The Star Online: Business
The Star Online: Business |
- Share prices tumbled Mon, but US stocks up, Asia recovers Tue(update 2)
- What ideas is Europe mulling to solve its debt?
- U.S. firm finds British shipwreck full of silver
| Share prices tumbled Mon, but US stocks up, Asia recovers Tue(update 2) Posted: 26 Sep 2011 05:58 PM PDT KUALA LUMPUR: Share prices plummeted across the board, as the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) posted its steepest single-day loss since Oct 24, 2008, due to the cloudy outlook for the US and Europe economic growth. The FBM KLCI tumbled 34.14 points, or 2.5%, to 1,331.80 points. The benchmark index had fallen the past three trading days, losing a combined 6.28%, and is now down 16.5% from the year-to-date high of 1,594.74 on July 8. On Bursa Malaysia, blue chips fell sharply. Losers led gainers 842 to 84 while 143 counters were unchanged. Turnover stood at 1.04 billion shares worth RM1.78bil. Malayan Banking Bhd fell 48 sen to RM7.51, dragging the index down by 8.31 points. Public Bank Bhd suffered a similar fate, falling 62 sen to RM11.82. The ringgit did not fare any better, closing weaker against the greenback as the eurozone crisis deepened fears. The ringgit was quoted at 3.1790 to the US dollar compared with 3.1650 on Friday. The local currency has dropped more than 6% this month. Analysts said the local bourse could be headed for further consolidation this week so long as the debt problems in the West persisted. "An overnight gain on Wall Street gave little assurance to Asian investors as they fear the effects of a looming US debt crisis on the export-driven economies of Asia," an analyst said. Fortress Capital Asset Management (M) Sdn Bhd chief executive officer Thomas Yong said the steep fall was relatively "mild" compared with other Asian markets which suffered a similar fate. "There's just not that many buyers in the market. The 2.8% fall (in early trade) is mild compared with the region. It (the drop) is definitely smaller," he said, adding that the selling was mainly due to some foreign portfolios selling out. Yong opined that the local market had not bottomed out yet but did not expect the local bourse to be severely impacted due to lower foreign participation. "The market is probably at the low end of the valuation. The issue is whether to move in and buy all at this point or not. We have started cautiously looking at buying some stocks at the moment," he added. An analyst from a bank-backed research house said there were no strong positive catalysts in sight this week and that the upcoming Budget 2012 might not be strong enough to withhold the external factor. "The steep fall is still due to foreign selling. It's all external factors and has nothing to do domestically. The foreign funds are shifting their portfolios," he said, adding that he had a target of 1,280 points for the FBM KLCI for this year. "I can't see much stability in the market because I would have thought the higher close of the Dow Jones last week would boost the market." OSK Research head Chris Eng in a report said he saw potential for "further market retracement" although a possible deep recession could probably be averted after seeing the FBM KLCI having fallen below its previous non-recessionary bottom target of 1,378 points. "In the medium term, we maintain our 2012 FBM KLCI fair value at 1,466 points seeing a slow recovery forward unlike in 2009. We retain our defensive stance recommending telcos, consumer, healthcare and media as defensive sectors. "Nonetheless, with the market approaching our new 1,350-point non-recessionary bottom, we believe some bottom nibbling' would be reasonable although we do not recommend aggressive bottom fishing," he said. Meanwhile, a technical analyst said Bursa Malaysia suffered a plunge, dropping as much as 55.41 points, or 4.06%, during intra-day session, the second biggest drop in recent years amid extended liquidation pressure on fears of a double-dip recession in the United States, exacerbated by worries that Europe's debt woes might trigger another banking crisis, thus causing more damage on the world economy. He said based on the daily bar chart, the prevailing trend was overwhelmingly bearish, but the key index might find temporary shelter at yesterday's low of 1,310.53 points and, given the extremely oversold position of the stochastic momentum index and the 14-day relative strength index, a relief rebound might follow suit. According to the default setting of the Fibonacci retracements, the FBM KLCI enjoys a stronger support at the 1,293 points level, which is the 38.2% pullback of the previous major rally from 801.27 on Oct 28, 2008 to an all-time high of 1,597.08 on July 11 this year. If this concrete floor is violated, then the next downside to look for should be the 50% retracement or 1,199 points. Elsewhere in the region, the Singapore Straits Times Index shed 44.49 points to 2,654.31 while Hong Kong's Hang Seng Index lost 261.03 to 17,407.80 points. The Jakarta Composite Index fell 110.21 points to 3,316.14 and Japan's Nikkei 225 slipped 186.13 to 8,374.13 points. Tuesday morning (Malaysian time) Reuters reported from New York that Euro zone hope reviveed optimism on Wall Street US stocks rose on Monday as sentiment swung toward hope that European officials would find a way to cut Greece's debt and shore up European banks. Shares rallied to session highs in the afternoon after a report said a plan to leverage money from the European Financial Stability Facility was in the works. Investors were reluctant to make long-term commitments because of conflicting reports about whether or not European officials were preparing to take bold new action to solve the crisis. "Given how markets have behaved over the past two months, people are interested in the vaguest of rumors because any kind of action being taken would be well-received," said Michael Church, president of Addison Capital in Yardley, Pennsylvania. Markets have been highly sensitive to European efforts to cauterize the euro zone's credit crisis that has Greece teetering near a default. Last week, the Dow had its biggest weekly loss since October 2008 in the depths of the financial crisis, while the S&P 500 shed 6.6 percent for the week. Financial shares ranked among the session's best performers, with the KBW Bank Index <.bkx> up 5.3 percent. Dow component JPMorgan Chase & Co advanced 7 percent to $31.65 while Citigroup Inc gained 7 percent to $26.72. However, the Nasdaq's gains were limited after a report on Apple suggested the tech company was cutting back on some key orders. Talk of plans for a 50 percent write-down in Greek debt and improvements in the euro-zone rescue fund buoyed the market, although European officials called the talk premature. A CNBC report cited a top European official, who said the plans involved using leverage and the European Investment Bank to buy sovereign debt to save European banks. The Dow Jones industrial average <.dji> shot up 272.38 points, or 2.53 percent, to end at 11,043.86. The Standard & Poor's 500 Index <.spx> jumped 26.52 points, or 2.33 percent, to finish at 1,162.95. The Nasdaq Composite Index <.ixic> climbed 33.46 points, or 1.35 percent, to close at 2,516.69. The CBOE Market Volatility index <.vix> fell 5.4 percent but remains more than 20 percent higher for the month. "These confidence issues make it hard to move forward and will result in more volatility ahead," said Mark Foster, who helps manage $500 million at Kirr Marbach & Co in Columbus, Indiana. Apple slipped 0.3 percent to $403.17 after an analyst said the iPhone maker was cutting orders from suppliers of parts for its iPad tablet. The tech bellwether fell as much as 3.2 percent earlier in the session. "If things slow down on the tablet side, that means that perhaps Apple isn't immune from the economic slowdown after all," Foster said. On the upside, Boeing Co gave a major lift to the Dow a day after the manufacturer delivered its long-awaited Dreamliner jet to its first airline customer. The stock rose 4.2 percent to $62.01. Warren Buffett's conglomerate, Berkshire Hathaway Inc , will launch a share-buyback program, an unprecedented move from Buffett that comes after months of investor complaints that the stock was undervalued. Shares of Berkshire Hathaway's more actively traded Class B stock soared 8.6 percent to $72.09. In economic news, sales of new single-family home sales fell in August to a six-month low in another sign the U.S. economy is flagging. About 8.75 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, above last year's daily average of 8.47 billion. About 11 stocks rose for every four that fell on the New York Stock Exchange, while about 62 percent of Nasdaq issues rose. Other market developments reported by Reuters on Tuesday * Australian stocks snapped a three-day losing streak on Tuesday, rebounding 2.5 percent as global markets rallied on hopes that European officials would find a way to cut Greece's debt and shore up European banks. The benchmark S&P/ASX 200 index jumped 96.8 points to 3,960.7 at 0012 GMT, the biggest gain in three weeks. The benchmark lost 1 percent on Monday. * New Zealand's benchmark NZX 50 index rose 0.9 percent to 3,285.4. * The Philippine Stock Exchange said there would be no trading on Tuesday due to a lack of clearing facilities, with government offices and the central bank closed because of Typhoon Nesat, which made landfall north of the capital early on Tuesday. In a statement on its website, the exchange also said there would be no settlement of trades on Tuesday. * Oil prices rose on Tuesday in early Asian trade on hopes that European officials would tackle the eurozone's debt crisis. November Brent crude gained $1 a barrel before triming gains to 87 cents at $104.81 a barrel as of 0008 GMT. On the New York Mercantile Exchange, crude for November delivery was up 83 cents at $81.07 a barrel. * In Tokyo the Nikkei average rose on Tuesday as risk assets got a lift from a report that a plan to contain Europe's sovereign debt contagion is in the works. The Nikkei added 1.4 percent to 8,488.03. The broader Topix index rose 1.3 percent to 738.03. |
| What ideas is Europe mulling to solve its debt? Posted: 26 Sep 2011 05:54 PM PDT BRUSSELS (Reuters) - Europe is working to ramp up the fire-power of its bailout fund amid growing alarm over its slow handling of a debt crisis that threatens to derail a global economic recovery, but European policymakers disagree over the best course of action. Many of the options to bolster the 440 billion euro European Financial Stability Facility (EFSF) have catches, including opposition from countries like Germany, which fears a replay of its disastrous economic policies of the 1920s. Meanwhile, euro zone officials played down reports on Monday of emerging plans to halve Greece's debts and recapitalize European banks to cope with the fallout, stressing that no such scheme is on the table yet. HOW BIG MUST THE EURO ZONE FUND BE TO STOP THE CRISIS? Rough calculations suggest the EFSF, which borrows its funds from the markets backed by guarantees from euro zone states, might cope with a bailout of Spain but that it would not have enough ammunition if Italy needed help. The EFSF is already committed to providing 17.7 billion euros in emergency loans to Ireland and 26 billion to Portugal. In addition, it takes over the remainder of Europe's contribution to an initial bailout of Greece, which is likely to require around 25 billion euros, and is expected to provide two-thirds of a 109 billion euro second bailout of Greece. Taken together, the EFSF's current commitments total at least 142 billion euros, leaving it 298 billion euros. A package for Spain might top 290 billion euros, according to some estimates, while a rescue bill for Italy could total almost 490 billion euros. Some experts suggest doubling the EFSF. Others talk of boosting it to "several trillion." But the way to restore confidence, which will be determined by the reaction of stressed markets, goes beyond simple mathematics. COULD TURNING THE EFSF INTO A BANK HELP? One way of bolstering the EFSF's size, being proposed by the Center for European Policy Studies, a think tank in Brussels, is to turn it into a bank. This means the Luxembourg-based vehicle could lend money to countries in difficulty and turn to the European Central Bank to refinance such loans rather than having to rely solely on its limited capital base. Banks typically lend roughly 10 times their capital, and experts who have drawn up this model believe the EFSF could do the same. That would mean the 440 billion euros of capital in the facility could in theory be transformed into more than 4 trillion euros of fire-power. But the reality is not that simple. The EFSF would only qualify to receive credit from the ECB that was as good as the collateral, for example Spanish government bonds, that it has to offer. If the EFSF buys these from the Spanish government directly, then a market discount to reflect the risk of default has to be applied, in addition to the standard haircuts the ECB charges for collateral. This reduces the amount of credit the EFSF could get from the ECB. But it is political opposition rather than technical hitches that pose the biggest and perhaps insurmountable hurdle. At the core of these are concerns recently aired by German Bundesbank chief Jens Weidmann that the ECB may already be overextending itself. The euro zone's central banks and the ECB have a combined capital base of 82 billion euros. It has already lent 535 billion euros to banks and bought a further 150 billion euros of government bonds to prop up the market. So far, Germany, the euro zone's chief paymaster, and the ECB are opposed to the idea, suggesting it has little chance of making it beyond the drawing board. Last weekend, German finance minister Wolfgang Schaeuble said he was looking into alternatives. WHAT OTHER SCHEMES COULD BOLSTER THE EFSF'S FIRE-POWER? One such alternative would be to use the EFSF to insure investors against future losses when they buy Italian or Spanish bonds. The EFSF would issue "credit enhancements" for new bonds that could cover potential losses, cutting the risk for investors and making it easier for countries like Italy to tap markets. Such a scheme would not help Greece, said Sony Kapoor, a financial expert who has advocated the model, but would set up a "firewall" for Italy and Spain that would allow them tap money markets even if Greece were to default. "This could take the form of the EFSF offering insurance against, say, the first 20 percent of any losses on these ... and would enable the EFSF to bring down the borrowing costs for Italy and Spain for the next 3 years or more," said Kapoor, the managing director of think tank Re-Define. "Lowering the borrowing costs for Italy and Spain is a necessary step before any restructuring of Greek debt can be seriously contemplated." "The options being discussed are primarily about policymakers, who believe that Italy and Spain are fundamentally solvent, calling the markets' bluff that they are not." WHAT WOULD ACCELERATING THE INTRODUCTION OF A PERMANENT MECHANISM ACHIEVE? Unlike the current EFSF, the European Stability Mechanism (ESM) is permanent and has a pool of capital of 80 billion euros, paid in by countries in the same way as they do with the ECB. Starting the ESM in July next year, rather than July 2013 as planned, could reassure investors because it provides a second lever to support markets alongside the ECB. But first, however, German chancellor Angela Merkel and other leaders have to convince national lawmakers to back their pledge to allow the EFSF to extend loans to countries under attack from markets or buy sovereign bonds to prop up struggling states. |
| U.S. firm finds British shipwreck full of silver Posted: 26 Sep 2011 05:52 PM PDT TAMPA, Florida (Reuters) - U.S. salvage company Odyssey Marine Exploration Inc said on Monday it had found the sunken wreckage of a British cargo ship filled with silver in the Atlantic Ocean, where it was torpedoed by the Germans during the Second World War. The wreckage of the S.S. Gairsoppa was found in international waters 300 miles off the coast of Ireland, at a depth of 15,510 feet, the Tampa, Florida, company said. The Gairsoppa sank on February 17, 1941, after it was hit by a torpedo from a German U-Boat. Only one of the 85 men on board survived. The 412-foot (125-metre) ship was carrying cargo for the British Ministry of War Transportation when it was sunk. Its cargo included about 7 million ounces of silver, the company said in a statement, which would make it the largest known cargo of precious metal ever recovered from the sea. Odyssey Marine was awarded a salvage contract by the British government in 2010. Under the contract, the company will retain 80 percent of the net salvaged value of the silver bullion. The ship was located using sonar, and a remotely controlled vehicle was used to send pictures of the wreckage to the surface. "Given the orientation and condition of the shipwreck, we are extremely confident that our planned salvage operation will be suited for the recovery of this silver cargo," Andrew Craig, the Odyssey Marine recovery manager, said in a statement. Recovery operations are expected to begin in the spring, the company said. Odyssey Marine has been in a legal battle with Spain over 500,000 gold and silver coins it discovered in the Atlantic Ocean in 2007. Spain says the coins came from a Spanish ship that sank in 1804, Nuestra Senora de las Mercedes. A U.S. appeals court ruled last week that U.S. courts had no jurisdiction in the case and it should be decided in Spain. Odyssey Marine is appealing. |
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