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Tuesday, September 30, 2008
Inflows will be affected
With markets abroad tumbling as the fate of US bailout package hangs in balance, a key Finance Ministry official on Tuesday said that the global financial crisis will hurt capital inflows in India.
"The situation is staring on the face of huge mind-boggling crisis in the western world, especially the US. There will be shortage of money in the country, that is the financial crisis is to hurt capital inflows in India," Economic Affairs Secretary Ashok Chawla said in a seminar here.
At the same seminar, stock market regulator C B Bhave said once the crisis is over, India will come stronger and the balance would be in the country's favour. He also said in the future, there will be more open market in the recently-launched currency futures.
Former chairman of PM economic advisory panel C Rangarajan said, "We are going through an international crisis which we cannot ignore."
Yesterday, the US House of Representatives had rejected around USD 700 billion bailout package, sending stock markets around the world into a tailspin.
After coming into major selling pressure yesterday and in the early morning trade today, Indian markets recovered after Bhave's statement that there is no panic and no settlement issues in the markets.
US plans for a new bailout plan
Top Congressional and White House officials, stunned when the House rejected a massive rescue plan for the nation's economy, scrambled to structure a new bailout proposal that would attract reluctant lawmakers and still soothe the unnerved financial markets.
"Doing nothing is not an option," House Majority Leader Steny Hoyer, D-Md, said after seeing the USD 700 billion emergency package for the nation's financial systems fail 228-205 on Monday.
With the House not scheduled to meet again until Thursday, Congressional leaders and Bush administration officials promptly sought to assess what types of changes could win over enough votes to guarantee success. President Bush planned to make a statement on the rescue plan at 8:45 am EDT Tuesday.
The outcome of Monday's vote fed a huge sell-off in the stock market, sending the Dow Jones Industrial Average into its biggest single-day plunge, 777 points. The House vote and the market's terrified reaction shook Washington and New York centers of power — even overseas markets — but no immediate solution seemed at hand.
The bill's failure came despite furious personal lobbying by Bush and support from House leaders of both parties. But the legislation was highly unpopular with the public, ideological groups on the left and the right organized against it, and Bush no longer wielded the influence to leverage tough votes. Even pressure in favour of the bill from some of the biggest special interests in Washington, including the US Chamber of Commerce and the National Association of Realtors, could not sway enough votes.
The legislation the administration promoted would have allowed the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believed it would help lift a major weight off the already sputtering national economy.
Treasury Secretary Henry Paulson emerged after the vote and warned of a credit crunch that would affect American businesses and said families would find it harder to get student loans and car loans.
"We need to work as quickly as possible," he said gravely. "We need to get something done."
The sense of urgency was not universal. Many opponents of the bill argued that the package amounted to a too-costly commitment of taxpayer money to bail out financial institutions for their own mistakes.
Rep Dean Heller, R-Nev, offered a typical sentiment. "I cannot with good conscience put Nevada's taxpayers on the hook for the foolish excesses of Wall Street," he said. "Congress should pass legislation that protects the taxpayer, assists with bad assets and allows the market to correct itself."
Immediately following the vote, Republican leaders blamed their failure to secure more votes on the partisan tone of Speaker Nancy Pelosi's pre-vote speech on the House floor. "There were a dozen members who we thought ... we had a really good chances of getting on the floor," said Minority Leader John Boehner of Ohio. "And all that evaporated with that speech."
Rep Barney Frank, D-Mass, the gruff but quick-witted chairman of the House banking committee, countered, "Give me the names of those 12 people and I'll go talk uncharacteristically nice to them."
Behind the bluster, lawmakers pledged to work again. Hoyer met with House Republican Whip Roy Blunt of Missouri, one of the lead GOP negotiators from the House.
Blunt, noting that the House would break for the Jewish holidays until Thursday, said, "We are going to have a couple days to see how the marketplace reacts to all this, and maybe that's a good thing."
House members weren't going home to campaign for re-election "until this is addressed," Hoyer vowed.
Both Blunt and Hoyer suggested that the Senate could vote first on a bill then send it to the House, but Senate leaders showed no inclination to take up a bill without being certain of its fate in the House.
"What would be wrong, I think, would be to act without some kind of clear indication from the House about how they're going to proceed," said Sen Christopher Dodd, D-Conn, the chairman of the Senate Banking Committee. "We don't need to start all over."
The two men campaigning to replace Bush watched the situation closely — from afar — and demanded action.
In Iowa, Republican John McCain said his rival Barack Obama and Congressional Democrats "infused unnecessary partisanship into the process. Now is not the time to fix the blame; it's time to fix the problem."
Obama said, "Democrats, Republicans, step up to the plate, get it done."
The burden for votes fell more strongly on Republican leaders. About three out of five House Democrats voted for the legislation; only a third of Republicans backed it.
Republicans, already seeking possible votes, floated several ideas. One would double the USD 100,000 ceiling on federal deposit insurance. Another would end rules that require companies to devalue assets on their books to reflect the price they could get in the market.
Post Session Commentary - Sep 30 2008
Domestic markets rebounded sharply from days low after sun outage session to end the day with handsome gains. The assuring comments from Finance Minster P Chidambaram that the Indian banking and financial system is well capitalized had provided some boost to the markets after sharp slide. Sentiments also got boosted on expectations that US administration will put forward a revised rescue package for the US financial sector. The BSE Sensex recovered nearly 700 points from days low to end above 12,800 level and the NSE Nifty above the 3900 mark. Markets opened on extremely negative note on weak global cues due to defeat of bailout package. Yesterday House of Representatives rejected the $700 billion bailout plan to save the US financial system. However, the markets suddenly managed to recover a bit but were still below dotted line till sun outage close. Markets extended its gains further to conclude the day in green. From the sectoral front, most of the indices ended with gains and Bank index out performed the benchmark index as witnessed sharp rise of around 5%. Apart from that, smart pullback was led by Capital Goods, Oil & Gas, Reality and Consumer Durables stocks. However, Metal and FMCG stocks remained out of favor as witnessed most of the selling from these baskets. The market breadth was negative as 1316 stocks closed in red while 1277 stocks closed in green and 79 stocks remained unchanged.
The BSE Sensex closed higher by 264.68 points at 12,860.43 and NSE Nifty ended up by 71.15 points at 3,921.20. The BSE Mid Caps and Small Caps closed with gains of 68.96 points at 4,798.29 and by 24.44 points at 5,577.47. The BSE Sensex touched intraday high of 12,995.20 and intraday low of 12,153.55.
Gainers from the BSE are ICICI Bank Ltd (8.42%), TCS Ltd (6.96%), HDFC (5.33)%, Bharti Airtel (5.14%), BHEL (5.07%), SBI (4.32%), L&T Ltd (4.16%), JP Associates (4.12%), Maruti Suzuki (3.73%), NTPC Ltd (3.31%) and HDFC Bank Ltd (2.46%).
The BSE Capital Goods index surged 310.53 points to close at 10,581.13. Major gainers are As Bharat Bijli (6.32%), Usha Martin (5.35%), BHEL (5.07%), Bharat Elect (4.65%), Punj Lloyd (4.53%) and L&T Ltd (4.16%).
The BSE Bank index advanced by 303.75 points to close at 6,478.15. As ICICI Bank Ltd (8.42%), Axis Bank (7.28%), Indus Ind Bank (4.52%), Bank of India (4.45%), SBI (4.32%) and IDBI Bank Ltd (4.27%) closed in positive territory.
The BSE Oil & Gas index ended up by 114.27 points at 9,039.28 as BPCL (5.59%), HPCL (5.39%), IOC Ltd (5.18%), Reliance Natural Resources (5.01%), Aban Offshore (3.10%) and Cairn India (1.24%) ended in positive territory.
The BSE Reality index closed higher by 100.90 points at 3,508.77. Gainers are Ansal Infra (11.63%), Akruti City (10.75%), Orbit Co (7.98%), Unitech Ltd (7.03%), Penland Ltd (3.43%) and Housing Dev (2.50%).
The Consumer Durables index gained 56.02 points to close at 2,929.18. As Titan Ind (3.10%), Gitanjali GE (2.83%), Blue Star L (2.06%) and Videocon Ind (0.69%) closed in positive territory.
The BSE Metal index plunged 152.17 points to close at 8,992.06. Major losers are Jai Corp Ltd (7.42%), JSW SL (4.94%), SAIL (4.87%), Hindustan Zinc (4.82%), Tata Steel (4.43%) and NMDC Ltd (2.19%).
Markets brave it out
After the 777-point fall, the highest-ever for the Dow Jones Industrial Average (Dow) as the $700-billion financial-rescue bill failed to get through the US’s house of representatives, the markets across the globe were expected to fall. In line, the Asian markets reported losses and witnessed high volatility for the major part of their trading session. In the early trades, the Sensex too seemed to take a leaf out of Dow’s book and plunged nearly 418 points on massive selling in front-line stocks, However sustained buying in heavyweights, banking and realty stocks lifted the market’s sentiment and the Sensex turned positive. Thereafter, the market witnessed choppy trades and with some range-bound moves the Sensex slipped in the red in the afternoon again. The market bounced back from its lows once again towards the close and touched the day’s high of 12,995 led by ICICI Bank, Tata Consultancy Services (TCS), HDFC and Bharti Airtel. The Sensex finally ended the session with a gain of 265 points at 12,860. Nifty ended the session at 2,921 by adding 71 points.
The breadth of the market was neutral. Of the 2,671 stocks traded on the BSE, 1,283 stocks advanced, whereas 1,309 stocks declined. Seventy nine stocks ended unchanged. Among the sectoral indices the BSE Bankex advanced by 4.92% at 6,479 followed by the BSE CG (up 3.02% at 10,581) and BSE Realty (up 2.96% at 3,508). However, the BSE Metal and BSE FMCG closed in the negative territory.
Select blue chips notched up significant gains. ICICI Bank jumped 8.42% to Rs534.85, TCS rose 6.96% at Rs662.75, HDFC advanced 5.33% at Rs2,141.15, Bharti Airtel climbed 5.14% at Rs785.05, BHEL surged 5.07% at Rs1,586, State Bank of India scaled up 4.32% at Rs1,465, Larsen & Toubro (L&T) gained 4.16% at Rs2,442.85 and JP Associates added 4.12% at Rs111.10 while Maruti Suzuki India, NTPC and HDFC Bank ended with gains. Among the laggards Tata Steel tumbled by 4.43% at Rs425.60, Tata Motors dropped 3.27% at Rs344.20 and Ranbaxy Laboratories declined 3.17% at Rs247.75 while Grasim Industries, Tata Power, ITC, Hindustan Unilever, Sterlite Industries, Wipro and Reliance Energy ended with marginal losses.
Over 2.33 crore Reliance Natural Resources shares changed hands on the BSE followed by IFCI (1.27 crore shares), Suzlon Energy (0.89 crore shares), Chambal Fertilisers and Chemicals (80.34 lakh shares) and Ispat Industries (72.22 lakh shares).
Valuewise, Reliance Capital registered a turnover of Rs405 crore on the BSE followed by Reliance Industries (Rs356 crore), ICICI Bank (Rs336 crore), L&T (Rs206 crore) and Axis Bank (Rs203 crore).
BSE Bulk Deals to Watch - Sep 30 2008
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
30/9/2008 533016 AUSTRAL COKE OPG SECURITIES P LTD B 170915 200.58
30/9/2008 533016 AUSTRAL COKE OPG SECURITIES P LTD S 170915 201.06
30/9/2008 532678 BOMBAY RAYON CREDIT SUISSE SINGAPORE LIMITED B 388522 291.50
30/9/2008 532678 BOMBAY RAYON MORGAN STANLEY MAURITIUS COMPANY LIMITED S 388522 291.50
30/9/2008 526141 COMP DISC IN EMKAY GLOBAL FINANCIAL SERVICES LTD PRODIGY SCHEME S 62955 39.06
30/9/2008 513059 G.S. AUTO D.C SECURITIES SERVICES P.LTD S 17500 79.37
30/9/2008 513059 G.S. AUTO MEET SHARES AND STOCK P.LTD S 29070 79.88
30/9/2008 531439 GOLDSTON TEC BHAVESH PRAKASH PABARI B 130000 108.84
30/9/2008 531602 KOFF BR PICT LAXMI CAP BROKIONG PVT LTD B 46846 36.66
30/9/2008 531602 KOFF BR PICT MANJUBEN HARSHADBHAI UKANI B 26759 37.44
30/9/2008 531366 KOHINOOR BRO S V ENTERPRISES B 704087 6.03
30/9/2008 531366 KOHINOOR BRO S V ENTERPRISES S 736882 6.02
30/9/2008 531213 MANAP GEN FI SWISS FINANCE CORPORATION MAURITIUS LTD B 215907 139.90
30/9/2008 531213 MANAP GEN FI GMO EMERGING ILLIQUID MAURITIUS FUND S 210000 140.00
30/9/2008 531096 MOUNT EVE MI TATA TEA LTD B 185000 139.95
30/9/2008 590011 MOVING PICTU-PMS HARDEEP SINGH B 45051 12.60
30/9/2008 590011 MOVING PICTU-PMS GURBACHAN KAUR S 39000 12.60
30/9/2008 532045 NEXXOFT INFO MANOJ H.MEHTA B 31840 36.94
30/9/2008 500304 NIIT LTD INDIA CAPITAL PTE LTD A/C INDEA LONG TERM OPPORTUNITIES MASTER FU B 865000 45.52
30/9/2008 531349 PANACEA BIOT SERUM INSTITUTE OF INDIA LTD B 500657 222.00
30/9/2008 531349 PANACEA BIOT THE INDIA FUND INC S 502512 222.00
30/9/2008 531769 PFL INFOTECH BHARAT VALJIBHAI BHANUSHALI B 30001 11.96
30/9/2008 514300 PIONER EMBRO MANMOHAN RATHI B 93399 18.15
30/9/2008 514300 PIONER EMBRO RELIGARE FINVEST LTD LIQUIDATI S 260454 17.75
30/9/2008 514300 PIONER EMBRO SARSWATI VINCOM LTD S 100000 18.18
30/9/2008 514300 PIONER EMBRO MEENAL NITESH THAKU S 78140 18.80
30/9/2008 531646 RFL INTERNAT KALAVATIBEN BHARATKUMAR SHAH S 26850 0.99
30/9/2008 532833 SPARSH BPO KAPILPURI B 127858 44.00
30/9/2008 512640 STOCKNET INT SANT LAL KHANEJA HUF B 30164 1.22
30/9/2008 512640 STOCKNET INT NOBLEMAN MANAGEMENT CONSULTANTS PVT LTD S 30164 1.22
30/9/2008 532948 TULSI EXTRU RIDDHI SIDDHI MULTITRADE PV LT B 70000 26.24
30/9/2008 532948 TULSI EXTRU NEW PLANET TRADING CO PVT LTD S 70000 26.24
NSE Bulk Deals to Watch - Sep 30 2008
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
30-SEP-2008,GOLDTECH,Goldstone Tech Ltd.,PABARI BHAVESH PRAKASH,BUY,120000,108.21,-
30-SEP-2008,NAGARFERT,Nagarjuna Fert & Chem,CLEAN FINANCE & INVESTMENT LTD,BUY,3615813,27.48,-
30-SEP-2008,NIITLTD,NIIT Limited,INDEA CAPITAL PTE LTD A/C IND LONG TERM OPPORT MASTER FUND,BUY,935000,46.00,-
30-SEP-2008,PANACEABIO,Panacea Biotec Ltd.,SERUM INSTITUTE OF INDIA LTD,BUY,500845,221.99,-
30-SEP-2008,PHOENIXLTD,The Phoenix Mills Limited,DEUTSCHE SECURITIES MAURITIUS LIMITED,BUY,1030000,144.00,-
30-SEP-2008,ZEENEWS,Zee News Limited,PRUDENTIAL ICICI TRUST LTD,BUY,1995744,39.75,-
30-SEP-2008,IBREALEST,Indiabulls Real Estate Li,MIRAE ASSET INVESTMENT MANAGEMENT CO LTD A/C MIRA,SELL,1316427,169.81,-
30-SEP-2008,NAGARFERT,Nagarjuna Fert & Chem,CLEAN FINANCE & INVESTMENT LTD,SELL,3615813,27.49,-
30-SEP-2008,PANACEABIO,Panacea Biotec Ltd.,THE INDIA FUND INC,SELL,500000,222.00,-
30-SEP-2008,PHOENIXLTD,The Phoenix Mills Limited,HSBC FINANCIAL SERVICES(MIDDLE EAST) LIMITED,SELL,1037500,144.00,-
30-SEP-2008,PIONEEREMB,Pioneer Embroideries Limi,SARSWATI VINCOM LTD,SELL,100000,18.13,-
Asian Equities Slide As Wall Street Tumble
Nikkei, Sydney Fell By 4% While Sensex Showed A Gain Of 2%
The stock markets across the Asian region closed mostly lower after U.S. lawmakers rejected a $700 billion plan to bailout the ailing U.S. banks and ward off recession. However, the Asian markets pared back some of the losses on news that U.S. President George Bush will make a statement later today on his administration's response to the crisis in financial markets. The stock markets in Hong Kong and India recovered sharply and moved into positive territory. The Chinese market and the Indonesian market remained closed on account of public holidays.
Oil was quoted at $95.16 a barrel, down $1.21, by 4:38 a.m. ET after the contract for November delivery plunged $10.52 to settle at $96.36 on the New York Mercantile Exchange on Monday.
In the currency market, the U.S. dollar strengthened to the upper 104-yen levels in late Tokyo deals from the upper 103-yen range in early trade. On Monday, the dollar closed the local session at 106.14-106.15 yen.
The weak current account data added to pressure on the South Korean won. The won finished the local session down 1.5%, its lowest level since early 2003. The local currency closed at 1,207.0 won to a dollar, down 18.2 from Monday's close of 1,188.8 to a dollar.
The Australian dollar fell to its lowest in two weeks against the U.S. dollar on Tuesday. The Aussie fell to US$0.8013 in late trade from US$0.8250 on Monday, but was off the day's low of US$0.7935, helped in part by better-than-expected domestic retail sales data.
The New Zealand dollar was sold off following the surprise vote against the US$700 billion bailout plan for U.S. banks. The kiwi finished the session at US$0.6700, recovering from the day's low around US$0.6640, but well down from Monday's close at US$0.6858.
The Philippine currency also came under pressure after the US rejected a $700-billion bailout plan for the financial sector and plunged back to the P47 to a dollar level. The peso opened at P47.10 to a dollar on Tuesday, 35 centavos weaker than it’s opening rate on 29 September 2008.
Coming back in equities, the Japanese stock market plummeted to its lowest level in three years, extending losses for the fourth straight trading session. Japanese stocks plunged around 5% in the opening move, tracking the overnight sell-off on Wall Street, after the U.S. Congress rejected a $700 billion bailout plan for the troubled American financial sector, but recouped some of their losses in the afternoon session on news that U.S. President George Bush will make a statement later today on his administration's response to the crisis in financial markets.
The benchmark Nikkei 225 Index closed down 483.75 points or 4.1% at 11,259.86, its lowest closing level since June 9, 2005. The index hit an intraday low of 11,160.83. The broader Topix Index of all First Section issues fell 40.46 points or 3.6% to finish at 1,087.41.
A slew of economic data were released today. The Ministry of Internal Affairs and Communications said that the seasonally adjusted rate of jobless people in Japan was 4.2% in August, higher than the analysts' expectation of 4.1%, and also came in higher than the 4.0% reported in July.
The Ministry of Economy, Trade and Industry reported that industrial output in Japan was down 3.4% in August compared to that for the previous month, representing the first decline in two months. That was sharply lower than the analysts' expectation that called for a 2.4% decline.
An index that measures Japanese manufacturing activity came in at a six-year low, according to the Nomura/JMMA Japan Purchasing Managers Index, standing at a seasonally adjusted 44.3 in September, lower than the August figure of 46.9.
Japan's housing starts picked up in August, exceeding economists' expectation, a report by the Ministry of Land, Infrastructure and Transport said Tuesday. Housing starts surged 53.6% year-over-year in August, marking a faster rate than the 19% recorded in July, and above the 49.8% expected by analysts.
Average Japanese monthly household spending in August fell a real 4.0% from a year earlier to 291,154 yen, the government said Tuesday.
Stock markets on Mainland China are closed for National Day holidays this week.
The Hong Kong stock market closed higher, staging a remarkable recovery, after bargain hunting picked up in late trade. The benchmark Hang Seng index closed up 135.53 points or 0.76% at 18,016.21, off the day's low of 16,799.29. For the month of September, the index has lost 3,245.68 points or 15%, while for the third quarter it has dropped 4,085.8 points or 18.5%.
The Australian stock market closed sharply lower on Tuesday, extending losses for the fourth consecutive trading session. After plunging more than 5% within minutes of opening on news that the House of Representatives failed to pass the U.S. government's proposed rescue plan for banks, the Australian market clawed back some ground in the afternoon but dropped again in the last minutes of trade to finish the session down 4.3%.
The benchmark S&P/ASX 200 index closed down 206.9 points at 4,600.5, its lowest close since December 2005. The broader All Ordinaries index fell 207.9 points or 4.3% to finish at 4,631.3.
Among a slew of economic data released today, the number of houses and apartments approved for construction in Australia in August decreased by a seasonally adjusted 3.7% from July, while the amount of credit extended to private sector entities rose by 0.5% in August following a 0.6% increase in July and retail trade increased 0.3% in August in trend terms to A$18.378 billion compared to an upwardly revised total of $18.319 billion in July.
The New Zealand stock market closed sharply lower on Tuesday, reversing Monday's mild gains. The benchmark NZX 50 index started off weak, plunging 148 points within the first thirty minutes of trading, after Wall Street slumped overnight following the news that the House of Representatives failed to pass the U.S. government's proposed rescue plan for banks. However, the key index recovered some ground over the course of the trading session. The benchmark NZX 50 index closed down 98.32 points or 3.18% at 3,090.22 and the broader NZX All Capital index lost 95.52 points or 3.07% to finish at 3,114.47.
On the economic front, the Statistics New Zealand reported that consents for new dwellings, including apartment units, continued to fall in August. The number of consents issued totaled 1,328 in August, marking the lowest monthly total since December 2000, down a seasonally adjusted 7.9% from July. For the full year through August 2008, consents for all new dwellings fell 20%.
Meanwhile, business confidence continued to improve in September, with the National Bank Business Outlook survey hitting positive territory for the first time in over six years. A net 2% expected better times over the year ahead, a turnaround from the net 20.5% expecting a worse outlook in the August survey.
The South Korean market closed slightly lower, recovering sharply from the 5.5% slump in early trade after U.S. Congress rejected a financial bailout plan. The market finished lower for the 3rd straight trading session. The benchmark Korea Composite Stock Price Index or Kospi closed down 8.30 points or 0.57% at 1,448.06 points, after hitting a session low of 1,376.72.
The recovery in the local stock market is partly attributable to market measures introduced by the government earlier in the day. The Financial Services Commission said that it would ban short selling of stocks for the time being and allowed listed firms to buy back more of their own shares.
Meanwhile, domestic economic data released today pointed to a slump in the real economy and worsening export market conditions. South Korea's industrial output fell a seasonally adjusted 2.2% in August from July, a deeper decline than expected. The current account balance hit its biggest deficit on record in August. The current account deficit reached a 12-year high of US$4.71 billion in August compared to a revised $2.53 billion deficit in the previous month. Additionally, the business survey index for manufacturers' expectations declined to 78 for October compared to 79 in the previous month, according to the Bank of Korea.
The Philippines stock exchange declined by 1.45% after the US House of Representatives rejected a $700-billion bailout plan for the financial sector. However the drop was much lower than the session's opening which saw the Philippines stocks tumbling as much as 155.81 points or 6% while the all-share index plummeting 76.6 points or 4.6502 %.
The benchmark index PSEi lost 37.93 points or 1.45 % at 2,569.65 while the all-share index shed 26.0 points or 1.80% to 1,622.25. Losers trampled gainers, 95 to 24, while 30 stocks were unchanged. Volume traded reached 3.617 billion valued at P3.033 billion.
In India, the BSE 30-share Sensex closed up 264.68 points or 2.10% to 12,860.43. The index shed 442.2 points at the day's low of 12,153.55, hit in early trade, its lowest level in two years. The Sensex rose 368.25 points at day’s high of 15,964 hit in mid-afternoon trade.
The Reserve Bank of India said the country's second largest lender, ICICI Bank has sufficient liquidity, including in its current account with the central bank, to meet the requirements of its depositors. The RBI added that it is monitoring the developments and has arranged to provide adequate cash to ICICI, adding that ICICI and its overseas subsidiary banks are well capitalized. The central bank's statement followed speculation about the bank's financial strength.
In addition the Securities & Exchange Board of India (Sebi) chairman C B Bhave today, 30 September 2008, said he did not have concerns that institutional investors were short-selling stocks and added that no change in the rules governing short selling was expected. The market surveillance system is already in place, Bhave said.
Singapore's Strait Times Index closed flat at 2,358 as Singapore's import and export price fell by 1.2% and 2.3% respectively in August 2008 over the previous month, due to lower oil prices.
Elsewhere, Taiwan's Taiex, which slid more than 6% earlier in the session, ended down 3.6% at 5,719.28, as trading resumed after a holiday; Malaysia's KLCI closed flat at 1,018. On the economic front, Malaysian producers price index, which is designed to measure the changes in the price of commodities, charged by domestic producers and those paid by importers for importing goods into Malaysia, increased by 11.33% in the month of August 2008.
In other regional market, European shares moved off lows in a volatile session, with miners clawing back some ground lost in the previous session, as investors started to hope that a $700 billion U.S plan to shore up financial markets will eventually be approved.
In the opening trade, the U.K. FTSE 100 index lost 0.6% to 4,791.68, the German DAX 30 index fell 1.2% to 5,739.19 and the French CAC-40 index declined 0.6% to 3,934.34. At 10.53 GMT, the U.K. FTSE 100 index recovered a bit as it was down by 0.15% to 4,811.52, the German DAX 30 index lost 1.1% to 5,743.80 and the French CAC-40 index declined 0.1% to 3,949.08.
Looking ahead, the Conference Board will release the results of its consumer confidence index for the month of September. The National Association of Purchasing Management – Chicago will also release its index of business conditions in the Chicago area. The purchasing manager’s index is expected to fall to a reading of 53.0 in September after rising to 60.2 in August. In Fed Speak, Atlanta Federal Reserve Bank President Dennis Lockhart is scheduled speak Tuesday afternoon about the US economic outlook in New Orleans, Louisiana.
Sensex bounces back from 2 year lows
The key benchmark indices snapped last three days losses to post decent gains today, 30 September 2008. Sensex rose 264.58 points. The barometer index had lost 1,096.77 points or 8% in the past three trading sessions to 13,102.18 on Monday, 29 September 2008, from a recent high of 13,692.52 hit on 24 September 2008
Expectations that a revised rescue package for the US financial sector would be put forward quickly by the US administration, triggered a recovery on the domestic bourses today, 30 September 2008, after an initial sharp fall that pushed Sensex to 2-year low. The US House of Representatives on Monday, 29 September 2008, unexpectedly rejected a plan to buy toxic assets from struggling banks that had been designed to revitalise strained lending markets. US stock futures were trading higher. Nasdaq futures were up 32.25 points while Dow Jones futures gained 211 points.
Banking stocks climbed. Index pivotal ICICI Bank rose more than 8%, Tata Consultancy Services rose close to 7%. Bharat Heavy Electricals and Bharti Airtel rose more than 5% each.
Finance minister P Chidambaram today said Indian banks are well capitalised and regulated. He further added that foreign institutional investors are not selling all the time.
European markets were trading mixed. France’s CAC 40 and UK’s FTSE 100 were up by between 0.02% to 0.16%. Germany’s DAX was down 0.89%.
The Securities & Exchange Board of India (Sebi) chairman C B Bhave today, 30 September 2008, said he did not have concerns that institutional investors were short-selling stocks and added that no change in the rules governing short selling was expected. The market surveillance system is already in place, Bhave said.
The rejection of the US bailout plan has heightened concerns that more banks will fail and global credit-losses will widen, leading to a global slowdown. The Dow Jones industrial average on Monday, 29 September 2008, posted its largest point decline ever on Monday, and its biggest daily percentage slide since the 1987 stock market crash.
Adding to the woes were troubles in Europe, where authorities were scrambling to prop up a slew of banks. On Tuesday, 30 September 2008, the Belgian-French financial services group Dexia got a 6.4 billion euro ($9.18 billion) capital boost from public shareholders to help it fight the global credit crisis. Ireland also offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets.
Meanwhile, global central banks on Tuesday, 30 September 2008, more than doubled the amount of dollar funding to $620 billion, but the move showed no signs of thawing the freeze in money markets where banks are hoarding cash and bracing for more trouble ahead in the deepening year-long credit crisis.
The BSE 30-share Sensex jumped 264.58 points or 2.1% to 12,860.43. The index shed 442.2 points at the day's low of 12,153.55, hit in early trade, its lowest level in two years. The Sensex rose 399.45 points at day’s high of 15,995.20 hit in mid-afternoon trade.
The S&P CNX Nifty was up 71.15 points or 1.85% to 3,921.20. Nifty hit a low of 3,715.05 in early trade, its lowest level in 17 months.
The BSE Sensex is down 7,426.56 points or 36.6% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 8,346.34 points or 39.35% below its all-time high of 21,206.77 struck on 10 January 2008.
The BSE clocked a turnover of Rs 5,164 crore today, 30 September 2008 as compared to a turnover of Rs 4,594.16 on 29 September 2008.
Nifty October 2008 futures were at 3923.15, at a premium of 1.95 points as compared to spot closing of 3921.20. NSE's futures & options (F&O) segment turnover was Rs 56,549.63 crore, which was higher than Rs 55,905.71 crore on Monday, 29 September 2008.
The BSE Mid-Cap index was up 1.46% at 4,798.29 and the BSE Small-Cap index was up 0.44% at 5,577.47.
BSE Bankex (up 4.92% to 6,478.85), BSE Capital Goods index (up 3.02% to 10,581.13), BSE Realty index (up 2.96% to 3,508.77), BSE Teck index (up 2.24% to 2,545.91) outperformed Sensex.
BSE Metal index (down 1.66% to 8,992.06), BSE FMCG index (down 0.86% to 2,160.76), BSE HealthCare index (up 0.58% to 3,672.18), BSE IT index (up 1.22% to 3,095.08), BSE Oil & Gas index (up 1.28% to 9,039.28), BSE Auto index (up 1.4% to 3,674.98), BSE Power index (up 1.58% to 2,260.27), BSE PSU index (up 1.62% to 6,246.03) and BSE Consumer Durables index (up 1.98% to 2,929.18) underperformed Sensex.
The market breadth was weak on BSE with 1,277 shares advancing as compared to 1,316 that declined. 79 shares remained unchanged.
India’s largest private sector firm by market capitalization and oil refiner Reliance Industries rose 0.8% to Rs 1,946.35. The stock recovered from the session’s low of Rs 1,862.60.
Tata Consultancy Services (up 6.96% to Rs 662.75), Bharat Heavy Electricals (up 5.07% to Rs 1,586), Bharti Airtel (up 5.14% to Rs 785.05), Maruti Suzuki India (up 3.73% to Rs 687.15), Larsen & Toubro (up 4.16% to Rs 2442.90), HDFC (up 5.33% to Rs 2,141.15), Jaiprakash Associates (up 4.12% to Rs 111.10), edged higher from the Sensex pack.
Ranbaxy Laboratories (down 3.17% to Rs 247.75), Tata Motors (down 3.27% to Rs 344.20), Tata Steel (down 4.43% to Rs 425.60), Grasim Industries (down 2.58% to Rs 1,687.60), Sterlite Industries (down 1.02% to Rs 428.45), edged lower from the Sensex pack.
India’s largest private sector bank in terms of net profit ICICI Bank rose 8.42% to Rs 534.85. The stock recovered from the session’s low of Rs 458. ICICI Bank today said rumours about its financial strength were baseless and malicious. The bank said it has a very strong capital position. In a statement, chief executive K.V. Kamath said ICICI's banking and non-banking units were well capitalised and the impact of the current market conditions on its investment portfolio would not pose any challenge to its capital position.
The stock had slumped 12.11% to Rs 493.30 yesterday despite the bank clarifying that 98% of ICICI Bank UK PLC's non-India investment book is rated investment grade and above. ICICI Bank UK PLC has zero exposure to US subprime-credit, it had said.
India’s largest commercial bank State Bank of India rose 4.32% to Rs 1,465.65. It recovered from the session’s low of Rs 1,353. India’s second largest private sector bank by net profit, HDFC Bank, rose 2.46% to Rs 1,229. The stock recovered from session’s low of Rs 1,125.
Reliance Natural Resources clocked the highest volume of 2.33 crore shares on BSE. IFCI (1.27 crore shares), Suzlon Energy (89.37 lakh shares), Chambal Fertilisers and Chemicals (80.36 lakh shares) and Ispat Industries (72.22 lakh shares) were the other volume toppers in that order.
Reliance Capital clocked the highest turnover of Rs 405.22 crore on BSE. Reliance Industries (Rs 356.18 crore), ICICI Bank (Rs 336.95 crore), Larsen & Toubro (Rs 206.55 crore) and Axis Bank (Rs 203.49 crore) were the other turnover toppers in that order.
US stocks slumped on Monday, 29 September 2008 as the House of Representatives rejected the $700 billion bailout plan to rescue the financial system. The S&P 500 index tumbled the most since the 1987 crash and the Dow Jones saw it's biggest single day point fall ever. The Dow Jones Industrial Average plunged 777.68 points, or 6.98%, to 10,365.45. The S&P 500 index fell 106.62 points, or nearly 9%, to 1,106.39. The Nasdaq Composite index declined 199.61 points, more than 9%, to 1,983.73.
Most Asian markets pared initial sharp fall triggered by overnight setback in US stocks. Hong Kong's Hang Seng rose 0.76%. Japan's Nikkei, Singapore's Straits Times, South Korea's Seoul Composite and Taiwan's Taiwan Weighted fell between 0.57% to 4.12%.
US light crude for November 2008 delivery fell 59 cents to $95.78 a barrel today, 30 September 2008 plunging $10.52 its second biggest fall since 23 April 2003, on the previous day.
Panic strikes US Market
Dow suffers worst one day loss in twenty one years as bailout plan gets rejected
US stocks were pushed back to the wall on Monday, 29 September, 2008 and the Dow suffered its worst loss in more than twenty years. The rejection of the $700 billion bailout plan for the financial market acted as the main catalyst for the steep losses of the day. Other than that there were a couple of other factors too. European governments agreed to a $16.4 billion bailout for Fortis NV, Belgium's largest retail bank. Also, the British government said it was nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio.
The Dow Jones industrial Average ended the day with a huge loss of 777.77 points at 10,365.45. It surpassed the loss of 684 points in incurred the day market reopened after 11 September, 2001 crashes. The Nasdaq Composite Index, finished today lower by 199.61 points at 1,983.71. S&P 500 finished lower by 106.59 points at 1,106.42.
All the thirty Dow stocks plunged in the red. American Express and Banc of America were the topmost losers shedding almost 18% each. All ten of the economic sectors posted a loss. The worst performing sector, financials, fell 16%, while the best-performing sector, consumer staples, fell 4.2%.
The House of Representatives failed to pass the Emergency Economic Stabilization Act today. The $700 billion financial relief plan was rejected today. A total of 218 votes were needed to pass the vote. Democrats voted 141 for, 94 against. Republicans voted 66 for, 132 against. Presumably, Congress will work toward a new plan to ease the financial market turmoil, although it is not clear how long it might take.
Among major news of the day at Wall Street, Citigroup is acquiring Wachovia's banking operations. Citi will absorb up to $42 billion of losses on a $312 billion pool of loans. Wachovia will continue to own AG Edwards and Evergreen. Market started the downward slide today with this piece of news. But then, indices just plunged once the failure of the bailout plan hit the market.
Nasdaq suffered heavy losses today after Apple shares skidded by 18% once two firms cut their rating on the stock.
Among earning news of the day, Circuit City posted a second quarter loss of as revenue fell 9.6% year-over-year. The consumer electronics retailer withdrew its previous 2009 outlook so it can take a comprehensive review. On the other hand, Walgreen earnings per share by 12.5% which matched expectations. The company said it saw a negative impact on overall margins due to an increase in nonretail businesses.
The strength in the dollar and concerns over global growth drove down the price of most commodities. Oil prices were down 11% to $95 per barrel. Gold bucked the negative trend, thanks to the precious metal's perceived safety.
Volume on the New York Stock Exchange topped 2 billion, with decliners ousting advancers more than 15 to 1. On the Nasdaq, 1.1 billion shares exchanged hands, and decliners ran past advancing stocks more than 6 to 1.
For tomorrow, economic data will take center stage. The release of the Chicago PMI and Consumer Confidence reports will draw some attention. In light of the huge losses seen today, the behavior of the market itself will be the focal point on Tuesday.
Pre Session Commentary - Sep 30 2008
Today the Market would open negative and nose-dive in deep red as the $700 billion rescue bail out was defeated in the House of Representatives. After the defeat of the bail out bill, the US market crashed hugely as investors had no confidence in the Wall Street. Most of the heavy stocks in the Wall Street have plummet since 1987. The weak sentiments of the investors further deteriorated as the three major European banks came out for a bail out help. On the other hand, Citigroup acquired the Wachovia banking operations for roughly $2 billion in deal facilitated by FDIC. To fund this acquisition the Citi group will raise $10 billion in a common stock offering and cut is dividend by 50%. In order to improve the strength of the Dollar Liquidity, the Fed has coordinated with nine central banks across the globe to more than double their swap authorization limits to $620 billion. Besides that the Fed is also increasing the size of its Term Auction Facilities.
On Monday, the bears have once again clawed down the market brutally by 595.75 points, recording a 52 week lowest mark. The Realty and Banking sectors were brutally thrashed by the bears. The market was mainly influenced by the meltdown in the European market where European financial giants like UK’s Bradford & Bingley Plc, Belgium’s Fortis Financial, and Germany’s Hypo Real Estate Holding AG drowned due to the US credit crisis. The investors are very concerned about the weakness and chronic financial crisis happening across the world. Companies like Bear Stearns, Fannie Mae, Freddie Mac, Lehman Bros, AIG, Washington Mutual, Fortis Financial, Bradford & Bingley have already declared themselves bankrupt seeking a bail out or bridge loan from their respective government. These incidents are just reinforcing the skepticism of investors’ sentiment about the strength of the global financial giants. In order to save the Fortis financial, the regulators in Belgium, the Netherlands and Luxembourg injected 11.2 billion euros ($16.3 billion) as a last resort. Every day a new financial company is added on the list of bail out firms, and who knows many more are yet to come on the list in near future. During the trading session we expect the market to trade in deep red amidst concerns in the US and the falling Asian Indices.
The BSE Sensex closed lower by 506.43 points at 12,595.75 and NSE Nifty ended down by 135.2 points at 3,850.05. The BSE Mid Caps and Small Caps closed with losses of 211.49 points and by 308.75 points at 4,729.33 and 5,553.03. The BSE Sensex touched intraday high of 13,113.53 and intraday low of 12,402.84.
On Monday, the US market crashed with huge selling pressure as the bail out plan was defeated in the US senate house. This negative sentiment ruined the market brutally and all the major indices plunged in deep red. Crude oil futures for the month of November delivery plunged $10.52 at $96.37 per barrel on New York Mercantile Exchange. The oil prices are further expected to come down as the demand for oil in future would fall due to the economic slowdown in US. Further the Euro lost some charm against dollar, thus strengthening the latter due to the bail out of three major European banks. The rising dollar also contributed in the fall of the oil prices to some extent.
The Dow Jones Industrial Average (DJIA) was down by 777.68 points at 10,365.45 along with NASDAQ index, which was low by 199.61 points at 1,983.73 and the S&P 500 (SPX) low by 106.59 points to close at 1,106.42 points.
Indian ADRs ended down. In technology sector, Satyam closed down by (17.50%) followed by Wipro by (13.37%), Infosys ended lower by (12.67%) and Patni Computers by (4.48%). In banking sector HDFC Bank and ICICI Bank lost (16.78%) and (12.47%). In telecommunication sector, Tata Communication and MTNL plunged (17.00%) and (8.03%). Sterlite Industries decreased by (12.28%).
Today the major stock markets in Asia opened in deep red territory on the back of negative cues from the US market as the $700 billion bail out plan was rejected in the House of Representatives. And further the European major banks calling out for a bridge loan started the negative sentiment since yesterday. Hang Seng index is trading down by 399.61 points at 17,481.07. Followed by, Japan''s Nikkei which was low by 430.63 points at 11,312.98 and Singapore''s Straits trading at 2,313.60 down by 47.74 points.
The FIIs on Monday stood as net seller in equity and debt. Gross equity purchased stood at Rs2712.20 Crore and gross debt purchased stood at Rs136.80 Crore while the gross equity sold stood at Rs3316.30 Crore and gross debt sold stood at Rs322.10 Crore. Therefore, the net investment of equity reported was (Rs604.10) Crore and net debt was (Rs185.20) Crore.
On Monday, the rupee dived to a 5 year low due to weak global cues and dollar demand from oil companies. The Oil marketing companies are paying nearly $8 billion per month to set off their monthly dues, hence creating huge demand for the green back. The Rupee closed at 46.95/96 per dollar, and touched an intraday high of 47.11, which was its lowest since June 2, 2003.
On BSE, total number of shares traded were 27.50 crores and total turnover stood at Rs4,594.16 crores. On NSE, total volumes of shares traded were 55.56 crores and total turnover was Rs13118.7 crores.
Top traded volumes on NSE Nifty – ICICI Bank with total volume of 21497419 shares followed by Unitech 14111766 shares, Suzlon Energy 12646388 shares, Reliance Petro 10751860 shares and ITC 8693592 shares.
On NSE Future and Options, total number of contracts traded in index futures was 1033599 with a total turnover of Rs18822.07 crores. Along with this total number of contracts traded in stock futures were 912112 with a total turnover of Rs13457.5 crores. Total number of contract for index options was 1084398 and total turnover was Rs 22774.41 crores and total number of contracts for stock options was 51599 and notional turnover was Rs851.72 crores.
Today, Nifty would have a support at 3,651 and resistance at 3,825 and BSE Sensex has support at 12,010 and resistance at 12,525.
Market headed for a slump on US bailout plan denial
Key benchmark indices are headed for a plunge mirroring global carnage triggered post rejection of the $700 billion financial rescue plan of the US government. Singapore Nifty futures were trading at over 200 points discount pointing to a sharp gap-down opening.
On Monday, 29 September 2008, the House of Representatives voted down the US government’s financial rescue plan intended to restore confidence in the US banking system. The House rejected by a vote of 228-205, triggering a wide based sell-off in US markets. The rejection of the US plan has heightened concerns that more banks will fail and global credit-losses will widen, leading to a global slowdown.
US stocks slumped on Monday, 29 September 2008 as the House of Representatives rejected the $700 billion bailout plan to rescue the financial system. The S&P 500 index tumbled the most since the 1987 crash and the Dow Jones saw it's biggest single day point fall ever. The Dow Jones Industrial Average plunged 777.68 points, or 6.98%, to 10,365.45. The S&P 500 index fell 106.62 points, or nearly 9%, to 1,106.39. The Nasdaq Composite index declined 199.61 points, more than 9%, to 1,983.73.
US light crude for November 2008 delivery fell 59 cents to $95.78 a barrel today, 30 September 2008 plunging $10.52 its second biggest fall since 23 April 2003, on the previous day.
Asian markets were trading weak today, 30 September 2008, post overnight bloodbath on the US markets. Hong Kong's Hang Seng plunged 4.48% or 801.31 points at 17,079.37, Japan's Nikkei tumbled 4.64% or 544.54 points at 11,199.07, Singapore's Straits Times fell 3.77% or 88.95 points at 2,272.39, South Korea's Seoul Composite declined 2.56% or 37.22 points at 1,419.14 and Taiwan's Taiwan Weighted was down 5.82% or 344.81 points at 5,584.82.
Back home, key indices plunged on Monday, 29 September 2008, to multi-month lows, on uncertainty about the $700 billion US bailout package. The BSE 30-share Sensex plunged 506.43 points or 3.87% to 12,595.75 and The S&P CNX Nifty was down 135.20 points or 3.39% to 3,850.05, on that day.
Foreign institutional investors (FIIs) were net equity sellers worth Rs 476.94 crore while mutual funds bought shares worth Rs 554.82 crore on Monday, 29 September 2008, according to provisional data on NSE.
ICICI Bank - UK investment has zero exposure to US
ICICI Bank, the largest private sector lender in the country whose shares suffered heavy hammering on the bourses, on Monday allayed fears over its overseas exposure.
In a statement issued today, the bank said that 98 per cent of ICICI Bank UK PLC’s non-India investment book of $ 3.5 billion is rated investment grade and above. Of this, exposure to US is only about 18 per cent.
“ICICI Bank UK PLC has zero exposure to US sub-prime credit, whether directly or through credit derivatives such as CDOs/CLNs/CDS,” the statement said.
This unsolicited statement from the country’s second largest bank seems to be an effort to quell the general negative sentiment and the fears over the bank’s overseas exposure.
One year-low
Shares of the bank closed at a one-year low of Rs 493.3, down 12.11 per cent from Friday’s close of Rs 561.25, on the BSE, on Monday. The stock touched a low of Rs 483 during day trade.
It was a case of ‘extreme pessimism’ driving the stock down, said a banking analyst.
The fears were on account of both international and domestic developments.
On the international front, the fear is that the bank may face mark-to-market losses given it exposure to overseas financial institutions.
On the domestic front there are concerns about the high exposure to residential mortgages and credit card receivables, both segments which are likely to see a rise in defaults, said a banking analyst with a broking house.
According to the head of research of a securities firm, ICICI Bank is likely to see a rise in small ticket defaults i.e. personal loans and credit card receivables, which will impact revenues.
Also, the bank has not been able to make good its treasury losses of the last fiscal, on account of forex derivative transactions, due to the volatile market conditions. This too is likely to put pressure on earnings, he said.
Almost 30 per cent of the retail book consists of housing loans. As on June 30, 2008, the bank’s outstanding on credit cards was Rs 8,500 crore, on personal loans Rs 12,000 crore and on home loans 65,600 crore.
A recent report by Merrill Lynch, said that the bank is likely to post a modest growth of 13 per cent due to weaker loan growth (15 per cent) and a likely hit of $30 million on its CDS book (as part of the Indian balance sheet) and higher non-performing loans provisions .
A report by Motilal Oswal estimated that ICICI Bank will see only 1 per cent growth in earnings in the second quarter, against the sector earnings growth of 15 per cent.
The concern over asset quality is not restricted to ICICI Bank alone, but is a concern for the banking sector.
“With the extent of an economic slowdown and interest rates remaining high, there will be some deterioration in the asset quality,” said Mr Abhishek Agrawal, analyst, Angel Broking Ltd.
Am-Bushed…Time to bid Good Buy!
When you go to buy, use your eyes, not your ears
President Bush and the leaders of both parties were in for a rude shock after the US government failed to win an approval for its mega rescue plan. The Dow Jones Industrial Average on Wall Street had its biggest single-day point loss ever. The S&P and the Nasdaq too came in for some harsh punishment. European shares tumbled to their second-worst single-session loss amid desperate government bailouts of banks across Europe. Among the emerging market indices, the Bovespa in Brazil (we know a lot many of you see some correlation with Indian market) ended down 9.3% overnight. Asian stocks too took a beating this morning, but have since recovered some lost ground.
There's hardly any good news, barring the steep fall in crude oil, which again (like we told you earlier) is linked to apprehensions of a substantial slowdown in global energy demand amid the unprecedented financial crisis. Global investors are rushing to buy safe-haven Bonds and Gold.
Predictably, we expect a gap-down opening in the wake of global carnage and anxiety surrounding the fate of the US economy and its wider global fallout. Things on the macro front are not too encouraging either. Interest rates are at a six-year peak. Inflation is hovering above the 12% mark. The rupee is losing ground steadily, and hit a five-year low on Monday. The Indian government and the RBI too could announce some more measures if the markets here do not recover.
Amidst all the gloom, some flowers may bloom. A bounce back is not ruled out later in the day. You will hear rumors and whispers of margin calls being triggered if stocks come crashing substantially. Close your ears for now and open your eyes to opportunities for the medium to long term.
For those happy hunting for mid-cap bargains, avoid the temptation and stick to the large caps. Don’t go overboard as the near term outlook remains hazy. Add some stocks at lower levels today for quick gains during a bounce back. If you don’t have the money and the appetite, just say good bye!
US stocks plunged on Monday after the much-touted bailout package for America's troubled financial system was voted out by the House of Representatives, sparking fears of more pain for the world's biggest economy.
The Dow Jones Industrial Average suffered its worst point drop on record, knocking off a mind-boggling US$1.2 trillion in market value, the first such instance ever in the history of Wall Street.
The Dow slumped 777.68 points, surpassing the 684.81 loss on Sept. 17, 2001 - the first trading day after the September 11 attacks. However, the 7% decline does not rank among the top 10 percentage declines.
The S&P 500 index nose-dived 106.59 points or 8.8%, to close at 1,106.42. It was its seventh worst day ever on a percentage basis and the biggest one-day percentage drop since the crash of 1987, when it lost 20.50%.
The Nasdaq Composite index slid nearly 200 points or 9.1%, to shut shop at 1,983.73. This was its third worst day on a percentage basis and also its worst decline since the crash of 1987.
Market breadth was negative. Twenty-five stocks fell for each that rose on the New York Stock Exchange (NYSE), as two billion shares were traded on the floor, up 35% over the three- month average.
US stocks tumbled ahead of the vote and the selling accelerated on fears that Congress would not be able come up with a fix for nearly frozen credit markets.
There was also news that troubled Wachovia had to sell its banking assets to Citigroup. A number of European banks also collapsed and had to be rescued by their respective governments and regulators.
But the possibility that the House won't pass the bailout plan caused stock losses to accelerate. Although another version of the plan will likely go before Congress, investors are skeptical whether it would be enough to avert the crisis.
Meanwhile, the Federal Reserve and other central banks around the world announced steps to make billions available to troubled banks.
The TED spread hit a more than 26-year high of 3.58% before dipping back to 3.54%. The TED spread is the difference between what banks charge each other to borrow for three months and what the Treasury pays.
The three-month Treasury bill, seen as the safest place to park money in the short term, fell to 0.34% from 0.83% late on Friday. Earlier this month, the three-month bill fell to a 68-year low around 0% as panic gripped financial markets.
Long-term Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.58% from 3.82% late on Friday.
US light crude oil for November delivery fell $10.52 to settle at $96.37 a barrel, in the second-biggest one-day plunge ever. COMEX gold for December delivery rose $5.90 to $894.40 an ounce.
In currency trading, the dollar gained against the euro and fell against the yen. Gas prices fell for the 12th day in a row, according to a nationwide survey of credit card activity.
Apple shares slumped almost 18% after RBC and Morgan Stanley analysts downgraded the stock to "neutral" from "buy" saying the consumer spending slowdown will hurt profits.
European shares slid, as financial market turmoil led to bailouts of financial institutions in Belgium, Britain, Germany and even Iceland. The pan-European Dow Jones Stoxx 600 index skidded 5.5% to 251.37, a three-year low, as metals extractors, financial services firms and banks paced a decline.
The UK's FTSE 100 dropped 5.3% to 4,818.77, while Germany's DAX 30 shed 4.2% to 5,807.08 and the French CAC-40 dived 5% to 3,953.48. The AEX was down 8.8% to 323.55 in Holland and the ISEQ was down 12.7% to 3,303.62 in Ireland.
In the emerging markets, the Bovespa in Brazil was down 9.4% at 46,028 while the IPC index in Mexico slid 6.4% to 23,955. The RTS index in Russia slumped 7.1% to 1194 while the ISE National 30 index was down 1.6% at 45,472.
Global cues to drive sentiments
Weak global cues coupled with heavy selling in the scrips all over dragged the BSE benchmark Sensex and the Nifty index below the 12,500 and 3,800mark.
Market sentiments were again hit as concerns continue to surface whether the US$700bn bailout would ease the global credit crunch. The BSE benchmark Sensex slipped 506 points to close at 12,595 and the NSE Nifty index fell 135 points to close at 3,850.
Among the 30 components of the Sensex, 29 stocks ended in the red and only 1 stock i.e. Hindustan Unilever ended with positive bias. ICICI Bank, Infosys and L&T were among the major laggards.
Among the BSE Sectoral indices, BSE Bankex index (down 6%), BSE Consumer Durable index (down 5.6%), BSE IT index (down 5.5%) and BSE Realty index (down 5.2%).
Nagarjuna Construction announced that M/s. A V S R Holdings Pvt. Ltd an investment company belonging to the promoters group has acquired during the period September 19, 2008 to September 26, 2008. 509,743 equity shares of Rs2/- each of the company in the aggregate (Equivalent to 0.22% of the paid-up capital) through purchases from the Market.
With the aforesaid acquisition, the holding of the promoters group in the company has gone up to 23.29% of the total equity of the Company.
Shares of Nagarjuna Construction plunged by over 11% to Rs95 touching an intra-day high of Rs109 and a low of Rs92 and recorded volumes of over 2,00,000 shares on BSE.
Shares of ICICI Bank plunged by over 12% and slipped below the Rs500 mark on the back of heavy selling. The stock has declined by over 65% from its 52-week high of Rs1,465.
The stock finally ended at Rs493 touching an intra-day high of Rs569 and a low of Rs483 and recorded volumes of over 58,00,000 shares on BSE.
Shares of Subex ended on a flat note at Rs77. The company announced that BT (British Telecom) signed a three-year framework contract at an estimated value of US$ 50mn, for Subex to provide the company with products and services in the domains of revenue assurance, fraud detection, interconnect billing and event integrity.
Shares of Gwalior Chemicals declined by over 9% to Rs66 after 5.8% equity changed hands on the BSE. The scrip touched an intra-day high of Rs72 and a low of Rs65 and recorded volumes of over 14,00,000 shares on BSE.
Shares of Orchid Chemicals gained by 1% at Rs214 after the company announced that it would collaborate with Merck to develop novel Anti-Infective drugs. The company would get US$100mn milestone payment from Merck and would also get royalties on net sale. The scrip touched an intra-day high of Rs217 and a low of Rs198 and recorded volumes of over 2,00,000 shares on BSE.
Shares of HCL Tech declined by over 8% to Rs195 after the company offered to buy Axon Group Plc, countering a bid from Infosys.
The company had announced in the previous week that it offered to buy Axon for 650 pence per share. The price was 8.3% higher than an offer from Infosys. The scrip touched an intra-day high of Rs213 and a low of Rs188 and recorded volumes of over 1,00,000 shares on BSE.
RIL has offered to sell diesel from the company’s refinery in India if the government removes double taxation of the fuel. (BS)
The Government may not allow RIL to supply KG basin gas to RNRL and NTPC in violation of the gas utilization policy, which accords priority to the fertilizer sector. (ET)
Subex has bagged a US$50mn contract from British Telecom. (ET)
British Telecom has put the sale of its stake in Tech Mahindra on hold. (ET)
Tata Motors has stepped up production of Indica at its Tata-Fiat JV plant at Ranjangaon and may start Nano production also at this plant. (ET)
Maruti to increase it’s yet to be launched new compact car A-Star’s production by 50,000 units. (ET)
Aurobindo Pharma has received USFDA approval for marketing Cyclobenzaprine hydrochloride tablets. (ET)
Sterlite Industries to start mining bauxite from Niyamgiri hills in Kalahandi district within a year. (BS)
IVRCL Infrastructures and Projects Ltd bagged a Rs4.2bn lift irrigation scheme in Madhya Pradesh. (BL)
Suven Life Science has got DCGI approval for Phase I clinical trials of SUVN-502, a product used in the treatment of Alzeimer disease. (ET)
TIG Capital plans to invest over US$400mn for a substantial stake in Kingfisher Airlines. (ET)
Union Bank of India, which had extended a credit line of Rs3bn and term loan of Rs1bn to DSP Merrill Lynch, has put both the deals on freeze. (ET)
NHPC may delay its initial public offer due to market turmoil. (ET)
Orchid Chemicals has entered into strategic research collaboration and licensing agreement with Merck & Co Inc. (FE)
The boards of MindTree and Aztecsoft have approved a share swap ratio of 2:11 for their merger. (ET)
Area T&D and GE Consumer have jointly announced a strategic alliance. (FE)
Aksh Optifibre has entered into a three-year agreement with Sony Pictures Entertainment. (FE)
Mahindra Holidays & Resorts India to spend Rs3.5-4.0bn to double its capacity to 1,500 apartments over the next one year. (BS)
Jet Airways Chairman Naresh Goyal to sell up to 10% of his stake in the company. (BS)
Adani Enterprise entered in a JV with Chemoil for marine fuel supply. (BS)
Economic Front Page
The rupee hit a five-year low of 47.115 against the US Dollar in intra-day trade, before recovering to close at 46.97, the lowest since July 19, 2006. (BS)
Nasscom may cut software exports growth forecast downwards by few percentage points for 2008-09. (ET)
Banks have made a strong representation to RBI to release more cash into their system. (ET)
The Home Ministry and the Department of Industrial Policy and Promotion have denied DoT’s plans to let foreign telcos bid for 3G spectrum without an Indian partner. (ET)
The Government is likely to allocate start-up GSM technology spectrum in the Maharashtra circle to new telecom licensees. (ET)
The Government has revived the proposal for allowing 100% FDI in electronics and sports goods retail. (ET)
Indian banks plan to stop loans to local arms of crisis-hit US companies, this may result in cancellation of deals worth ~Rs20bn. (ET)
India and the European Union have agreed to conclude a broad-based Trade and Investment Agreement by 2009 and double their trade turnover to e100bn in the next five years. (ET)
The Supreme Court has approved smoking ban in public places from October 2. (ET)
The Petroleum Planning and Analysis Cell has made a strong pitch for a judicious mix of reduction in excise duties and state taxes along with a gradual increase in prices to bring the price of automotive fuels at par with international prices.(FE)
Union food and agriculture minister Sharad Pawar has rejected duty free imports of raw sugar. (ET)
Indian tea production in January-July 2008 increased by 17mn kgs to 476.6mn kgs compared to same period last year. (ET)
Manmade fibre textile exports increased by 35% yoy in Apr-Jul’08. (FE)
Gold rallies
Gold Rallies Towards All Time High
The dollar's fortunes reversed sharply, falling from near the 107-level against the yen to plunge to the 104-handle after it was announced that the House of Representatives voted against the $700 billion bailout plan by a vote of 228 to 205. The failure to pass the Administration's plan to purchase toxic assets off banks' balance sheets was incredibly disappointing to markets and heightens uncertainty over the outlook for the financial sector and raises the risk for the economy to plunge into a prolonged recession.
Gold for December delivery rose $5.90, or 0.7%, to close at $894.40 an ounce on the Comex division of the New York Mercantile Exchange. MCX Gold contract for October expiry closed the session at Rs 13455 per 10 grams up Rs 301.
Global central banks continued to pump liquidity into the financial system with another bout of coordinated intervention. The Fed announced that it would be injecting another $630 billion in an effort to prevent the credit markets from locking up.
ICICI FII Holdings
Foreign funds which hold more than 1% stake in ICICI Bank include Allamanda Investments Pte Ltd, Merrill Lynch Capital Markets Espana, Government of Singapore, CLSA Mauritius Ltd, Growth Funds of America Inc., Dodge and Cox International Stock Fund and FID Funds Mauritius.
Real Estate Stocks at 52 week lows
Realty stocks took a tumble on the bourses and many logged their 52-week low on Monday.
The BSE Realty Index closed at a 52-week low at 3,407.87, down 5.26 per cent. It had dropped 16.79 per cent over the week from 4,095.50, and 31.78 per cent over the month. In January, the index clocked a high of 13,848.09.
Over the week, almost all real estate company stocks have taken a hammering, dovetailing the Sensex’s fall with the negative market sentiment at an all-time high, which this week is compounded by the wait for the US congressional nod for the $700-billion bailout package for bankrupt investment firms there.
Delhi-based DLF Ltd stock closed at Rs 350. 60, 5.12 per cent lower than its previous close. The DLF issue was priced at Rs 525. (52-week high – Rs 1,225, low Rs 329)
Buyback
In July, the company announced its buyback intention of up to Rs 600 a share for Rs 1,100 crore.
On September 18, it informed BSE that its board of directors would meet on September 30 to consider and approve a public announcement with the proposed buyback of equity of the company.
Sobha Developers’ stock suffered a 9.59 per cent drop, closing at Rs 171.55. The issue price was Rs 640 (Rs 1,060, Rs 164.50). Puravankara Projects traded at Rs 154.05 at close, down 3.14 per cent. The IPO price was Rs 400 (Rs 535, Rs 132.05). At close, Omaxe stock traded at Rs 96.05, down 4.38 per cent, far below its issue price of Rs 310 (Rs 613, Rs 93.60). Housing Development and Infrastructure Ltd was at Rs 166.05, down 13.72 per cent lower than its previous close (Rs 1,432, Rs 160.20). Parsvnath Developers was down 7.04 per cent at Rs 89.85 (Rs 598, Rs 86.60).
Among the marginal declines, was Ansal Infrastructure at Rs 77.30, down 4.13 per cent, and Unitech, which lost 1.98 per cent at Rs 108.85, but recovered from day’s of low Rs 97.5, which is its 52-week low. Of the many investments Lehman Brothers made in India, Delhi-based Unitech received about $175 million (Rs 740 crore).
Mr Hardeep Dayal of Centrum Broking Pvt Ltd said it was a knee-jerk reaction as the medium and long-term story remains strong. Market sentiments were down and only need-based buying was happening. People have held back their decisions to purchase properties, in anticipation of a price fall which is real. Mr Dayal was however, hopeful of a turnaround in a year.
Liquidity crunch
Enam Securities Researchers pointed out that aggressive land acquisition at peak prices through short-term high cost debt and huge working capital mismanagement (short-term debt used for long-term projects) were some of the ills that plagued the industry. Moreover, developers had stubbornly held on to selling prices and high-cost inventories, hoping for a renewal of demand and hike in prices.
Enam said the realty business model consists of three stages of value creation — land acquisition/aggregation and conversion, construction and development, and the lease/sale of the property.
The whole business model depended on the ability to infuse cheap monies at the earliest stages, including additional infusion through exits at the end of each stage, to be able to funnel monies back to stage 1 — land acquisition. Further, as each project funds another in this working-cap intensive business, liquidity is the key exponentiator of the business. This funnelling process has now unravelled. With decreasing options, distress-sale of land parcels was the only option for some
Indian Bank - SELL
We recommend a sell in Indian Bank from short-term perspective. It is clearly apparent from the charts of Indian Bank that it had been on a medium-term uptrend between mid July and early September from Rs 78 (a 52-week low) to a high of Rs 142.
However, the stock met with a key resistance at Rs 140 levels and started to decline. Recently the stock began to loss its bullish momentum by breaching the medium-term up trendline and subsequently the 21-day moving average. We also observe that the daily volume has been shrinking over the past one week.
On September 29 the bank tumbled 6 per cent, reinforcing the bearish momentum. The daily relative strength index has been gradually falling in the neutral zone. The moving average convergence and divergence has indicated a sell and is declining in line with the stock price.
We are bearish on the stock from a short-term horizon. We anticipate the counter to decline further until it hits our price target of Rs 106 in the approaching trading sessions. Traders with short-term perspective can sell the stock while maintaining a stop-loss at Rs 125.
Bailout shattered, House rejects US financial-rescue plan
The US House on Monday, September 29, voted down the Bush administration`s historic USD 700 billion financial bailout plan, that led to one of the worst days for stocks. This is a sharp blow to all-party efforts, despite repeated warnings about the U.S. heading towards a long-term economic slowdown.
Treasury Secretary Henry Paulson warned on that stressed world markets would reduce credit availability threatening American jobs and livelihood.
Meanwhile, officials are trying to figure out what the next step will be for rescue-related legislation, and an aide in the House speaker`s office said lawmakers are ready to work in a bipartisan way.
U.S. stocks plunged after the news was broken. Dow Jones Industrial Average ended down 777 points, or 7%, to 10,365.
Major Asian indices also reacted to the bailout failure. Japan, South Korea and Australia markets plummeted in early trading on Tuesday.
Bloodbath on Wall Street
US stocks plunged on Monday after the much-touted bailout package for America's troubled financial system was voted out by the House of Representatives, sparking fears of more pain for the world's biggest economy.
The Dow Jones Industrial Average suffered its worst point drop on record, knocking off a mind-boggling US$1.2 trillion in market value, the first such instance ever in the history of Wall Street.
The Dow slumped 777.68 points, surpassing the 684.81 loss on Sept. 17, 2001 - the first trading day after the September 11 attacks. However, the 7% decline does not rank among the top 10 percentage declines.
The S &P 500 index nose-dived 106.59 points or 8.8%, to close at 1,106.42. It was its seventh worst day ever on a percentage basis and the biggest one-day percentage drop since the crash of 1987, when it lost 20.50%.
The Nasdaq Composite index slid nearly 200 points or 9.1%, to shut shop at 1,983.73. This was its third worst day on a percentage basis and also its worst decline since the crash of 1987.
Market breadth was negative. Twenty-five stocks fell for each that rose on the New York Stock Exchange (NYSE), as two billion shares were traded on the floor, up 35% over the three- month average.
A day to remember/forget ?
The failure of the bailout package in Congress literally dropped jaws on Wall Street and triggered a historic selloff—including a terrifying decline of nearly 500 points in mere minutes as the vote took place, the closest thing to panic the stock market has seen in years.
The Dow Jones industrial average lost 777 points on Monday, its biggest single-day fall ever, easily beating the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.
As uncertainty gripped investors, the credit markets, which provide the day-to-day lending that powers business in the United States, froze up even further.
At the New York Stock Exchange, traders watched with faces tense and mouths agape as TV screens showed the House vote rejecting the Bush administration's $700 billion plan to buy up bad debt and shore up the financial industry.
Activity on the trading floor became frenetic as the "sell" orders blew in. The selling was so intense that just 162 stocks on the Big Board rose, while 3,073 dropped.
The Dow Jones Wilshire 5000 Composite Index recorded a paper loss of $1 trillion across the market for the day, a first.
The Dow industrials, which were down 210 points at 1:30 p.m. EDT, nose-dived as traders on Wall Street and investors across the country saw "no" votes piling up on live TV feeds of the House vote.
By 1:42 pm, the decline was 292 points. Then the bottom fell out. Within five minutes, the index was down about 700 points as it became clear the bill was doomed.
"How could this have happened? Is there such a disconnect on Capitol Hill? This becomes a problem because Wall Street is very uncomfortable with uncertainty," said Gordon Charlop, managing director with Rosenblatt Securities.
"The bailout not going through sends a signal that Congress isn't willing to do their part," he added.
While investors didn't believe that the plan was a cure-all and it could take months for its effects to be felt, most market watchers believed it was at least a start toward setting the economy right and unlocking credit.
"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson, president of Johnson Research Group. "This isn't a market for the timid."
Before trading even began came word that Wachovia Corp., one of the biggest banks to struggle from rising mortgage losses, was being rescued in a buyout by Citigroup Inc.
That followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies — Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc., all of them felled by bad mortgage investments.
And it raised the question: Which banks are next, and how many? The Federal Deposit Insurance Corp. lists more than 110 banks in trouble in the second quarter, and the number has probably grown since.
Wall Street is contending with all of it against the backdrop of a credit market — where bonds and loans are bought and sold — that is barely functioning because of fears that anyone lending money will never be paid back.
More evidence could be found Monday in the Treasury's three-month bill, where investors were stashing money, willing to accept the tiniest of returns simply to be sure that their principal would survive. The yield on the three-month bill was 0.15 percent, down from 0.87 percent and approaching zero, a level reached last week when fear was also running high.
Analysts said the government needs to find a way to help restore confidence in the markets.
"It's probably fair to say that we are not going to see any significant stability in the credit markets or the stock market until we see some sort of rescue package passed," said Fred Dickson, director of retail research for D.A. Davidson & Co.
The bailout bill failed 228-205 in the House, and Democratic leaders said the House would reconvene Thursday in hopes of a quick vote on a revised bill.
"We need to put something back together that works," Treasury Secretary Henry Paulson said. "We need it as soon as possible."
The Dow fell 777.68 points, just shy of 7 percent, to 10,365.45, its lowest close in nearly three years. The decline also surpasses the record for the biggest decline during a trading day — 721.56 at one point on Sept. 17, 2001, when the market reopened after 9/11.
In percentage terms, it was only the 17th-biggest decline for the Dow, far less severe than the 20-plus-percent drops seen on Black Monday in 1987 and before the Great Depression.
Broader stock indicators also plummeted. The Standard & Poor's 500 index declined 106.62, or nearly 9 percent, to 1,106.39. It was the S&P's largest-ever point drop and its biggest percentage loss since the week after the October 1987 crash.
The Nasdaq composite index fell 199.61, more than 9 percent, to 1,983.73, its third-worst percentage decline. The Russell 2000 index of smaller companies fell 47.07, or 6.7 percent, to 657.72.
A huge drop in oil prices was another sign of the economic chaos that investors fear. Light, sweet crude fell $10.52 to settle at $96.36 on the New York Mercantile Exchange as investors feared energy demand would continue to slide amid further economic weakness. And gold, where investors flock when they need a relatively secure investment, rose $23.20 to $911.70 on the Nymex.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.
"Things are dying and breaking apart," he said.
The federal Office of Thrift Supervision, one of the government's banking regulators, indicated that the market was overreacting to the House vote and that its fears about the financial system are misplaced.
"There is an irrational financial panic taking place today, and we support and applaud the continuing efforts of Secretary Paulson and congressional leadership to restore liquidity and public confidence," John Reich, Director of the federal Office of Thrift Supervision, said in a statement.
The plan would have placed caps on pay packages of top executives that accepted help from the government, and included assurances the government would ultimately be reimbursed by the companies for any losses.
The Treasury would have been permitted to spend $250 billion to buy banks' risky assets, giving them a much-needed cash infusion. There also would be another $100 billion for use at the president's discretion and a final $350 billion if Congress signs off.
But Wall Street found further reason for worry overseas. Three European governments agreed to a $16.4 billion bailout for Fortis NV, Belgium's largest retail bank, and the British government said it was nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the US.
Monday, September 29, 2008
The Era of Leverage is over
A few years ago, senior officials at the Bank for International Settlements started ringing alarm bells about the scale of leverage that was quietly building up in the financial system. Back then, though, it was fantastically hard to get American policymakers – let alone bankers – to listen.
In the go-go days of the credit bubble, Washington policymakers blithely assumed that the Western financial system had plenty of capital to cope with any potential risks. Consequently, as one former BIS official admits: "Worrying about leverage wasn't fashionable at all – no one wanted to hear."
Fast-forward a couple of years and, my, how those Western financiers are having to eat humble pie (even to the point of accepting a helping hand from the once-ailing Japanese). After all, the events of the past year have now made it patently – horrifically – obvious that the Western banking system has become dangerously undercapitalized in recent years, to the point where even the Federal Reserve is having to shore up its defences.
Moreover, it is now also clear that Western policymakers are belatedly trying to correct this state of affairs. The days when high leverage, mega bonuses and wacky instruments were equated with financial virility have gone; instead a more humble, back-to-basics and slim-line approach is what investors are demanding. Thus, deleveraging is now all the rage – in whatever form it might take.
The news that Morgan Stanley and Goldman Sachs – which were the last surviving big investment banks on Wall Street – have become regulated banks is a particularly compelling sign of this trend. On a micro level, the move packs a powerful historical punch, since it essentially spells the end of the old broker-dealer business model, with its bold, buccaneering approach to life.
In a broader sense, it also provides further evidence that the era of high leverage is over. After all, one key factor that has marked the brokers out in recent years is that they did not face the type of strict leverage rules that were applied to US commercial banks. Thus, while the latter group was generally forced to keep tangible equity at 5 per cent of assets, or more, brokers operated with a lower equity ratio. That let them have leverage ratios of more than 30 times – which in turn turbocharged their profits.
The regulatory controls on the commercial banks have sometimes produced disagreeable side effects – most notably encouraging banks such as Citi to create a plethora of off-balance sheet vehicles, such as the now notorious structured investment vehicles.
However, these rules also meant that groups such as Citi, JPMorgan Chase and Bank of America started the crisis with more ammunition. And Sunday's news shows that Goldman Sachs and Morgan Stanley now recognise they must do the same, if they are to survive.
Moreover, they are not the only ones facing a slimmer life. Over in Switzerland, the central bank now wants to impose a comparably tough leverage ratio on groups such as UBS (which, remarkably, has been operating with even more leverage than some US brokers in recent years).
Separately, international regulators in Basel are now tweaking the so-called Basel Two capital rules to force banks to hold more capital against esoteric assets. And efforts are now under way to toughen the rules for a putative central clearing house for credit derivatives – which, in turn, would prompt lower leverage in that sector too.
In the long term, all this is utterly desirable. Indeed, it is also overdue. However, nobody should forget that the shift also presents policymakers with yet another headache. After all, even at the best of times, deleveraging is never an easy process; and right now, it threatens to produce a particularly unpleasant downward drag on asset prices and growth.
Some industry analysts estimate, for example, that if investment banks were to cut leverage ratios from 30 times (or recent levels) to 20 times, this would trigger $6,000bn worth of asset sales, excluding likely deleveraging by hedge funds too.
Of course, such deleveraging will not happen overnight, or necessarily in such a simplistic way. But what these rough calculations show, as George Magnus at UBS points out, is that the putative $700bn RTC fund cannot be considered an all-encompassing solution to the current woes. Deleveraging, in other words, still has a long way to run – at Morgan Stanley and Goldman Sachs, for starters.
By Gillian Tett for FT
Asian Markets Remain Cautious On Concerns Of Bailout Plan
Hong Kong, Sensex Lead the Regional Fall As Markets In China, Malaysia, and Taiwan Closed For Holiday
The stock markets across the Asian region closed lower, led by Hong Kong and India, ahead of a vote in both the Senate and the Congress on the revised $700 billion rescue package agreed by the U.S. lawmakers. On Friday, U.S. stocks ended mixed after gains in big financial companies lifted the Dow Jones Industrials Average more than 120 points, while worries about smaller banks and parts of the technology sector weighed on the market. The Dow closed up 121.07 points or 1.1 %at 11,143.13 and the S&P 500 closed up 4.09 points or 0.3 % at 1,213.27, while the Nasdaq closed down 3.23 points or 0.2 %at 2,183.34.
Oil extended its decline, pressured by a rise in the U.S. dollar, on optimism ahead of a vote on the U.S. financial sector bailout package. By 3:49 a.m. ET, oil was quoted at $103.86 a barrel, down $3.03 from Friday's close.
In currency market, the U.S. dollar gained against the yen, but gave away some of the gains in late Tokyo deals. The U.S. dollar dipped to the lower 106-yen levels in late Tokyo deals from the upper 106-yen levels in early Tokyo deals. The dollar closed in the upper 105-yen zone late Friday in Tokyo. The U.S. dollar was quoted at 106.24-106.26 yen, up 0.90 yen from Friday's close of 105.95-106.05 yen
The Australian dollar closed weaker, finishing below US$0.83 for the first time in more than a week as U.S. lawmakers prepared to vote on a revised bailout package for Wall Street. The Aussie finished the local session at US$0.8218-0.8221, down from Friday's close of US$0.8318-0.8322.
The New Zealand dollar finished a mixed session weaker at US$0.6858, compared to US$0.6864 in early local deals and US$0.6876 late Friday.
The South Korean won fell more than 3% to near 5-year lows against the dollar. The won fell to as low as 1,199.8 a dollar, its weakest since December 29, 2003, before finishing the local session at 1,188.6-1,189.0 a dollar on talk of dollar-selling intervention, compared to Friday's domestic close of 1,160.5 a dollar.
The Philippines peso weakened further as it closed at 46.990 against the dollar compared to Friday's domestic close P46.745 a dollar.
Coming back to Asian equities, the investors turned cautious on concerns about the effectiveness of the plan and also on worries about the health of financial institutions in Europe. Meanwhile, the stock markets in China, Malaysia, and Taiwan remained closed on account of public holidays.
The Japanese stock market pared early gains to close lower on Monday, extending losses for a third day. The market started off higher, after the White House and congressional leaders struck a deal Sunday on a bill to resolve the ongoing financial crisis, but lost ground as investors turned cautious ahead of a vote in the U.S. House of Representatives as early as today. The benchmark Nikkei 225 index closed down 149.55 points or 1.26% at 11,743.61 and the broader Topix index of all First Section issues on the Tokyo Stock Exchange shed 20.02 points or 1.74% to finish at 1,127.87.
On the economic front, Japanese retail sales rose 0.7% in August from a year earlier, rising for the 13th straight month, the Ministry of Economy, Trade and Industry said. In July, retail sales rose by a revised 2.0% on year. Sales at department stores and supermarkets fell, for the fifth straight month, by 2.2% on year after adjustment for the change in the number of stores.
The Hong Kong stocks were battered today as property players tumbled after HSBC Holdings' local banking unit raised mortgage rates by a half-point because of rising funding costs. Ping An Insurance (Group) Co. slumped after three European countries were forced to rescue Fortis, in which the insurance major has a stake. The Hang Seng Index ended 4.3% down to 17,880.68 and the Hang Seng China Enterprises Index slumped 6.6% to 8,955.26.
The Australian stock market closed lower, extending its losses for the third consecutive trading session. After opening on a firm note following, the market lost ground as investors turned cautious ahead of a vote on the rescue package in both the Senate and the Congress. The benchmark S&P/ASX 200 index closed down 97.4 points, or 2.0%, at 4,807.4, while the broader All Ordinaries index lost 95.4 points, or 1.9%, to finish at 4,839.2.
The New Zealand stock market closed slightly higher on Monday, ending a two-day losing streak. The market started off higher, encouraged by news that U.S. lawmakers have tentatively agreed to a US$700 billion rescue plan for the ailing U.S. financial sector, but pared most of its early gains in the after noon session following weakness in other regional markets. The benchmark NZX 50 Index closed up 0.95 point or 0.03% at 3,188.51 and the broader NZX All Capital Index added 3.46 points or 0.11% to finish at 3,210.0.
On the economic front, New Zealand's annual trade deficit contracted in August, according to data released by Statistics New Zealand. For the month of August, the deficit was NZ$750 million, the smallest August deficit in dollar terms since 2004. The monthly deficit through July 2008 was a downwardly revised NZ$808.1 million. The nation's trade balance for the year through August was a deficit of NZ$4.3 billion.
Meanwhile, the value of New Zealand's M3 money supply rose 7.2% on year in August to NZ$205.23 billion, the Reserve Bank of New Zealand said.
The South Korean market closed lower as steep falls in the won weighed on banks. The Korea Composite Stock Price Index or Kospi closed down 19.97 points or 1.35% at 1,456.36 after rising to near 1,500 points in early trade.
The Philippines stock exchange went up for a fourth successive day though the quantum of the up move was rather limited as investors remained cautious while waiting for the final approval of a US government plan to buy bad debts from troubled financial institutions. The benchmark PSEi ended up 0.39% on 29 September 2008, as the weakness in the Service sector hovered over the market and the early gains were given away in the closing hours of the session.
The benchmark index PSEi closed up 10.35 points or 0.39% to 2,607.58.While the all-share index leaped 12.09 points or 0.73% to 1,648.30. Three of the eight indices, however, went down. Industrial stocks gained the most, advancing by 53.88 points or 1.75% to 3,119.1 while the service sector led today's losers, followed by property stocks and mining and oil indices.
In India, the BSE Sensex plunged to 52-week low. Sensex was down a massive 644.38 points in the afternoon. According to the provision closing the Sensex closed down by 506.43 points or 3.87% to 12595.75.
Elsewhere, Singapore's Straits Times index was trading down by 2.1% at 2,316.34 while the Indonesia's Jakarta composite index was down 0.74% at 1,832.51.
In other regional market, European shares headed back towards three-year lows, with banks falling sharply as news of bailouts for Fortis and Hypo Real Estate and the nationalization of Bradford & Bingley highlighted current turmoil in the sector, while details of a U.S. plan to shore up the financial sector received a cool reception.
In the opening trade, the U.K. FTSE 100 index dropped 2.5% to 4,962.97, the German DAX 30 index fell 2.8% to 5,896.35 and the French CAC-40 index dropped 2.7% to 4,051.29. At 10.53 GMT, the U.K. FTSE 100 index fell further 3.3% to 4,920.62, the German DAX 30 index lost 2.8% to 5,891.05 and the French CAC-40 index declined 3.1% to 4,036.34.
On the economic front, Euro zone economic sentiment weakened to 87.7 in September from 88.5 in August. The commission said the reading reached its lowest since 2001. However, the index stood above the expected reading of 87.2.
The overall decrease in sentiment was characterized by a fall in confidence in industry, services and construction. The industrial confidence index stood at -12, down from -9 in August. The indicator measuring services confidence fell to zero and that for the construction sector slid to -16.
At the same time, consumer confidence remained unchanged at -19 and retail trade confidence rose in September to -8 from -10. Separately, the Commission said the business confidence index slid to 0.79 in September from minus 0.28 in the prior month. The reading for August was revised from minus 0.33.
Looking ahead the day is scheduled to release core personal consumption expenditure index for month of August, which will be followed by the data on personal income and expenditure. In the late evening we have building permits details from New Zealand. Japan’s statistical house will release its monthly figures of unemployment and industrial production for the month of August.
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