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Wednesday 12 December 2007
Today 12 Dec 2007
Market was disappointed with 1/4 point rate cut. So it is a sell on news. But is this a buying opportunity? I am inclined to believe so. We may be near the trough of the Bradley turning point.
Another knee jerk reaction offers an excellent buying opportunity.
We are witnessing 2 knee jerk reactions here. Firstly, the sell down in US, which appears irrational and now the decline in the STI.
The decline in the DOW is just a knee jerk reaction to the gradual build up in prices ahead of the FOMC. We believe that the index will rebound over the next 1-2 weeks back to the 13800-13900 level. The same pattern exists for the STI, with a possibility of a stronger rebound. In this aspect, we think the likelihood of a move towards 3700-3750 is high. Recommend buying on today's weakness.
The same stocks that we featured 2 days ago offers excellent buying levels. Support for DBS is pushed up to $21.00-21.10.
1. DBS- Support at $21.00-21.10. 2. SGX- support at $13.90-14.00 3. COSCO- Support at $6.50 4. Yangsijiang- Support at $2.02-2.04 5. China Hongxing- support at $0.975 6. Rickers Maritime- Defensive yield play which is currently displaying relative strength. Support $1.26 7. Ausgroup- Support at $1.71. 8. SPH- Support at $4.46. 9. China XLX- Support at $1.10.
Fed Lowers Rate by a Quarter Point to 4.25 Percent
Dec. 11 (Bloomberg) -- The Federal Reserve lowered its benchmark interest rate by a quarter point to 4.25 percent, while signalling officials are open to further cuts if the housing slump and credit squeeze worsen.
Stocks fell and Treasury notes surged after the decision, which some economists said fell short of what’s needed to spur lending and avert a recession. The central bank also pared the discount rate by a quarter point to 4.75 percent, counter to speculation among investors that the Fed would make a deeper reduction.
“Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation,” the Federal Open Market Committee said in a statement after meeting today in Washington. Lower borrowing costs “should help promote moderate growth over time.”
The Fed dropped language from its previous statement that risks of slower growth and faster inflation were “roughly” balanced. The economy is faltering after a third-quarter surge as house prices drop, consumer spending slows and banks tighten lending standards for even their best customers. Policy makers are actively considering steps to ease credit in financial markets, and haven’t ruled out moves to increase liquidity before their next scheduled meeting on Jan. 29-30.
“If things deteriorate they will cut again,” said Stephen Cecchetti, professor of international economics at Brandeis University in Waltham, Massachusetts, and a former director of research at the New York Fed. “If financial conditions don’t start to improve dramatically,” officials might have to cut before their January gathering, he said.
Discount Rate
The gap between the discount rate, which the Fed charges for direct loans, and the federal funds rate, the rate banks charge each other for overnight loans, remains half a point.
“Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending,” the FOMC said. “The committee will continue to assess the effects of financial and other developments in economic prospects and will act as needed to foster price stability and sustainable economic growth.” The central bank also said some “inflation risks remain,” and probably was reluctant to reduce borrowing costs at all, said Vincent Reinhart, former director of the Fed’s Division of Monetary Affairs and now a resident scholar at the American Enterprise Institute in Washington.
Rosengren Rebels
Today’s decision, which matches the median forecast of economists surveyed by Bloomberg News, wasn’t unanimous. Boston Fed President Eric Rosengren voted in favour of a half point cut.
Rosengren has a background in banking, having formerly headed the Boston Fed’s banking supervision department. His research focused on financial crises including New England’s credit crunch in the early 1990s and Japan’s bad-loan debacle last decade.
The Dow Jones Industrial Average slumped 2.1 percent to 13,432.77, while the yield on the two-year Treasury note –among securities most sensitive to official interest rates –declined about 25 basis points to 2.92 percent at 4:33 p.m. in New York.
“When stocks go into a tailspin after you release your press statement, you know as a central banker that you didn’t meet the market’s expectations,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “There were rumours today about the possibility of 50 basis points, so that was a modest disappointment.”
Policy Under Bernanke
The benchmark rate is now at the lowest level since January 2006. Bernanke, 53, who succeeded Alan Greenspan as chairman the following month, continued a series of increases that lifted the federal funds rate to 5.25 percent by June last year.
Policy makers held their ground until August this year, when the collapse in assets backed by subprime mortgages roiled markets around the world and forced central banks to pump billions of dollars into the banking system. It also spurred the Fed to start cutting the federal funds rate in September. The Fed was joined last week by the Bank of Canada and Bank of England.
Investors became confident of further reductions after Bernanke and Vice Chairman Donald Kohn said in separate speeches last month that “turbulence” in markets could alter their outlook for growth. Fed officials estimated in October the economy would grow 1.8 percent to 2.5 percent in 2008. Rosengren said Dec. 3 that the expansion will be “well below” its long-term pace for the next two quarters.
Weaker Numbers
Since Fed officials made their forecasts, government reports show orders for U.S.-made durable goods fell in October, capacity-use rates in the nation’s factories slipped and retail sales slowed. Payrolls increased by 94,000 jobs last month, after a 170,000 increase in October.
The economy will expand at an annual pace of 1 percent in the fourth quarter, down from 4.9 percent in the previous three months, according to the median estimate in a Bloomberg News survey of 63 economists.
The number of Americans who fell behind on their mortgage payments rose to a seasonally adjusted 5.6 percent in the third quarter, the highest in two decades, the Mortgage Bankers Association said last week. New foreclosures hit a record.
As creditors took possession of properties, the supply of unsold homes grew to a 10.8-month supply in October. Prices of previously owned homes fell 5.1 percent from a year ago, the most on record, according to the National Association of Realtors.
Across Atlantic
The credit deterioration has spread to Wall Street and commercial banks around the world that hold bonds and derivative contracts created from pools of home loans. Banks including Credit Suisse Group in Zurich and London-based Barclays Plc are among lenders that have marked down more than $50 billion on losses linked to U.S. home loans.
Because banks are protecting capital, lending has been cut and concerns about counter-party risk are higher. About 40 percent of lenders have increased their standards for the most creditworthy borrowers to qualify for a so-called prime loan, according to a Fed study in October.
Throughout the rate cutting-cycle, Fed officials have highlighted longer-term inflation risks in their statements and their public remarks. Oil prices hit a record $99.29 a barrel in New York on Nov. 21, and traded at $89.21 this morning.
The Fed’s preferred gauge, the personal consumption expenditures price index excluding food and energy, rose 1.9 percent in October from a year ago. The index has remained below 2 percent since June.
Japan Headed for 'Mild Recession' in 2008, Morgan Stanley Says
Dec. 12 (Bloomberg) -- Japan’s economy is headed for a “mild recession” that could be worsened should a bigger-than-expected U.S. slowdown halt the nation’s export-led expansion, Morgan Stanley said.
“It’s time to buckle up,” Takehiro Sato, chief Japan economist at the investment bank, said in a report yesterday. Sato cut next year’s growth estimate for Japan in half, saying “errant” government policy has hurt consumers and the building industry at home, and credit problems stemming from the subprime-mortgage crisis will stifle demand from abroad.
The world’s second-largest economy is becoming more dependent on overseas markets just as world growth looks set to slow. Policies meant to protect homeowners from building fraud and borrowers from predatory lenders have hurt an economy that’s already struggling with falling wages and record gas prices.
“The foreign-demand growth scenario for Japan’s economy appears to be approaching a tipping point,” Sato said. “Coming on top of high energy prices, the fallout from the subprime crisis and errant policies will likely cause economic activity to stagnate.”
Sato slashed his 2008 growth estimate to 0.9 percent from 1.9 percent a month ago. He considers growth of less than 1 percent “for an extended period,” to constitute a “mild recession.”
A U.S. recession, combined with higher oil prices and yen gains could cause Japan’s growth to “slide to zero,” he said, giving that scenario a one-in-three chance.
Reports last week suggest Japan’s expansion is already cooling.
Energy Costs
The economy grew more slowly than the government initially estimated in the third quarter and profits fell for the first time in five years because higher energy costs wiped out margins at small and mid-sized companies, where 70 percent of Japan’s workers are employed.
Rising raw material costs already make it “tough for firms to pay higher wages,” Sato said. Consumer confidence plunged to the lowest level in almost four years in November, the government said yesterday.
The Bank of Japan’s quarterly Tankan business survey on Dec. 14 will probably show a drop in sentiment of large manufacturers for the first time since March, according to economists surveyed by Bloomberg News.
Exports, led by shipments to Europe and China, accounted for almost all of the country’s annualized 1.5 percent growth in the three months ended Sept. 30.
Government Regulation
Housing starts plunged 35 percent in October and fell to 40-year lows in the previous two month, after the Land Ministry tightened rules for building permits, causing a log-jam in applications. The change was made after architect Hidetsugu Aneha in 2005 admitted to skimping on steel in dozens of hotels and condominiums.
Other well-intended regulations capping the interest rates that consumer-finance companies can charge and requiring banks to be more thorough in explaining the risks of mutual fund investment have also taken a toll on growth, Sato said.
“Just to be clear, we don’t think the objectives of these policies is misguided, but hasty moves by bureaucrats to implement such laws, without regard for the economy, have had a considerable impact,” he said.
Slower growth will prompt the Bank of Japan to postpone raising the benchmark interest rate from 0.5 percent until the third quarter of 2009 and increases the risk of a cut, Sato said. “A rate cut is a bigger risk than a hike,” he said. The bank will keep its key rate, the lowest among major economies, on hold until the second quarter of 2008, according to 21 of 30 economists surveyed by a government think tank.
Yangzijiang Shipbuilding (Holdings) Ltd. (S$2.10) / Leading China’s Push to Catch Up in Containerships
Morgan Stanley Asia Limited
We initiate coverage of Yangzijiang Shipbuilding with an Overweight-V rating and S$2.48 price target. As a leading global player in medium-size containerships, YZJ should benefit from a secular growth opportunity as China seeks to catch up in this segment of the industry. We see the company’s receipt of an order for 16 containerships as a positive catalyst and expect the stock to re-rate in the next 3-6 months.
Leading player in medium-size containerships: Yangzijiang’s 28% global market share in the 2,500 TEU category and 19% in 4,250 TEU compares favourably with China’s lagging performance in the containership segment, where it has only 19% global market share vs. 47% in bulk carriers and 28% in tankers.
Breakthrough in domestic market: The order for 16 containerships from China Ocean (COSCO) marks a breakthrough for YZJ. In the past, more than 90% of YZJ’s orders have come from overseas, but we expect it to enjoy better growth opportunity in domestic market in light of Chinese shipping companies’ recent large IPOs and forthcoming expansion.
Top pick despite concerns on US slowdown: YZJ is our top pick in Chinese shipbuilding, as it offers significant growth potential, while its valuation is attractive. Given its cost-cutting advantage, YZJ should outperform other Chinese listed shipyards through the industry cycle, despite our medium-term bearish view that a US slowdown could weaken shipbuilding demand.
Risks to our price target: 1) Peaking of global shipbuilding cycle; 2) significant cost inflation that erodes margins; 3) production bottlenecks that delay deliveries.
The rich are taking it with them, at least as far as the mausoleum
Dec. 11, 2007
SANTA MONICA, Calif. (MarketWatch) -- The nouveau riche are reaching back in time to honor themselves when they die: they’re increasingly building mausoleums. In Massachusetts, a 400-square-foot Roman Doric structure made with 450,000 pounds of Vermont granite featuring 17-foot high cathedral ceilings, brass doors and a stained glass depiction of The Last Supper was recently built, according to The Boston Globe, for a hedge fund manager.
He’s not dead yet, maybe not even close; he’s 41 years old. Yet, he spent more than $1 million dollars on what will be his final home, the Globe reports.
With the largest and wealthiest segment of the population nearing retirement, a huge amount of capital is set to be transferred among generations, although if the recent trend of monument building kicks in countrywide there may be a lot less to transfer.
And there is evidence that it has. Across the country there are reports of ornate and elaborate cemetery plots being constructed.
It isn’t a new phenomenon. We’ve all read about the ancient Egyptians, Romans and other societies building monuments for the dead. The Globe reminds us that industrial barons erected monuments to their wealth nearly a century ago. Why not a pyramid to hedge-fund honchos?
So, with an ever-increasing aristocracy being created in the United States -- the widest gap in history exists between the rich and the poor in this country now -- it should be no wonder that some of the prongs of the gilded class would spring skyward.
The hedge fund manager, Thomas Hudson, Jr., actually built a columbarium, which holds different vaults lined with recesses to hold many urns. Hudson’s features 44 niches for cremated remains, each of which can hold a double urn so that husbands and wives can be kept together.
With additional space for expansion of the structure and 10 feet of land on all sides for burials, Hudson estimates that as many as 200 people could come to rest in the family plot, “if you really want to max it out,” he told the Globe.
Still, while Hudson’s monument may be grand, his isn’t the only mausoleum at the cemetery -- there are 20 others scattered throughout the grounds.
The grandeur of the structures is interesting and provocative, but the trend is even more so.
Last rites
So you’d think that the exorbitant burial grounds would increase profits for funeral home companies. Not so. Notice what Hudson built: a place for urns.
Cremation is much cheaper than traditional burials, about half the cost. And cremations are on the rise. According to the Cremation Association of North America, about one-third of all people who die are cremated.
That’s up from 15% in 1985. Service Corp. International, the Houston-based funeral home company, reports the number of services it has conducted this year has fallen. And Batesville Casket Co. reports sales are flat.
Historically, the death-care business stands the test of time and is relatively recession-proof. The sector has always been able to count on the sure thing of death.
However, recently the numbers have fallen due to increasing life spans, resulting in fewer deaths each year.
The latest data from the National Center for Health Statistics show fewer people are dying now than in previous years, 8.5 per 1,000 versus 8.8 per 1,000 just before the turn of the century.
This is good news for us -- we live longer and healthier lives, but not so good news for those who profit off of death. The business, apparently, is becoming more boutique in fashion, where a minority of people are spending lots and lots of money and the majority affording less of a funeral.
Even in death it seems the disparity between rich and the rest of us is evident -- in more grandiose ways.
They say you can’t take it with you, but you can certainly let people know how much money you had when you were alive. And the rich today are doing just that.
Investors hoped for more aggressive half-point drop from central bank
NEW YORK - Wall Street appeared poised for a recovery Wednesday following Tuesday’s big drop, as investors unhappy that the Federal Reserve did not lower rates more aggressively grew optimistic that the central bank will continue to aid the turbulent financial markets.
On Tuesday, stocks plummeted after the Fed lowered the target fed funds rate by a quarter point, disappointing investors who hoped for a more aggressive move to boost the economy during the seize-up in credit and rise in home foreclosures. Investors were also unnerved that the central bank did not implement a larger cut in the discount rate — the rate the Fed charges banks — and did not telegraph further rate cuts in its statement.
But according to media reports, the Fed is actively considering all the tools at its disposal to pump more liquidity into the U.S. banking system. The Financial Times reported that the central bank could announce a move as soon as Wednesday.
6 comments:
Buying Opportunity.
Another knee jerk reaction offers an excellent buying opportunity.
We are witnessing 2 knee jerk reactions here. Firstly, the sell down in US, which appears irrational and now the decline in the STI.
The decline in the DOW is just a knee jerk reaction to the gradual build up in prices ahead of the FOMC. We believe that the index will rebound over the next 1-2 weeks back to the 13800-13900 level. The same pattern exists for the STI, with a possibility of a stronger rebound. In this aspect, we think the likelihood of a move towards 3700-3750 is high. Recommend buying on today's weakness.
The same stocks that we featured 2 days ago offers excellent buying levels. Support for DBS is pushed up to $21.00-21.10.
1. DBS- Support at $21.00-21.10.
2. SGX- support at $13.90-14.00
3. COSCO- Support at $6.50
4. Yangsijiang- Support at $2.02-2.04
5. China Hongxing- support at $0.975
6. Rickers Maritime- Defensive yield play which is currently displaying relative strength. Support $1.26
7. Ausgroup- Support at $1.71.
8. SPH- Support at $4.46.
9. China XLX- Support at $1.10.
Best Regards
K Ajith
Fed Lowers Rate by a Quarter Point to 4.25 Percent
Dec. 11 (Bloomberg) -- The Federal Reserve lowered its benchmark interest rate by a quarter point to 4.25 percent, while signalling officials are open to further cuts if the housing slump and credit squeeze worsen.
Stocks fell and Treasury notes surged after the decision, which some economists said fell short of what’s needed to spur lending and avert a recession. The central bank also pared the discount rate by a quarter point to 4.75 percent, counter to speculation among investors that the Fed would make a deeper reduction.
“Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation,” the Federal Open Market Committee said in a statement after meeting today in Washington. Lower borrowing costs “should help promote moderate growth over time.”
The Fed dropped language from its previous statement that risks of slower growth and faster inflation were “roughly” balanced. The economy is faltering after a third-quarter surge as house prices drop, consumer spending slows and banks tighten lending standards for even their best customers.
Policy makers are actively considering steps to ease credit in financial markets, and haven’t ruled out moves to increase liquidity before their next scheduled meeting on Jan. 29-30.
“If things deteriorate they will cut again,” said Stephen Cecchetti, professor of international economics at Brandeis University in Waltham, Massachusetts, and a former director of research at the New York Fed. “If financial conditions don’t start to improve dramatically,” officials might have to cut before their January gathering, he said.
Discount Rate
The gap between the discount rate, which the Fed charges for direct loans, and the federal funds rate, the rate banks charge each other for overnight loans, remains half a point.
“Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending,” the FOMC said. “The committee will continue to assess the effects of financial and other developments in economic prospects and will act as needed to foster price stability and sustainable economic growth.”
The central bank also said some “inflation risks remain,” and probably was reluctant to reduce borrowing costs at all, said Vincent Reinhart, former director of the Fed’s Division of Monetary Affairs and now a resident scholar at the American Enterprise Institute in Washington.
Rosengren Rebels
Today’s decision, which matches the median forecast of economists surveyed by Bloomberg News, wasn’t unanimous. Boston Fed President Eric Rosengren voted in favour of a half point cut.
Rosengren has a background in banking, having formerly headed the Boston Fed’s banking supervision department. His research focused on financial crises including New England’s credit crunch in the early 1990s and Japan’s bad-loan debacle last decade.
The Dow Jones Industrial Average slumped 2.1 percent to 13,432.77, while the yield on the two-year Treasury note –among securities most sensitive to official interest rates –declined about 25 basis points to 2.92 percent at 4:33 p.m. in New York.
“When stocks go into a tailspin after you release your press statement, you know as a central banker that you didn’t meet the market’s expectations,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “There were rumours today about the possibility of 50 basis points, so that was a modest disappointment.”
Policy Under Bernanke
The benchmark rate is now at the lowest level since January 2006. Bernanke, 53, who succeeded Alan Greenspan as chairman the following month, continued a series of increases that lifted the federal funds rate to 5.25 percent by June last year.
Policy makers held their ground until August this year, when the collapse in assets backed by subprime mortgages roiled markets around the world and forced central banks to pump billions of dollars into the banking system. It also spurred the Fed to start cutting the federal funds rate in September. The Fed was joined last week by the Bank of Canada and Bank of
England.
Investors became confident of further reductions after Bernanke and Vice Chairman Donald Kohn said in separate speeches last month that “turbulence” in markets could alter their outlook for growth. Fed officials estimated in October the economy would grow 1.8 percent to 2.5 percent in 2008. Rosengren said Dec. 3 that the expansion will be “well below” its long-term pace for the next two quarters.
Weaker Numbers
Since Fed officials made their forecasts, government reports show orders for U.S.-made durable goods fell in October, capacity-use rates in the nation’s factories slipped and retail sales slowed. Payrolls increased by 94,000 jobs last month, after a 170,000 increase in October.
The economy will expand at an annual pace of 1 percent in the fourth quarter, down from 4.9 percent in the previous three months, according to the median estimate in a Bloomberg News survey of 63 economists.
The number of Americans who fell behind on their mortgage payments rose to a seasonally adjusted 5.6 percent in the third quarter, the highest in two decades, the Mortgage Bankers Association said last week. New foreclosures hit a record.
As creditors took possession of properties, the supply of unsold homes grew to a 10.8-month supply in October. Prices of previously owned homes fell 5.1 percent from a year ago, the most on record, according to the National Association of Realtors.
Across Atlantic
The credit deterioration has spread to Wall Street and commercial banks around the world that hold bonds and derivative contracts created from pools of home loans. Banks including Credit Suisse Group in Zurich and London-based Barclays Plc are among lenders that have marked down more than $50 billion on losses linked to U.S. home loans.
Because banks are protecting capital, lending has been cut and concerns about counter-party risk are higher. About 40 percent of lenders have increased their standards for the most creditworthy borrowers to qualify for a so-called prime loan, according to a Fed study in October.
Throughout the rate cutting-cycle, Fed officials have highlighted longer-term inflation risks in their statements and their public remarks. Oil prices hit a record $99.29 a barrel in New York on Nov. 21, and traded at $89.21 this morning.
The Fed’s preferred gauge, the personal consumption expenditures price index excluding food and energy, rose 1.9 percent in October from a year ago. The index has remained below 2 percent since June.
Japan Headed for 'Mild Recession' in 2008, Morgan Stanley Says
Dec. 12 (Bloomberg) -- Japan’s economy is headed for a “mild recession” that could be worsened should a bigger-than-expected U.S. slowdown halt the nation’s export-led expansion, Morgan Stanley said.
“It’s time to buckle up,” Takehiro Sato, chief Japan economist at the investment bank, said in a report yesterday. Sato cut next year’s growth estimate for Japan in half, saying “errant” government policy has hurt consumers and the building industry at home, and credit problems stemming from the subprime-mortgage crisis will stifle demand from abroad.
The world’s second-largest economy is becoming more dependent on overseas markets just as world growth looks set to slow. Policies meant to protect homeowners from building fraud and borrowers from predatory lenders have hurt an economy that’s already struggling with falling wages and record gas prices.
“The foreign-demand growth scenario for Japan’s economy appears to be approaching a tipping point,” Sato said. “Coming on top of high energy prices, the fallout from the subprime crisis and errant policies will likely cause economic activity to stagnate.”
Sato slashed his 2008 growth estimate to 0.9 percent from 1.9 percent a month ago. He considers growth of less than 1 percent “for an extended period,” to constitute a “mild recession.”
A U.S. recession, combined with higher oil prices and yen gains could cause Japan’s growth to “slide to zero,” he said, giving that scenario a one-in-three chance.
Reports last week suggest Japan’s expansion is already cooling.
Energy Costs
The economy grew more slowly than the government initially estimated in the third quarter and profits fell for the first time in five years because higher energy costs wiped out margins at small and mid-sized companies, where 70 percent of Japan’s workers are employed.
Rising raw material costs already make it “tough for firms to pay higher wages,” Sato said. Consumer confidence plunged to the lowest level in almost four years in November, the government said yesterday.
The Bank of Japan’s quarterly Tankan business survey on Dec. 14 will probably show a drop in sentiment of large manufacturers for the first time since March, according to economists surveyed by Bloomberg News.
Exports, led by shipments to Europe and China, accounted for almost all of the country’s annualized 1.5 percent growth in the three months ended Sept. 30.
Government Regulation
Housing starts plunged 35 percent in October and fell to 40-year lows in the previous two month, after the Land Ministry tightened rules for building permits, causing a log-jam in applications. The change was made after architect Hidetsugu Aneha in 2005 admitted to skimping on steel in dozens of hotels and condominiums.
Other well-intended regulations capping the interest rates that consumer-finance companies can charge and requiring banks to be more thorough in explaining the risks of mutual fund investment have also taken a toll on growth, Sato said.
“Just to be clear, we don’t think the objectives of these policies is misguided, but hasty moves by bureaucrats to implement such laws, without regard for the economy, have had a considerable impact,” he said.
Slower growth will prompt the Bank of Japan to postpone raising the benchmark interest rate from 0.5 percent until the third quarter of 2009 and increases the risk of a cut, Sato said.
“A rate cut is a bigger risk than a hike,” he said. The bank will keep its key rate, the lowest among major economies, on hold until the second quarter of 2008, according to 21 of 30 economists surveyed by a government think tank.
Yangzijiang Shipbuilding (Holdings) Ltd. (S$2.10) / Leading China’s Push to Catch Up in Containerships
Morgan Stanley Asia Limited
We initiate coverage of Yangzijiang Shipbuilding with an Overweight-V rating and S$2.48 price target. As a leading global player in medium-size containerships, YZJ should benefit from a secular growth opportunity as China seeks to catch up in this segment of the industry. We see the company’s receipt of an order for 16 containerships as a positive catalyst and expect the stock to re-rate in the next 3-6 months.
Leading player in medium-size containerships: Yangzijiang’s 28% global market share in the 2,500 TEU category and 19% in 4,250 TEU compares favourably with China’s lagging performance in the containership segment, where it has only 19% global market share vs. 47% in bulk carriers and 28% in tankers.
Breakthrough in domestic market: The order for 16 containerships from China Ocean (COSCO) marks a breakthrough for YZJ. In the past, more than 90% of YZJ’s orders have come from overseas, but we expect it to enjoy better growth opportunity in domestic market in light of Chinese shipping companies’ recent large IPOs and forthcoming expansion.
Top pick despite concerns on US slowdown: YZJ is our top pick in Chinese shipbuilding, as it offers significant growth potential, while its valuation is attractive. Given its cost-cutting advantage, YZJ should outperform other Chinese listed shipyards through the industry cycle, despite our medium-term bearish view that a US slowdown could weaken shipbuilding demand.
Risks to our price target: 1) Peaking of global shipbuilding cycle; 2) significant cost inflation that erodes margins; 3) production bottlenecks that delay deliveries.
Death and statues
The rich are taking it with them, at least as far as the mausoleum
Dec. 11, 2007
SANTA MONICA, Calif. (MarketWatch) -- The nouveau riche are reaching back in time to honor themselves when they die: they’re increasingly building mausoleums.
In Massachusetts, a 400-square-foot Roman Doric structure made with 450,000 pounds of Vermont granite featuring 17-foot high cathedral ceilings, brass doors and a stained glass depiction of The Last Supper was recently built, according to The Boston Globe, for a hedge fund manager.
He’s not dead yet, maybe not even close; he’s 41 years old. Yet, he spent more than $1 million dollars on what will be his final home, the Globe reports.
With the largest and wealthiest segment of the population nearing retirement, a huge amount of capital is set to be transferred among generations, although if the recent trend of monument building kicks in countrywide there may be a lot less to transfer.
And there is evidence that it has. Across the country there are reports of ornate and elaborate cemetery plots being constructed.
It isn’t a new phenomenon. We’ve all read about the ancient Egyptians, Romans and other societies building monuments for the dead. The Globe reminds us that industrial barons erected monuments to their wealth nearly a century ago. Why not a pyramid to hedge-fund honchos?
So, with an ever-increasing aristocracy being created in the United States -- the widest gap in history exists between the rich and the poor in this country now -- it should be no wonder that some of the prongs of the gilded class would spring skyward.
The hedge fund manager, Thomas Hudson, Jr., actually built a columbarium, which holds different vaults lined with recesses to hold many urns. Hudson’s features 44 niches for cremated remains, each of which can hold a double urn so that husbands and wives can be kept together.
With additional space for expansion of the structure and 10 feet of land on all sides for burials, Hudson estimates that as many as 200 people could come to rest in the family plot, “if you really want to max it out,” he told the Globe.
Still, while Hudson’s monument may be grand, his isn’t the only mausoleum at the cemetery -- there are 20 others scattered throughout the grounds.
The grandeur of the structures is interesting and provocative, but the trend is even more so.
Last rites
So you’d think that the exorbitant burial grounds would increase profits for funeral home companies. Not so. Notice what Hudson built: a place for urns.
Cremation is much cheaper than traditional burials, about half the cost. And cremations are on the rise. According to the Cremation Association of North America, about one-third of all people who die are cremated.
That’s up from 15% in 1985.
Service Corp. International, the Houston-based funeral home company, reports the number of services it has conducted this year has fallen. And Batesville Casket Co. reports sales are flat.
Historically, the death-care business stands the test of time and is relatively recession-proof. The sector has always been able to count on the sure thing of death.
However, recently the numbers have fallen due to increasing life spans, resulting in fewer deaths each year.
The latest data from the National Center for Health Statistics show fewer people are dying now than in previous years, 8.5 per 1,000 versus 8.8 per 1,000 just before the turn of the century.
This is good news for us -- we live longer and healthier lives, but not so good news for those who profit off of death. The business, apparently, is becoming more boutique in fashion, where a minority of people are spending lots and lots of money and the majority affording less of a funeral.
Even in death it seems the disparity between rich and the rest of us is evident -- in more grandiose ways.
They say you can’t take it with you, but you can certainly let people know how much money you had when you were alive. And the rich today are doing just that.
Stocks set to rebound from steep fall
Investors hoped for more aggressive half-point drop from central bank
NEW YORK - Wall Street appeared poised for a recovery Wednesday following Tuesday’s big drop, as investors unhappy that the Federal Reserve did not lower rates more aggressively grew optimistic that the central bank will continue to aid the turbulent financial markets.
On Tuesday, stocks plummeted after the Fed lowered the target fed funds rate by a quarter point, disappointing investors who hoped for a more aggressive move to boost the economy during the seize-up in credit and rise in home foreclosures. Investors were also unnerved that the central bank did not implement a larger cut in the discount rate — the rate the Fed charges banks — and did not telegraph further rate cuts in its statement.
But according to media reports, the Fed is actively considering all the tools at its disposal to pump more liquidity into the U.S. banking system. The Financial Times reported that the central bank could announce a move as soon as Wednesday.
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