Palm oil, the world's most-used cooking oil, is also the cheapest, a discrepancy that won't last long as demand rises across Asia's biggest countries.
An ingredient in curries, stir-fries and Skittles candy, Malaysian palm oil costs 17 percent less than soybean oil on the Chicago Board of Trade. Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney, said the two may soon be even money, raising the prospect of at least a $1.7 million profit from a $10 million investment.
Rising incomes mean billions of people in Asia's developing economies seek palm oil for fried and processed foods, according to the U.S. Department of Agriculture. Crude oil at $100 a barrel is boosting demand for alternative fuels such as diesel from vegetable oil. As consumption rises, supply in China may drop after the worst snowstorms in five decades damaged crops in January, the government reported.
``We may have a case of mass shortage of vegetable oil in China,'' said Rudolphe Roche, a manager at Schroders Plc's $6 billion agricultural commodities fund in London. ``This means they will continue to import from the rest of the world.'' Palm oil, produced in Malaysia and Indonesia, will benefit the most because its proximity to China lowers shipping costs, he said.
Rising prices will increase expenses at Nissin Food Products Co., Japan's biggest instant-noodle maker, and increase profits at Kuala Lumpur-based Sime Darby Bhd., the world's largest publicly traded owner of palm plantations. About 36 percent of the world's cooking oil comes from crushed palm kernels, more than any other plant, USDA data show.
``Ninety-three percent of all the palm oil in the world is going to food demand,'' William Doyle, chief executive officer of fertilizer maker Potash Corp. of Saskatchewan Inc., said in a Feb. 19 interview. ``It's enormously powerful, and we don't see this backing off.''
The Precedent
The last time palm oil was this cheap, in April 2007, prices rallied for two months because of increasing demand, gaining 38 percent to 2,855 ringgit ($889) a metric ton on the Malaysia Derivatives Exchange to reach parity with Chicago prices. Contracts for May delivery ended at 3,698 ringgit a ton (52 U.S. cents a pound) on Feb. 22 in Malaysia. May soybean oil finished at 63.02 cents a pound on the CBOT.
``There is no reason why the price of soybean oil and palm oil cannot be the same,'' said Edgare Kerwijk, chief financial officer for Biox Group BV in Rotterdam, which has put on hold plans for three biodiesel projects in the Netherlands and the U.K. due to higher prices. ``The discount will narrow'' for palm oil, he said.
U.S. manufacturers will increase consumption of soybean oil for energy by 22 percent to 3.4 million pounds in the 2007-2008 marketing year, the USDA forecasts. The total equals 16 percent of U.S. use.
Food Inflation
Soaring food prices are fueling inflation. China's consumer-price gains accelerated to 7.1 percent in January, the fastest pace in more than 11 years, the statistics bureau said Feb. 19. U.S. inflation quickened to 4.3 percent in January from 4.1 percent in December, the Labor Department said Feb. 20.
China's January snowstorms and rains, the worst in 50 years, affected as much as 48 million mu (7.9 million acres) of rapeseed crops, almost half the total area planted, the China National Grain and Oils Information Center said Feb. 14.
China, the biggest annual buyer of cooking oils, raised palm oil imports 18 percent in January to 360,000 metric tons, compared with a year earlier, according to customs figures. India boosted imports 75 percent to 366,353 tons that month, and imports of all cooking oils may gain 15 percent to 5.4 million tons in the year ending Oct. 31, according to a Bloomberg News survey of six traders and analysts.
U.S. Imports
``With the strong demand coming from the substitution effect this year, the discount should narrow further from here,'' said Ben Santoso, a plantations analyst at the brokerage arm of DBS Group Holdings, Singapore's largest bank. He said palm oil may reach the same level as soy.
Even the U.S., the world's largest soybean grower and exporter, is buying more palm oil. Soyoil is hydrogenated in some foods to make them last longer on store shelves, a process resulting in trans-fats that may raise the risk of heart disease, according to the Food and Drug Administration.
``Trans-fats are a big reason for more palm oil imports,'' Anne Frick, a senior oilseed analyst for Prudential Financial Inc. in New York, said in a Feb. 20 e-mail.
U.S. palm oil imports may rise 13 percent to 790,000 tons in the 2007-2008 marketing season after a 17 percent gain the previous year, according to the USDA.
Less Momentum
To be sure, world production of palm oil will gain 10 percent to 40.6 million tons in the year ending Sept. 30, the USDA estimates. To ABN Amro Holding NV, based in Amsterdam, that's a sell signal.
``We've turned bearish on the palm oil sector,'' said Nirgunan Tiruchelvam, an analyst at ABN Amro Asia Securities in Singapore.
Food consumption is driving the higher prices. Nisshin Oillio Group Ltd., Japan's biggest producer of edible oils, started selling palm-based product for home use on Feb. 18. The company expects sales of imported palm oil to rise 10 percent to 20 percent this year, said spokesman Yasuko Hoshino.
``Palm oil is conquering new markets,'' said Dorab Mistry, director at Godrej International, India's biggest vegetable oil importer, who has traded the commodity for more than 30 years.
Monday, February 25, 2008
Market Around the Globe
Indian equities are among the worst performers in the global markets since January 2008. Among the major markets only Hong Kong markets have seen as much negative growth this year as the benchmark indices Nifty and Sensex.Analysts feel the FIIs’ withdrawal is a major factor for the negative performance of the Indian markets. They also attribute the fall to corrections of other major markets in the last quarter of 2007. The best performing markets this year have been the markets in Middle East, Latin America and Africa. The 50-share S&P CNX Nifty index of the NSE registered a year-to-date negative growth of 17.91 per cent while BSE Sensex was down by 15.67 per cent; only Hong Kong’s market has seen similar erosion in value, Hang Seng has lost 17.25 per cent.
Romanian, Vietnamese and Croatian market top the list of worst performing markets ahead of Nifty, Hang Sheng and Sensex.
Even among the BRIC nations – Brazil, Russia, India and China – India was the worst performer. While Brazil gave out a positive return of 5.30 per cent, China’s Shenzhen dipped 2.6 per cent and Russia-RTS declined 9.20 per cent.
Muscat was the best performer in 2008 so far after it scored a return of 13.9 per cent, followed by Mauritius 11.2 per cent, Nigeria 11.01 per cent and Kuwait 10.8 per cent.
The US markets were better off than Asian markets with S&P 500 index reflecting a negative growth of 7.85 per cent, Dow Jones Industrial Average of 6.66 per cent and Nasdaq Composite index of 13.16 per cent as it faces the scare of big write-downs by the banks due to the sub prime lending as well as chances of the world’s largest economy entering a phase of economic recession.
FIIs net sellers
FIIs have been net sellers so far this year and have off loaded shares worth $2.86 billion (Rs 11,539 crore) from the Indian market. Last year the FIIs had invested $17.23 billion in the Indian market.
“The fall appears sharper because Indian market is the last where the FIIs pulled out while it began to happen earlier elsewhere,” said Mr Nipun Mehta, Co-founder & CEO of Unitis Tower Wealth Advisors, a private wealth management firm. “Secondly in the last quarter of 2007 Indian market didn’t fall rather gained while all other markets had fallen after the sub-prime crisis reports began to surface.”
Best performance
Muscat was the best performer in 2008 so far after it scored a return of 13.9 per cent, followed by Mauritius 11.2 per cent, Nigeria 11.01 per cent and Kuwait 10.8 per cent.
Even, the Karachi 100 index has performed better and has shown a positive growth of 5.92 per cent this year so far despite the political uncertainty in the country in recent times.
Japan’s Nikkei representing the second largest market in the world has shown a negative growth of 7.85 per cent. German’s Dax was down 14.21 per cent, French’s CAC index has gone down by 12.62 per cent and UK’s FTSE dipped by 9.53 per cent.
US better off
The US markets were better off than Asian markets with S&P 500 index reflecting a negative growth of 7.85 per cent, Dow Jones Industrial Average of 6.66 per cent and Nasdaq Composite index of 13.16 per cent as it faces the scare of big write-downs by the banks due to the sub prime lending as well as chances of the world’s largest economy entering a phase of economic recession.
Romanian, Vietnamese and Croatian market top the list of worst performing markets ahead of Nifty, Hang Sheng and Sensex.
Even among the BRIC nations – Brazil, Russia, India and China – India was the worst performer. While Brazil gave out a positive return of 5.30 per cent, China’s Shenzhen dipped 2.6 per cent and Russia-RTS declined 9.20 per cent.
Muscat was the best performer in 2008 so far after it scored a return of 13.9 per cent, followed by Mauritius 11.2 per cent, Nigeria 11.01 per cent and Kuwait 10.8 per cent.
The US markets were better off than Asian markets with S&P 500 index reflecting a negative growth of 7.85 per cent, Dow Jones Industrial Average of 6.66 per cent and Nasdaq Composite index of 13.16 per cent as it faces the scare of big write-downs by the banks due to the sub prime lending as well as chances of the world’s largest economy entering a phase of economic recession.
FIIs net sellers
FIIs have been net sellers so far this year and have off loaded shares worth $2.86 billion (Rs 11,539 crore) from the Indian market. Last year the FIIs had invested $17.23 billion in the Indian market.
“The fall appears sharper because Indian market is the last where the FIIs pulled out while it began to happen earlier elsewhere,” said Mr Nipun Mehta, Co-founder & CEO of Unitis Tower Wealth Advisors, a private wealth management firm. “Secondly in the last quarter of 2007 Indian market didn’t fall rather gained while all other markets had fallen after the sub-prime crisis reports began to surface.”
Best performance
Muscat was the best performer in 2008 so far after it scored a return of 13.9 per cent, followed by Mauritius 11.2 per cent, Nigeria 11.01 per cent and Kuwait 10.8 per cent.
Even, the Karachi 100 index has performed better and has shown a positive growth of 5.92 per cent this year so far despite the political uncertainty in the country in recent times.
Japan’s Nikkei representing the second largest market in the world has shown a negative growth of 7.85 per cent. German’s Dax was down 14.21 per cent, French’s CAC index has gone down by 12.62 per cent and UK’s FTSE dipped by 9.53 per cent.
US better off
The US markets were better off than Asian markets with S&P 500 index reflecting a negative growth of 7.85 per cent, Dow Jones Industrial Average of 6.66 per cent and Nasdaq Composite index of 13.16 per cent as it faces the scare of big write-downs by the banks due to the sub prime lending as well as chances of the world’s largest economy entering a phase of economic recession.
R-Power bonus shares at 3:5
Reliance Power Ltd, the company, which raised Rs 11,000 crore last month in India's biggest initial public offer (IPO), will issue free shares in a ratio of three shares for every five held to compensate investors for the slump in the stock price after listing.
The free shares won’t be given to Chairman Anil Ambani and the founder group, including Reliance Energy Ltd, holding a combined 90 per cent stake.
Reliance Power, which attracted a record Rs 756,000 crore worth of bids, slumped as much as 21 per cent when it listed on February 11 as a global sell-off in equities dried up appetite for new shares. The rout prompted Indian companies to scrap Rs 7,200 crore of initial share sales.
India’s benchmark Sensitive Index declined 16 per cent from the day the IPO opened on January 15 until the day before listing. Reliance Power shares have never closed above Rs 450, the maximum offer price. Individual investors had to pay Rs 430 for each share in the IPO.
“I have been personally concerned by the notional losses to millions of our investors as a result of a dramatic adverse change in sentiment in global and domestic capital market after the pricing of our IPO,” Ambani said. “The board endorsed my concern and approved the bonus issue.”
The bonus issue will reduce the cost of acquiring Reliance Power shares to Rs 269 for individual investors, 40 per cent lower than the IPO price. For large shareholders, the rate will fall to Rs 281 a share, Ambani said.
Anil Ambani’s personal holding in Reliance Power will fall to 40 per cent from 45 per cent to enable Reliance Energy’s stake in the company to be maintained at 45 per cent. The dilution in his shareholding represents a “contribution” of Rs 5,000 crore in favour of investors in Reliance Energy and Reliance Power, Ambani said.
Business Standard adds: On whether this contribution attracted gift tax or not, corporate lawyers said the tax was not applicable to share transactions.
Reliance Power gained 7.5 per cent on February18, the most since listing, after the bonus plan was announced. The stock closed 1.2 per cent lower at Rs 416.85 in Mumbai trading on February 22.
The unit of Reliance Energy Ltd, India’s second-largest power producer, sold out its record Indian initial share sale in less than a minute. Anil Ambani embarked on the Reliance Power IPO following a break with brother Mukesh and the splitting up of the Reliance empire founded by father Dhirubhai Ambani.
Meanwhile, Reliance Power has sought an enquiry by the Securities and Exchange Board of India (Sebi), the market regulator, into “hammering” of the stock price, Ambani said.
“Seven Mauritius-based investors went on selling within 4 minutes of the listing even when the market was falling,” he said. “I can understand people selling when the price is rising. There’s more than meets the eye.”
The company plans to set up 13 plants with 28,200 Mw of generating capacity in five years, a third of India’s planned new projects. Ambani, who will use the money to fund his $28 billion plan, became the second-richest man in India after his Reliance Energy quadrupled in value last year.
The Anil Dhirubhai Ambani Group has filed to sell shares in Reliance Infratel Ltd, the transmission-tower unit of Reliance Communications Ltd, India’s second-largest operator of wireless services. The company plans to sell 89.1 million shares, or 10.1 per cent of Reliance Infratel, according to a release sent to the Bombay Stock Exchange on February 4.
“There’s no rethink on the IPO. We’re waiting to hear from Sebi,” Ambani said.
The free shares won’t be given to Chairman Anil Ambani and the founder group, including Reliance Energy Ltd, holding a combined 90 per cent stake.
Reliance Power, which attracted a record Rs 756,000 crore worth of bids, slumped as much as 21 per cent when it listed on February 11 as a global sell-off in equities dried up appetite for new shares. The rout prompted Indian companies to scrap Rs 7,200 crore of initial share sales.
India’s benchmark Sensitive Index declined 16 per cent from the day the IPO opened on January 15 until the day before listing. Reliance Power shares have never closed above Rs 450, the maximum offer price. Individual investors had to pay Rs 430 for each share in the IPO.
“I have been personally concerned by the notional losses to millions of our investors as a result of a dramatic adverse change in sentiment in global and domestic capital market after the pricing of our IPO,” Ambani said. “The board endorsed my concern and approved the bonus issue.”
The bonus issue will reduce the cost of acquiring Reliance Power shares to Rs 269 for individual investors, 40 per cent lower than the IPO price. For large shareholders, the rate will fall to Rs 281 a share, Ambani said.
Anil Ambani’s personal holding in Reliance Power will fall to 40 per cent from 45 per cent to enable Reliance Energy’s stake in the company to be maintained at 45 per cent. The dilution in his shareholding represents a “contribution” of Rs 5,000 crore in favour of investors in Reliance Energy and Reliance Power, Ambani said.
Business Standard adds: On whether this contribution attracted gift tax or not, corporate lawyers said the tax was not applicable to share transactions.
Reliance Power gained 7.5 per cent on February18, the most since listing, after the bonus plan was announced. The stock closed 1.2 per cent lower at Rs 416.85 in Mumbai trading on February 22.
The unit of Reliance Energy Ltd, India’s second-largest power producer, sold out its record Indian initial share sale in less than a minute. Anil Ambani embarked on the Reliance Power IPO following a break with brother Mukesh and the splitting up of the Reliance empire founded by father Dhirubhai Ambani.
Meanwhile, Reliance Power has sought an enquiry by the Securities and Exchange Board of India (Sebi), the market regulator, into “hammering” of the stock price, Ambani said.
“Seven Mauritius-based investors went on selling within 4 minutes of the listing even when the market was falling,” he said. “I can understand people selling when the price is rising. There’s more than meets the eye.”
The company plans to set up 13 plants with 28,200 Mw of generating capacity in five years, a third of India’s planned new projects. Ambani, who will use the money to fund his $28 billion plan, became the second-richest man in India after his Reliance Energy quadrupled in value last year.
The Anil Dhirubhai Ambani Group has filed to sell shares in Reliance Infratel Ltd, the transmission-tower unit of Reliance Communications Ltd, India’s second-largest operator of wireless services. The company plans to sell 89.1 million shares, or 10.1 per cent of Reliance Infratel, according to a release sent to the Bombay Stock Exchange on February 4.
“There’s no rethink on the IPO. We’re waiting to hear from Sebi,” Ambani said.
Market Watch
Stock Market Prediction
The stock market hardly had a chance to wake up to the opportunities before the Union Budget announcements for 2008-09.
The “irrational exuberance” of the third quarter of 2007-08 lost its steam early in January and the market is yet to recover fully from the wounds of the crash.
Easy money-driven rally is not on for Dalal Street now.
Apart from the consolation of remaining “technically” in a bull market, the equity street is still far from reflecting optimism.
Bulls have tenaciously kept the Sensex bound within a range for the past three weeks, but did not have the heart to step into another adventure, lest it might again turn sour.
This week, the last before the Budget, Dalal Street may remain sedate and let the chances of revaluations largely go by.
It'll be a green opening but as always. I'm expecting a two-sided movement again! Things are too volatile to even predict stuff now! One doesn't know whats gonna happen in the next hour.
But a green opening is expected because Asia will mirror America's strong closing on Friday.
The dramatic recovery in the US market in the last half an hour of trade on Friday could provide some respite to bulls across key Asian markets, including India, when trading resumes on Monday. The Dow Jones Industrial Average ended 96.72 points higher after trading weak for most part of the session on bailout reports of bond insurer Ambac, which guarantees more than $500 billion in debt.
Some Good news are moving around
HDFC-CBoP Merger( Swap Ratio 29:1)
Reliance Bonus
Corporate Announcement
Essar Shipping - Outcome of EGM
Essar Shipping Ltd has informed BSE that the members at the Extra Ordinary General Meeting (EGM) of the Company held on February 23, 2008, have approved the following by way of Special Resolutions:
1. Issue, offer and allotment of equity shares, FCCBs, GDRs etc., upto an aggregate amount not exceeding US$ 1 billion in terms of the resolution at item No. 1 of the notice of the EGM.
2. Change of name of the Company to Essar Ports & Logistics Ltd.
3. Ratification / enhancement of the loans / guarantee limits upto US$ 100,000,000.
Reliance Energy - Outcome of Board Meeting
Reliance Energy Ltd has informed BSE that the Board of Directors of the Company was held on February 24, 2008.The following media release issued by Reliance Power Ltd, which, inter alia, incorporates the decisions of Board of Reliance Energy Ltd, which is self explanatory:"Reliance Power Ltd has informed BSE that the Board of Directors of the Company at its meeting held on February 24, 2008, has approved a proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group (comprising of Reliance Energy Ltd. and the ADA Group), in the ratio of 3 shares for every 5 shares held, subject to necessary approvals.The proposed bonus offering will result in reduction of the cost of Reliance Power shares below the IPO price as follows:
Rs 269 per share for retail investors, 40% lower than the IPO price of Rs 430.
Rs 281 per share for other investors, 37% lower than the IPO price of Rs 450.
In a related development, Mr. Anil D Ambani, Chairman, Reliance ADA Group, on February 24, 2008 simultaneously announced a voluntary contribution of 2.6% of his shareholding in Reliance Power to Reliance Energy Ltd., to protect the Company from any dilution of its existing 45% stake in Reliance Power, as a result of the bonus proposal.
The stock market hardly had a chance to wake up to the opportunities before the Union Budget announcements for 2008-09.
The “irrational exuberance” of the third quarter of 2007-08 lost its steam early in January and the market is yet to recover fully from the wounds of the crash.
Easy money-driven rally is not on for Dalal Street now.
Apart from the consolation of remaining “technically” in a bull market, the equity street is still far from reflecting optimism.
Bulls have tenaciously kept the Sensex bound within a range for the past three weeks, but did not have the heart to step into another adventure, lest it might again turn sour.
This week, the last before the Budget, Dalal Street may remain sedate and let the chances of revaluations largely go by.
It'll be a green opening but as always. I'm expecting a two-sided movement again! Things are too volatile to even predict stuff now! One doesn't know whats gonna happen in the next hour.
But a green opening is expected because Asia will mirror America's strong closing on Friday.
The dramatic recovery in the US market in the last half an hour of trade on Friday could provide some respite to bulls across key Asian markets, including India, when trading resumes on Monday. The Dow Jones Industrial Average ended 96.72 points higher after trading weak for most part of the session on bailout reports of bond insurer Ambac, which guarantees more than $500 billion in debt.
Some Good news are moving around
HDFC-CBoP Merger( Swap Ratio 29:1)
Reliance Bonus
Corporate Announcement
Essar Shipping - Outcome of EGM
Essar Shipping Ltd has informed BSE that the members at the Extra Ordinary General Meeting (EGM) of the Company held on February 23, 2008, have approved the following by way of Special Resolutions:
1. Issue, offer and allotment of equity shares, FCCBs, GDRs etc., upto an aggregate amount not exceeding US$ 1 billion in terms of the resolution at item No. 1 of the notice of the EGM.
2. Change of name of the Company to Essar Ports & Logistics Ltd.
3. Ratification / enhancement of the loans / guarantee limits upto US$ 100,000,000.
Reliance Energy - Outcome of Board Meeting
Reliance Energy Ltd has informed BSE that the Board of Directors of the Company was held on February 24, 2008.The following media release issued by Reliance Power Ltd, which, inter alia, incorporates the decisions of Board of Reliance Energy Ltd, which is self explanatory:"Reliance Power Ltd has informed BSE that the Board of Directors of the Company at its meeting held on February 24, 2008, has approved a proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group (comprising of Reliance Energy Ltd. and the ADA Group), in the ratio of 3 shares for every 5 shares held, subject to necessary approvals.The proposed bonus offering will result in reduction of the cost of Reliance Power shares below the IPO price as follows:
Rs 269 per share for retail investors, 40% lower than the IPO price of Rs 430.
Rs 281 per share for other investors, 37% lower than the IPO price of Rs 450.
In a related development, Mr. Anil D Ambani, Chairman, Reliance ADA Group, on February 24, 2008 simultaneously announced a voluntary contribution of 2.6% of his shareholding in Reliance Power to Reliance Energy Ltd., to protect the Company from any dilution of its existing 45% stake in Reliance Power, as a result of the bonus proposal.
HDFC-CBoP MERGER
Boards of HDFC Bank and Centurion Bank of Punjab (CBoP) on Saturday agreed to merge to form a joint entity. The share-swap ratio for the merger will be decided by both the boards on Monday, after getting the valuation report. They will meet again on February 28 to finalise the details of the merger, a joint statement from the lenders said. "The two Boards have resolved to pursue the merger subject to satisfactory due diligence, a fair share-swap ratio and all the requisite statutory, regulatory and corporate approvals," said a statement issued by both the banks. It is understood that configuration of board and other issues will be decided on February 28. However, a banking source said the swap ratio will be fixed in the vicinity of 25:1. That means, for every 25 shares of Re 1 each of CBoP, one share of HDFC bank will be given. Ernst & Young and Dalal & Shah have been appointed to determine the share swap ratio, HDFC Bank said in a statement. The merger will create a bank with 1,148 branches, surpassing second largest bank ICICI Bank with 955 branches. CBoP has 394 branches and HDFC Bank 754 branches as on Dec 31 2007, the statement said. The merger will increase the number of customers of HDFC Bank from existing level of 10 million to 12.5 million. Both HDFC Bank and Centurion Bank got the license in mid-nineties along with IDBI Bank, UTI Bank, Global Trust Bank, Times Bank and Bank of Punjab, when government liberalised its banking policy. Later Times Bank was merged with HDFC Bank in 2000. And, when Centurion Bank faced financial crisis in 2003, it was rescued by Sabre Capital of Rana Talwar, who earlier headed Standard Chartered Bank’s global operations. After restructuring the capital of Centurion Bank, Talwar successfully completed two merger deals to strengthen the bank. First Bank of Punjab was merged with the bank in 2005 and later Lord Krishna Bank in August 2007. At present, Bank Muscat owns 14.02% and Sabre Capital 3.74% in CBoP. Centurion Bank shares, which ended one percent down on Friday valuing the bank at Rs 10,500 crore, have risen 13% since Wednesday close. During same period, HDFC Bank's stocks lost 4%. Once the two banks iron out the merger process, they will approach the RBI for approval. However, it is understood that both the institutions have already taken informal permission from the central bank.
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