulson Calls
That night, Schwartz got a call from Treasury Secretary Henry Paulson making it clear that the Bear Stearns had until Sunday evening to find a buyer because the Fed planned to withdraw its financial backing. Paulson, who didn't want the government to appear to be bailing out a Wall Street firm, then brokered the sale to JPMorgan.
Schwartz and Bear Stearns Chairman James ``Jimmy'' Cayne convinced fellow board members by explaining that their only alternative was to accept the deal or face bankruptcy. The agreement was announced Sunday night.
Options bets that looked irrational on Friday proved brilliant on Monday, when the shares traded between $3 and $5. By Wollney's calculations, the traders who spent $35.8 million on the deep out-of-the-money puts reaped an estimated $274 million windfall from the plunge in Bear Stearns.
Peter Chepucavage, a former general counsel for compliance at Nomura Securities and onetime SEC lawyer, said the Bear Stearns bets were neither smart nor lucky.
`Riddled With Bullets'
``When you buy $5 strikes when the stock is trading over $50, you either have to be manipulating, or you have to have insider information,'' said Chepucavage, who's now with Washington-based Plexus Consulting.
John Welborn, a London School of Economics-educated economist who works at Haverford Group investment firm in Salt Lake City, has been analyzing data released by the SEC on Bear Stearns shares sold but not delivered to buyers within the required three-day limit.
From March 10 to March 14, SEC data show that the failed Bear Stearns trades jumped to 2.1 million from 19,424, Welborn said. The failed trades correlate with increases in the firm's put volume. The volume of Bear Stearns puts soared to 237,770 on March 11 from 32,081 on March 7. Put contracts doubled again to 445,635 on March 14.
``It looks to me like Bear Stearns got riddled with bullets,'' Welborn said.
The question is whether the trading was premeditated and designed to ruin Bear Stearns, Chepucavage said. If there is a link between these separate activities, only subpoena power will be able to establish it, he said.
``Track the rumors,'' Chepucavage said. ``Follow the puts.''
To contact the reporters on this story: Gary Matsumoto in New York at gmatsumoto@bloomberg.net.
Read more...
Aug. 11 (Bloomberg) -- On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street's devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.
In a gambit with such low odds of success that traders question its legitimacy, someone wagered $1.7 million that Bear Stearns shares would suffer an unprecedented decline within days. Options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million.
Whoever placed the bet used so-called put options that gave purchasers the right to sell 5.7 million Bear Stearns shares for $30 each and 165,000 shares for $25 apiece just nine days later, data compiled by Bloomberg show. That was less than half the $62.97 closing price in New York Stock Exchange composite trading on March 11. The buyers were confident the stock would crash.
``Even if I were the most bearish man on earth, I can't imagine buying puts 50 percent below the price with just over a week to expiration,'' said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. ``It's not even on the page of rational behavior, unless you know something.''
The 5.7 million puts that traded March 11 at the $30 strike price and the 1,649 that traded at $25 were collectively worth about $1.7 million, Bloomberg data show. Each put is equal to 100 shares of stock.
`Lottery Ticket'
``That trade amounted to buying a lottery ticket,'' said Michael McCarty, chief options and equity strategist at New York- based brokerage Meridian Equity Partners Inc. ``Would you buy $1.7 million worth of lottery tickets just because you could? No. Neither would a hedge fund manager.''
During the next four days, New York-based Bear Stearns unraveled in the swiftest investment-banking failure in Wall Street history. Speculation about a cash shortage proved self- fulfilling, causing customers and lenders to demand their money back. Bear Stearns's stock sank 47 percent to $30 on Friday, March 14. That's when the Fed moved to stave off a panic by helping the U.S. Treasury arrange JPMorgan Chase & Co.'s purchase of the company for $2 a share, a price unimaginable to the firm's 14,000 employees and more than 500 shareholders.
In the aftermath, Bear Stearns Chief Executive Officer Alan Schwartz told Congress that the firm was toppled by rumor- mongering and abusive trading. Regulators have begun peeling back trading records, hunting for suspects.
Schwartz and officials at the SEC declined to comment for this story.
Wall Street Seizure
The fire sale of Bear Stearns was the climax of a nine-month credit seizure that started with the failure of two Bear Stearns hedge funds, caused more than $490 billion of losses and writedowns in the banking and securities industry and ousted the CEOs of Citigroup Inc., Merrill Lynch & Co., and UBS AG. Never in its 95-year history had the Fed done so much to rescue Wall Street during its worst financial crisis in at least two decades.
Evidence of any scheme to bring down Bear Stearns is most likely buried in options data, according to former government investigators. Options, contracts to buy or sell shares by a certain date at a specific price, can offer forensic evidence of market manipulation and insider trading, said Brent Baker, a former U.S. Securities and Exchange Commission Enforcement Division lawyer who helped prosecute Anthony Elgindy, the stock- picker convicted in 2005 on 11 counts of securities fraud, wire fraud, extortion and racketeering.
The DNA
``On CSI Wall Street, the options are the DNA,'' he said, referring to the television series, ``Crime Scene Investigation.''
While Bear Stearns executives tried to quash rumors about the firm's insolvency with press releases and television appearances by its CEO Schwartz, the number of $30 Bear Stearns put options held by speculators soared 10,768 percent from Monday March 10 to Tuesday March 11, Bloomberg data show.
On March 11, when the Fed said it planned to make up to $200 billion available through weekly auctions and for the first time lend Treasuries in exchange for debt that includes the devalued mortgage-backed securities that contributed to the credit seizure, one or more unidentified traders requested the Chicago Board Options Exchange list the even deeper out-of-the-money strike at $25.
Bear Stearns also was rocked that week by failed trades, a problem associated with naked short selling. Failed trades in Bear Stearns soared more than 10,800 percent during the week of March 10, according to data released by the SEC.
Stock in Freefall
Bear Stearns fell 11 percent to $62.30 in the first trading day of the week on speculation that the firm had insufficient liquidity, or enough funds to cover any sudden withdrawals. The 58-year-old Schwartz, who was in Palm Beach, Florida, at an industry conference, was puzzled by the rumors, according to people who talked to him. He was told by associates that the firm had no shortage of cash. Clients weren't pulling their money, trading counterparties weren't refusing to do business with Bear Stearns, and short-term credit lines weren't being cut.
To quell the speculation, the company issued a two-paragraph statement at the end of the day, saying its financial position was ``strong.''
Hedge funds, concerned about losing their money, weren't convinced. Eagle Asset Management Inc. moved to other prime brokers, according to Managing Director Todd McCallister. Investors who had credit default swap contracts with Bear Stearns turned to Goldman Sachs Group Inc. and other Wall Street firms, asking them to buy the contracts.
Bankruptcy Put
On Wednesday, March 12, Schwartz appeared on CNBC, live from Florida, saying the company had ample resources to weather the credit crunch. While for the moment, at least, that assuaged concerns in the market, the capital flight began again the next day. Many of Bear Stearns's traditional creditors reduced or halted their lending to the 85-year-old company founded by Joseph Bear and Robert Stearns.
By the end of the day, Bear Stearns's cash was almost depleted and its stock closed at $57. As Schwartz realized the company couldn't function on Friday without access to overnight borrowing, he called government officials, regulators and JPMorgan CEO Jamie Dimon.
After discussions late into Thursday night, the Fed agreed to provide cash through JPMorgan, the second-biggest U.S. bank by market value, because Bear Stearns didn't have direct access to the Fed as a lender of last resort.
Then, on March 14, the CBOE listed a series of put options with less than five days to expiration. The lowest strike price, $5, was more than 90 percent out-of-the-money in what options traders refer to as a ``bankruptcy put.'' Bear Stearns slumped 47 percent that day to $30 in NYSE trading.
`One Tick'
The out-of-the-money Bear Stearns puts point to a raid, said Baker, who's now a securities lawyer whose clients include companies that have filed complaints over naked short selling.
The $25 Bear Stearns puts, and others obtained March 14 involving the right to purchase 630,000 shares at a strike price of $5 by March 22, were ``bizarre,'' according to Haugh, the PTI partner who spent 18 years as a CBOE options-market maker.
John Olagues, who started trading options 30 years ago, said he has never experienced anything like it. Olagues, who runs a New Orleans consulting company called Truth in Options, also manages more than $1 million for a client who had a stake in Bear Stearns, which plummeted 94 percent in value on March 17. The drop prompted Olagues to start pouring over options trading records and call officials at the CBOE.
``In just one tick, the company's share price lost nearly all its value, a steeper drop than Enron's right before its de-listing in 2001,'' said 63-year-old Olagues, referring to the bankruptcy of Houston-based energy trading company Enron Corp. ``I've never seen a stock perform like that in my life.''
Vertical Put
Olagues, who was an options market maker at the Pacific Exchange and then the CBOE from 1976 to 1984, said he knows all about so-called time decay, implied volatility, arbitrage and the complexities of options trading. The former all-conference pitcher at Tulane University, who started his own firm called Truth in Options in River Ridge, Louisiana, in 2003, said he has found options transactions that convince him Bear Stearns was the victim of insider trading.
``I would stake my reputation on that,'' he said.
Olagues said he was able to avoid losses for his client on Friday, March 14. His hedged position -- a so-called vertical put spread designed to absorb losses as great as 50 percent -- made money by the closing bell that day. The hedging failed the next trading day, March 17, when the stock opened at $3.17.
``Nobody prepares for the stock going from $57 to $3 in just two days,'' he said.
SEC Review
Schwartz told the U.S. Senate Banking Committee on April 3 that there are ``lots of reasons why people could have a financial motivation to induce panic'' and ``a lot of trading would point to that.''
Bear Stearns has forwarded options data to the Senate Banking Committee and the SEC, said a person close to the firm, who declined to be identified.
SEC Chairman Christopher Cox told Congress last month that the agency is probing whether illegal trading spurred the collapse of Bear Stearns and the 72 percent drop this year in Lehman Brothers Holdings Inc.'s market value. The inquiry focuses on investors suspected of seeking to profit by intentionally spreading false information about the companies.
The SEC subpoenaed Wall Street's largest firms and hedge funds for trading records and communications, including e-mails. The agency also enacted an emergency limit on so-called naked short sales in Freddie Mac, Fannie Mae and 17 brokerages as it prepares broader rules to thwart stock manipulation.
`Turbocharge' Effect
Naked shorting, which can be illegal, occurs when short sellers who intend to profit from a decline in securities prices fail to borrow stock by the settlement date. Traders can use that method to drive down prices by flooding the market with sell orders.
The strategy can ``turbocharge'' the effect of false rumors on a stock price, Cox said on a July 16 conference call with reporters. The SEC will consider new rules to prevent improper short selling, Cox told Congress on July 24. It also may force investors to disclose ``substantial'' bets on falling stocks, he said.
On Tuesday, March 11, when Federal Reserve Bank Chairman Ben Bernanke attended a luncheon with Wall Street executives at the New York Fed and the CBOE listed its $25 Bear Stearns put option, McCarty of Meridian red-flagged Bear Stearns in his ``MEP Noteworthy Option Activity'' memo.
Big Bets
What got McCarty's attention that day was the volume of put trading in strike prices of $35 and below. Investors bought 84,109 puts at strike prices that would require a calamitous drop to make money, he said.
``Somebody placed some big bets that day that paid off,'' McCarty said. ``The question is did they make it pay off?''
On March 14, when Schwartz sought emergency funding, Bear Stearns opened at $54.24 in NYSE trading. That day, the CBOE listed eight new put options that expired in five days with strike prices that ranged from $22.50 to $5. The lowest was 90.7 percent below the opening stock price.
Gail Osten, a spokeswoman for the CBOE, declined to say who placed the order for the options.
``Nobody in their right mind would buy that put unless you knew what was going down,'' said Ray Wollney, Olagues's partner at Truth in Options. On Friday, March 14, a total of 6,303 of the $5 Bear Stearns puts traded.
Paulson Calls
That night, Schwartz got a call from Treasury Secretary Henry Paulson making it clear that the Bear Stearns had until Sunday evening to find a buyer because the Fed planned to withdraw its financial backing. Paulson, who didn't want the government to appear to be bailing out a Wall Street firm, then brokered the sale to JPMorgan.
Schwartz and Bear Stearns Chairman James ``Jimmy'' Cayne convinced fellow board members by explaining that their only alternative was to accept the deal or face bankruptcy. The agreement was announced Sunday night.
Options bets that looked irrational on Friday proved brilliant on Monday, when the shares traded between $3 and $5. By Wollney's calculations, the traders who spent $35.8 million on the deep out-of-the-money puts reaped an estimated $274 million windfall from the plunge in Bear Stearns.
Peter Chepucavage, a former general counsel for compliance at Nomura Securities and onetime SEC lawyer, said the Bear Stearns bets were neither smart nor lucky.
`Riddled With Bullets'
``When you buy $5 strikes when the stock is trading over $50, you either have to be manipulating, or you have to have insider information,'' said Chepucavage, who's now with Washington-based Plexus Consulting.
John Welborn, a London School of Economics-educated economist who works at Haverford Group investment firm in Salt Lake City, has been analyzing data released by the SEC on Bear Stearns shares sold but not delivered to buyers within the required three-day limit.
From March 10 to March 14, SEC data show that the failed Bear Stearns trades jumped to 2.1 million from 19,424, Welborn said. The failed trades correlate with increases in the firm's put volume. The volume of Bear Stearns puts soared to 237,770 on March 11 from 32,081 on March 7. Put contracts doubled again to 445,635 on March 14.
``It looks to me like Bear Stearns got riddled with bullets,'' Welborn said.
The question is whether the trading was premeditated and designed to ruin Bear Stearns, Chepucavage said. If there is a link between these separate activities, only subpoena power will be able to establish it, he said.
``Track the rumors,'' Chepucavage said. ``Follow the puts.''
To contact the reporters on this story: Gary Matsumoto in New York at gmatsumoto@bloomberg.net.
Read more...
U.S. Stock-Index Futures Rise; Newmont, ConocoPhillips Gain
By Adam Haigh
Aug. 11 (Bloomberg) -- U.S. stock-index futures advanced as rising commodity prices boosted the earnings outlook for energy companies and raw-material producers.
Newmont Mining Corp. and Barrick Gold Corp. gained with gold, while ConocoPhillips climbed after oil rebounded from a 14- week low. Varian Medical Systems Inc., the maker of X-ray machines and cancer-treatment systems, retreated as Citigroup Inc. downgraded the shares.
Futures on the Standard & Poor's 500 Index expiring in September added 1.4, or 0.1 percent, to 1,293.7 at 11:44 a.m. in London. Dow Jones Industrial Average futures increased 9 to 11,696. Nasdaq-100 Index futures advanced 2 to 1,926.5.
``I do think we're starting to get a lot of bad news already digested'' in share prices, said Alan Gayle, the Richmond, Virginia-based senior investment strategist at Ridgeworth Capital Management, which oversees about $74 billion. ``I would say that we are encouraged and are cautiously bullish.'' He spoke in a Bloomberg Television interview.
The S&P 500 rallied 2.9 percent last week as Cisco Systems Inc. and Procter & Gamble Co. joined the majority of companies in beating estimates, the Federal Reserve predicted inflation will ease through next year and crude oil fell.
Analysts forecast full-year earnings among companies in the S&P 500 to rise 1.6 percent, weekly Bloomberg data shows. That compares with expectations for 15 percent growth at the end of last year. Profits among the 426 companies that have reported second-quarter results dropped 23 percent on average from the year-earlier period, according to data compiled by Bloomberg.
Gold, Oil
Newmont Mining, the largest U.S. gold producer, added 14 cents to $43.73 in Switzerland. Bullion rebounded from a three- month low in London as higher oil prices increased demand for the metal as a hedge against inflation. Barrick Gold, the world's biggest gold producer, rose 59 cents to $35.79 in Germany.
ConocoPhillips gained 30 cents to $81.21 in Germany. Crude futures climbed on concern the Russia-Georgia conflict may disrupt crude supplies from the Caspian Sea. The contract for September delivery rose as much as $1.70, or 1.5 percent, to $116.90 a barrel on the New York Mercantile Exchange.
Varian dropped $1.53 to $62.37 in Germany as Citigroup cut its recommendation to ``hold'' from ``buy,'' saying the stock price has had ``a nice run.'' The shares closed at a 2008 high of $63.90 on Aug. 8 and are up 23 percent this year.
United Parcel Service Inc. lost 16 cents to $65.54 in Germany. The world's largest package-delivery company held initial talks to buy TNT NV for 10 billion euros ($15 billion), the Sunday Telegraph said, citing unidentified people.
FTI Upgrade
``It's our policy not to comment on market rumors,'' said Pieter Schaffels, a TNT spokesman, when contacted by Bloomberg News. UPS ``never discusses rumors or speculation about mergers and acquisitions,'' spokesman Norman Black said yesterday.
FTI Consulting Inc., a provider of forensic accounting in cases such as the Refco Inc. bankruptcy, may be active after Merrill Lynch & Co. upgraded the stock to ``buy'' from ``underperform,'' citing the company's plan to spin off a technology unit. The shares didn't trade in Europe.
Retailers Wal-Mart Stores Inc. and Macy's Inc. are among companies due to report earnings this week.
For related news:
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.
Read more...
Aug. 11 (Bloomberg) -- U.S. stock-index futures advanced as rising commodity prices boosted the earnings outlook for energy companies and raw-material producers.
Newmont Mining Corp. and Barrick Gold Corp. gained with gold, while ConocoPhillips climbed after oil rebounded from a 14- week low. Varian Medical Systems Inc., the maker of X-ray machines and cancer-treatment systems, retreated as Citigroup Inc. downgraded the shares.
Futures on the Standard & Poor's 500 Index expiring in September added 1.4, or 0.1 percent, to 1,293.7 at 11:44 a.m. in London. Dow Jones Industrial Average futures increased 9 to 11,696. Nasdaq-100 Index futures advanced 2 to 1,926.5.
``I do think we're starting to get a lot of bad news already digested'' in share prices, said Alan Gayle, the Richmond, Virginia-based senior investment strategist at Ridgeworth Capital Management, which oversees about $74 billion. ``I would say that we are encouraged and are cautiously bullish.'' He spoke in a Bloomberg Television interview.
The S&P 500 rallied 2.9 percent last week as Cisco Systems Inc. and Procter & Gamble Co. joined the majority of companies in beating estimates, the Federal Reserve predicted inflation will ease through next year and crude oil fell.
Analysts forecast full-year earnings among companies in the S&P 500 to rise 1.6 percent, weekly Bloomberg data shows. That compares with expectations for 15 percent growth at the end of last year. Profits among the 426 companies that have reported second-quarter results dropped 23 percent on average from the year-earlier period, according to data compiled by Bloomberg.
Gold, Oil
Newmont Mining, the largest U.S. gold producer, added 14 cents to $43.73 in Switzerland. Bullion rebounded from a three- month low in London as higher oil prices increased demand for the metal as a hedge against inflation. Barrick Gold, the world's biggest gold producer, rose 59 cents to $35.79 in Germany.
ConocoPhillips gained 30 cents to $81.21 in Germany. Crude futures climbed on concern the Russia-Georgia conflict may disrupt crude supplies from the Caspian Sea. The contract for September delivery rose as much as $1.70, or 1.5 percent, to $116.90 a barrel on the New York Mercantile Exchange.
Varian dropped $1.53 to $62.37 in Germany as Citigroup cut its recommendation to ``hold'' from ``buy,'' saying the stock price has had ``a nice run.'' The shares closed at a 2008 high of $63.90 on Aug. 8 and are up 23 percent this year.
United Parcel Service Inc. lost 16 cents to $65.54 in Germany. The world's largest package-delivery company held initial talks to buy TNT NV for 10 billion euros ($15 billion), the Sunday Telegraph said, citing unidentified people.
FTI Upgrade
``It's our policy not to comment on market rumors,'' said Pieter Schaffels, a TNT spokesman, when contacted by Bloomberg News. UPS ``never discusses rumors or speculation about mergers and acquisitions,'' spokesman Norman Black said yesterday.
FTI Consulting Inc., a provider of forensic accounting in cases such as the Refco Inc. bankruptcy, may be active after Merrill Lynch & Co. upgraded the stock to ``buy'' from ``underperform,'' citing the company's plan to spin off a technology unit. The shares didn't trade in Europe.
Retailers Wal-Mart Stores Inc. and Macy's Inc. are among companies due to report earnings this week.
For related news:
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.
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Banco Itau, Cap, Cesp, Edenor, Falabella: Latin Equity Preview
By James Attwood and Paulo Winterstein
Aug. 11 (Bloomberg) -- The following companies may have unusual price changes in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 2.2 percent to 4,033.09.
Argentina
Empresa Distribuidora y Comercializadora Norte SA (EDN AF): The Buenos Aires-based electricity distributor reported an almost fivefold jump in second-quarter profit to 38.6 million pesos ($12.7 million), beating the 30.4 million peso average forecast of three analysts surveyed by Bloomberg. Edenor fell 2.2 percent to 1.78 pesos.
Brazil
Banco Itau Holding Financeira SA (ITAU4 BS): The BFB Leasing SA Arrendamento Mercantil unit of Brazil's second-biggest non- government bank canceled plans to sell as much as 20 billion ($12.4 billion) reais of subordinated notes in local debt markets. Itau fell 1.5 percent to 32.71 reais.
Cia. Energetica de Sao Paulo (CESP6 BS): The state- controlled utility that was put up for auction this year requested that the federal government extend licenses for two hydroelectric dams to 2024. Cesp fell 1.7 percent to 28.75 reais.
Chile
Cap SA (CAP CC): Chile's biggest steel and iron-ore producer said second-quarter profit more than doubled to $98.8 million on higher prices, beating the $77.9 million average estimate of five analysts surveyed by Bloomberg. Cap fell 1.9 percent to 19,991 pesos.
SACI Falabella SA (FALAB CC): Chile's biggest department store operator said first-half profit declined 6.1 percent to 110 billion pesos. Falabella fell 0.2 percent to 2,120.20 pesos.
To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Aug. 11 (Bloomberg) -- The following companies may have unusual price changes in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index fell 2.2 percent to 4,033.09.
Argentina
Empresa Distribuidora y Comercializadora Norte SA (EDN AF): The Buenos Aires-based electricity distributor reported an almost fivefold jump in second-quarter profit to 38.6 million pesos ($12.7 million), beating the 30.4 million peso average forecast of three analysts surveyed by Bloomberg. Edenor fell 2.2 percent to 1.78 pesos.
Brazil
Banco Itau Holding Financeira SA (ITAU4 BS): The BFB Leasing SA Arrendamento Mercantil unit of Brazil's second-biggest non- government bank canceled plans to sell as much as 20 billion ($12.4 billion) reais of subordinated notes in local debt markets. Itau fell 1.5 percent to 32.71 reais.
Cia. Energetica de Sao Paulo (CESP6 BS): The state- controlled utility that was put up for auction this year requested that the federal government extend licenses for two hydroelectric dams to 2024. Cesp fell 1.7 percent to 28.75 reais.
Chile
Cap SA (CAP CC): Chile's biggest steel and iron-ore producer said second-quarter profit more than doubled to $98.8 million on higher prices, beating the $77.9 million average estimate of five analysts surveyed by Bloomberg. Cap fell 1.9 percent to 19,991 pesos.
SACI Falabella SA (FALAB CC): Chile's biggest department store operator said first-half profit declined 6.1 percent to 110 billion pesos. Falabella fell 0.2 percent to 2,120.20 pesos.
To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
Read more...
Oils, autos help Europe stocks to 6-week highs
Mon Aug 11, 2008 4:52am EDT
* FTSEurofirst up 0.5 percent, led by oils, banks
* Automakers gain on euro weakness
* UBS rises on debt buyback
By Sitaraman Shankar
LONDON, Aug 11 (Reuters) - European stocks hit their highest level in more than 6 weeks early on Monday, led by oil shares as fighting between Russia and Georgia boosted oil prices, while automakers gained from a weak euro.
At 0827 GMT, the pan-European FTSEurofirst 300 index was up 0.5 percent at 1,204.70 points, after having hit a high of 1,210.79, its strongest level since June 26.
Auto stocks gained as the euro traded as low as $1.4908 after suffering its biggest one-day drop since January 2001 on Friday. The euro later recovered to above $1.50.
BMW rose 3.4 percent, Daimler gained 2.7 percent, while Renault and Peugeot advanced about 2 percent.
Though oil gained $1.60 a barrel, it was still below $117, and a long way below record highs above $147 hit last month.
"The key elements of this equities rebound are the drop in both the euro and oil prices. Even the ECB seems to finally recognise that the recession in Europe is just around the corner," said Marc Touati, economist at Global Equities in Paris.
"The U.S. economy is already getting better, while Europe's is plunging ... with hopes of rate cuts, the euro is falling, boosting the U.S. dollar, which prompts a retreat in oil prices."
Dutch mail and logistics group TNT was a standout gainer, jumping 3.5 percent after a source familiar with the talks said U.S. delivery company United Parcel Service was in talks to buy TNT.
Shares in Swiss bank UBS rose 4.3 percent after it agreed on Friday to buy back $18.6 billion in auction-rate securities (ARS) whose value collapsed during a global financial crisis, and to pay $150 million to settle charges it misled investors.
"UBS ... says that costs for the ARS buyback should not exceed $900 million. On Friday, market participants expected up to $2 billion," one Zurich-based trader said.
Across Europe, Britain's FTSE 100 .FTSE was up 0.7 percent, Germany's DAX .GDAXI up 0.4 percent and France's CAC .FCHI up 0.5 percent.
OIL STRONG ENOUGH, WEAK ENOUGH
While a 21 percent slide in crude since its July 11 high has eased inflation worries and is generally positive for equities, oil's uptick on Monday lifted heavyweight energy shares and contributed to the FTSEurofirst's rise.
BP , Royal Dutch Shell and Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) gained 1.3 to 1.8 percent.
Miners were in focus after Kazakhmys raised its stake in rival Eurasian Natural Resources (ENRC) to above 25 percent and Xstrata looked to raise more than 5 billion pounds to forge ahead with a hostile bid for Lonmin .
Kazakhmys was up 2.3 percent, Xstrata up 1.1 percent and Lonmin flat but ENRC tanked 4.2 percent after Kazakhmys said it had no immediate plans for a bid.
"ENRC has also been very highly correlated to the Russian market recently," said an analyst. Russian stocks hit their lowest level for two years on Monday, unsettled by the military conflict between Russia and Georgia.
Georgia shelled the capital of South Ossetia on Monday, a Russian news agency said, while Tbilisi said dozens of Russian bombers were attacking Georgia.
The FTSEurofirst is down 20 percent so far this year, led lower by financials, which have been battered by a global credit crisis. But the index is up 2.1 percent in August.
"If there is no major escalation in Ossetia, no negative developments in tensions between the West and Iran and no major hurricanes, stocks could end the summer on a positive note," said Touati. (Additional reporting by Blaise Robinson in Paris; Editing by Quentin Webb)
Read more...
* FTSEurofirst up 0.5 percent, led by oils, banks
* Automakers gain on euro weakness
* UBS rises on debt buyback
By Sitaraman Shankar
LONDON, Aug 11 (Reuters) - European stocks hit their highest level in more than 6 weeks early on Monday, led by oil shares as fighting between Russia and Georgia boosted oil prices, while automakers gained from a weak euro.
At 0827 GMT, the pan-European FTSEurofirst 300 index was up 0.5 percent at 1,204.70 points, after having hit a high of 1,210.79, its strongest level since June 26.
Auto stocks gained as the euro traded as low as $1.4908 after suffering its biggest one-day drop since January 2001 on Friday. The euro later recovered to above $1.50.
BMW rose 3.4 percent, Daimler gained 2.7 percent, while Renault and Peugeot advanced about 2 percent.
Though oil gained $1.60 a barrel, it was still below $117, and a long way below record highs above $147 hit last month.
"The key elements of this equities rebound are the drop in both the euro and oil prices. Even the ECB seems to finally recognise that the recession in Europe is just around the corner," said Marc Touati, economist at Global Equities in Paris.
"The U.S. economy is already getting better, while Europe's is plunging ... with hopes of rate cuts, the euro is falling, boosting the U.S. dollar, which prompts a retreat in oil prices."
Dutch mail and logistics group TNT was a standout gainer, jumping 3.5 percent after a source familiar with the talks said U.S. delivery company United Parcel Service was in talks to buy TNT.
Shares in Swiss bank UBS rose 4.3 percent after it agreed on Friday to buy back $18.6 billion in auction-rate securities (ARS) whose value collapsed during a global financial crisis, and to pay $150 million to settle charges it misled investors.
"UBS ... says that costs for the ARS buyback should not exceed $900 million. On Friday, market participants expected up to $2 billion," one Zurich-based trader said.
Across Europe, Britain's FTSE 100 .FTSE was up 0.7 percent, Germany's DAX .GDAXI up 0.4 percent and France's CAC .FCHI up 0.5 percent.
OIL STRONG ENOUGH, WEAK ENOUGH
While a 21 percent slide in crude since its July 11 high has eased inflation worries and is generally positive for equities, oil's uptick on Monday lifted heavyweight energy shares and contributed to the FTSEurofirst's rise.
BP , Royal Dutch Shell and Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) gained 1.3 to 1.8 percent.
Miners were in focus after Kazakhmys raised its stake in rival Eurasian Natural Resources (ENRC) to above 25 percent and Xstrata looked to raise more than 5 billion pounds to forge ahead with a hostile bid for Lonmin .
Kazakhmys was up 2.3 percent, Xstrata up 1.1 percent and Lonmin flat but ENRC tanked 4.2 percent after Kazakhmys said it had no immediate plans for a bid.
"ENRC has also been very highly correlated to the Russian market recently," said an analyst. Russian stocks hit their lowest level for two years on Monday, unsettled by the military conflict between Russia and Georgia.
Georgia shelled the capital of South Ossetia on Monday, a Russian news agency said, while Tbilisi said dozens of Russian bombers were attacking Georgia.
The FTSEurofirst is down 20 percent so far this year, led lower by financials, which have been battered by a global credit crisis. But the index is up 2.1 percent in August.
"If there is no major escalation in Ossetia, no negative developments in tensions between the West and Iran and no major hurricanes, stocks could end the summer on a positive note," said Touati. (Additional reporting by Blaise Robinson in Paris; Editing by Quentin Webb)
Read more...
Babies "R" Us to sell Amy Coe-designed products
Mon Aug 11, 2008 5:00am EDT
By Aarthi Sivaraman
NEW YORK, Aug 11 (Reuters) - Taking a cue from Target Corp , retailer Toys "R" Us introduced the largest line of exclusive baby products at its Babies "R" Us stores, billing it as affordable, at a time when U.S. consumers are seeking value in everything from food to furniture.
The merchandise, from infant furniture such as cribs, to clothes and diaper bags, is designed by Amy Coe, who once designed baby products for Target.
The products will be available in more than 230 Babies "R" Us stores in the United States and on the baby merchandise retailer's Web site this month, Toys "R" Us said.
"It is very appropriate for current market conditions," said Toys "R" Us Chief Executive Jerry Storch.
"She (Coe) offers designs that are innovative, fun and different, but at an affordable price, which appeals to a broad customer base," Storch said in an interview.
Coe's playwear includes baby clothes that sell for between $6.99 and $21.99, while prices for cribs will start at $269, to Toys "R" Us said.
This is the first time Coe is designing furniture, according to Toys "R" Us.
Coe said in a separate interview that she no longer designs an active line for Target, though the discount retailer carries some items designed by her on its Web site under clearance prices.
The products arrive as U.S. consumers and retailers are set to head into the holiday shopping season, which accounts for a big portion of sales for many.
Toy companies get the lion's share of their annual sales in the run-up to the winter holidays.
But rising commodity costs have forced them to raise retail prices. Mattel Inc hiked prices on most of its products by mid- to high-single-digit rates in June, while Hasbro Inc has said it will increase prices in the mid-single-digit percentage from Sept. 1.
U.S. shoppers could have trouble digesting higher prices as they battle pricier food and fuel and flock to discount retailers such as Wal-Mart Stores Inc and Target to stretch their dollars.
Still, Toys "R" Us is not planning to raise prices on any of the products it is launching currently, Storch said. (Reporting by Aarthi Sivaraman, editing by Leslie Gevirtz)
Read more...
By Aarthi Sivaraman
NEW YORK, Aug 11 (Reuters) - Taking a cue from Target Corp , retailer Toys "R" Us introduced the largest line of exclusive baby products at its Babies "R" Us stores, billing it as affordable, at a time when U.S. consumers are seeking value in everything from food to furniture.
The merchandise, from infant furniture such as cribs, to clothes and diaper bags, is designed by Amy Coe, who once designed baby products for Target.
The products will be available in more than 230 Babies "R" Us stores in the United States and on the baby merchandise retailer's Web site this month, Toys "R" Us said.
"It is very appropriate for current market conditions," said Toys "R" Us Chief Executive Jerry Storch.
"She (Coe) offers designs that are innovative, fun and different, but at an affordable price, which appeals to a broad customer base," Storch said in an interview.
Coe's playwear includes baby clothes that sell for between $6.99 and $21.99, while prices for cribs will start at $269, to Toys "R" Us said.
This is the first time Coe is designing furniture, according to Toys "R" Us.
Coe said in a separate interview that she no longer designs an active line for Target, though the discount retailer carries some items designed by her on its Web site under clearance prices.
The products arrive as U.S. consumers and retailers are set to head into the holiday shopping season, which accounts for a big portion of sales for many.
Toy companies get the lion's share of their annual sales in the run-up to the winter holidays.
But rising commodity costs have forced them to raise retail prices. Mattel Inc hiked prices on most of its products by mid- to high-single-digit rates in June, while Hasbro Inc has said it will increase prices in the mid-single-digit percentage from Sept. 1.
U.S. shoppers could have trouble digesting higher prices as they battle pricier food and fuel and flock to discount retailers such as Wal-Mart Stores Inc and Target to stretch their dollars.
Still, Toys "R" Us is not planning to raise prices on any of the products it is launching currently, Storch said. (Reporting by Aarthi Sivaraman, editing by Leslie Gevirtz)
Read more...
Tokio Marine profit slides as economic pain bites
Mon Aug 11, 2008 5:10am EDT
(Adds details)
By David Dolan
TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings , Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its insurance business.
The firm, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.
Results were even grimmer for three of Tokyo Marine's smaller rivals, underscoring the harsh outlook for insurers in the world's second-largest economy.
Nissay Dowa General Insurance and Aioi Insurance both booked sharp drops in quarterly profit, while Fuji Fire and Marine Insurance fell to a loss.
Japanese insurers face limited prospects for expansion at home given the country's economic problems and expected decline in population. Growth figures due on Wednesday are expected to show Japan's economy contracted in the second quarter and some policymakers say the country may already be in recession.
The cash-rich Tokio Marine is looking to counteract the malaise at home by increasingly its business overseas.
Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.
The insurer said group net profit fell to 28.9 billion yen ($263 million) in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.
Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.
The insurer said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock.
Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)
Read more...
(Adds details)
By David Dolan
TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings , Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its insurance business.
The firm, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.
Results were even grimmer for three of Tokyo Marine's smaller rivals, underscoring the harsh outlook for insurers in the world's second-largest economy.
Nissay Dowa General Insurance and Aioi Insurance both booked sharp drops in quarterly profit, while Fuji Fire and Marine Insurance fell to a loss.
Japanese insurers face limited prospects for expansion at home given the country's economic problems and expected decline in population. Growth figures due on Wednesday are expected to show Japan's economy contracted in the second quarter and some policymakers say the country may already be in recession.
The cash-rich Tokio Marine is looking to counteract the malaise at home by increasingly its business overseas.
Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.
The insurer said group net profit fell to 28.9 billion yen ($263 million) in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.
Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.
The insurer said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock.
Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)
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Dainippon Screen tumbles to Q1 loss on chip gear
Mon Aug 11, 2008 5:05am EDT
TOKYO, Aug 11 (Reuters) - Dainippon Screen Manufacturing Co , the world's top maker of silicon wafer cleaners, fell to a quarterly loss on a drop in chip equipment sales, but it kept its annual outlook higher than the market consensus, eyeing a recovery in orders from logic chip makers and demand from LCD makers.
Memory chip makers have been reining in spending, hurting sales at semiconductor equipment makers such as Advantest Corp and Tokyo Electron Ltd .
Dainippon Screen is counting on demand from liquid crystal display makers to stay solid while it waits for orders from logic chip makers to recover.
For the year to March, the Kyoto-based company kept its full-year operating profit outlook at 12.7 billion yen ($115.5 million), down 13 percent from the previous year and above a consensus average of 11.7 billion yen by 12 analysts polled by Reuters Estimates.
Total orders in April-June rose 14 percent, as orders for flat panel display-making equipment more than quadrupled, outpacing a 32 percent fall in orders for semiconductor making machines.
The orders take anywhere from two to 10 months to fill.
Dainippon Screen tumbled to an operating loss of 834 million yen in April-June from a 4.58 billion yen profit in the same period a year ago.
It fell to a net loss of 3.05 billion yen from a 2.13 billion yen profit the previous year, on sales of 52.06 billion yen, down 25 percent.
Prior to the announcement, its shares closed up 7.8 percent to 415 yen, outperforming the benchmark Nikkei average .N225, which rose 2.0 percent. (Reporting by Mayumi Negishi; Editing by Hugh Lawson)
Read more...
TOKYO, Aug 11 (Reuters) - Dainippon Screen Manufacturing Co , the world's top maker of silicon wafer cleaners, fell to a quarterly loss on a drop in chip equipment sales, but it kept its annual outlook higher than the market consensus, eyeing a recovery in orders from logic chip makers and demand from LCD makers.
Memory chip makers have been reining in spending, hurting sales at semiconductor equipment makers such as Advantest Corp and Tokyo Electron Ltd .
Dainippon Screen is counting on demand from liquid crystal display makers to stay solid while it waits for orders from logic chip makers to recover.
For the year to March, the Kyoto-based company kept its full-year operating profit outlook at 12.7 billion yen ($115.5 million), down 13 percent from the previous year and above a consensus average of 11.7 billion yen by 12 analysts polled by Reuters Estimates.
Total orders in April-June rose 14 percent, as orders for flat panel display-making equipment more than quadrupled, outpacing a 32 percent fall in orders for semiconductor making machines.
The orders take anywhere from two to 10 months to fill.
Dainippon Screen tumbled to an operating loss of 834 million yen in April-June from a 4.58 billion yen profit in the same period a year ago.
It fell to a net loss of 3.05 billion yen from a 2.13 billion yen profit the previous year, on sales of 52.06 billion yen, down 25 percent.
Prior to the announcement, its shares closed up 7.8 percent to 415 yen, outperforming the benchmark Nikkei average .N225, which rose 2.0 percent. (Reporting by Mayumi Negishi; Editing by Hugh Lawson)
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Forex Technical Analysis
| Daily Forex Technicals | Written by DeltaStock Inc. | Aug 11 08 08:58 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||
EUR/USDCurrent level-1.5051 EUR/USD is in а downtrend from 1.6039 (15 July 2008). Technical indicators are descending and trading is situated below the 50- and 200-Day SMA, currently projected at 1.5677 and 1.5227. Friday's consolidation managed to stay below 1.5251 and the downtrend was renewed, accelerating below the 1.50+ support. We think, that today's intraday bottom at 1.4908 is a final of the 1.5507-1.4908 sell-off, so a consolidation is unfolding, that should challenge 1.5103. Ofcourse the general downtrend from 1.6039 is still intact and after brief consolidation below 1.5143, one more leg towards 1.4742 i sexpected to complete the structure since 1.6039. Intraday be prepared for an upward bias, targeting 1.5103. Today's strategy: Trade the 1.4925-1.5143 range
USD/JPYCurrent level - 109.88 The pair is still in the broad consolidation since 95.75 short-term bottom, aiming at 111.03. Trading is situated above the 50- and 200-day SMA, currently projected at 107.09 and 106.62. As expected the pair broke through 109.89, reaching high at 110.36. From that level a minor consolidation is on the run, that will challenge the 108.93 support before renewing the uptrend towards 111.03. Intraday expect downward move, to 109.14. Today's strategy: Sell for 109.14, stop above 110.19.
GBP/USDCurrent level- 1.9231 The pair has finished the broad consolidation above 1.9338 and the general downtrend has been renewed, targeting levels below 1.85+. Trading is situated below the 50- and 200-day SMA, currently projected at 1.9752 and 1.9853. A local bottom is set at 1.9124, that may be enough to provoke a brief consolidation above that level , for a re-test of the 1.9338 resistance. Today's strategy : Stand aside.
DeltaStock Inc. - Online Forex & Securities Broker RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice. | |||||||||||||||||||||||||||||||||||||||||||||||||
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FOREX-Dollar hits new highs then slips on profit-taking
Mon Aug 11, 2008 4:51am EDT
(Recasts, adds comment and quotes, updates prices, changes byline and dateline. Previous: TOKYO)
* Dollar hits new multi-month highs but then slips back
* Profit-taking lifts euro back above $1.50
* Dollar entering sustained long-term recovery?
* Oil remains key variable
By Jamie McGeever
LONDON, Aug 11 (Reuters) - The dollar scaled new multi-month highs on Monday as traders reassessed whether the slowdown that has already hit the U.S. economy would show up elsewhere in the world but it then succumbed to sharp profit-taking.
The euro, which last week suffered its biggest weekly fall since its 1999 inception, fell almost as low as $1.49 earlier on Monday as the downward technical momentum intensified before snapping back to above $1.50.
Strong anti-inflation comments from a leading European Central Bank policymaker and a 1.5 percent rebound in oil prices helped take the gloss off the dollar's earlier rally and provided traders with the excuse to cash in on the month-long fall in commodities and dollar's latest surge [ID:nWEA5361].
ECB Governing Klaus Liebscher's warning that inflation remained high reminded investors that the ECB's main concern was still to tame inflation and pipeline price pressures.
But ECB President Jean-Claude Trichet's warning last week that the euro zone economy was facing tough times confirmed what many analysts had suspected -- the rest of the world is not immune to the economic pain being endured in the United States stemming from the year-long financial crisis.
"The market is recalibrating its expectations for global growth: we already knew the U.S. growth dynamic was weak, but other economies are now starting to feel the impact of high oil prices and weak housing markets in some areas," said Phyllis Papadavid, currency strategist at Societe Generale in London.
"We're seeing some recoupling, which is holding the dollar in good stead. But we're not necessarily convinced it's going to last because it's not been supported by good macro news in the U.S.. It has been a significant move and we've broken some important levels, but we're not convinced 'this is it'."
At 0815 GMT the euro was up 0.4 percent on the day at $1.5065, rebounding sharply from the near six-month low of $1.4908 on the EBS platform in early Asian trade.
The dollar index, a measure of the greenback's value against a basket of six currencies, was trading at 75.550 .DXY. The index hit a six-month high of 76.192 earlier on Monday.
OIL THE FX KEY
Papadavid said the euro was likely to remain under pressure in the near term but could see some sporadic relief such Monday's rebound as traders buy euros relatively cheaply.
Despite Trichet's relative pessimism on the economic outlook after the ECB kept interest rates on hold at 4.25 percent on Thursday, he didn't sound like a policymaker advocating easier policy any time soon.
"Liebscher was on the hawkish side and that's been helping the euro," said Ian Stannard, senior currency strategist at BNP Paribas. But he added that the euro's rally was likely to be short-lived.
In the near term, the dollar looks poised to gain further ground, especially if traders continue to liquidate the long positions built up in commodities and non-dollar currencies over recent months.
Oil rebounded 1.5 percent to $116.90 a barrel CLc1 on Monday amid heightened tensions between oil-exporting giant Russia and former Soviet state Georgia, having hit a three-month low below $115 on Friday.
Oil prices could be key to the dollar near-term.
"The longer oil stays stable or lower, the more inflation-targeting central banks such as the ECB and the RBA (Reserve Bank of Australia) have been able to focus on downside risks to growth. Conversely if oil were to start creeping higher again in the absence of clear fundamentals, it would raise the risk of a partial reversal of recent moves," UBS strategists said in a note on Monday.
"As policymakers outside of the U.S. converge towards dovish positions, we believe the market will approach a period of consolidation as the dollar moves into new, stronger ranges across the board," they said.
The euro's weakness against the yen, meanwhile, helped keep the dollar down against the Japanese currency, off 0.25 percent on the day at 109.95 yen.
In terms of economic data, the UK economy takes centre stage Monday with the release of the latest producer prices and trade balance figures [ECON].
Read more...
(Recasts, adds comment and quotes, updates prices, changes byline and dateline. Previous: TOKYO)
* Dollar hits new multi-month highs but then slips back
* Profit-taking lifts euro back above $1.50
* Dollar entering sustained long-term recovery?
* Oil remains key variable
By Jamie McGeever
LONDON, Aug 11 (Reuters) - The dollar scaled new multi-month highs on Monday as traders reassessed whether the slowdown that has already hit the U.S. economy would show up elsewhere in the world but it then succumbed to sharp profit-taking.
The euro, which last week suffered its biggest weekly fall since its 1999 inception, fell almost as low as $1.49
Strong anti-inflation comments from a leading European Central Bank policymaker and a 1.5 percent rebound in oil prices helped take the gloss off the dollar's earlier rally and provided traders with the excuse to cash in on the month-long fall in commodities and dollar's latest surge [ID:nWEA5361].
ECB Governing Klaus Liebscher's warning that inflation remained high reminded investors that the ECB's main concern was still to tame inflation and pipeline price pressures.
But ECB President Jean-Claude Trichet's warning last week that the euro zone economy was facing tough times confirmed what many analysts had suspected -- the rest of the world is not immune to the economic pain being endured in the United States stemming from the year-long financial crisis.
"The market is recalibrating its expectations for global growth: we already knew the U.S. growth dynamic was weak, but other economies are now starting to feel the impact of high oil prices and weak housing markets in some areas," said Phyllis Papadavid, currency strategist at Societe Generale in London.
"We're seeing some recoupling, which is holding the dollar in good stead. But we're not necessarily convinced it's going to last because it's not been supported by good macro news in the U.S.. It has been a significant move and we've broken some important levels, but we're not convinced 'this is it'."
At 0815 GMT the euro was up 0.4 percent on the day at $1.5065
The dollar index, a measure of the greenback's value against a basket of six currencies, was trading at 75.550 .DXY. The index hit a six-month high of 76.192 earlier on Monday.
OIL THE FX KEY
Papadavid said the euro was likely to remain under pressure in the near term but could see some sporadic relief such Monday's rebound as traders buy euros relatively cheaply.
Despite Trichet's relative pessimism on the economic outlook after the ECB kept interest rates on hold at 4.25 percent on Thursday, he didn't sound like a policymaker advocating easier policy any time soon.
"Liebscher was on the hawkish side and that's been helping the euro," said Ian Stannard, senior currency strategist at BNP Paribas. But he added that the euro's rally was likely to be short-lived.
In the near term, the dollar looks poised to gain further ground, especially if traders continue to liquidate the long positions built up in commodities and non-dollar currencies over recent months.
Oil rebounded 1.5 percent to $116.90 a barrel CLc1 on Monday amid heightened tensions between oil-exporting giant Russia and former Soviet state Georgia, having hit a three-month low below $115 on Friday.
Oil prices could be key to the dollar near-term.
"The longer oil stays stable or lower, the more inflation-targeting central banks such as the ECB and the RBA (Reserve Bank of Australia) have been able to focus on downside risks to growth. Conversely if oil were to start creeping higher again in the absence of clear fundamentals, it would raise the risk of a partial reversal of recent moves," UBS strategists said in a note on Monday.
"As policymakers outside of the U.S. converge towards dovish positions, we believe the market will approach a period of consolidation as the dollar moves into new, stronger ranges across the board," they said.
The euro's weakness against the yen, meanwhile, helped keep the dollar down against the Japanese currency, off 0.25 percent on the day at 109.95 yen
In terms of economic data, the UK economy takes centre stage Monday with the release of the latest producer prices and trade balance figures [ECON].
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Daily FX Forecast
| Daily Forex Technicals | Written by FX Dream | Aug 11 08 08:46 GMT | | |
EUR/USDResistance levels: 1.5000/1.5060/1.5150 EUR/USD has fallen strongly even below our longer term target at 1.4950 over the last trading sessions No important fundamental news today . On downside, the bias remains bearish in longer term with long term target near 1.4770 In short term, a break below 1.4920 daily bottom may ease price further to 1.4850 over the next trading sessions On the other side, there is a minor Resistance at 1.5000. Above squeezes price to 1.5060 later today In mid term, a beak above 1.5060 is required for deeper recovery towards 1.5140-50 region Strategy-neutral. GBP/USDResistance levels: 1.9240/1.9360/1.9420 GBP/USD has fallen further directly to 1.9130-20 area ( below 1.9180 our next down target ) Today focus will be on UK Producer Price Index at 08:30 GMT Higher than expected numbers may cause recovery to 1.9240-50 area later today In longer term, an upmove above 1.9250 is needed to signal reversal in the bias and rally towards 1.9360 On downside, below 1.9120 temporary base formed resumes the downmove towards 1.9030 Strategy-neutral. USD/JPYResistance levels: 110.10/111.00/111.70 USD/JPY has risen further beyond 110.10 our up suggestion on Friday as it was suggested On the upside, in longer term the uptrend remains intact for test of 111.70 previous gap level First important Resistance comes near 110.10 again . On downside, first important Support comes at 109.65-60 area Below causes pullback down towards 109.00 later today and 108.40-30 area in longer term Strategy-neutral. USD/CHFResistance levels: 1.0840/1.0900 USD/CHF has rallied to our next up target at 1.0840 on Friday Currently the bias is neutral Below 1.0760 crucial Support eases price down to 1.0700 in short term and 1.0640 over today and tomorrow On the upside, a break above 1.0840 again confirms further rally to 1.0900 and higher Strategy-neutral. EUR/JPYResistance levels: 165.30/166.00/166.50 The Cross has eased down to 165.30 our down target on Friday exactly as it was suggested and even below 164.00 in Asia today On downside, the bias remains bearish in longer term for test of 162.30 next down target First Support comes at 164.00 ahead of 163.60 daily bottom . On the upside, first important Resistance comes at 165.30 , a break above 165.30 recovers price to 166.00 later today and 166.50 over today and tomorrow Strategy-neutral. | |
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Major Market Mover: Overall Picture…
| Daily Forex Fundamentals | Written by Crown Forex | Aug 11 08 08:02 GMT | | |
| Here we are starting a new week with the bulls dominating financial markets, as last week they conquered the movement of majors, taking the Euro and the British pound to dip down recording new lows. The outlook in those two major economies are getting gloomier, the Europeans are facing a threat of a contraction especially after markets saw the Italian GDP contracting 0.3% in the second quarter, as now expectations heads toward a contraction of 0.8% in Germany the leading economy in the Union. The severe fall in the Industrial production and the demand on the European goods along with high oil prices complicated the situation. If growth contracts, which I doubt my dear reader, the ECB would be facing a fear of stagflation; inflation is escalating higher with no signs that it would be easing any time soon even when the ECB hiked rates to 4.25% in July, besides the dropping growth levels due to the sliding confidence and the exports that got crippled badly in the previous period. This weeks EU calendar is full of inflationary, growth and the trade data, as it would clear up the picture more, though the fear between investors expecting the worse is what dominates markets, as I believe the Euro won't be strengthening any time soon as the clouds floating in the Unions sky's are not propagating of any good news. United Kingdom is falling too, fear of recession is increasing the housing slump diffused in the Royal had weighed strongly on the Britons, as they are unable to handle the situation with the flaming inflationary pressures. Whereas the Britons are waiting for some consumer prices, retail prices and the unemployment data, as expectations points out to a rise unemployment rate to 5.3%. Though the easing oil and depreciation of the major two currency would came as a survivor are the time being, or just to buy time for the ECB and the BOE to move fast to salvage their economy from an inescapable doom. If inflation eases till the end of the year the ECB won't consider a rate hike where they can head their attention now toward the upside risks to growth; as well as the Britons, they would ignore inflation and stick to the growth levels. As for the United States, the question still arousing in markets whether the effect of rebates creating a higher spending pattern between Americans would fade away in the last three months of the year. The Americans are still feeling the tension even when they had some extra cash given by the fiscal contribution; nevertheless rising unemployment and the endless layoffs are affecting consumer as they remain fearing that they would lose they jobs any time soon. SO lets just hope the bulls movement that controlled markets would ease, giving some space for the bears just to regain some of the losses that halted upon them last week. disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk. | |
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Singapore's STATS ChipPAC delays benchmark bond sale
Mon Aug 11, 2008 4:51am EDT
(Updates with figure in first paragraph, adds underwriters)
By Rafael Nam
HONG KONG, Aug 11 (Reuters) - Singapore-listed STATS ChipPAC delayed its planned benchmark dollar bond sale of about $500 million, but is looking to relaunch the deal as early as September, a source close to the deal said on Monday.
The sale highlights difficulties Asian issuers, particularly those with lower credit ratings, face in raising funds in debt markets, as risk-averse global investors gravitate to safer bets.
STATS ChipPAC's planned benchmark bond sale had been put into doubt when the chip firm -- which is majority-owned by sovereign wealth fund Temasek [TEM.UL] -- said on Saturday it had cancelled a bond buyback, saying "the financing condition had not been satisfied."
STATS ChipPAC had announced in June a debt buyback that was to be financed at least partly via the issuance of new bonds, but the firm was unable to get a sale done by last Friday's deadline due to adverse market conditions, the source said.
Both the debt buyback and the sale of new bonds will have to be postponed until after the summer, the source said.
The firm had initially been looking to raise as much as $1 billion in five-year bonds, but later pared down its expectations to a benchmark deal, typically of about $500 million.
"Conditions in July and early August prevented the deal from pushing over the line," said the source, who declined to be identified because he was not authorised to talk to the media about the sale.
"More normal post-summer conditions should be more favourable and the global investor base will be fully focused," the source added. "The deal is likely to come back to market after the August break."
AUGUST BLACK HOLE
The deadline for STATS ChipPAC's tender offer for the buyback of its $150 million bonds maturing in 2010 <85771TAE4=RRPS> and the $215 million 2011 bonds <85771TAC8=RRPS> was on Friday.
But the following day, the microchip firm announced the termination of the tender offer, effectively cancelling the planned debt buyback, as it had been unable to raise the financing needed to back the purchases.
The tender offer deadline had already been pushed back once from July 22, to allow STATS ChipPAC more time to find the financing needed for the debt repurchase from investors.
Credit Suisse and Deutsche Bank are handling the debt buyback and the new bond sale.
Investors are demanding hefty premiums to purchase new debt, particularly those rated below investment-grade, or the so-called "junk" ratings.
A global credit crunch that marks its one-year anniversary this month is being accompanied by increased worries about slowing global economic growth, highlighting the risks to profits in the region.
STATS ChipPAC's proposed debt was rated BB-plus by Standard & Poor's and Ba1 by Moody's Investors Service, both one notch below investment-grade ratings.
Debt sales in G3 currencies, or dollars, euro or yen, dropped 48 percent to $19.9 billion so far this year compared with the equivalent period in 2007, data from Thomson Reuters show.
August is traditionally a slow month. This year has seen only a single deal worth $100 million this month, compared with a meagre $894.6 million seen in 2007. (Editing by Jacqueline Wong)
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(Updates with figure in first paragraph, adds underwriters)
By Rafael Nam
HONG KONG, Aug 11 (Reuters) - Singapore-listed STATS ChipPAC delayed its planned benchmark dollar bond sale of about $500 million, but is looking to relaunch the deal as early as September, a source close to the deal said on Monday.
The sale highlights difficulties Asian issuers, particularly those with lower credit ratings, face in raising funds in debt markets, as risk-averse global investors gravitate to safer bets.
STATS ChipPAC's planned benchmark bond sale had been put into doubt when the chip firm -- which is majority-owned by sovereign wealth fund Temasek [TEM.UL] -- said on Saturday it had cancelled a bond buyback, saying "the financing condition had not been satisfied."
STATS ChipPAC had announced in June a debt buyback that was to be financed at least partly via the issuance of new bonds, but the firm was unable to get a sale done by last Friday's deadline due to adverse market conditions, the source said.
Both the debt buyback and the sale of new bonds will have to be postponed until after the summer, the source said.
The firm had initially been looking to raise as much as $1 billion in five-year bonds, but later pared down its expectations to a benchmark deal, typically of about $500 million.
"Conditions in July and early August prevented the deal from pushing over the line," said the source, who declined to be identified because he was not authorised to talk to the media about the sale.
"More normal post-summer conditions should be more favourable and the global investor base will be fully focused," the source added. "The deal is likely to come back to market after the August break."
AUGUST BLACK HOLE
The deadline for STATS ChipPAC's tender offer for the buyback of its $150 million bonds maturing in 2010 <85771TAE4=RRPS> and the $215 million 2011 bonds <85771TAC8=RRPS> was on Friday.
But the following day, the microchip firm announced the termination of the tender offer, effectively cancelling the planned debt buyback, as it had been unable to raise the financing needed to back the purchases.
The tender offer deadline had already been pushed back once from July 22, to allow STATS ChipPAC more time to find the financing needed for the debt repurchase from investors.
Credit Suisse and Deutsche Bank are handling the debt buyback and the new bond sale.
Investors are demanding hefty premiums to purchase new debt, particularly those rated below investment-grade, or the so-called "junk" ratings.
A global credit crunch that marks its one-year anniversary this month is being accompanied by increased worries about slowing global economic growth, highlighting the risks to profits in the region.
STATS ChipPAC's proposed debt was rated BB-plus by Standard & Poor's and Ba1 by Moody's Investors Service, both one notch below investment-grade ratings.
Debt sales in G3 currencies, or dollars, euro or yen, dropped 48 percent to $19.9 billion so far this year compared with the equivalent period in 2007, data from Thomson Reuters show.
August is traditionally a slow month. This year has seen only a single deal worth $100 million this month, compared with a meagre $894.6 million seen in 2007. (Editing by Jacqueline Wong)
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Waste Management may raise bid for Republic: report
Mon Aug 11, 2008 4:41am EDT
(Reuters) - Waste Management Inc, the No.1 U.S. trash hauler, was expected to raise its unsolicited cash bid for rival Republic Services Inc by nearly 10 percent to $6.73 billion, the Wall Street Journal said on Monday, citing people familiar with the matter.
Waste Management was expected to deliver a letter to Republic as soon as Monday, offering to pay $37 a share, up from its original $34 a share bid, the Journal said, citing the people familiar with the matter.
Last month, trash hauler Republic Services and its biggest shareholder rejected a $34 per share, or $6.2 billion, takeover offer from Waste Management.
(Reporting by Tenzin Pema in Bangalore; Editing by Louise Ireland)
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(Reuters) - Waste Management Inc, the No.1 U.S. trash hauler, was expected to raise its unsolicited cash bid for rival Republic Services Inc by nearly 10 percent to $6.73 billion, the Wall Street Journal said on Monday, citing people familiar with the matter.
Waste Management was expected to deliver a letter to Republic as soon as Monday, offering to pay $37 a share, up from its original $34 a share bid, the Journal said, citing the people familiar with the matter.
Last month, trash hauler Republic Services and its biggest shareholder rejected a $34 per share, or $6.2 billion, takeover offer from Waste Management.
(Reporting by Tenzin Pema in Bangalore; Editing by Louise Ireland)
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Alaska Airlines cancels 41 flights over volcanic ash
Mon Aug 11, 2008 4:36am EDT
WASHINGTON, Aug 11 (Reuters) - Alaska Airlines canceled 41 flights by early Monday because of a towering plume of ash created by the eruption of a volcano last week, the airline said.
The cancellations began Sunday evening and affected flights between Alaska and Denver, Los Angeles, San Francisco, Portland, Seattle and Vancouver, British Colombia, the airline said in a statement.
The ash cloud was created by the eruption of Kasatochi volcano in the Aleutian Islands on Thursday.
"If there's an ash plume in the way, we won't fly," Alaska Airlines spokeswoman Caroline Boren told the Anchorage Daily News.
The airline issued a travel advisory on its Web site that said volcanic ash cloud could affect Anchorage, Fairbanks and southeastern Alaska destinations through Aug. 17.
Alaska Airlines canceled the flights after the National Weather Service issued a warning Sunday for an area in Southeast Alaska near the panhandle, Boren told the Anchorage daily.
Kristi Wallace, a research geologist for the Alaska Volcano Observatory, told the newspaper the wind sheared off part of a 40,000-foot ash plume and carried it northeast from the North Pacific.
The airline said it hoped to resume flights later on Monday.
"These decisions are guided by our commitment to safety, and we are making every effort to re-accommodate passengers whose flight schedules have been disrupted," said Glenn Johnson, executive vice president of airports, maintenance and engineering.
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WASHINGTON, Aug 11 (Reuters) - Alaska Airlines canceled 41 flights by early Monday because of a towering plume of ash created by the eruption of a volcano last week, the airline said.
The cancellations began Sunday evening and affected flights between Alaska and Denver, Los Angeles, San Francisco, Portland, Seattle and Vancouver, British Colombia, the airline said in a statement.
The ash cloud was created by the eruption of Kasatochi volcano in the Aleutian Islands on Thursday.
"If there's an ash plume in the way, we won't fly," Alaska Airlines spokeswoman Caroline Boren told the Anchorage Daily News.
The airline issued a travel advisory on its Web site that said volcanic ash cloud could affect Anchorage, Fairbanks and southeastern Alaska destinations through Aug. 17.
Alaska Airlines canceled the flights after the National Weather Service issued a warning Sunday for an area in Southeast Alaska near the panhandle, Boren told the Anchorage daily.
Kristi Wallace, a research geologist for the Alaska Volcano Observatory, told the newspaper the wind sheared off part of a 40,000-foot ash plume and carried it northeast from the North Pacific.
The airline said it hoped to resume flights later on Monday.
"These decisions are guided by our commitment to safety, and we are making every effort to re-accommodate passengers whose flight schedules have been disrupted," said Glenn Johnson, executive vice president of airports, maintenance and engineering.
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Nobel profit slumps 42 pct as slowdown caps demand
Mon Aug 11, 2008 4:15am EDT
(Adds share price, analyst comment)
By Sven Egenter
ZURICH, Aug 11 (Reuters) - Nobel Biocare, the world's largest dental implant maker, reported a surprisingly big drop in second-quarter profit, as economic weakness curbed demand for its costly treatments and a weak dollar ate into its U.S. sales.
Nobel's shares dropped, even though the group confirmed its forecast for 2008, saying it expected revenue to grow at a low single-digit percentage rate at constant exchange rates and said it was working to regain the trust of clients.
Nobel Biocare shocked investors with a string of forecast cuts over the last year as U.S. consumers spent less on its treatments and the company struggled with management problems in several key markets in Europe.
Chief Executive Domenico Scala said he expected changes in its marketing approach and new management in Germany, Switzerland and Britain to pay off in the coming quarters. "We are not over the hump (in Europe)," he told journalists on a conference call.
Nobel Biocare shares fell as much as 6 percent in early trading before regaining ground to stand 0.98 percent lower at 36.44 Swiss francs by 0802 GMT.
The shares, which have already lost 40 percent this year, underperformed a 0.41 percent drop in the European healthcare sector index .
"Buying in the stock at best remains something for investors with strong nerves, who have a knack for turnaround candidates," analysts at bank Wegelin said.
Nobel Biocare's profit fell to 24.3 million euros ($36.5 million), missing the 40 million euros forecast on average by analysts, as the company booked one-off losses from writedowns on its investment portfolio.
Sales fell 6 percent to 168 million euros, also missing expectations. Sales rose in the United States by 3.7 percent when adjusted for currency effects but demand fell by 5 percent in Europe.
DAMAGED REPUTATION
Scala said the U.S. economic slowdown was hitting Nobel harder than rivals due to its more expensive products.
"We had a reputational issue," Scala said, in reference to its former, more aggressive marketing strategy which put off many dentists.
Nobel's main rival -- Switzerland's Straumann -- reported a nearly 20 percent sales rise in the second quarter in the United States, where it has long lagged Nobel, and a surprise profit jump in the first half.
Nobel Biocare's shares have fallen far more than Straumann's this year and it now trades at 15.3 times 2009 earnings, a discount of some 25 percent to Straumann. (Additional reporting by Rupert Pretterklieber; Editing by Jason Neely and Quentin Webb)
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(Adds share price, analyst comment)
By Sven Egenter
ZURICH, Aug 11 (Reuters) - Nobel Biocare, the world's largest dental implant maker, reported a surprisingly big drop in second-quarter profit, as economic weakness curbed demand for its costly treatments and a weak dollar ate into its U.S. sales.
Nobel's shares dropped, even though the group confirmed its forecast for 2008, saying it expected revenue to grow at a low single-digit percentage rate at constant exchange rates and said it was working to regain the trust of clients.
Nobel Biocare shocked investors with a string of forecast cuts over the last year as U.S. consumers spent less on its treatments and the company struggled with management problems in several key markets in Europe.
Chief Executive Domenico Scala said he expected changes in its marketing approach and new management in Germany, Switzerland and Britain to pay off in the coming quarters. "We are not over the hump (in Europe)," he told journalists on a conference call.
Nobel Biocare shares fell as much as 6 percent in early trading before regaining ground to stand 0.98 percent lower at 36.44 Swiss francs by 0802 GMT.
The shares, which have already lost 40 percent this year, underperformed a 0.41 percent drop in the European healthcare sector index .
"Buying in the stock at best remains something for investors with strong nerves, who have a knack for turnaround candidates," analysts at bank Wegelin said.
Nobel Biocare's profit fell to 24.3 million euros ($36.5 million), missing the 40 million euros forecast on average by analysts, as the company booked one-off losses from writedowns on its investment portfolio.
Sales fell 6 percent to 168 million euros, also missing expectations. Sales rose in the United States by 3.7 percent when adjusted for currency effects but demand fell by 5 percent in Europe.
DAMAGED REPUTATION
Scala said the U.S. economic slowdown was hitting Nobel harder than rivals due to its more expensive products.
"We had a reputational issue," Scala said, in reference to its former, more aggressive marketing strategy which put off many dentists.
Nobel's main rival -- Switzerland's Straumann -- reported a nearly 20 percent sales rise in the second quarter in the United States, where it has long lagged Nobel, and a surprise profit jump in the first half.
Nobel Biocare's shares have fallen far more than Straumann's this year and it now trades at 15.3 times 2009 earnings, a discount of some 25 percent to Straumann. (Additional reporting by Rupert Pretterklieber; Editing by Jason Neely and Quentin Webb)
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Tokio Marine posts Q1 decline, to buy back shares
Mon Aug 11, 2008 4:13am EDT
TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings (8766.T: Quote, Profile, Research, Stock Buzz), Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its core insurance business.
Tokio Marine, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.
The insurer said group net profit fell 41.6 percent to 28.9 billion yen in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.
Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.
Although still little known outside of Japan, 129-year-old Tokio Marine has become increasingly aggressive in expanding overseas.
Japanese insurers face limited prospects for expansion at home given the country's slow-growth economy and expected decline in population.
Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.
The insurer also said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock, between Aug. 12 and Nov. 18.
Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)
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TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings (8766.T: Quote, Profile, Research, Stock Buzz), Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its core insurance business.
Tokio Marine, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.
The insurer said group net profit fell 41.6 percent to 28.9 billion yen in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.
Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.
Although still little known outside of Japan, 129-year-old Tokio Marine has become increasingly aggressive in expanding overseas.
Japanese insurers face limited prospects for expansion at home given the country's slow-growth economy and expected decline in population.
Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.
The insurer also said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock, between Aug. 12 and Nov. 18.
Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)
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GLOBAL MARKETS-Dollar hits six-month high, shares rise
Mon Aug 11, 2008 4:09am EDT
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 11 (Reuters) - The dollar hit a six-month high against major currencies on Monday, driven by concerns that U.S. economic problems are spreading to the rest of the world, while equities rose against a background of lower oil prices.
Europe's FTSEurofirst 300 share index was at its highest level since late June and Japan's Nikkei .N225 gained nearly 2 percent.
Military conflict between Russia and Georgia ignited fears that energy exports from the Caspian region may be disrupted in the longer term, nudging oil prices up. But they remained around $116 a barrel, well below recent highs.
The fighting in Georgia and concerns about the global economy kept emerging market stocks .MSCIEF near Friday's one-year low.
The dollar vaulted to a six-month high against its major currency basket and the euro fell further below $1.50 after suffering its biggest one-day drop since January 2001 on Friday.
"The dollar has been strengthening due to a deterioration in economic data outside of the U.S. coupled with low oil prices," said Ashley Davies, currency strategist with UBS in Singapore.
Investors were also caught off guard by the European Central Bank's acknowledgment last week that economic growth had slowed more than it expected.
The dollar index, which measures the U.S. currency against a basket of six currencies, punched to a six-month high of 76.192 before pulling back to 75.914 .DXY.
Crude oil CLc1 was up $1.51 at $116.71 a barrel, rebounding from the previous session's $5 decline on concern that fighting between Russia and Georgia could further disrupt energy exports from the Caspian region.
The Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which passes through Georgia, is already closed after an explosion on Turkish territory before conflict began over the South Ossetia region.
But analysts said oil's gain was tempered by the rising U.S. dollar. Oil has shed about $31, or 21 percent, since its peak of over $147.27 struck on July 11, on concerns of a slowdown in demand.
SHARES RISE
European stocks hit their highest in more than 6 weeks, with automakers rising on the euro's weakness which helps exports.
The FTSEurofirst 300 index was up 0.8 percent having hit its highest level since June 26.
"The key elements of this equities rebound are the drop in both the euro and oil prices," said Marc Touati, economist at Global Equities in Paris.
Earlier, Japan's benchmark Nikkei .N225 gained 262.50 points or 1.99 percent, to 13,430.91, its highest close since July 24. The broader Topix gained 1.6 percent to 1,280.00.
Euro zone government bonds held steady. Two-year yields were 4.070 percent while 10-year yields were at 4.263 percent .
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By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 11 (Reuters) - The dollar hit a six-month high against major currencies on Monday, driven by concerns that U.S. economic problems are spreading to the rest of the world, while equities rose against a background of lower oil prices.
Europe's FTSEurofirst 300 share index was at its highest level since late June and Japan's Nikkei .N225 gained nearly 2 percent.
Military conflict between Russia and Georgia ignited fears that energy exports from the Caspian region may be disrupted in the longer term, nudging oil prices up. But they remained around $116 a barrel, well below recent highs.
The fighting in Georgia and concerns about the global economy kept emerging market stocks .MSCIEF near Friday's one-year low.
The dollar vaulted to a six-month high against its major currency basket and the euro fell further below $1.50 after suffering its biggest one-day drop since January 2001 on Friday.
"The dollar has been strengthening due to a deterioration in economic data outside of the U.S. coupled with low oil prices," said Ashley Davies, currency strategist with UBS in Singapore.
Investors were also caught off guard by the European Central Bank's acknowledgment last week that economic growth had slowed more than it expected.
The dollar index, which measures the U.S. currency against a basket of six currencies, punched to a six-month high of 76.192 before pulling back to 75.914 .DXY.
Crude oil CLc1 was up $1.51 at $116.71 a barrel, rebounding from the previous session's $5 decline on concern that fighting between Russia and Georgia could further disrupt energy exports from the Caspian region.
The Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which passes through Georgia, is already closed after an explosion on Turkish territory before conflict began over the South Ossetia region.
But analysts said oil's gain was tempered by the rising U.S. dollar. Oil has shed about $31, or 21 percent, since its peak of over $147.27 struck on July 11, on concerns of a slowdown in demand.
SHARES RISE
European stocks hit their highest in more than 6 weeks, with automakers rising on the euro's weakness which helps exports.
The FTSEurofirst 300 index was up 0.8 percent having hit its highest level since June 26.
"The key elements of this equities rebound are the drop in both the euro and oil prices," said Marc Touati, economist at Global Equities in Paris.
Earlier, Japan's benchmark Nikkei .N225 gained 262.50 points or 1.99 percent, to 13,430.91, its highest close since July 24. The broader Topix gained 1.6 percent to 1,280.00.
Euro zone government bonds held steady. Two-year yields were 4.070 percent
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Tokio Marine posts Q1 decline, to buy back shares
Mon Aug 11, 2008 4:13am EDT
TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings (8766.T: Quote, Profile, Research, Stock Buzz), Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its core insurance business.
Tokio Marine, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.
The insurer said group net profit fell 41.6 percent to 28.9 billion yen in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.
Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.
Although still little known outside of Japan, 129-year-old Tokio Marine has become increasingly aggressive in expanding overseas.
Japanese insurers face limited prospects for expansion at home given the country's slow-growth economy and expected decline in population.
Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.
The insurer also said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock, between Aug. 12 and Nov. 18.
Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)
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TOKYO, Aug 11 (Reuters) - Tokio Marine Holdings (8766.T: Quote, Profile, Research, Stock Buzz), Japan's largest property and casualty insurer, posted a 42 percent decline in quarterly profit on Monday, as a stumbling economy dented its core insurance business.
Tokio Marine, which last month unveiled plans to buy U.S. insurer Philadelphia Consolidated as part of a push beyond its shrinking home market, also said it will buy back up to 50 billion yen ($455.8 million) of its own stock, a move that could support its softening share price.
The insurer said group net profit fell 41.6 percent to 28.9 billion yen in the three months to the end of June, hurt by a slowdown at its core unit, which booked a downturn in underwriting income.
Underwriting income was flat across the group while deposit premiums from policyholders fell by nearly 16 percent.
Although still little known outside of Japan, 129-year-old Tokio Marine has become increasingly aggressive in expanding overseas.
Japanese insurers face limited prospects for expansion at home given the country's slow-growth economy and expected decline in population.
Tokio Marine completed the purchase of Lloyd's of London insurer Kiln Ltd in March for 442 million pounds ($848 million), to increase its European presence.
The insurer also said it would by back up to 50 billion yen of its own shares, or 2.2 percent of its outstanding stock, between Aug. 12 and Nov. 18.
Shares of the firm have fallen 24 percent over the past 12 months, reflecting the worsening outlook for Japanese financial firms. Tokyo's index of insurance firms fell about 27 percent during the same period. ($1=109.93 Yen, $1=.5214 Pound) (Reporting by David Dolan; Editing by Michael Watson)
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HK shares close off highs on China slowdown fears
Mon Aug 11, 2008 4:09am EDT
HONG KONG, Aug 11 (Reuters) - Hong Kong stocks closed flat on Monday, giving up early gains after concerns over slowing economic growth and rising producer price inflation in China sent shares in most mainland manufacturers tumbling.
Shares in timepiece-maker Peace Mark Holdings plunged more than 70 percent at one point, as institutional investors dumped the stock on worries about the firm's high debt leverage and lack of clarity in its recent annual report.
China's largest offshore oil producer CNOOC slipped more than 3 percent, weighed down by a 20 percent slide in crude prices in the past month from record highs.
The Hang Seng Index .HSI unofficially closed down 1.75 points at 21,883.46.
The China Enterprises Index .HSCE of top locally listed Chinese firms dropped 0.7 percent, weighed down by a 5.2 percent slump on the Shanghai bourse.
(Reporting by Parvathy Ullatil; Editing by Jonathan Hopfner)
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HONG KONG, Aug 11 (Reuters) - Hong Kong stocks closed flat on Monday, giving up early gains after concerns over slowing economic growth and rising producer price inflation in China sent shares in most mainland manufacturers tumbling.
Shares in timepiece-maker Peace Mark Holdings plunged more than 70 percent at one point, as institutional investors dumped the stock on worries about the firm's high debt leverage and lack of clarity in its recent annual report.
China's largest offshore oil producer CNOOC slipped more than 3 percent, weighed down by a 20 percent slide in crude prices in the past month from record highs.
The Hang Seng Index .HSI unofficially closed down 1.75 points at 21,883.46.
The China Enterprises Index .HSCE of top locally listed Chinese firms dropped 0.7 percent, weighed down by a 5.2 percent slump on the Shanghai bourse.
(Reporting by Parvathy Ullatil; Editing by Jonathan Hopfner)
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European shares hit 6-wk highs; autos, TNT gain
Mon Aug 11, 2008 3:25am EDT
LONDON, Aug 11 (Reuters) - European stocks hit their highest in more than 6 weeks in early trade on Monday, led by oil shares which were aided by an uptick in crude on fighting between Russia and Georgia, and automakers, which rose on euro weakness.
At 0719 GMT, the pan-European FTSEurofirst 300 index was up 1 percent at 1,210.48 points, its highest level since June 26.
Dutch mail and logistics group TNT jumped 5.7 percent to top gainers in Europe after a source familiar with the talks said U.S. delivery company United Parcel Service was in talks to buy TNT.
Auto stocks gained as the euro fell further below $1.50, having suffered its biggest one-day drop since January 2001 on Friday.
BMW rose 3.4 percent, Daimler DIAGn.DE gained 2.7 percent, while Renault and Peugeot advanced around 2 percent.
Though oil gained $1.60 a barrel, it was still below $117, and a long way below record highs above $147 hit last month.
"The key elements of this equities rebound are the drop in both the euro and oil prices," said Marc Touati, economist at Global Equities, in Paris.
Banks were broadly higher, with UBS leading the way with a gain of 4.3 percent.
The mining sector was in focus after Kazakhmys raised its stake in rival Eurasian Natural Resource (ENRC) to above 25 percent and Xstrata looked to raise more than 5 billion pounds to forge ahead with a hostile bid for Lonmin.
Kazakhmys was up 2.3 percent, Eurasian down 0.8 percent, Xstrata up 1.1 percent and Lonmin flat. (Reporting by Sitaraman Shankar and Blaise Robinson)
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LONDON, Aug 11 (Reuters) - European stocks hit their highest in more than 6 weeks in early trade on Monday, led by oil shares which were aided by an uptick in crude on fighting between Russia and Georgia, and automakers, which rose on euro weakness.
At 0719 GMT, the pan-European FTSEurofirst 300 index was up 1 percent at 1,210.48 points, its highest level since June 26.
Dutch mail and logistics group TNT jumped 5.7 percent to top gainers in Europe after a source familiar with the talks said U.S. delivery company United Parcel Service was in talks to buy TNT.
Auto stocks gained as the euro fell further below $1.50, having suffered its biggest one-day drop since January 2001 on Friday.
BMW rose 3.4 percent, Daimler DIAGn.DE gained 2.7 percent, while Renault and Peugeot advanced around 2 percent.
Though oil gained $1.60 a barrel, it was still below $117, and a long way below record highs above $147 hit last month.
"The key elements of this equities rebound are the drop in both the euro and oil prices," said Marc Touati, economist at Global Equities, in Paris.
Banks were broadly higher, with UBS leading the way with a gain of 4.3 percent.
The mining sector was in focus after Kazakhmys raised its stake in rival Eurasian Natural Resource (ENRC) to above 25 percent and Xstrata looked to raise more than 5 billion pounds to forge ahead with a hostile bid for Lonmin.
Kazakhmys was up 2.3 percent, Eurasian down 0.8 percent, Xstrata up 1.1 percent and Lonmin flat. (Reporting by Sitaraman Shankar and Blaise Robinson)
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China Producer-Price Inflation Is Fastest Since 1996
By Nipa Piboontanasawat
Enlarge Image/Details
Aug. 11 (Bloomberg) -- China's producer prices climbed at the fastest pace since 1996 on energy and commodity costs, underscoring the risk of a rebound in consumer-price inflation.
Factory-gate prices rose 10 percent in July from a year earlier, the statistics bureau said today, after gaining 8.8 percent in June. That was more than the 9 percent median estimate of 15 economists surveyed by Bloomberg News.
China's government has tweaked policies toward stimulating growth rather than cooling prices after inflation cooled from February's 12-year high as food-price gains eased. Today's number may make policy makers more cautious after they loosened bank lending quotas, raised tax rebates for some exporters and halted gains by the yuan.
Producer prices pose ``a strong upside risk to consumer- price inflation growth,'' said Sherman Chan, a Sydney-based economist at Moody's Economy.com. ``In the next few months, the authorities will likely further tighten monetary policy and impose price curbs.''
The yuan traded at 6.8648 as of 11:39 a.m. in Shanghai, from a close of 6.8588 on Aug. 8.
The surge in producer prices isn't likely to flow through to consumer prices ``soon'' because of the extremely competitive market for goods, Zhang Liqun, a senior research fellow at the State Council's Development Research Center, said in an e-mailed statement.
Zhang said the gain was the biggest since 1996. Bloomberg data goes back to 1999.
Consumer Goods
So far, manufacturers are absorbing most of the higher prices, rather than passing them on to consumers. Producer prices of consumer goods rose 4.6 percent in July from a year earlier, the least in six months.
Consumer prices rose 7.1 percent in June from a year earlier, down from 8.7 percent in February.
China raised last month lending quotas for banks and increased tax rebates on exports of textiles and garments as export growth cooled. The yuan has fallen 0.2 percent against the dollar this quarter after gaining 4.2 percent in the first quarter and 2.3 percent in the second.
The world's fourth-largest economy expanded 10.1 percent in the second quarter from a year earlier, down from 10.6 percent in the three months through March.
The producer price of crude oil jumped 41 percent in July from a year earlier after rising 36 percent in June, the statistics bureau said. Ferrous metals climbed 31 percent after gaining 29 percent.
Fuel, Electricity prices
China raised state-controlled fuel and electricity prices in June and July.
Tumbling commodity prices have increased the likelihood of producer-price inflation slowing in coming months.
Crude oil fell below $115 a barrel on Aug. 8 for the first time since May. The Bloomberg Constant Maturity Commodity Index dropped 3.3 percent to 1,420.62, the lowest since March 20.
``The recent sharp falls in many commodity prices suggest that these upstream inflation pressures may be at a peak,'' said Mark Williams, a London-based economist at Capital Economics Ltd.
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net
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Enlarge Image/Details
Aug. 11 (Bloomberg) -- China's producer prices climbed at the fastest pace since 1996 on energy and commodity costs, underscoring the risk of a rebound in consumer-price inflation.
Factory-gate prices rose 10 percent in July from a year earlier, the statistics bureau said today, after gaining 8.8 percent in June. That was more than the 9 percent median estimate of 15 economists surveyed by Bloomberg News.
China's government has tweaked policies toward stimulating growth rather than cooling prices after inflation cooled from February's 12-year high as food-price gains eased. Today's number may make policy makers more cautious after they loosened bank lending quotas, raised tax rebates for some exporters and halted gains by the yuan.
Producer prices pose ``a strong upside risk to consumer- price inflation growth,'' said Sherman Chan, a Sydney-based economist at Moody's Economy.com. ``In the next few months, the authorities will likely further tighten monetary policy and impose price curbs.''
The yuan traded at 6.8648 as of 11:39 a.m. in Shanghai, from a close of 6.8588 on Aug. 8.
The surge in producer prices isn't likely to flow through to consumer prices ``soon'' because of the extremely competitive market for goods, Zhang Liqun, a senior research fellow at the State Council's Development Research Center, said in an e-mailed statement.
Zhang said the gain was the biggest since 1996. Bloomberg data goes back to 1999.
Consumer Goods
So far, manufacturers are absorbing most of the higher prices, rather than passing them on to consumers. Producer prices of consumer goods rose 4.6 percent in July from a year earlier, the least in six months.
Consumer prices rose 7.1 percent in June from a year earlier, down from 8.7 percent in February.
China raised last month lending quotas for banks and increased tax rebates on exports of textiles and garments as export growth cooled. The yuan has fallen 0.2 percent against the dollar this quarter after gaining 4.2 percent in the first quarter and 2.3 percent in the second.
The world's fourth-largest economy expanded 10.1 percent in the second quarter from a year earlier, down from 10.6 percent in the three months through March.
The producer price of crude oil jumped 41 percent in July from a year earlier after rising 36 percent in June, the statistics bureau said. Ferrous metals climbed 31 percent after gaining 29 percent.
Fuel, Electricity prices
China raised state-controlled fuel and electricity prices in June and July.
Tumbling commodity prices have increased the likelihood of producer-price inflation slowing in coming months.
Crude oil fell below $115 a barrel on Aug. 8 for the first time since May. The Bloomberg Constant Maturity Commodity Index dropped 3.3 percent to 1,420.62, the lowest since March 20.
``The recent sharp falls in many commodity prices suggest that these upstream inflation pressures may be at a peak,'' said Mark Williams, a London-based economist at Capital Economics Ltd.
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net
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