The Star Online: Business
The Star Online: Business |
- M'sia and global markets lower as hopes for quick end to eurozone crisis fade(update)
- Ex-China central c.banker says too early to ease policy
- Goldman Sachs commods risk tumbles on tough markets
| M'sia and global markets lower as hopes for quick end to eurozone crisis fade(update) Posted: 18 Oct 2011 05:50 PM PDT PETALING JAYA: The Malaysian stock market lost its momentum, along with other regional markets, as hopes for a quick solution to the eurozone debt crisis were doused and signs were clear that China's robust growth was moderating. The benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) lost 25.41 points, or 1.73%, to close at 1,439.94 yesterday. Trading volume was moderate, with 1.34 million shares worth RM1.37bil changing hands. Among the regional markets, Hong Kong's Hang Seng Index fell the most by 4.23% or 797.53 points to 18,076.46. This was followed by China's Shanghai Index, which fell 2.33% or 56.92 points to 2,383.49. "The markets remain highly volatile and they have become more sensitive than ever to macro news," an analyst told StarBiz. "Market players are very cautious, as they keep a wary eye on how policymakers coordinate their stance on managing the current global economic woes," he added. Overnight, the US Dow Jones Industrial Average ended weaker on heavy selling, after German Finance Minister Wolfgang Schaeuble said that concrete solutions to the eurozone debt crisis would unlikely be made at the European Union summit this weekend. Moody's warning that France's triple-A credit rating faced increasing risk of a downgrade due to the country's weakening fiscal strength further dampened investor sentiment. Adding to the negative news was China's economic data, which showed gross domestic product for the third quarter had moderated to a two-year low of 9.1% year-on-year, compared with a growth of 9.5% in the preceding quarter. On Bursa Malaysia, more than 700 counters were traded in the red, while 173 remained unchanged. Only 145 counters registered gains, with PacificMas Bhd and Leader Universal Holdings Bhd among the notable ones leading the list. PacificMas rose 33 sen to RM3.40, while Leader was up 14.5 sen to its 18-month high of 98.5 sen. Both had on Monday received offers from their respective major shareholders to buy their assets. PacificMas received an offer from OCBC Capital (M) Sdn Bhd, a unit of Singapore-based Oversea-Chinese Banking Corp Ltd, to buy stakes in its five subsidiaries for RM450mil. The offer effectively valued the company at RM2.63 per share. The offer represented a premium of 13.85% to PacificMas' net asset value (NAV) of RM2.31 per share as at Sept 30, 2011. It was, however, a discount of 14.33% to the company's last traded price of RM3.07 before the announcement was made public. "What's attractive about the offer is the potential cash distribution via special dividends as well as a potential capital repayment to entitled shareholders after PacificMas liquidates all its assets and settles all its outstanding liabilities upon completion of the corporate exercise, as it has announced in its statement to Bursa Malaysia," an analyst said. As for Leader, the buyout offer came from its controlling shareholder, HNG Capital Sdn Bhd, at RM480.1mil, or RM1.10 per share. The offer price was a discount to the company's NAV of RM1.36 per share as at June 30. It was, however, a premium of 30.95% to the company's last traded price of 84 sen prior to the announcement of the offer. TA Research in its report said the offer was considered "lucrative," as Leader had barely exceeded the RM1 per share threshold over the last four years. The acquisition price, it said, offered shareholders a comfortable capital gain. "The offeror has proposed to buy out Leader at nine times price/earnings ratio (PER), which we believe is attractive, considering that the average PER for Leader only stood at 6.4 times for the past four years," TA Research explained. On Wednesday morning Reuters reported from Tokyo that Asian shares rose on Wednesday, but gains were capped by a cut to Spain's sovereign credit rating from Moody's Investors Service that kept investors' risk appetite in check. A rise in U.S. stocks and a report that Europe will strengthen the region's rescue fund helped improve sentiment, with spreads over a key Asian credit default swaps index narrowing several basis points. But bearish technicals remained in place to suggest investors were still wary about buying riskier assets. "It's a familiar pattern these days, to sell stocks whenever there's bad news from Europe and buy them back whenever there's good news, but investors are getting tired of it," said Kenichi Hirano, operating officer at Tachibana Securities, adding that this was one reason for recent thin trade. MSCI's broadest index of Asia Pacific shares outside Japan rose 0.5 percent, while the Nikkei stock average opened up 0.8 percent. Moody's, one of the big three ratings agencies, on Tuesday cut Spain's sovereign ratings by two notches, saying high levels of debt in the banking and corporate sectors leave the country vulnerable to funding stresses. The latest step followed Moody's warning on Monday over risks for France to maintaining its top credit rating. A report on Tuesday by Britain's Guardian newspaper that France and Germany had agreed to boost a euro zone financial rescue fund to 2 trillion euros was later denied by a senior euro zone source, who told Reuters there had been no mention of such a deal. The MSCI world equity index ended up 0.21 percent on Tuesday, as U.S. stocks rose following the euro zone report, which saw big banks rally despite disappointing results. Banks' earnings underscored the damage inflicted by the global financial turmoil, with Goldman Sachs Group Inc posting its second quarterly loss as a public company on Tuesday as its investment portfolio lost billions of dollars in value. Bank of America Corp posted a thirdquarter profit on accounting gains, but its main businesses struggled as income from lending and investment banking fell. After the U.S. stock market close, index futures sold off following weakerthanexpected quarterly results from Apple Inc . In Asian credit markets, spreads on the iTraxx Asia exJapan investment grade index , a gauge for whether investor risk appetite is returning, narrowed by about 5 basis points, reflecting a rise in equities. But other gauges of risk appetite, such as crossyen currency pairs, showed sentiment remained cautious. The euro and the Australian dollar failed to break this week's highs against the yen and have fallen back to levels a week ago. The euro dipped 0.1 percent against the dollar after Moody's cut Spain's sovereign rating. The dollar index, which measures its performance against six major currencies , inched up. Gold, traditionally a safehaven metal, slumped 1 percent in the last two sessions, reviving an inverse correlation to the dollar. Gold was down 0.1 percent on Wednesday. A double top on charts, based on the two recent highs formed in late August and early September, prompted technical analysts to turn bearish on the metal's nearterm outlook. Oil prices fell, with Brent crude down 0.2 percent to $110.93 a barrel, while U.S. crude futures fell 0.3 percent to $88.02. Full content generated by Get Full RSS. |
| Ex-China central c.banker says too early to ease policy Posted: 18 Oct 2011 05:44 PM PDT BEIJING Oct 19 (Reuters) China should not ease monetary policy now as such a move would increase inflation risks, Wu Xiaoling, former deputy central bank governor, was quoted as saying by the China Securities Journal on Wednesday. Growth in the world's second biggest economy slowed to 9.1 percent, its weakest in more than two years, in the second quarter, although other data published on Tuesday suggested domestic drivers remain healthy. Wu was quoted as telling a financial conference in Beijing that she was not worried about slowing growth and the government needed to focus on reallocating national income and economic restructuring. Policymakers have set tackling inflation, which hit a threeyear peak of 6.5 percent in July, as a top priority this year. To combat rising prices and prevent them from stoking social unrest, Beijing raised interest rates five times and banks' reserve requirements nine times in the past year. Still, annual inflation stood at 6.1 percent in September, well over Beijing's official 2011 target of 4 percent. Full content generated by Get Full RSS. |
| Goldman Sachs commods risk tumbles on tough markets Posted: 18 Oct 2011 05:36 PM PDT NEW YORK (Reuters) - Goldman Sachs commodities business generated more revenue in the third quarter but treacherous markets forced it to slash risks, leading to overall losses at Wall Street's top bank. Goldman Sachs Group Inc's Value at Risk (VaR) for commodities averaged $25 million per day in the third quarter versus $39 million in the second quarter and $29 million in the third quarter of 2010, financial results on Tuesday showed. The VaR numbers -- which are a measure for how much of a bank's money is at risk on one day of trading a particular asset class -- underscored the difficulties for commodities investors in the just-ended quarter as energy, metals and agricultural markets plunged amid wild price swings. Like most Wall Street banks, Goldman does not break down profit and loss figures for commodities. In its earnings report, it posted a wider-than-expected loss of $428 million in the third quarter. It said the fixed income, currency and commodity (FICC) transactions it executed on behalf of clients fell 36 percent from a year ago to $1.73 billion in the third quarter, citing a lack of confidence among investors and corporate clients. But Goldman also said it generated more revenue on commodities compared to some asset classes during the quarter. Aside from interest rates, commodities were the only portion of FICC that generated higher revenue in the third quarter compared to a year ago, Goldman said in the report. In call with analysts to discuss the bank's earnings, Goldman's Chief Financial Officer David Viniar also said receipts from commodities were better than in the second quarter. "Commodities improved relative to a difficult second quarter as elevated volatility and macro uncertainty drove higher levels of business," Viniar said. Commodities suffered some of their biggest losses in years during the third quarter as worries about the European debt crisis escalated, causing the dollar to surge against the euro. Signs that China may no longer be counted on to bump up demand for raw materials as Western economies teetered also sent many investors in the asset class scrambling for the exits. The Reuters-Jefferies CRB index <.crb>, a global benchmark for commodities, ended the quarter down 12 percent for its sharpest quarterly loss since the 2008 financial crisis. The tough market conditions have cut into risk and revenues levels for commodities at other major Wall Street banks. Bank of America Merrill Lynch , another major player on Wall Street, said on Thursday its fixed income, currency and commodities businesses as a whole saw lower sales and trading revenues in the third quarter from thinner client activity and adverse market conditions. JPMorgan Chase , also a Goldman rival, reported last week that its commodities VaR fell slightly in the third quarter from the second quarter. Aside from commodities, Goldman's risk taking in equities and currencies trading also fell sharply in the third quarter. In equities, the bank's VaR averaged $24 million versus $35 million in the second quarter and $58 million a year ago. In currencies, its risk levels fell to $15 million from $39 million a quarter ago and $29 million a year back. However, risk in trading of interest rates instruments, spiked, reaching $90 million from $76 million in the second quarter and $88 million a year ago. That helped the group's overall VaR to finish at $102 million from $101 million a quarter ago and $121 million a year ago. |
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