From the BDIY Index (Baltics Dry Index), the trend has peaked at Oct 2007. It has now broken recent low and weakness is likely to continue. We have not detected any signs of reversal for now and the next support is located at 8292. The negative sentiment on bulk shipping sector is also creating spill over sentiment to the shipping sector in general. Container shipping stocks are also feeling the brunt of the selloff as it inches closer towards the commencement of the 2008/2009 contract freight negotiation season beginning early 2Q08.
Below is the list of shipping companies that listed in Singapore. They are:
China’s State Council 9 Jan announcement that prices of electric power, natural gas and oil products will not be raised in the near future was implemented in a bid to contain surging inflation. China’s consumer price index rose 6.9% year-on-year in November, the biggest surge since December 1996. The Council’s decision basically implies that oil and derivatives refining and power utilities will face margin squeeze in 1Q08. Within the confines of this space, price action was more negative for Jiutian than China Energy, particularly following news that Legg Mason had pared its stake holding in Jiutian from 7.23% to 6.72%. We see Jiutain’s resistance at $0.355.
Additionally, the government has also placed a price ceiling which caps the amount by which soft commodity (grains, meat, milk, edible oils) vendors are allowed to hike selling prices; accordingly, the limits range between 5%-8%. Investor sentiment for China XLX was affected although it is noteworthy that the company is already the subject of chemical fertiliser price controls since its IPO in 2007. More importantly, XLX has also made explicit its strategy to ensure the sustainability of its low cost structure with measures that include the construction of a new power generator system to double electricity self sufficiency to 70%. As the cost of self-generated electricity is 17.4% lower than the subsidized rates, the company expects to generate annual cost savings of RMB85.2m. XLX also has plans to reduce transportation costs by constructing a railway extension into its new plant. This will result in additional cost savings of RMB16-20 per ton when rail links comes into operation by FY08. Technical cut-loss @ $1.11.
KTL Global staged a correction yesterday morning with a "bearish harami" pattern in its intraday chart. With the stock gains over the past 2 weeks, KTL is undoubtedly in overbought territory. From the chart pattern, it established a bear flag formation, suggesting further low.
The price action has not troughed in our view and we are looking at a further low for now. Intraday technical indications have weakened significantly; this is in line with our bearish assumption. The next support locates at $0.595, KTL Global may rebounds at this level.
Resistance at $0.70 may cap the upside in near term.
Recommend a sell on KTL Global with a target price of $0.595.
Merrill Lynch to Take $15 Billion Mortgage Writedown, NYT Says
By Joseph Galante
Jan. 11 (Bloomberg) -- Merrill Lynch & Co., the third- largest U.S. securities firm, may take a $15 billion writedown for losses stemming from mortgage investments, almost twice its original estimate, the New York Times reported, citing people briefed on the plan.
Merrill is trying to raise $4 billion in the coming days from investors in the U.S., Asia and the Middle East, the newspaper said, citing the same people. The firm is expected to disclose the loss when it reports earnings next week, according to the Times.
Banks and securities firms in the U.S. and Europe have turned to Asian and Middle Eastern governments for about $34 billion to prop up balance sheets battered by writedowns from the collapse of the U.S. subprime market. New York-based Citigroup Inc. and Merrill want to secure additional financing before they report the extent of their fourth-quarter losses next week, the Wall Street Journal reported yesterday.
Merrill's writedown is more than the $12 billion analysts had estimated, the newspaper said. Merrill spokeswoman Jessica Oppenheim declined to comment when contacted by Bloomberg News.
The firm lost as much as 50 percent of its market value in the past 12 months, a year during which escalating losses from investments related to subprime mortgages cost the job of former Chief Executive Officer Stan O'Neal. John Thain, the former head of NYSE Euronext, replaced him in December.
Merrill said last month that it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York- based money manager Davis Selected Advisors LP.
While the current weakness in the Baltic Dry Index has precipitated recent sharp selloff in shipping stocks, we note some are trading close to their key technical supports. In particular, STX PO, which has been a darling of the sector for its its aggressive capacity expansion plans, share buyback program and impending fungibility of its shares between SGX and the Korean exchange, has fallen about $1.00 from its Jan 08 high of $3.74 and is now sitting above its key support area of $2.55-2.60. Notably, the stock has bounced strongly from this level on three other occasions in Sep, Nov and Dec 07. STX PO is currently trading at KRW2960 or equivalent of S$4.53 in Korea giving a 39% discount to its Singapore-listed shares.
BUTTERWORTH: Some men may be marrying women from China to have them work as prostitutes.
The State Immigration Department is checking on this development following the arrest of 20 women from China, aged between 19 and 34, working as guest relations officers at a karaoke lounge in George Town on Wednesday.
One of the women, aged 25, told enforcement officers that she was married to a local man.
Department director Abdul Rahman Harun said she was attending to a customer when enforcement officers raided the place about 8pm following a five-hour surveillance.
He said the woman said her husband was in Selangor. “We are investigating her claim.
“We are fully aware of such cases where local men marry women from China and force them into vice when they come here,” he told a press conference on Wednesday.
“We believe the karaoke lounge is the place for the customers to pick up the women of their choice before they go elsewhere for sex.”
Merrill Lynch to Take $15 Billion Mortgage Writedown, NYT Says
By Joseph Galante
Jan. 11 (Bloomberg) -- Merrill Lynch & Co., the third- largest U.S. securities firm, may take a $15 billion writedown related to mortgage investments, almost twice its original estimate, the New York Times reported, citing people briefed on the plan.
Merrill is trying to raise $4 billion in the coming days from investors in the U.S., Asia and the Middle East, the newspaper said, citing the same people. The firm is expected to disclose the loss when it reports earnings next week, according to the Times.
Reports of larger-than-expected writedowns may trigger more declines in financial stocks, after Merrill and Citigroup Inc. lost almost half their market value in the past year. U.S. and European banks and securities firms have turned to Asian and Middle Eastern governments for about $34 billion as subprime mortgage losses battered their balance sheets.
``I suspect there'll be more to come,'' said Hugh Young, who oversees $50 billion at Aberdeen Asset Management Asia Ltd. in Singapore. ``It's going to be a tough year for investors.''
Merrill's writedown is more than the $12 billion analysts had estimated, the newspaper said. Merrill spokeswoman Jessica Oppenheim declined to comment when contacted by Bloomberg News.
Losses on bets related to U.S. mortgages cost the job of former Merrill Chief Executive Officer Stan O'Neal in October. John Thain, the former head of NYSE Euronext, replaced him in December. That month, Merrill said it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York- based money manager Davis Selected Advisors LP.
Recession?
Soaring investments by sovereign wealth funds such as China Investment Corp. in finance companies may trigger a political backlash in the U.S. and Europe. China Investment, the nation's $200 billion wealth fund, is paying $5 billion for as much as 10 percent of Morgan Stanley.
``Because sovereign wealth funds, by definition, are potentially susceptible to non-economic interests, the closer they come to exercising control and influence, the greater concerns we have,'' said New York Senator Charles Schumer in a statement yesterday.
Addressing concerns that the housing crisis will spread to the wider U.S. economy and trigger a recession, Federal Reserve Board Chairman Ben S. Bernanke said yesterday that more interest-rate cuts ``may well be necessary.'' Bernanke said the Fed isn't forecasting a recession.
``Even if we don't see a technical recession in the U.S., it will definitely feel like one,'' said Young. ``Many of the speculative positions are being washed out very quickly.''
Goldman Says Japan Recession Risk at `Danger Level'
By Jason Clenfield
Jan. 10 (Bloomberg) -- Goldman Sachs Group cut its economic growth estimate for Japan and said there's a 50 percent chance of a recession in the world's second-largest economy.
``The probability of a recession in Japan has risen to the danger level,'' Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. ``We project weaker-than-expected growth in Japan.''
The nation's economy will continue to slow ``for the time being,'' Bank of Japan Deputy Governor Toshiro Muto said today. The housing slump in the U.S., which Goldman yesterday said may already be in recession, could prompt overseas investors to sell real estate holdings in Japan, Credit Suisse Group said today.
Yamakawa cut his 2008 growth estimate to 1 percent from 1.2 percent, citing slower demand from emerging markets.
Stocks including Mitsubishi Estate Co. declined today after the Credit Suisse report. Japan's leading index, a gauge of growth in the next three to six months, stalled in November, a report today showed.
``Goldman's report highlighting the increasing chances of a recession, as well as the leading index's poor showing, indicates the outlook for external and internal demand is nonexistent,'' said Hiroaki Osakabe, who helps oversee $365 million at Chiba-Gin Asset Management Co. in Tokyo.
Sluggish spending by consumers has left Japan more dependant on overseas markets, just as cooling U.S. demand threatens to spread to Asia, where Japan sells half its exports.
Slashing Interest Rates
Goldman yesterday said slower growth in the world's largest- economy may force the U.S. Federal Reserve to slash interest rates. It predicts the Fed to cut its benchmark rate to 2.5 percent by the third quarter, after saying in November it would reduce the key rate, currently at 4.25 percent, to 3 percent by the middle of 2008.
Earnings gains among Standard & Poor's 500 Index members may have averaged 8.1 percent from a year earlier, the slowest growth in six years, according to data compiled by Bloomberg.
The Bank of Japan probably won't be able to raise its key interest rate, the lowest among industrialized nations, this year because of the recession risk, Yamakawa said. The cycle of rising corporate profits feeding into wages and consumer spending is losing momentum and the bank will conduct policy ``with discretion,'' Muto said in a speech in Sapporo, northern Japan.
`Increasingly Cautious'
``Muto is signaling the Bank of Japan is becoming increasingly cautious about the downside risks for the economy,'' said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. ``The central bank is already veering from its path of raising rates.''
The yield on Japan's 10-year bond fell 3 basis points to 1.44 percent as of 3:26 p.m. in Tokyo. Muto, 64, is most likely to become governor of the central bank when Toshihiko Fukui's term expires in March, according to 13 of 15 economists surveyed by Bloomberg News last month.
Falling wages, which have dropped about 10 percent in the last decade, and rising food and energy prices have sent consumer confidence to a near four-year low.
``The greatest challenge for the Japanese economy, needless to say, is a recovery in personal consumption, which has remained in an extended slump,'' Goldman's Yamakawa said. ``Innumerable obstacles stand in the way.''
Export Reliance
With domestic consumption flat, the economy is more dependent on foreign demand. Exports contributed almost all of Japan's growth in the third quarter, as demand from Asia helped make up for slowing orders from the U.S.
The risk is that demand from Asia will also dry up.
``A U.S. slowdown affects Asia, beginning with China, and via that route it affects Japan,'' Economic and Fiscal Policy Minister Hiroko Ota said this week. ``The extent to which Japan is hurt depends on the severity of the U.S. slowdown.''
"Markets move in a way that will cause most people pain."
The Pareto distribution, named after the Italian economist Vilfredo Pareto, is a power law probability distribution that coincides with social, scientific, geophysical, actuarial, and many other types of observable phenomena. Outside the field of economics it is at times referred to as the Bradford distribution.
Pareto originally used this distribution to describe the allocation of wealth among individuals since it seemed to show rather well the way that a larger portion of the wealth of any society is owned by a smaller percentage of the people in that society. This idea is sometimes expressed more simply as the Pareto principle or the "80-20 rule" which says that 20% of the population owns 80% of the wealth[1].
BEIJING (Dow Jones)--Air China Ltd.’s parent said Friday it plans a "wide-ranging proposal" to link up with China Eastern Airlines Corp. (CEA), but China Eastern said it can’t consider such an offer for now.
China Eastern said it is barred from accepting deals with other carriers until Aug. 9, as part of a lockup clause in its failed attempt to sell a stake to Singapore Airlines Ltd. and its parent, Temasek Holdings Pte Ltd.
China Eastern’s minority shareholders rejected the planned link-up Tuesday. Air China’s parent, China National Aviation Holding Co., has said it would bid for a stake of up to 30% in its Shanghai-based rival.
CNAHC said it will propose to pay at least HK$5 a share for a stake in China Eastern, representing a premium of 32% to the HK$3.80 a share price the Singapore companies had tabled.
But China Eastern, which has made clear it wants no deal with Air China, said it can’t even consider a bid from CNAHC for the time being.
"We have a nine-month lockup agreement with Singapore Airlines that expires Aug. 9. Before then, we can’t consider proposals from others," said a China Eastern official, who declined to be named.
Singapore Airlines confirmed such a clause was in place, with spokesman Stephen Forshaw saying the lockup measure hadn’t required shareholder approval.
A CNAHC official said his company didn’t have any concerns about the lockup.
China Eastern’s shareholders voted Tuesday to reject the proposed HK$7.2 billion (US$923 million) tie-up with the Singaporeans, which would have given Singapore Air a significant foothold in China while giving China Eastern a partnership with one of the world’s most respected airlines.
The Singaporeans had sought a combined 24% stake in China Eastern, but Air China’s parent fought the bid, saying it would make its own offer.
CNAHC said it plans to send a proposal to China Eastern within two weeks of Tuesday’s shareholders meeting.
The CNAHC official said the state-owned company would make its proposal soon, but probably not this weekend.
CNAHC’s proposal will include the three principles outlined in a statement it issued in late December, said a second CNAHC official, who declined to be named.
The three principles include Air China and China Eastern establishing a cross-shareholding structure, integration of their cargo operations into a single joint venture, and joint operation of international air routes.
China Eastern has said it still hopes to reach a deal with Singapore Airlines. Singapore Airlines also said it still wants a deal, but it doesn’t plan to raise its offer.
Air China, CEA Had Discussed Cooperation But No Deal
Prompted by the desire to be globally competitive, China Eastern and Air China had held talks on greater cooperation starting in 2005 but the discussions were inconclusive, the second CNAHC official said.
China Eastern has said the two airlines have discussed plans to merge their air cargo operations.
However, China Eastern Chairman Li Fenghua said in December those merger talks ended without agreement after Beijing-based Air China announced its cargo joint venture with Cathay Pacific Airways Ltd. in May 2006.
When asked whether CNAHC had received the government’s support to make an offer for China Eastern, the first CNAHC official said the company didn’t expect any regulatory problems.
"In our view, the government’s scope is the macroeconomy, while businesses deal in the microeconomy," the official said.
The first CNAHC official also said Cathay Pacific will be brought into the proposed tie-up "on an operational level," but he declined to specify the cooperation.
Cathay Pacific owns a 17.64% stake in Air China, which has a similar shareholding in the Hong Kong-based airline. Air China remains the nation’s only state carrier to have a foreign partner.
Air China, China Eastern May Swap Shares, People Say
Jan. 11 (Bloomberg) -- Air China Ltd. and China Eastern Airlines Corp. may swap shares in an alliance plan being prepared after Singapore Airlines Ltd. failed to buy a stake in China Eastern, said three people familiar with the negotiations.
Air China’s parent, China National Aviation Holding Co., will suggest the cross-shareholding, said the people, who declined to be identified before an official statement.
Air China, the world’s largest airline by market value, and affiliate Cathay Pacific Airways Ltd. are seeking a tie-up with Shanghai-based China Eastern to dominate the world’s second- largest aviation market. China National Aviation will offer at least HK$5 a share, after minority shareholders rejected Singapore Air’s HK$3.80 bid.
“The share swap may make it easier to be accepted’’ by China Eastern’s management, said Jack Xu, an analyst at Sinopac Securities Co. in Shanghai. “China Eastern may not reject the plan as it can’t afford to lose the best opportunity for expansion now.’’
China National Aviation will make an offer by Jan. 22. It may bid to buy as much as 30 percent, it said on Jan. 7. The company may also propose a cargo venture between the two carriers and Hong Kong-based Cathay Pacific, the people said.
China Eastern closed unchanged at HK$7.04 in Hong Kong. Air China rose 1 percent to HK$10.52.
China Eastern spokesman Li Jiang was unavailable to comment immediately. Air China’s head of investor’s relation Rao Xinyu declined to comment.
Chinese carriers have a 44 percent share of the nation’s international passenger market and less than 20 percent of its international cargo market, according to China National Aviation.
Independence
The proposed tie-up will come after China National Aviation helped scuttle Singapore Air’s bid to buy 24 percent of China Eastern on Jan. 8. China National Aviation owns about 10 percent of China Eastern’s minority shares and voted against Singapore Air’s offer.
China Eastern had previously said it wouldn’t consider an alliance with any company other than Singapore Air.
China Eastern will keep its management independence under the bid to be submitted by China National Aviation, the people said. It will be another “successful case,’’ following Air China’s share swap with Cathay Pacific in 2006.
“A share swap may enable China Eastern to have some influence in Air China,’’ said Xu. “Combining routes and other resources may boost both companies’ performance.’’
China Eastern is forecast to have an operating margin of 2.5 percent this year, according to Xu. That compares with 10.7 percent at Air China and 9.9 percent at Cathay Pacific. Air China and Cathay Pacific own about 17.5 percent of each other.
The government, which controls both airlines, would like to see the combination if it can improve profits, the people said. The Assets Supervision and Administration Commission, an arm of the State Council, China’s cabinet, controls the country’s big three carriers.
MACQUARIE is awaiting decisions on bids it has lodged for two developments in Singapore - a sporting complex and a power station - with a potential investment of nearly $3 billion.
Macquarie expects to know by the end of this month if it has been chosen by the Sports Council of Singapore to build the proposed Sports Hub as part of a consortium featuring some of Australia's best-known organisations such as Lend Lease and the Australian Sports Commission.
The cost of the project has not been disclosed but those familiar with it told The Australian that such a project could easily cost $S1 billion ($783 million).
The bigger prize, however, is Tuas Power station, owned by Temasek Holdings, which is expected to choose the winning tenderer by the end of March.
Macquarie, which already owns power stations in South Korea, is one of up to nine parties shortlisted this week to buy Tuas Power station.
An Australian lawyer close to one deal confirmed that Macquarie was on the shortlist.
Given the size of the power station, the lawyer said, the station would be worth at least $US2 billion ($2.23 billion).
He added that Babcock & Brown had also expressed an interest (among a field of 30 potential investors) but was not shortlisted.
Others reported to be on the shortlist for the power station included Japan's Marubeni, Li Ka-shing's Hong Kong Electric, India's Reliance Energy, Malaysia's Tanjong, and China's Huaneng Power.
Local media reports said that in the next few weeks, those on the shortlist, including Macquarie, would have the opportunity to go through the books of Tuas as they began due diligence.
Tuas's management had been told to prepare presentations to potential buyers, with these "road shows" likely to begin as early as next week.
Temasek, owner of the power station, had declined to confirm the identity of those on the shortlist.
Tuas is the first of three power stations to be divested over the next two years.
Temasek executives had earlier said the timing was right to divest the assets because of persistent interest from potential investors.
Tuas Power's assets include oil-fired plants with a capacity of 1200 megawatts as well as 1470MW in gas-fired electricity plants.
The company recorded annual net profit of $S177 million to March 2007 on sales of $S2.28 billion.
The other two power firms that Temasek hopes to sell are PowerSeraya and Senoko.
They have capacities of 3100MW and 3300MW, respectively.
Together, the three power-generating stations are responsible for more than 80 per cent of power used in the city state.
Singapore rates plunge as currency tests top limit
Fri Jan 11, 2008 By Vidya Ranganathan
SINGAPORE, Jan 11 (Reuters) - Singapore's money market rates and bond yields have plunged at the start of the year, which analysts say is evidence that the central bank is intervening heavily to cap its rising currency.
Three-month rates in the interbank market (SIBOR) hit a 2-year low of 1.75 percent on Friday, a sharp drop from levels close to 2.4 percent at the start of 2008.
Likewise, 5-year bond yields have fallen 50 basis points to 1.8 percent over the past 10 days. Simultaneously, the Singapore dollar has gained 0.7 percent during the same period and hit a decade high of $1.4264 on Friday against a broadly weak U.S. dollar.
Analysts estimate the Singapore dollar has been testing the top end of the Monetary Authority of Singapore's (MAS) policy band. The MAS conducts monetary policy by managing the Singapore dollar against a secret band, based on the value of its nominal effective exchange rate (NEER) or trade-weighted basket of currencies.
"The need to manage Singapore dollar NEER within its boundaries meant letting go the third corner of the "impossible trinity" and allowing SIBOR to be driven down by liquidity," Morgan Stanley analyst Deyi Tan said in a note to clients.
WHAT'S HAPPENED
The MAS has been buying U.S. dollars to hold down the Singapore dollar, thereby releasing Singapore dollars into the system, traders said.
It could have absorbed some of those Singapore dollar funds by issuing bonds.
But that so-called sterilisation operation would lift market yields -- and returns on the currency -- defeating its objective of reining in the Singapore dollar. Analysts say the MAS has allowed the funds to remain in the banking system.
The "impossible trinity" hypothesis market economists subscribe to states that a country can at any point in time only have two of the following three conditions: a fixed exchange rate, free capital movement and an independent monetary policy.
By that token, Singapore, whose open markets allow free movement of capital into the country, would have to give up its grip on market yields if it wanted to control the currency.
"MAS can't control both exchange rate and interest rate at the same time, at least not over a long period of time," said Han Sia Yeo, a strategist with Bank Of America.
"Expectations of Singapore dollar appreciation drives inflows, hence depressing market rates and bond yields too," he said.
INFLATION DILEMMA
Morgan Stanley's Tan said the MAS had encouraged the drop in interest rates in order to reduce returns on the currency and ease the appreciation pressure on the trade-weighted currency rate.
But that was "counter-intuitive", she said, because inflation was still rising and the MAS had tightened policy in October last year, by allowing a steeper pace of appreciation for the currency.
"The SIBOR decline now poses a policy dilemma given that inflation is running at its highest since the exchange rate policy was adopted in 1981," Tan wrote.
Singapore's annual consumer price inflation hit a 25-year high in November of 4.2 percent.
And analysts see no respite to rising housing and food prices, particularly as market expectations of further monetary easing in the United States and more gains in the Singapore dollar mean local yields will be driven lower.
"With U.S. rates tilting lower again, Singapore dollar rates will have to fall in order to stop the gap narrowing too far," said Westpac Bank's Sean Callow.
Negative Sentiment Engulfing The Financial Space May Weigh on Markets
1/11/2008 9:31:10 AM
The major U.S. index futures are pointing to a lower opening on Friday. The fears that the subprime losses confessed by financial companies so far are only a small portion of the actual damage is prompting the market participants to react negatively. Lending credence to this belief came the speculation that Merrill Lynch (MER) may have more skeletons in the closet. Additionally, the perception that Countrywide (CFC) is being sold below its intrinsic value may also impact sentiment. Global growth, which economists say would support the U.S., is also showing signs of weakness. India today reported weaker than expected industrial production.
U.S. stocks began Thursday’s session on a weak note, but they built up some momentum in reaction to comments by Federal Reserve Chairman Ben Bernanke. Although there was a transitory loss of momentum after the mid-session strength, the major averages advanced strongly in the last 2 hours of trading, encouraged by reports that troubled lender Countrywide Financial (CFC) may be close to being bought by Bank of America (BAC).
The Dow Industrials gained 117.78 points or 0.92% to 12,853 and the S&P 500 Index rose 11.20 points or 0.79% to 1,420. Meanwhile, the Nasdaq Composite Index moved up 13.97 points or 0.56% to 2,489.
General Motors (GM) topped the list of gainers among the Dow components following the launch of its Cadillac Provoq in the Consumer Electronics Show, while Wal-Mart (WMT) rebounded after it reported decent same store sales results for December. JP Morgan Chase (JPM) gained 2.66% after it unveiled the appointment of former British Prime Minister Tony Blair as a part time adviser. Other notable gainers included AIG (AIG), Citigroup (C), Home Depot (HD), Hewlett-Packard (HPQ) and Verizon (VZ).
Among the sector indexes, the Amex Airline Index rallied 12% after the price of oil dropped below the $94-a-barrel mark. Most other sectors also found buying interest, with semiconductor, oil and utility stocks were among the few that came under selling pressure.
Bernanke said in his remarks yesterday that in light of the recent outlook for and the risks to growth, additional policy easing may be necessary. The Fed Chairman also said that based on the central bank’s evaluation of incoming information that has a bearing on the economic outlook and its dual mandate, the Fed stands ready to take substantive additional actions as needed to support growth.
Among the economic reports released on Thursday, initial claims for unemployment benefits unexpectedly declined by 15,000, which could offer some comfort, especially after the bleak December non-farm payroll report. Wholesale inventories increased by 0.6% in November, according to a report released by the U.S. Commerce Department. Wholesale sales moved up a steeper 2.2%, rendering the inventory-to-sales ratio at 1.07, marking a record low level.
Currency, Commodity Markets
The price of oil is moving back to the upside, as it is currently falling $0.53 to $93.18 a barrel. On Thursday, crude oil futures declined $1.96 to $93.71 a barrel. The slide followed conviction that slower growth in the U.S. will depress crude oil demand.
Gold futures are receding $1.30 at $892.30 an ounce after rising $11.90 to $893.60 an ounce on Thursday. Gold ran up, in-line with its recent upward momentum, as the dollar sank on comments that suggested that the Fed will lower rates.
The dollar is receding to 109.518 yen from the 109.334 yen it fetched at the close of New York trading on Thursday. The dollar is currently worth $1.4788 versus the euro. Dankse Bank expects the dollar to decline further, while the euro is expected to rise to $1.52 in about three months. By then, the slowdown is expected to spread to the euro zone region as well, leading to lower interest rates. The yen is expected to fall to 100 against the dollar in the near term.
Asia
Most Asian markets ended Friday’s session lower, with only select markets such as the Malaysian, Indian and Chinese markets ending higher. Japan’s Nikkei 225 average showed a lackluster phase in early trading. After the first hour of trading, the index fell decisively into negative territory and moved further down over the course of trading to close down 277.32 points or 1.93% at 14,111.
Auto stocks ended the session weaker and most export dependent stocks also fell. Mining stocks were mostly lower, while steel, financial and oil stocks showed mixed sentiment. Chiyoda Corp. declined 6.57% and Daikin Industries receded 4.24%. Daiwa House Industries slipped 5.25% compared to a 5.22% drop by Fuji Electric Holding.
Fujikura, Furukawa Electric, Hitachi Zosen, J Front Retailing, Kawasaki Kisen, Kumagai Gumi, Mitsui Fudosan, Nippon Sheet Glass, Sumitomo Heavy Industries, Sumitomo Realty and Tokyu Land also came under selling pressure. On the other hand, Trend Micro, Sharp, Nichirei and Mitsui Sumitomo advanced.
Australia’s All Ordinaries declined for the third straight day. The index opened unchanged, but it declined over the course of trading to close down 92.90 points or 1.51% at 6,054. All sector stocks showed some weakness, with energy, financial, healthcare, industrial and material stocks receding sharply.
Miners BHP Billiton and Rio Tinto moved to the downside. The major banks also receded. In the media space, News Corp. and Seven Network fell, while John Fairfax rose.
After holding modestly higher in the morning, Hong Kong’s Hang Seng Index lost ground in the afternoon before closing down 363.85 points or 1.34% at 26,867. Index heavyweight HSBC Holdings slipped 2.14% and most other stocks also receded. Property and utility stocks also came under selling pressure.
However, Cathay Pacific gained 1.01%. China Unicom surged up over 6% on rumors that the company may be split. Bank of China Hong Kong and China Shenhua also saw some strength.
South Korea’s Kospi gap-opened higher, but thereafter it declined throughout the session to close down 42.51 points or 2.33% at 1,782. Steel maker Posco and Hyundai Heavy Industries fell by 1.84% and 3.64%, respectively. Index heavyweight Samsung Electronics ended unchanged.
India’s Sensex hovered in positive territory for most of the session except for some momentary weakness in the mid session. Notwithstanding not-so-upbeat results from tech bellwether Infosys (INFY) and a report showing slower industrial production growth, the index closed up 245.37 points or 1.19% at 20,828. Bank and oil & gas stocks helped to lead the market higher.
Among the economic reports from the region, the Chinese Customs Bureau said today that the nation’s trade surplus declined to $22.7 million in December from $26.2 million last month. Exports increased 21.7%, slower than the 22.8% growth witnessed in the previous month, while the import growth rate remained almost unchanged.
Europe
The major European markets are receding in the session. The French CAC 40 Index is down about 0.50% compared to a 0.17% decline by the German DAX Index, while the U.K.’s FTSE 100 Index is losing 0.25%.
The German Federal Statistical Office reported that German wholesale prices increased at a year-over-year pace of 5.1% in December, tamer than the 6.1% increase expected by economists. In November and October, the annual rate of increases was 5.7% and 4.7%, respectively. Meanwhile, a report from the National Statistical Office of the U.K. showed that U.K.’s industrial output eased 0.1% in November compared to expectations for a 0.1% increase.
U.S. Economic Reports
The Labor Department said today that import prices remained unchanged in December following an upwardly revised 3.3% increase in November. The stable prices were due to a 0.3% increase in non-petroleum imports, which offset a 0.6% decline in petroleum imports.
Meanwhile, export prices edged up 0.4% in December following a 0.9% increase in the previous month. Agricultural export prices were up 2.7% on a monthly basis and are up 23.5% year-over-year. Non-agricultural export prices escalated 0.3% on a monthly basis and increased 4.5% on a year-over-year basis.
The Commerce Department reported that U.S. trade deficit widened to $63.1 billion in November from the revised deficit of $57.1 billion in October. Economists estimated a deficit of $59.5 billion for November. The wider deficit came about due to an increase in the value of imports and a slower rate of increase in imports.
The value of exports rose $0.6 billion to $142.309 billion, while the value of imports rose $6 billion to $205.427 billion.
Federal Reserve Governor Frederic Mishkin and Boston Fed President Eric Rosengren are due to speak at two separate appearances on Friday.
The Treasury Budget, a monthly account of the surplus or deficit of the federal government, is due out at 2 PM ET on Friday. The changes in the budget balance are keenly watched to know the budgetary trends and the thrust of fiscal policy. Economists expect the Treasury Budget for December to reveal a surplus of $64 billion compared to a surplus of $52 billion in the previous month.
Stocks in Focus
Infosys (INFY) may react to its announcement that its third quarter earnings increased to 54 cents per share from 39 cents per share last year. Revenues were up 32% to $1.08 billion. Analysts expected earnings of 51 cents per share on revenues of $1.09 billion. Looking ahead, the company expects fourth quarter earnings of 54 cents per share on revenues of $1.136-$1.142 billion. For 2008, the company expects earnings and revenues of $2.02 per share and $4.17-$4.18 billion, respectively.
Countrywide Financial (CFC) is expected to see some strength after Bank of America (BAC) agreed to acquire the company for $4 billion in stock. Meanwhile, Merrill Lynch (MER) could recede after reports suggested that the company may have to take $15 billion in write-downs related to losses from its exposure to the subprime mortgage market.
Chevron (CVX) may see some strength after it said it expects fourth quarter net income to be higher than $3.7 billion earned in the third quarter. The higher earnings forecast follows strong performance of its upstream business, which benefited from higher crude oil and natural gas prices.
Benchmark Electronics (BHE) could be in the focus after it reaffirmed its fourth quarter revenue guidance of $700-$740 million and its adjusted earnings estimate of 32-38 cents per share. Analysts estimate earnings of 33 cents per share on revenues of $720.98 million.
Microsoft (MSFT) is expected to move in reaction of its announcement that Jeff Raikes, the President of the Microsoft Business Division, is retiring after a 9-month transition period. The company also announced the appointment of Stephen Elop, a former Juniper Networks (JNPR) executive, as President of the Microsoft Business division.
AmComp Inc. (AMCP) is likely to be in the spotlight over its proposed acquisition of Employers Holdings (EIG) for $194 million in cash. United Rentals (URI) may react to its guidance for fiscal years 2007 and 2008. The company expects 2007 earnings of $2.55-$2.60 per share, excluding a benefit of 50 cents per share from the termination fee it received following the termination of the deal it struck with Cerberus Capital. The company guided 2008 earnings to $2.80-$3 per share. The consensus estimates call for earnings of $2.61 per share for 2007 and $2.60 per share for 2008.
American Express (AXP) is likely to come under pressure after it said it would take a pre-tax charge of about $440 million in its fourth quarter. The company attributed the predicament to lower spending and higher delinquencies and loan write-offs. AllianceBernstein (AB) may also recede after it reduced its earnings per unit estimate for 2007 to about 30 cents below its earlier estimate of $4.64 per unit.
GENEVA : Swiss banking giant UBS on Friday warned of a "difficult" year ahead after losing 10 billion dollars (6.8 billion euros) in the US sub-prime mortgage crisis.
"The problems that the financial industry faces have not evaporated with the turn of the year ... 2008 is likely to be another generally difficult year," the bank said in a letter to shareholders.
UBS in December turned to Singapore's state investment arm (GIC) and an unnamed Middle Eastern investor to help restore its balance sheet, which had been badly hit by losses in the US mortgage crisis.
GIC said it would inject 11 billion Swiss francs into UBS, giving it a stake of around nine percent and thus making it the largest single shareholder, while the Middle Eastern investor was to put up two billion Swiss francs.
The bank said it was a "valuable demonstration of confidence to bring in highly reputable, stable, long-term financial investors."
Some shareholders have voiced unhappiness with the plans to raise funds from foreign, state-controlled investment authorities, fearing the terms of the deal put existing investors at a disadvantage.
UBS warned that the full impact of the sub-prime crisis had yet to be felt.
"We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in sub-prime mortgage related securities," the bank said.
However it said that "appropriate lessons have been drawn" from the turbulence in terms of personnel and systems.
"UBS will become a stronger firm as a result of these changes," the bank pledged.
Earlier this week, CEO Marcel Rohner rejected any hiving off of UBS' investment banking arm, primarily responsible for its sub-prime exposure, saying the unit "lies at the heart" of the bank's activities.
19 comments:
From the BDIY Index (Baltics Dry Index), the trend has peaked at Oct 2007. It has now broken recent low and weakness is likely to continue. We have not detected any signs of reversal for now and the next support is located at 8292. The negative sentiment on bulk shipping sector is also creating spill over sentiment to the shipping sector in general. Container shipping stocks are also feeling the brunt of the selloff as it inches closer towards the commencement of the 2008/2009 contract freight negotiation season beginning early 2Q08.
Below is the list of shipping companies that listed in Singapore. They are:
Ø NEPTUNE ORIENT LINES LTD
Ø SAMUDERA SHIPPING LINE LTD
Ø SINGAPORE SHIPPING CORP LTD
Ø COSCO CORP SINGAPORE LTD
Ø PAN-UNITED CORP LTD
Ø PAN-UNITED MARINE LTD
Ø VITA HOLDINGS LTD
Ø PACIFIC SHIPPING TRUST
Ø JAYA HOLDINGS LTD
Ø STX PAN OCEAN
China’s State Council 9 Jan announcement that prices of electric power, natural gas and oil products will not be raised in the near future was implemented in a bid to contain surging inflation. China’s consumer price index rose 6.9% year-on-year in November, the biggest surge since December 1996. The Council’s decision basically implies that oil and derivatives refining and power utilities will face margin squeeze in 1Q08. Within the confines of this space, price action was more negative for Jiutian than China Energy, particularly following news that Legg Mason had pared its stake holding in Jiutian from 7.23% to 6.72%. We see Jiutain’s resistance at $0.355.
Additionally, the government has also placed a price ceiling which caps the amount by which soft commodity (grains, meat, milk, edible oils) vendors are allowed to hike selling prices; accordingly, the limits range between 5%-8%. Investor sentiment for China XLX was affected although it is noteworthy that the company is already the subject of chemical fertiliser price controls since its IPO in 2007. More importantly, XLX has also made explicit its strategy to ensure the sustainability of its low cost structure with measures that include the construction of a new power generator system to double electricity self sufficiency to 70%. As the cost of self-generated electricity is 17.4% lower than the subsidized rates, the company expects to generate annual cost savings of RMB85.2m. XLX also has plans to reduce transportation costs by constructing a railway extension into its new plant. This will result in additional cost savings of RMB16-20 per ton when rail links comes into operation by FY08. Technical cut-loss @ $1.11.
Regards,
Kelive Research
KTL Global Correction has arrived.
KTL Global staged a correction yesterday morning with a "bearish harami" pattern in its intraday chart. With the stock gains over the past 2 weeks, KTL is undoubtedly in overbought territory. From the chart pattern, it established a bear flag formation, suggesting further low.
The price action has not troughed in our view and we are looking at a further low for now. Intraday technical indications have weakened significantly; this is in line with our bearish assumption. The next support locates at $0.595, KTL Global may rebounds at this level.
Resistance at $0.70 may cap the upside in near term.
Recommend a sell on KTL Global with a target price of $0.595.
Merrill Lynch to Take $15 Billion Mortgage Writedown, NYT Says
By Joseph Galante
Jan. 11 (Bloomberg) -- Merrill Lynch & Co., the third- largest U.S. securities firm, may take a $15 billion writedown for losses stemming from mortgage investments, almost twice its original estimate, the New York Times reported, citing people briefed on the plan.
Merrill is trying to raise $4 billion in the coming days from investors in the U.S., Asia and the Middle East, the newspaper said, citing the same people. The firm is expected to disclose the loss when it reports earnings next week, according to the Times.
Banks and securities firms in the U.S. and Europe have turned to Asian and Middle Eastern governments for about $34 billion to prop up balance sheets battered by writedowns from the collapse of the U.S. subprime market. New York-based Citigroup Inc. and Merrill want to secure additional financing before they report the extent of their fourth-quarter losses next week, the Wall Street Journal reported yesterday.
Merrill's writedown is more than the $12 billion analysts had estimated, the newspaper said. Merrill spokeswoman Jessica Oppenheim declined to comment when contacted by Bloomberg News.
The firm lost as much as 50 percent of its market value in the past 12 months, a year during which escalating losses from investments related to subprime mortgages cost the job of former Chief Executive Officer Stan O'Neal. John Thain, the former head of NYSE Euronext, replaced him in December.
Merrill said last month that it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York- based money manager Davis Selected Advisors LP.
曾渊沧：股市玩死人高追难搵食
2008年01月11日
股市玩死人，一天升一天跌，昨日本文提到，前日恒指上升502点，只是大家在博美股可以周三晚上反弹,因为美股已经一连下跌多天，没理由不反弹。前晚，美股真的反弹，但是反弹仍然是很勉强，是到了最后半小时才止跌回升，仍不稳定。另一个玩死人的现象是人人太短线，人人打游击，赚一点就跑。前日青岛啤酒 (168) 是国企股中升幅之冠，昨日竟成跌幅之冠，贸贸然追货马上被套牢，惨！ 踏入2008年，尽管大市走势飘忽，但奥运股、内地消费股突然热炒。记住，只是热炒，股份热炒不一定有实际的盈利来支持，只是大家想当然，认为2008年是奥运年，奥运概念股一定好；面对欧美贸易战，一定会发展内部消费。但是，如今人人如此打游击式的投机，炒短线，因此要炒起一只股的成本不低，股价一炒起，马上有人套利离场，庄家得准备许多现金才能将这些短线客的股票全部吸收，之后才能真正将股价大幅炒高。我在2008年开市第一天，也跟大队炒奥运概念股，买入锦江酒店 (2006) 股，希望赢个彩，可惜股价至今仍是在目前的位置浮沉，以昨日收市价计几乎没有利润，看来还得再呆等一阵子，希望2008年第一击不会令我失望。
大陆豪客杀入又一村?
去年庄家炒股，股价突然一升，马上就有许多人跟进，原本持股者也会耐心地等股价再升，大家一齐把股价托高至新的击瓜入场买才放掉。但是，今年一开始，股价一炒上，第一天跟入的人第二天就卖了，气死人，想等击瓜真不容易，说不定第二日才追入者已成为击瓜。既然现在人人玩短线，因此得改变策略，千万不能再以追货的方法高追任何股，今天追，明天就可能后悔，二三线股如此，大蓝筹股也如此。前日升势不错的本地地产股昨日又回跌了，跌幅不小。当然，这些蓝筹地产股我是不会担心，只不过得更有耐性地等股价经过一次又一次的短线炒家套利，又升又跌，跌跌升升，进三步退两步，反反覆覆地缓慢造好。前日与朋友一起吃饭，其中一位朋友去年参选区议会，选区是又一村。又一村是香港中上等住宅区，朋友天天在达之路站击派宣传单张，竟然发现每天有一团团的内地旅游团来又一村「旅游」，又一村有甚麼好的风景旅游点? 原来是一幢幢的楼房，一团团的内地客全是买楼团。
STX Pan Ocean
Opportunistic trade at around $2.60
While the current weakness in the Baltic Dry Index has precipitated recent sharp selloff in shipping stocks, we note some are trading close to their key technical supports. In particular, STX PO, which has been a darling of the sector for its its aggressive capacity expansion plans, share buyback program and impending fungibility of its shares between SGX and the Korean exchange, has fallen about $1.00 from its Jan 08 high of $3.74 and is now sitting above its key support area of $2.55-2.60. Notably, the stock has bounced strongly from this level on three other occasions in Sep, Nov and Dec 07. STX PO is currently trading at KRW2960 or equivalent of S$4.53 in Korea giving a 39% discount to its Singapore-listed shares.
王冠一: 故作镇定或犹豫不决
2008-01-11
高盛美国首席经济师Jan Hatzius在给客户的提示中指出，美国经济绝大机会於今年陷入衰退(如果不是已降临)，第二及第三季实际GDP或出现负增长1%，经济急剧倒退有可能维持两至三季，但程度与历史标准比较，相对温和。
Jan所持的理由是，失业率飙升，多年来皆录得增长的消费者开支，将画上句号，并预测失业率在09年大有机会由目前5%，攀升上6.5%。苟如是，占美GDP超过七成的个人及家庭消费若萎缩，加上信贷收缩导致企业经营或捉襟见肘，这美经济实在令人担忧。
财政紧绌经济难救
商业周期之盛衰循环，乃必然定律，如何防止经济硬著陆，或提早结束衰退带来的痛苦期，则视乎决策者在资源或政策上是否运用得宜，乔治布殊屡放风有救经济良方，可是只闻楼梯响，是否考虑到资源或许不足，不敢妄下诺言？
01年可以非常潇洒地大洒金钱，皆因有克林顿交棒时剩下的1万亿美元财政盈余，现在政府穷到燶，何来银両救亡？ 就算硬著头皮，腾出如萨默斯教授(克林顿时期曾任财长)献计的750亿美元，如果没有依循大教授3点原则─ ─时间掌握、目标明确、只属暂时性，别说救经济，连头痛也止不了！
既然财政政策尚得研究，货币政策可先行了吧？ 市场谣传，联储局或提早1月30日FOMC例会议息前突然减息，空穴来风，未必无因。可是作为央行决策者，通常在未见损害之前，会按兵不动，单一个失业率，不足以动摇其决策，除非有数字显示经济下陷严重，才会毅然出手，何况性格柔弱如伯南克，又岂敢造次？
Men force China wives into flesh trade
BUTTERWORTH: Some men may be marrying women from China to have them work as prostitutes.
The State Immigration Department is checking on this development following the arrest of 20 women from China, aged between 19 and 34, working as guest relations officers at a karaoke lounge in George Town on Wednesday.
One of the women, aged 25, told enforcement officers that she was married to a local man.
Department director Abdul Rahman Harun said she was attending to a customer when enforcement officers raided the place about 8pm following a five-hour surveillance.
He said the woman said her husband was in Selangor.
“We are investigating her claim.
“We are fully aware of such cases where local men marry women from China and force them into vice when they come here,” he told a press conference on Wednesday.
“We believe the karaoke lounge is the place for the customers to pick up the women of their choice before they go elsewhere for sex.”
Merrill Lynch to Take $15 Billion Mortgage Writedown, NYT Says
By Joseph Galante
Jan. 11 (Bloomberg) -- Merrill Lynch & Co., the third- largest U.S. securities firm, may take a $15 billion writedown related to mortgage investments, almost twice its original estimate, the New York Times reported, citing people briefed on the plan.
Merrill is trying to raise $4 billion in the coming days from investors in the U.S., Asia and the Middle East, the newspaper said, citing the same people. The firm is expected to disclose the loss when it reports earnings next week, according to the Times.
Reports of larger-than-expected writedowns may trigger more declines in financial stocks, after Merrill and Citigroup Inc. lost almost half their market value in the past year. U.S. and European banks and securities firms have turned to Asian and Middle Eastern governments for about $34 billion as subprime mortgage losses battered their balance sheets.
``I suspect there'll be more to come,'' said Hugh Young, who oversees $50 billion at Aberdeen Asset Management Asia Ltd. in Singapore. ``It's going to be a tough year for investors.''
Merrill's writedown is more than the $12 billion analysts had estimated, the newspaper said. Merrill spokeswoman Jessica Oppenheim declined to comment when contacted by Bloomberg News.
Losses on bets related to U.S. mortgages cost the job of former Merrill Chief Executive Officer Stan O'Neal in October. John Thain, the former head of NYSE Euronext, replaced him in December. That month, Merrill said it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York- based money manager Davis Selected Advisors LP.
Recession?
Soaring investments by sovereign wealth funds such as China Investment Corp. in finance companies may trigger a political backlash in the U.S. and Europe. China Investment, the nation's $200 billion wealth fund, is paying $5 billion for as much as 10 percent of Morgan Stanley.
``Because sovereign wealth funds, by definition, are potentially susceptible to non-economic interests, the closer they come to exercising control and influence, the greater concerns we have,'' said New York Senator Charles Schumer in a statement yesterday.
Addressing concerns that the housing crisis will spread to the wider U.S. economy and trigger a recession, Federal Reserve Board Chairman Ben S. Bernanke said yesterday that more interest-rate cuts ``may well be necessary.'' Bernanke said the Fed isn't forecasting a recession.
``Even if we don't see a technical recession in the U.S., it will definitely feel like one,'' said Young. ``Many of the speculative positions are being washed out very quickly.''
东航A股99%反对票来自两基金
2008-01-10
来源:上海证券报
东航方面昨日公布了8日股东大会投票的具体情况。
数据显示，A股1746万股的反对票中，融通和博时两家基金分别投了1383万股和350万股的反对票，合计1733万股，占所有反对票的99.3%。根据国航披露的2007年三季报显示，融通和博时分别是国航A股的第一和第三大流通股东。在H股方面，中航有限所投反对票，占H股反对票的41%。(索佩敏)
揭秘李嘉诚唱多做空减持航运股来龙去脉
2008-01-10
来源:21世纪经济报道
香港报道 特约记者 朱宝
李嘉诚:我不再减持航运股
"由于其航运股仓位已经很小,超人唱多论调不应过分看重。" 1月9日,一港股操盘人士告诉本报记者。
"受美国经济衰退影响,世界航运经营环境比较严峻,未来几个月航运股压力较大。"恒生银行投资管理有限公司总经理冯孝忠表示。
日前香港长和系主席李嘉诚出席酒会接受媒体采访时提出,在未来一段时间内将不再减持航运股,对航运股前景看好,但告诫股民不要借钱去炒航运股。
记者从香港联交所权益披露记录中看到,包括长实集团、和记黄埔与李嘉诚个人在内的长和系都从2007年11月1日起开始减持中国远洋与中海集运的股份,长实集团、和记黄埔与李嘉诚在11月至12月间共6次减持中国远洋,从11月1日11.7%的持股量减少到12月14日的3.89%。
另外,从2007年11月2日起至12月14日,长实集团、和记黄埔与李嘉诚相继减持中海集运,持股量长实集团从13.57%减少到4.07%、和记黄埔从8.86%减少到2.07%,李嘉诚从12.48%减少到4.07%,持股数量也减少到5%以下。
由于大股东持股量降到5%以下后不须再做权益披露,李嘉诚及其长和系目前还持有多少航运股则无从得知,甚至存在已为零的可能性。
"李嘉诚及其长和系对航运股的减持已告一段落,减持使其锁定利润很大,从几块买进的中国远洋,到几十块卖出,减持锁定套现举措不难理解。"富昌证券总经理蔺常念认为。
"或许长和系有别的投资想法",香港一位高级证券分析员称。
摩根大通的增持理论
在长和系减持航运股的同时,摩根大通(JPMorgan Chase&Co.)在香港联交所权益披栏里却留下了增持中国远洋的记录。据香港联交所记录,从2007年9月27日至12月5日,摩根大通的持股量从10.39%经6次增持达到12.42%。
"摩根大通在联交所留下增持的记录并不一定代表摩根大通本身在增持,有可能是摩根大通的客户的增持记录,或者是其托管业务、代人持股与衍生产品业务等体现在对中国远洋股份的增持上,但实际上并不代表摩根大通对这只股票的判断,增持的份额也可能用做对冲,股价下跌时再抛出",冯孝忠表示。
在香港联交所里留下对航运股减持记录的还有花旗集团与摩根士丹利。花旗集团对中海发展的持股比例从2007年11月9日减少到9.3%,至11月16日,这一比例已在5%以下,达到3.1%。而摩根大通对中海集运的持股比例则同样从2007年11月1日的8.02%比例减少至12月7日的4.99%。另外,摩根士丹利对中国远洋的持股比例从12月4日的9.93%开始持续减少,至12月24日,其持股比例达到8.58%。
Goldman Says Japan Recession Risk at `Danger Level'
By Jason Clenfield
Jan. 10 (Bloomberg) -- Goldman Sachs Group cut its economic growth estimate for Japan and said there's a 50 percent chance of a recession in the world's second-largest economy.
``The probability of a recession in Japan has risen to the danger level,'' Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. ``We project weaker-than-expected growth in Japan.''
The nation's economy will continue to slow ``for the time being,'' Bank of Japan Deputy Governor Toshiro Muto said today. The housing slump in the U.S., which Goldman yesterday said may already be in recession, could prompt overseas investors to sell real estate holdings in Japan, Credit Suisse Group said today.
Yamakawa cut his 2008 growth estimate to 1 percent from 1.2 percent, citing slower demand from emerging markets.
Stocks including Mitsubishi Estate Co. declined today after the Credit Suisse report. Japan's leading index, a gauge of growth in the next three to six months, stalled in November, a report today showed.
``Goldman's report highlighting the increasing chances of a recession, as well as the leading index's poor showing, indicates the outlook for external and internal demand is nonexistent,'' said Hiroaki Osakabe, who helps oversee $365 million at Chiba-Gin Asset Management Co. in Tokyo.
Sluggish spending by consumers has left Japan more dependant on overseas markets, just as cooling U.S. demand threatens to spread to Asia, where Japan sells half its exports.
Slashing Interest Rates
Goldman yesterday said slower growth in the world's largest- economy may force the U.S. Federal Reserve to slash interest rates. It predicts the Fed to cut its benchmark rate to 2.5 percent by the third quarter, after saying in November it would reduce the key rate, currently at 4.25 percent, to 3 percent by the middle of 2008.
Earnings gains among Standard & Poor's 500 Index members may have averaged 8.1 percent from a year earlier, the slowest growth in six years, according to data compiled by Bloomberg.
The Bank of Japan probably won't be able to raise its key interest rate, the lowest among industrialized nations, this year because of the recession risk, Yamakawa said. The cycle of rising corporate profits feeding into wages and consumer spending is losing momentum and the bank will conduct policy ``with discretion,'' Muto said in a speech in Sapporo, northern Japan.
`Increasingly Cautious'
``Muto is signaling the Bank of Japan is becoming increasingly cautious about the downside risks for the economy,'' said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. ``The central bank is already veering from its path of raising rates.''
The yield on Japan's 10-year bond fell 3 basis points to 1.44 percent as of 3:26 p.m. in Tokyo. Muto, 64, is most likely to become governor of the central bank when Toshihiko Fukui's term expires in March, according to 13 of 15 economists surveyed by Bloomberg News last month.
Falling wages, which have dropped about 10 percent in the last decade, and rising food and energy prices have sent consumer confidence to a near four-year low.
``The greatest challenge for the Japanese economy, needless to say, is a recovery in personal consumption, which has remained in an extended slump,'' Goldman's Yamakawa said. ``Innumerable obstacles stand in the way.''
Export Reliance
With domestic consumption flat, the economy is more dependent on foreign demand. Exports contributed almost all of Japan's growth in the third quarter, as demand from Asia helped make up for slowing orders from the U.S.
The risk is that demand from Asia will also dry up.
``A U.S. slowdown affects Asia, beginning with China, and via that route it affects Japan,'' Economic and Fiscal Policy Minister Hiroko Ota said this week. ``The extent to which Japan is hurt depends on the severity of the U.S. slowdown.''
Pareto Distribution
"Markets move in a way that will cause most people pain."
The Pareto distribution, named after the Italian economist Vilfredo Pareto, is a power law probability distribution that coincides with social, scientific, geophysical, actuarial, and many other types of observable phenomena. Outside the field of economics it is at times referred to as the Bradford distribution.
Pareto originally used this distribution to describe the allocation of wealth among individuals since it seemed to show rather well the way that a larger portion of the wealth of any society is owned by a smaller percentage of the people in that society. This idea is sometimes expressed more simply as the Pareto principle or the "80-20 rule" which says that 20% of the population owns 80% of the wealth[1].
CEA-SIA Agreement May Stall CNAHC’s Bid Efforts
BEIJING (Dow Jones)--Air China Ltd.’s parent said Friday it plans a "wide-ranging proposal" to link up with China Eastern Airlines Corp. (CEA), but China Eastern said it can’t consider such an offer for now.
China Eastern said it is barred from accepting deals with other carriers until Aug. 9, as part of a lockup clause in its failed attempt to sell a stake to Singapore Airlines Ltd. and its parent, Temasek Holdings Pte Ltd.
China Eastern’s minority shareholders rejected the planned link-up Tuesday. Air China’s parent, China National Aviation Holding Co., has said it would bid for a stake of up to 30% in its Shanghai-based rival.
CNAHC said it will propose to pay at least HK$5 a share for a stake in China Eastern, representing a premium of 32% to the HK$3.80 a share price the Singapore companies had tabled.
But China Eastern, which has made clear it wants no deal with Air China, said it can’t even consider a bid from CNAHC for the time being.
"We have a nine-month lockup agreement with Singapore Airlines that expires Aug. 9. Before then, we can’t consider proposals from others," said a China Eastern official, who declined to be named.
Singapore Airlines confirmed such a clause was in place, with spokesman Stephen Forshaw saying the lockup measure hadn’t required shareholder approval.
A CNAHC official said his company didn’t have any concerns about the lockup.
China Eastern’s shareholders voted Tuesday to reject the proposed HK$7.2 billion (US$923 million) tie-up with the Singaporeans, which would have given Singapore Air a significant foothold in China while giving China Eastern a partnership with one of the world’s most respected airlines.
The Singaporeans had sought a combined 24% stake in China Eastern, but Air China’s parent fought the bid, saying it would make its own offer.
CNAHC said it plans to send a proposal to China Eastern within two weeks of Tuesday’s shareholders meeting.
The CNAHC official said the state-owned company would make its proposal soon, but probably not this weekend.
CNAHC’s proposal will include the three principles outlined in a statement it issued in late December, said a second CNAHC official, who declined to be named.
The three principles include Air China and China Eastern establishing a cross-shareholding structure, integration of their cargo operations into a single joint venture, and joint operation of international air routes.
China Eastern has said it still hopes to reach a deal with Singapore Airlines. Singapore Airlines also said it still wants a deal, but it doesn’t plan to raise its offer.
Air China, CEA Had Discussed Cooperation But No Deal
Prompted by the desire to be globally competitive, China Eastern and Air China had held talks on greater cooperation starting in 2005 but the discussions were inconclusive, the second CNAHC official said.
China Eastern has said the two airlines have discussed plans to merge their air cargo operations.
However, China Eastern Chairman Li Fenghua said in December those merger talks ended without agreement after Beijing-based Air China announced its cargo joint venture with Cathay Pacific Airways Ltd. in May 2006.
When asked whether CNAHC had received the government’s support to make an offer for China Eastern, the first CNAHC official said the company didn’t expect any regulatory problems.
"In our view, the government’s scope is the macroeconomy, while businesses deal in the microeconomy," the official said.
The first CNAHC official also said Cathay Pacific will be brought into the proposed tie-up "on an operational level," but he declined to specify the cooperation.
Cathay Pacific owns a 17.64% stake in Air China, which has a similar shareholding in the Hong Kong-based airline. Air China remains the nation’s only state carrier to have a foreign partner.
Air China, China Eastern May Swap Shares, People Say
Jan. 11 (Bloomberg) -- Air China Ltd. and China Eastern Airlines Corp. may swap shares in an alliance plan being prepared after Singapore Airlines Ltd. failed to buy a stake in China Eastern, said three people familiar with the negotiations.
Air China’s parent, China National Aviation Holding Co., will suggest the cross-shareholding, said the people, who declined to be identified before an official statement.
Air China, the world’s largest airline by market value, and affiliate Cathay Pacific Airways Ltd. are seeking a tie-up with Shanghai-based China Eastern to dominate the world’s second- largest aviation market. China National Aviation will offer at least HK$5 a share, after minority shareholders rejected Singapore Air’s HK$3.80 bid.
“The share swap may make it easier to be accepted’’ by China Eastern’s management, said Jack Xu, an analyst at Sinopac Securities Co. in Shanghai. “China Eastern may not reject the plan as it can’t afford to lose the best opportunity for expansion now.’’
China National Aviation will make an offer by Jan. 22. It may bid to buy as much as 30 percent, it said on Jan. 7. The company may also propose a cargo venture between the two carriers and Hong Kong-based Cathay Pacific, the people said.
China Eastern closed unchanged at HK$7.04 in Hong Kong. Air China rose 1 percent to HK$10.52.
China Eastern spokesman Li Jiang was unavailable to comment immediately. Air China’s head of investor’s relation Rao Xinyu declined to comment.
Chinese carriers have a 44 percent share of the nation’s international passenger market and less than 20 percent of its international cargo market, according to China National Aviation.
Independence
The proposed tie-up will come after China National Aviation helped scuttle Singapore Air’s bid to buy 24 percent of China Eastern on Jan. 8. China National Aviation owns about 10 percent of China Eastern’s minority shares and voted against Singapore Air’s offer.
China Eastern had previously said it wouldn’t consider an alliance with any company other than Singapore Air.
China Eastern will keep its management independence under the bid to be submitted by China National Aviation, the people said. It will be another “successful case,’’ following Air China’s share swap with Cathay Pacific in 2006.
“A share swap may enable China Eastern to have some influence in Air China,’’ said Xu. “Combining routes and other resources may boost both companies’ performance.’’
China Eastern is forecast to have an operating margin of 2.5 percent this year, according to Xu. That compares with 10.7 percent at Air China and 9.9 percent at Cathay Pacific. Air China and Cathay Pacific own about 17.5 percent of each other.
The government, which controls both airlines, would like to see the combination if it can improve profits, the people said. The Assets Supervision and Administration Commission, an arm of the State Council, China’s cabinet, controls the country’s big three carriers.
Macquarie awaits OK on top Singapore bids
Florence Chong
January 12, 2008
MACQUARIE is awaiting decisions on bids it has lodged for two developments in Singapore - a sporting complex and a power station - with a potential investment of nearly $3 billion.
Macquarie expects to know by the end of this month if it has been chosen by the Sports Council of Singapore to build the proposed Sports Hub as part of a consortium featuring some of Australia's best-known organisations such as Lend Lease and the Australian Sports Commission.
The cost of the project has not been disclosed but those familiar with it told The Australian that such a project could easily cost $S1 billion ($783 million).
The bigger prize, however, is Tuas Power station, owned by Temasek Holdings, which is expected to choose the winning tenderer by the end of March.
Macquarie, which already owns power stations in South Korea, is one of up to nine parties shortlisted this week to buy Tuas Power station.
An Australian lawyer close to one deal confirmed that Macquarie was on the shortlist.
Given the size of the power station, the lawyer said, the station would be worth at least $US2 billion ($2.23 billion).
He added that Babcock & Brown had also expressed an interest (among a field of 30 potential investors) but was not shortlisted.
Others reported to be on the shortlist for the power station included Japan's Marubeni, Li Ka-shing's Hong Kong Electric, India's Reliance Energy, Malaysia's Tanjong, and China's Huaneng Power.
Local media reports said that in the next few weeks, those on the shortlist, including Macquarie, would have the opportunity to go through the books of Tuas as they began due diligence.
Tuas's management had been told to prepare presentations to potential buyers, with these "road shows" likely to begin as early as next week.
Temasek, owner of the power station, had declined to confirm the identity of those on the shortlist.
Tuas is the first of three power stations to be divested over the next two years.
Temasek executives had earlier said the timing was right to divest the assets because of persistent interest from potential investors.
Tuas Power's assets include oil-fired plants with a capacity of 1200 megawatts as well as 1470MW in gas-fired electricity plants.
The company recorded annual net profit of $S177 million to March 2007 on sales of $S2.28 billion.
The other two power firms that Temasek hopes to sell are PowerSeraya and Senoko.
They have capacities of 3100MW and 3300MW, respectively.
Together, the three power-generating stations are responsible for more than 80 per cent of power used in the city state.
Singapore rates plunge as currency tests top limit
Fri Jan 11, 2008
By Vidya Ranganathan
SINGAPORE, Jan 11 (Reuters) - Singapore's money market rates and bond yields have plunged at the start of the year, which analysts say is evidence that the central bank is intervening heavily to cap its rising currency.
Three-month rates in the interbank market (SIBOR) hit a 2-year low of 1.75 percent on Friday, a sharp drop from levels close to 2.4 percent at the start of 2008.
Likewise, 5-year bond yields have fallen 50 basis points to 1.8 percent over the past 10 days. Simultaneously, the Singapore dollar has gained 0.7 percent during the same period and hit a decade high of $1.4264 on Friday against a broadly weak U.S. dollar.
Analysts estimate the Singapore dollar has been testing the top end of the Monetary Authority of Singapore's (MAS) policy band. The MAS conducts monetary policy by managing the Singapore dollar against a secret band, based on the value of its nominal effective exchange rate (NEER) or trade-weighted basket of currencies.
"The need to manage Singapore dollar NEER within its boundaries meant letting go the third corner of the "impossible trinity" and allowing SIBOR to be driven down by liquidity," Morgan Stanley analyst Deyi Tan said in a note to clients.
WHAT'S HAPPENED
The MAS has been buying U.S. dollars to hold down the Singapore dollar, thereby releasing Singapore dollars into the system, traders said.
It could have absorbed some of those Singapore dollar funds by issuing bonds.
But that so-called sterilisation operation would lift market yields -- and returns on the currency -- defeating its objective of reining in the Singapore dollar. Analysts say the MAS has allowed the funds to remain in the banking system.
The "impossible trinity" hypothesis market economists subscribe to states that a country can at any point in time only have two of the following three conditions: a fixed exchange rate, free capital movement and an independent monetary policy.
By that token, Singapore, whose open markets allow free movement of capital into the country, would have to give up its grip on market yields if it wanted to control the currency.
"MAS can't control both exchange rate and interest rate at the same time, at least not over a long period of time," said Han Sia Yeo, a strategist with Bank Of America.
"Expectations of Singapore dollar appreciation drives inflows, hence depressing market rates and bond yields too," he said.
INFLATION DILEMMA
Morgan Stanley's Tan said the MAS had encouraged the drop in interest rates in order to reduce returns on the currency and ease the appreciation pressure on the trade-weighted currency rate.
But that was "counter-intuitive", she said, because inflation was still rising and the MAS had tightened policy in October last year, by allowing a steeper pace of appreciation for the currency.
"The SIBOR decline now poses a policy dilemma given that inflation is running at its highest since the exchange rate policy was adopted in 1981," Tan wrote.
Singapore's annual consumer price inflation hit a 25-year high in November of 4.2 percent.
And analysts see no respite to rising housing and food prices, particularly as market expectations of further monetary easing in the United States and more gains in the Singapore dollar mean local yields will be driven lower.
"With U.S. rates tilting lower again, Singapore dollar rates will have to fall in order to stop the gap narrowing too far," said Westpac Bank's Sean Callow.
Negative Sentiment Engulfing The Financial Space May Weigh on Markets
1/11/2008 9:31:10 AM
The major U.S. index futures are pointing to a lower opening on Friday. The fears that the subprime losses confessed by financial companies so far are only a small portion of the actual damage is prompting the market participants to react negatively. Lending credence to this belief came the speculation that Merrill Lynch (MER) may have more skeletons in the closet. Additionally, the perception that Countrywide (CFC) is being sold below its intrinsic value may also impact sentiment. Global growth, which economists say would support the U.S., is also showing signs of weakness. India today reported weaker than expected industrial production.
U.S. stocks began Thursday’s session on a weak note, but they built up some momentum in reaction to comments by Federal Reserve Chairman Ben Bernanke. Although there was a transitory loss of momentum after the mid-session strength, the major averages advanced strongly in the last 2 hours of trading, encouraged by reports that troubled lender Countrywide Financial (CFC) may be close to being bought by Bank of America (BAC).
The Dow Industrials gained 117.78 points or 0.92% to 12,853 and the S&P 500 Index rose 11.20 points or 0.79% to 1,420. Meanwhile, the Nasdaq Composite Index moved up 13.97 points or 0.56% to 2,489.
General Motors (GM) topped the list of gainers among the Dow components following the launch of its Cadillac Provoq in the Consumer Electronics Show, while Wal-Mart (WMT) rebounded after it reported decent same store sales results for December. JP Morgan Chase (JPM) gained 2.66% after it unveiled the appointment of former British Prime Minister Tony Blair as a part time adviser. Other notable gainers included AIG (AIG), Citigroup (C), Home Depot (HD), Hewlett-Packard (HPQ) and Verizon (VZ).
Among the sector indexes, the Amex Airline Index rallied 12% after the price of oil dropped below the $94-a-barrel mark. Most other sectors also found buying interest, with semiconductor, oil and utility stocks were among the few that came under selling pressure.
Bernanke said in his remarks yesterday that in light of the recent outlook for and the risks to growth, additional policy easing may be necessary. The Fed Chairman also said that based on the central bank’s evaluation of incoming information that has a bearing on the economic outlook and its dual mandate, the Fed stands ready to take substantive additional actions as needed to support growth.
Among the economic reports released on Thursday, initial claims for unemployment benefits unexpectedly declined by 15,000, which could offer some comfort, especially after the bleak December non-farm payroll report. Wholesale inventories increased by 0.6% in November, according to a report released by the U.S. Commerce Department. Wholesale sales moved up a steeper 2.2%, rendering the inventory-to-sales ratio at 1.07, marking a record low level.
Currency, Commodity Markets
The price of oil is moving back to the upside, as it is currently falling $0.53 to $93.18 a barrel. On Thursday, crude oil futures declined $1.96 to $93.71 a barrel. The slide followed conviction that slower growth in the U.S. will depress crude oil demand.
Gold futures are receding $1.30 at $892.30 an ounce after rising $11.90 to $893.60 an ounce on Thursday. Gold ran up, in-line with its recent upward momentum, as the dollar sank on comments that suggested that the Fed will lower rates.
The dollar is receding to 109.518 yen from the 109.334 yen it fetched at the close of New York trading on Thursday. The dollar is currently worth $1.4788 versus the euro. Dankse Bank expects the dollar to decline further, while the euro is expected to rise to $1.52 in about three months. By then, the slowdown is expected to spread to the euro zone region as well, leading to lower interest rates. The yen is expected to fall to 100 against the dollar in the near term.
Asia
Most Asian markets ended Friday’s session lower, with only select markets such as the Malaysian, Indian and Chinese markets ending higher. Japan’s Nikkei 225 average showed a lackluster phase in early trading. After the first hour of trading, the index fell decisively into negative territory and moved further down over the course of trading to close down 277.32 points or 1.93% at 14,111.
Auto stocks ended the session weaker and most export dependent stocks also fell. Mining stocks were mostly lower, while steel, financial and oil stocks showed mixed sentiment. Chiyoda Corp. declined 6.57% and Daikin Industries receded 4.24%. Daiwa House Industries slipped 5.25% compared to a 5.22% drop by Fuji Electric Holding.
Fujikura, Furukawa Electric, Hitachi Zosen, J Front Retailing, Kawasaki Kisen, Kumagai Gumi, Mitsui Fudosan, Nippon Sheet Glass, Sumitomo Heavy Industries, Sumitomo Realty and Tokyu Land also came under selling pressure. On the other hand, Trend Micro, Sharp, Nichirei and Mitsui Sumitomo advanced.
Australia’s All Ordinaries declined for the third straight day. The index opened unchanged, but it declined over the course of trading to close down 92.90 points or 1.51% at 6,054. All sector stocks showed some weakness, with energy, financial, healthcare, industrial and material stocks receding sharply.
Miners BHP Billiton and Rio Tinto moved to the downside. The major banks also receded. In the media space, News Corp. and Seven Network fell, while John Fairfax rose.
After holding modestly higher in the morning, Hong Kong’s Hang Seng Index lost ground in the afternoon before closing down 363.85 points or 1.34% at 26,867. Index heavyweight HSBC Holdings slipped 2.14% and most other stocks also receded. Property and utility stocks also came under selling pressure.
However, Cathay Pacific gained 1.01%. China Unicom surged up over 6% on rumors that the company may be split. Bank of China Hong Kong and China Shenhua also saw some strength.
South Korea’s Kospi gap-opened higher, but thereafter it declined throughout the session to close down 42.51 points or 2.33% at 1,782. Steel maker Posco and Hyundai Heavy Industries fell by 1.84% and 3.64%, respectively. Index heavyweight Samsung Electronics ended unchanged.
India’s Sensex hovered in positive territory for most of the session except for some momentary weakness in the mid session. Notwithstanding not-so-upbeat results from tech bellwether Infosys (INFY) and a report showing slower industrial production growth, the index closed up 245.37 points or 1.19% at 20,828. Bank and oil & gas stocks helped to lead the market higher.
Among the economic reports from the region, the Chinese Customs Bureau said today that the nation’s trade surplus declined to $22.7 million in December from $26.2 million last month. Exports increased 21.7%, slower than the 22.8% growth witnessed in the previous month, while the import growth rate remained almost unchanged.
Europe
The major European markets are receding in the session. The French CAC 40 Index is down about 0.50% compared to a 0.17% decline by the German DAX Index, while the U.K.’s FTSE 100 Index is losing 0.25%.
The German Federal Statistical Office reported that German wholesale prices increased at a year-over-year pace of 5.1% in December, tamer than the 6.1% increase expected by economists. In November and October, the annual rate of increases was 5.7% and 4.7%, respectively. Meanwhile, a report from the National Statistical Office of the U.K. showed that U.K.’s industrial output eased 0.1% in November compared to expectations for a 0.1% increase.
U.S. Economic Reports
The Labor Department said today that import prices remained unchanged in December following an upwardly revised 3.3% increase in November. The stable prices were due to a 0.3% increase in non-petroleum imports, which offset a 0.6% decline in petroleum imports.
Meanwhile, export prices edged up 0.4% in December following a 0.9% increase in the previous month. Agricultural export prices were up 2.7% on a monthly basis and are up 23.5% year-over-year. Non-agricultural export prices escalated 0.3% on a monthly basis and increased 4.5% on a year-over-year basis.
The Commerce Department reported that U.S. trade deficit widened to $63.1 billion in November from the revised deficit of $57.1 billion in October. Economists estimated a deficit of $59.5 billion for November. The wider deficit came about due to an increase in the value of imports and a slower rate of increase in imports.
The value of exports rose $0.6 billion to $142.309 billion, while the value of imports rose $6 billion to $205.427 billion.
Federal Reserve Governor Frederic Mishkin and Boston Fed President Eric Rosengren are due to speak at two separate appearances on Friday.
The Treasury Budget, a monthly account of the surplus or deficit of the federal government, is due out at 2 PM ET on Friday. The changes in the budget balance are keenly watched to know the budgetary trends and the thrust of fiscal policy. Economists expect the Treasury Budget for December to reveal a surplus of $64 billion compared to a surplus of $52 billion in the previous month.
Stocks in Focus
Infosys (INFY) may react to its announcement that its third quarter earnings increased to 54 cents per share from 39 cents per share last year. Revenues were up 32% to $1.08 billion. Analysts expected earnings of 51 cents per share on revenues of $1.09 billion. Looking ahead, the company expects fourth quarter earnings of 54 cents per share on revenues of $1.136-$1.142 billion. For 2008, the company expects earnings and revenues of $2.02 per share and $4.17-$4.18 billion, respectively.
Countrywide Financial (CFC) is expected to see some strength after Bank of America (BAC) agreed to acquire the company for $4 billion in stock. Meanwhile, Merrill Lynch (MER) could recede after reports suggested that the company may have to take $15 billion in write-downs related to losses from its exposure to the subprime mortgage market.
Chevron (CVX) may see some strength after it said it expects fourth quarter net income to be higher than $3.7 billion earned in the third quarter. The higher earnings forecast follows strong performance of its upstream business, which benefited from higher crude oil and natural gas prices.
Benchmark Electronics (BHE) could be in the focus after it reaffirmed its fourth quarter revenue guidance of $700-$740 million and its adjusted earnings estimate of 32-38 cents per share. Analysts estimate earnings of 33 cents per share on revenues of $720.98 million.
Microsoft (MSFT) is expected to move in reaction of its announcement that Jeff Raikes, the President of the Microsoft Business Division, is retiring after a 9-month transition period. The company also announced the appointment of Stephen Elop, a former Juniper Networks (JNPR) executive, as President of the Microsoft Business division.
AmComp Inc. (AMCP) is likely to be in the spotlight over its proposed acquisition of Employers Holdings (EIG) for $194 million in cash. United Rentals (URI) may react to its guidance for fiscal years 2007 and 2008. The company expects 2007 earnings of $2.55-$2.60 per share, excluding a benefit of 50 cents per share from the termination fee it received following the termination of the deal it struck with Cerberus Capital. The company guided 2008 earnings to $2.80-$3 per share. The consensus estimates call for earnings of $2.61 per share for 2007 and $2.60 per share for 2008.
American Express (AXP) is likely to come under pressure after it said it would take a pre-tax charge of about $440 million in its fourth quarter. The company attributed the predicament to lower spending and higher delinquencies and loan write-offs. AllianceBernstein (AB) may also recede after it reduced its earnings per unit estimate for 2007 to about 30 cents below its earlier estimate of $4.64 per unit.
Swiss bank UBS warns of difficult year ahead
GENEVA : Swiss banking giant UBS on Friday warned of a "difficult" year ahead after losing 10 billion dollars (6.8 billion euros) in the US sub-prime mortgage crisis.
"The problems that the financial industry faces have not evaporated with the turn of the year ... 2008 is likely to be another generally difficult year," the bank said in a letter to shareholders.
UBS in December turned to Singapore's state investment arm (GIC) and an unnamed Middle Eastern investor to help restore its balance sheet, which had been badly hit by losses in the US mortgage crisis.
GIC said it would inject 11 billion Swiss francs into UBS, giving it a stake of around nine percent and thus making it the largest single shareholder, while the Middle Eastern investor was to put up two billion Swiss francs.
The bank said it was a "valuable demonstration of confidence to bring in highly reputable, stable, long-term financial investors."
Some shareholders have voiced unhappiness with the plans to raise funds from foreign, state-controlled investment authorities, fearing the terms of the deal put existing investors at a disadvantage.
UBS warned that the full impact of the sub-prime crisis had yet to be felt.
"We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in sub-prime mortgage related securities," the bank said.
However it said that "appropriate lessons have been drawn" from the turbulence in terms of personnel and systems.
"UBS will become a stronger firm as a result of these changes," the bank pledged.
Earlier this week, CEO Marcel Rohner rejected any hiving off of UBS' investment banking arm, primarily responsible for its sub-prime exposure, saying the unit "lies at the heart" of the bank's activities.
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