Consumer confidence fell in July on concerns about jobs and business conditions, following a sharp decline in June, the Conference Board reported Tuesday.
July's consumer confidence index fell to 50.4 -- the lowest level since February -- from an upwardly revised 54.3 in June.
"Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves," said Lynn Franco, director of the Conference Board's consumer research center, in a statement.
"Given consumers' heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season."
July's confidence reading should be closer to 90 than 50, given how long the economy has been recovering, Dan Greenhaus, chief economic strategist with Miller Tabak, wrote in a research note.
"While July provides some measure of stability for this index following the exceptionally large drop in June, by any measure, consumer confidence remains extraordinarily depressed in comparison to previous readings," Greenhaus wrote.
Consumers' view of current conditions fell in July, as did their short-term outlook.
The present-situation index fell to 26.1 in July, the lowest level since March, from 26.8 in June. Those saying present business conditions are "bad" rose to 43.6% in July from 41% in June, while those saying jobs are "hard to get" rose to 45.8% from 43.5%.
The expectations index fell to 66.6 in July, hitting the lowest level since February, from 72.7 in June. Those expecting business conditions in six months to be "worse" rose to 15.7% in July from 13.9% in June, while those expecting more jobs fell to 14.3% from 16.2%, and those expected a decrease of income rose to 17.5% from 16.8%.
Buying plans have been affected, according to the Conference Board. Those with plans to buy a home within six months fell to 1.9% in July from 2% in June. However, those with plans to buy an automobile rose to 4.5% from 4.1%, and those planning to buy major appliances rose to 28.5% from 23.7%.
Earlier this month the government reported that nonfarm payrolls fell 125,000 in June, with weak private-sector hiring.
Tuesday, July 27, 2010
RBI raises rates for fourth time this year
The Reserve Bank of India on Tuesday raised its key policy rates for the fourth time this year, taking more steps to tame rising prices amid a strong rebound in the economy.
As widely expected, the RBI raised the repo rate by 25 basis points (bps) to 5. 75 per cent in its credit policy review. But the reverse repo rate has been hiked by a slightly higher-than-expected 50 bps to 4.5 per cent. The cash reserve ratio has been kept unchanged at 6 per cent.
One basis point is one-hundredth of a percentage point. The repo rate is the rate at which the RBI infuses cash into the system or banks borrow from the RBI. The reverse repo rate is the rate at which the central bank drains cash from the banking system, or the rate at which banks lend to the RBI.
In an NDTV poll, 12 out of 15 bankers expected a 25 bps hike in repo and reverse repo rates.
Since the RBI did not spring any negative surprise by going for a steep rate hike, Indian markets reacted mildly positively to the rate hike announcement. It was trading flat-to-positive in the early noon trade.
The RBI said that the rate hikes will help to rein in demand pressures and moderate inflation. The central bank also raised its economic growth target for FY11 to 8.5 vs 8 per cent earlier.
Earlier this month on July 2, the RBI in an unscheduled move had raised the key rates by 25 bps to tame inflation, which is still in double-digits, led by high food prices. Inflation for June stood at 10.55 per cent and it is expected to stay in double-digits at least for another couple of months. The July inflation is likely to move further up as the full impact of the oil price hike which was effective from June 25 would be felt during the month.
Despite a sharp rebound in the domestic economy, the RBI has refrained from steep hikes, partly due to an optimistic inflation outlook and fears that a big rise in interest rates will derail the economic recovery process. The tight liquidity in the banking system also had a bearing on its decisions.
Prime Minister Manmohan Singh recently said that expects inflation to ease and reach 6 per cent by December. The government hopes that a normal monsoon will boost supplies of summer-sown crops and help bring down food prices.
"Going by the progress of the monsoon so far, agricultural output is expected to be better than last year. Lead indicators for services activities suggest continuation of the growth momentum," the Reserve Bank said in its Macroeconomic and Monetary Developments: First Quarter Review 2010-11, which was released on Monday.
It cited the prospect of a better Kharif output than last year, buoyancy in the industrial sector, notwithstanding the moderation in May and a significant pick-up in investment demand as major factors giving a positive growth outlook.
As widely expected, the RBI raised the repo rate by 25 basis points (bps) to 5. 75 per cent in its credit policy review. But the reverse repo rate has been hiked by a slightly higher-than-expected 50 bps to 4.5 per cent. The cash reserve ratio has been kept unchanged at 6 per cent.
One basis point is one-hundredth of a percentage point. The repo rate is the rate at which the RBI infuses cash into the system or banks borrow from the RBI. The reverse repo rate is the rate at which the central bank drains cash from the banking system, or the rate at which banks lend to the RBI.
In an NDTV poll, 12 out of 15 bankers expected a 25 bps hike in repo and reverse repo rates.
Since the RBI did not spring any negative surprise by going for a steep rate hike, Indian markets reacted mildly positively to the rate hike announcement. It was trading flat-to-positive in the early noon trade.
The RBI said that the rate hikes will help to rein in demand pressures and moderate inflation. The central bank also raised its economic growth target for FY11 to 8.5 vs 8 per cent earlier.
Earlier this month on July 2, the RBI in an unscheduled move had raised the key rates by 25 bps to tame inflation, which is still in double-digits, led by high food prices. Inflation for June stood at 10.55 per cent and it is expected to stay in double-digits at least for another couple of months. The July inflation is likely to move further up as the full impact of the oil price hike which was effective from June 25 would be felt during the month.
Despite a sharp rebound in the domestic economy, the RBI has refrained from steep hikes, partly due to an optimistic inflation outlook and fears that a big rise in interest rates will derail the economic recovery process. The tight liquidity in the banking system also had a bearing on its decisions.
Prime Minister Manmohan Singh recently said that expects inflation to ease and reach 6 per cent by December. The government hopes that a normal monsoon will boost supplies of summer-sown crops and help bring down food prices.
"Going by the progress of the monsoon so far, agricultural output is expected to be better than last year. Lead indicators for services activities suggest continuation of the growth momentum," the Reserve Bank said in its Macroeconomic and Monetary Developments: First Quarter Review 2010-11, which was released on Monday.
It cited the prospect of a better Kharif output than last year, buoyancy in the industrial sector, notwithstanding the moderation in May and a significant pick-up in investment demand as major factors giving a positive growth outlook.
Sunday, July 25, 2010
POLL - RBI likely to lift rates by 25 bps next week
REUTERS FORECAST: A majority of economists expect the Reserve Bank of India (RBI) to raise key interest rates by 25 basis points in its quarterly review on July 27 and tighten policy further in coming quarters, a new Reuters poll showed.
While headline inflation has been in double-digits for five months running and economic growth is expected to reach 8.5 percent this year, tight liquidity and continued uncertainty about global recovery are expected to prevent the Reserve Bank of India (RBI) from tightening policy more aggressively.
The RBI has raised rates three times this year by 25 basis points each, most recently in an unexpected move on July 2.
"My sense is unless we see a strong pick up in domestic demand both for credit, investment and for the economic activity in general, we might see a little bit of a softer approach towards policy tightening than initially thought," said Saugata Bhattacharya, an economist with Axis Bank in Mumbai.
Most economists have not changed their expectations from a Reuters poll on July 5 that the RBI would raise the repo rate, at which it lends to banks, by another 50 basis points to 6.0 percent by end of December.
They expect the RBI to raise the reverse repo rate, at which it absorbs excess cash from the banking system, by 50 basis points by end-December.
Tight liquidity since early June has led economists to expect no change in the cash reserve ratio (CRR), the percentage of cash banks must keep in reserve with the RBI by end-December, compared with a 50 basis point rise expected in the July 5 poll.
Of 12 economists in the new survey who were also part of the previous poll, two have lowered their expectations on rate increases for the rest of the year, while three expect the RBI to tighten more aggressively than earlier forecast.
Twelve economists said the RBI's policy tightening in recent quarters was appropriate, while four said the RBI should tighten more aggressively.
Most economists polled expect the repo rate to remain the RBI's operative rate by the end of September, a sign that they expect tight cash conditions to persist. The RBI has allowed cash conditions to remain tight in recent weeks, which helps dampen inflation expectations.
Economists were almost evenly split on whether the repo or reverse repo would be the operative rate by the end of December.
REPO:
Seventeen of 20 economists expect the RBI to raise the repo rate in the July 27 policy review by a quarter-point to 5.75 percent. By the end of December, 10 economists expect a total of 50 basis points in increases in the repo rate and five expect 75 basis points of increase.
By the end of the fiscal year in March, nine economists predict a 75 basis point rise in the repo rate, five expect a 100 basis point increase, two expect 50 basis points and one expects 150 basis points of increase.
REVERSE REPO:
Eighteen of 20 economists expect the RBI to raise the reverse repo rate on July 27, with a median forecast of 4.25 percent, in line with the July 5 poll, from 4 percent. Ten economists expect the rate to be 4.50 percent at the end of December, and five expect the rate to reach 4.75 percent at the end of 2010.
By the end of the fiscal year in March 2011, nine respondents see a 75 basis point increase in the reverse repo rate, and five see a 100 basis point rise.
CASH RESERVE RATIO:
None of the 17 economists foresee a change in the CRR in the July 27 review, in line with the last poll.
The median forecast for the end of December is 6.0 percent, the same level it has held since April 24, compared with 6.5 percent in the July 5 poll. However, none of those who participated in both surveys changed their forecast.
By the end of March, nine economists expects no change in CRR, and three expect a 50 basis point rise.
FACTORS TO WATCH:
-- Wholesale prices in June rose 10.55 percent from a year earlier, marginally below the median forecast for a 10.8 percent rise in a Reuters survey and compared with May's pace of 10.16 percent.
-- The fuel price index rose 14.27 percent in the year to July 3, compared with the previous week's 18.02 percent, while food price index rose an annual 12.81 percent, from 12.63 percent reading in the previous week.
-- Industrial output in May grew at a slower-than-expected 11.5 percent from a year earlier, helped by robust domestic consumer demand, expanding exports, and higher infrastructure spending.
MARKET IMPACT: Traders have discounted a 25 basis point increase in interest rates by the RBI in the July review, but traders said a 50 basis point rise could see the benchmark 10-year bond rise to 7.80 percent, from 7.65 percent now.
A half percentage point increase in policy rates may also push up the one-year overnight indexed swap to 6.20 percent, from 5.86 percent now.
While headline inflation has been in double-digits for five months running and economic growth is expected to reach 8.5 percent this year, tight liquidity and continued uncertainty about global recovery are expected to prevent the Reserve Bank of India (RBI) from tightening policy more aggressively.
The RBI has raised rates three times this year by 25 basis points each, most recently in an unexpected move on July 2.
"My sense is unless we see a strong pick up in domestic demand both for credit, investment and for the economic activity in general, we might see a little bit of a softer approach towards policy tightening than initially thought," said Saugata Bhattacharya, an economist with Axis Bank in Mumbai.
Most economists have not changed their expectations from a Reuters poll on July 5 that the RBI would raise the repo rate, at which it lends to banks, by another 50 basis points to 6.0 percent by end of December.
They expect the RBI to raise the reverse repo rate, at which it absorbs excess cash from the banking system, by 50 basis points by end-December.
Tight liquidity since early June has led economists to expect no change in the cash reserve ratio (CRR), the percentage of cash banks must keep in reserve with the RBI by end-December, compared with a 50 basis point rise expected in the July 5 poll.
Of 12 economists in the new survey who were also part of the previous poll, two have lowered their expectations on rate increases for the rest of the year, while three expect the RBI to tighten more aggressively than earlier forecast.
Twelve economists said the RBI's policy tightening in recent quarters was appropriate, while four said the RBI should tighten more aggressively.
Most economists polled expect the repo rate to remain the RBI's operative rate by the end of September, a sign that they expect tight cash conditions to persist. The RBI has allowed cash conditions to remain tight in recent weeks, which helps dampen inflation expectations.
Economists were almost evenly split on whether the repo or reverse repo would be the operative rate by the end of December.
REPO:
Seventeen of 20 economists expect the RBI to raise the repo rate in the July 27 policy review by a quarter-point to 5.75 percent. By the end of December, 10 economists expect a total of 50 basis points in increases in the repo rate and five expect 75 basis points of increase.
By the end of the fiscal year in March, nine economists predict a 75 basis point rise in the repo rate, five expect a 100 basis point increase, two expect 50 basis points and one expects 150 basis points of increase.
REVERSE REPO:
Eighteen of 20 economists expect the RBI to raise the reverse repo rate on July 27, with a median forecast of 4.25 percent, in line with the July 5 poll, from 4 percent. Ten economists expect the rate to be 4.50 percent at the end of December, and five expect the rate to reach 4.75 percent at the end of 2010.
By the end of the fiscal year in March 2011, nine respondents see a 75 basis point increase in the reverse repo rate, and five see a 100 basis point rise.
CASH RESERVE RATIO:
None of the 17 economists foresee a change in the CRR in the July 27 review, in line with the last poll.
The median forecast for the end of December is 6.0 percent, the same level it has held since April 24, compared with 6.5 percent in the July 5 poll. However, none of those who participated in both surveys changed their forecast.
By the end of March, nine economists expects no change in CRR, and three expect a 50 basis point rise.
FACTORS TO WATCH:
-- Wholesale prices in June rose 10.55 percent from a year earlier, marginally below the median forecast for a 10.8 percent rise in a Reuters survey and compared with May's pace of 10.16 percent.
-- The fuel price index rose 14.27 percent in the year to July 3, compared with the previous week's 18.02 percent, while food price index rose an annual 12.81 percent, from 12.63 percent reading in the previous week.
-- Industrial output in May grew at a slower-than-expected 11.5 percent from a year earlier, helped by robust domestic consumer demand, expanding exports, and higher infrastructure spending.
MARKET IMPACT: Traders have discounted a 25 basis point increase in interest rates by the RBI in the July review, but traders said a 50 basis point rise could see the benchmark 10-year bond rise to 7.80 percent, from 7.65 percent now.
A half percentage point increase in policy rates may also push up the one-year overnight indexed swap to 6.20 percent, from 5.86 percent now.
India develops world's cheapest "laptop" at $35
(Reuters) - India has come up with the world's cheapest "laptop," a touch-screen computing device that costs $35.
India's Human Resource Development Minister Kapil Sibal this week unveiled the low-cost computing device that is designed for students, saying his department had started talks with global manufacturers to start mass production.
"We have reached a (developmental) stage that today, the motherboard, its chip, the processing, connectivity, all of them cumulatively cost around $35, including memory, display, everything," he told a news conference.
He said the touchscreen gadget was packed with Internet browsers, PDF reader and video conferencing facilities but its hardware was created with sufficient flexibility to incorporate new components according to user requirement.
Sibal said the Linux based computing device was expected to be introduced to higher education institutions from 2011 but the aim was to drop the price further to $20 and ultimately to $10.
The device was developed by research teams at India's premier technological institutes, the Indian Institute of Technology and the Indian Institute of Science.
India spends about three percent of its annual budget on school education and has improved its literacy rates to over 64 percent of its 1.2 billion population but studies have shown many students can barely read or write and most state-run schools have inadequate facilities.
India's Human Resource Development Minister Kapil Sibal this week unveiled the low-cost computing device that is designed for students, saying his department had started talks with global manufacturers to start mass production.
"We have reached a (developmental) stage that today, the motherboard, its chip, the processing, connectivity, all of them cumulatively cost around $35, including memory, display, everything," he told a news conference.
He said the touchscreen gadget was packed with Internet browsers, PDF reader and video conferencing facilities but its hardware was created with sufficient flexibility to incorporate new components according to user requirement.
Sibal said the Linux based computing device was expected to be introduced to higher education institutions from 2011 but the aim was to drop the price further to $20 and ultimately to $10.
The device was developed by research teams at India's premier technological institutes, the Indian Institute of Technology and the Indian Institute of Science.
India spends about three percent of its annual budget on school education and has improved its literacy rates to over 64 percent of its 1.2 billion population but studies have shown many students can barely read or write and most state-run schools have inadequate facilities.
JFE plans $1bn Indian steelmaker stake
JFE Holdings, the Japanese steelmaker, plans to invest about $1bn in India’s JSW Steel for a minority stake, according to two people close to the matter.
The deal is expected to be announced on July 27 when JSW, which has a market value of $4.8bn, reports first-quarter results.
An investment by JFE, the world’s sixth-largest steel producer, is the latest in a string of Japanese companies investing in fast-growing emerging markets to offset anaemic growth at home and an expected slowdown in Europe.
Last week, the Japanese carmakers Toyota and Nissan announced a combined $1.2bn of investments to bolster their presence in Latin America. Earlier this month, Sumitomo, the large trading house, signed a $1.9bn deal in Brazil for a stake in an iron ore mining venture.
The overall value of merger and acquisitions in emerging markets by Japanese companies so far this year has risen to $8.58bn, exceeding 2009’s total of $7.9bn, according to Dealogic.
JFE and JSW had been discussing plans to deepen ties since November, when they agreed to cooperate on boosting steel production to meet India’s voracious demand for the metal, said a person close to the matter.
Japanese carmakers such as Toyota and Nissan have a large manufacturing presence in India, the second-fastest growing auto market after China, and JFE aims to target their increasing demand for steel there.
For JSW, analysts in Mumbai said that JFE’s investment would help the highly indebted Indian steelmaker ease its debt exposure.
It would enable the steelmaker “to create more high-value products that JSW had in the pipeline but couldn’t develop due to its debt constraints,” said Sanjay Jain, a steel analyst at Motial Oswal.
India’s steel market is growing at about 10 per cent annually and per capita steel consumption is about 40kg a year compared with the global average of 150kg a year.
The deal is expected to be announced on July 27 when JSW, which has a market value of $4.8bn, reports first-quarter results.
An investment by JFE, the world’s sixth-largest steel producer, is the latest in a string of Japanese companies investing in fast-growing emerging markets to offset anaemic growth at home and an expected slowdown in Europe.
Last week, the Japanese carmakers Toyota and Nissan announced a combined $1.2bn of investments to bolster their presence in Latin America. Earlier this month, Sumitomo, the large trading house, signed a $1.9bn deal in Brazil for a stake in an iron ore mining venture.
The overall value of merger and acquisitions in emerging markets by Japanese companies so far this year has risen to $8.58bn, exceeding 2009’s total of $7.9bn, according to Dealogic.
JFE and JSW had been discussing plans to deepen ties since November, when they agreed to cooperate on boosting steel production to meet India’s voracious demand for the metal, said a person close to the matter.
Japanese carmakers such as Toyota and Nissan have a large manufacturing presence in India, the second-fastest growing auto market after China, and JFE aims to target their increasing demand for steel there.
For JSW, analysts in Mumbai said that JFE’s investment would help the highly indebted Indian steelmaker ease its debt exposure.
It would enable the steelmaker “to create more high-value products that JSW had in the pipeline but couldn’t develop due to its debt constraints,” said Sanjay Jain, a steel analyst at Motial Oswal.
India’s steel market is growing at about 10 per cent annually and per capita steel consumption is about 40kg a year compared with the global average of 150kg a year.
Seven banks fail EU stress tests
Europe took a further step towards restoring confidence in its banking system on Friday as it published the results of stress tests into the region’s leading financial institutions, showing that only seven of 91 banks failed to meet its capital requirements.
However, investors signalled their distrust of the assumptions underlying the tests and the surprisingly small number of banks to fail the tests.
Five of the seven were cajas, Spanish savings banks, sparking nervousness that the pan-European exercise that Madrid had championed might backfire.
The Bank of Spain on Friday indicated that it had sufficient contingent liquidity measures in place to reassure caja customers and counter any threat of a run on these banks.
The Committee of European Banking Supervisors, which oversaw the tests, identified a capital shortfall of €3.5bn at the seven banks that failed to reach the pass mark of a 6 per cent tier one capital ratio.
The test involved modelling macroeconomic and sovereign debt stresses over 2010 and 2011, applied to end-2009 capital levels.
Germany’s Hypo Real Estate and Greece’s ATEbank were the only non-Spanish institutions to fail.
Among the near-fails, which analysts say could come under pressure to raise capital soon, were Italy’s Monte dei Paschi, on 6.2 per cent, Allied Irish Banks, on 6.5 per cent, and Germany’s Postbank, on 6.6 per cent.
A handful of some of Europe’s most-stretched banks announced a combined €1.3bn of capital raisings on Friday, just hours before regulators divulged the results of the test, although two of them – National Bank of Greece and Slovenia’s NLB – both passed.
The third, Cívica, a caja based in northern Spain that failed the test, secured €450m of convertible bond finance from JC Flowers, the US buy-out firm that has a record of investing in troubled banks.
That marked the first time a caja had sought outside capital, following a liberalisation of the law governing the public sector institutions.
Among the top-rated banks in the tests was Barclays, the UK bank whose baseline tier one ratio of 13 per cent at the end of last year, rises under the stress scenario to 13.7 per cent by end-2011.
The two-month long test exercise has been closely scrutinised by investors, with growing scepticism in the markets that the parameters of the stress scenarios were insufficiently tough.
Germany also upset the pan-European exercise at the last minute by saying its banks would be disclosing the full details of sovereign debt holdings – an adjunct to the stress tests that all banks had been expected to comply with – only on a voluntary basis.
At least six German banks – including Deutsche Bank, Postbank, HRE and DZ Bank – did not publish sovereign holdings on Friday night.
“Arguably the failure here is not the banks concerned but the test itself,” said Richard Cranfield, chairman of the global corporate group at Allen & Overy, the law firm.
“There is little evidence that the tests have been applied consistently and there is a distinct lack of credibility, making this a wasted opportunity.
“One assumes those banks that have failed will be rescued or recapitalised. However, the banks that have scraped through may have more of a challenge on their hands and they may be the ones the market focuses on,” he said.
But European regulators hailed the results of the tests – which they said were three times as tough as last year’s US ones – as proof of the strength of the industry.
“The US did its tests before all its banks had recapitalised,” said Christian Noyer, governor of the Banque de France.
“European banks have now been through recapitalisations, restructurings, cleaning out of their portfolios. We’re arriving after the battle. A few years ago it would have been different,” he said.
However, investors signalled their distrust of the assumptions underlying the tests and the surprisingly small number of banks to fail the tests.
Five of the seven were cajas, Spanish savings banks, sparking nervousness that the pan-European exercise that Madrid had championed might backfire.
The Bank of Spain on Friday indicated that it had sufficient contingent liquidity measures in place to reassure caja customers and counter any threat of a run on these banks.
The Committee of European Banking Supervisors, which oversaw the tests, identified a capital shortfall of €3.5bn at the seven banks that failed to reach the pass mark of a 6 per cent tier one capital ratio.
The test involved modelling macroeconomic and sovereign debt stresses over 2010 and 2011, applied to end-2009 capital levels.
Germany’s Hypo Real Estate and Greece’s ATEbank were the only non-Spanish institutions to fail.
Among the near-fails, which analysts say could come under pressure to raise capital soon, were Italy’s Monte dei Paschi, on 6.2 per cent, Allied Irish Banks, on 6.5 per cent, and Germany’s Postbank, on 6.6 per cent.
A handful of some of Europe’s most-stretched banks announced a combined €1.3bn of capital raisings on Friday, just hours before regulators divulged the results of the test, although two of them – National Bank of Greece and Slovenia’s NLB – both passed.
The third, Cívica, a caja based in northern Spain that failed the test, secured €450m of convertible bond finance from JC Flowers, the US buy-out firm that has a record of investing in troubled banks.
That marked the first time a caja had sought outside capital, following a liberalisation of the law governing the public sector institutions.
Among the top-rated banks in the tests was Barclays, the UK bank whose baseline tier one ratio of 13 per cent at the end of last year, rises under the stress scenario to 13.7 per cent by end-2011.
The two-month long test exercise has been closely scrutinised by investors, with growing scepticism in the markets that the parameters of the stress scenarios were insufficiently tough.
Germany also upset the pan-European exercise at the last minute by saying its banks would be disclosing the full details of sovereign debt holdings – an adjunct to the stress tests that all banks had been expected to comply with – only on a voluntary basis.
At least six German banks – including Deutsche Bank, Postbank, HRE and DZ Bank – did not publish sovereign holdings on Friday night.
“Arguably the failure here is not the banks concerned but the test itself,” said Richard Cranfield, chairman of the global corporate group at Allen & Overy, the law firm.
“There is little evidence that the tests have been applied consistently and there is a distinct lack of credibility, making this a wasted opportunity.
“One assumes those banks that have failed will be rescued or recapitalised. However, the banks that have scraped through may have more of a challenge on their hands and they may be the ones the market focuses on,” he said.
But European regulators hailed the results of the tests – which they said were three times as tough as last year’s US ones – as proof of the strength of the industry.
“The US did its tests before all its banks had recapitalised,” said Christian Noyer, governor of the Banque de France.
“European banks have now been through recapitalisations, restructurings, cleaning out of their portfolios. We’re arriving after the battle. A few years ago it would have been different,” he said.
EU Bank Stress Tests Fail to Reassure Investors Wary of Capital Criteria
European regulators found that seven banks need to raise a combined 3.5 billion euros ($4.5 billion) of capital, underwhelming analysts who said the stress tests may not have been strict enough.
“The amount of capital needed is much lower than the market expected,” said Mike Lenhoff, chief strategist at London-based Brewin Dolphin Securities Ltd., which oversees $33 billion. “It seems quite trivial considering the concerns about losses from the sovereign crisis.”
Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks didn’t have adequate reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said yesterday. The banks that failed the stress tests are in “close contact” with national authorities over how they will raise capital, said the Committee of European Banking Supervisors, which ran the assessments of 91 lenders.
European governments are using their first coordinated stress tests to reassure investors about the health of financial institutions after the debt crisis pummeled the bonds of Greece, Spain and Portugal. Rising budget deficits in those countries raised concern that they won’t be able to pay their debts.
“This is not reassuring at all,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “These tests were set in such a way that most of them would pass. That doesn’t say to me that the banking system is stable.”
‘Not Very Rigorous’
Before the results were published yesterday, analysts at Goldman Sachs Group Inc. estimated that lenders would need to raise 38 billion euros and Barclays Capital said they would require as much as 85 billion euros. Tests carried out in the U.S. last year found that 10 lenders, including Bank of America Corp. and Citigroup Inc., needed $74.6 billion.
“I don’t think the market is so stupid as to think that they were so wrong,” said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, which oversees about $57 billion. “The right explanation here is that the testing was not very rigorous.”
European banks have already raised 220 billion euros in the past 18 months, Credit Suisse Group AG analysts said in a report this week. With that amount already raised, it was likely that most European banks would pass the tests, the analysts said.
Trading Books
Analysts and investors said the European tests may not have been strict enough because they ignored the majority of banks’ holdings of sovereign debt. The evaluations took into account potential losses only on government bonds the banks trade, rather than those they are holding until maturity, CEBS said.
Lenders hold about 90 percent of their Greek government bonds in their banking book and 10 percent in their trading book, according to a survey by Morgan Stanley analysts led by Huw van Steenis. They have to write down the value of bonds in their banking book only if there is serious doubt about a state’s ability to repay in full or make interest payments.
“The long-awaited stress tests do not seem to have been that stressful,” Gary Jenkins, an analyst at Evolution Securities Ltd. in London, wrote in a note to clients. “The majority of these bonds are held on the banking books.”
The European Central Bank said banks that failed the stress tests should seek to raise capital from investors before turning to national governments. Spain and Greece both moved to support their lenders that require capital.
Greek Rights Offering
“The ECB welcomes the commitment made by national authorities with regard to back-stop facilities to recapitalize the institutions that may have fallen below the minimum threshold of 6 percent,” the ECB said in a statement.
Agricultural Bank of Greece, the only one of the nation’s lenders to flunk, said it’s preparing a rights offering after posting a shortfall of 242.6 million euros. The government, which owns 77 percent of the bank, said it will take part in the share sale.
Hypo Real Estate, the German commercial-property lender rescued by the government during the financial crisis, had a capital shortfall of about 1.25 billion euros. An “immediate need for capital would arise only if the hypothetical stress scenario actually did materialize,” the Bundesbank and financial regulator BaFin said.
Spanish savings banks CajaSur; a group led by Caixa Catalunya; a group led by Caixa Sabadell; Caja Duero-Caja Espana; and Banca Civica all, posting a combined capital shortfall of 2 billion euros.
Stocks Little Changed
Bank of Spain Governor Miguel Angel Fernandez Ordonez said the central bank will set a deadline for the banks to raise capital privately before turning to public funds. Civica said yesterday it would raise 450 million euros by selling a convertible bond to U.S. leveraged buyout firm J.C. Flowers & Co.
The results of the U.S tests helped the Standard & Poor’s Financials Index jump 36 percent in the following seven months. The 54-member Bloomberg Europe Banks and Financial Services Index rose 0.1 percent yesterday.
“The seven that failed the tests were already banks that had failed or were in the watch list, and that says to me that these tests are not telling us anything we don’t already know,” Sri-Kumar said. “I don’t think the markets will buy it. We’ll have to wait until the Europe markets open on Monday.”
“The amount of capital needed is much lower than the market expected,” said Mike Lenhoff, chief strategist at London-based Brewin Dolphin Securities Ltd., which oversees $33 billion. “It seems quite trivial considering the concerns about losses from the sovereign crisis.”
Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks didn’t have adequate reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said yesterday. The banks that failed the stress tests are in “close contact” with national authorities over how they will raise capital, said the Committee of European Banking Supervisors, which ran the assessments of 91 lenders.
European governments are using their first coordinated stress tests to reassure investors about the health of financial institutions after the debt crisis pummeled the bonds of Greece, Spain and Portugal. Rising budget deficits in those countries raised concern that they won’t be able to pay their debts.
“This is not reassuring at all,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “These tests were set in such a way that most of them would pass. That doesn’t say to me that the banking system is stable.”
‘Not Very Rigorous’
Before the results were published yesterday, analysts at Goldman Sachs Group Inc. estimated that lenders would need to raise 38 billion euros and Barclays Capital said they would require as much as 85 billion euros. Tests carried out in the U.S. last year found that 10 lenders, including Bank of America Corp. and Citigroup Inc., needed $74.6 billion.
“I don’t think the market is so stupid as to think that they were so wrong,” said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, which oversees about $57 billion. “The right explanation here is that the testing was not very rigorous.”
European banks have already raised 220 billion euros in the past 18 months, Credit Suisse Group AG analysts said in a report this week. With that amount already raised, it was likely that most European banks would pass the tests, the analysts said.
Trading Books
Analysts and investors said the European tests may not have been strict enough because they ignored the majority of banks’ holdings of sovereign debt. The evaluations took into account potential losses only on government bonds the banks trade, rather than those they are holding until maturity, CEBS said.
Lenders hold about 90 percent of their Greek government bonds in their banking book and 10 percent in their trading book, according to a survey by Morgan Stanley analysts led by Huw van Steenis. They have to write down the value of bonds in their banking book only if there is serious doubt about a state’s ability to repay in full or make interest payments.
“The long-awaited stress tests do not seem to have been that stressful,” Gary Jenkins, an analyst at Evolution Securities Ltd. in London, wrote in a note to clients. “The majority of these bonds are held on the banking books.”
The European Central Bank said banks that failed the stress tests should seek to raise capital from investors before turning to national governments. Spain and Greece both moved to support their lenders that require capital.
Greek Rights Offering
“The ECB welcomes the commitment made by national authorities with regard to back-stop facilities to recapitalize the institutions that may have fallen below the minimum threshold of 6 percent,” the ECB said in a statement.
Agricultural Bank of Greece, the only one of the nation’s lenders to flunk, said it’s preparing a rights offering after posting a shortfall of 242.6 million euros. The government, which owns 77 percent of the bank, said it will take part in the share sale.
Hypo Real Estate, the German commercial-property lender rescued by the government during the financial crisis, had a capital shortfall of about 1.25 billion euros. An “immediate need for capital would arise only if the hypothetical stress scenario actually did materialize,” the Bundesbank and financial regulator BaFin said.
Spanish savings banks CajaSur; a group led by Caixa Catalunya; a group led by Caixa Sabadell; Caja Duero-Caja Espana; and Banca Civica all, posting a combined capital shortfall of 2 billion euros.
Stocks Little Changed
Bank of Spain Governor Miguel Angel Fernandez Ordonez said the central bank will set a deadline for the banks to raise capital privately before turning to public funds. Civica said yesterday it would raise 450 million euros by selling a convertible bond to U.S. leveraged buyout firm J.C. Flowers & Co.
The results of the U.S tests helped the Standard & Poor’s Financials Index jump 36 percent in the following seven months. The 54-member Bloomberg Europe Banks and Financial Services Index rose 0.1 percent yesterday.
“The seven that failed the tests were already banks that had failed or were in the watch list, and that says to me that these tests are not telling us anything we don’t already know,” Sri-Kumar said. “I don’t think the markets will buy it. We’ll have to wait until the Europe markets open on Monday.”
Monday, July 19, 2010
SEBI panel calls for sweeping changes in takeover norms
A twelve member panel of SEBI headed by C Achuthan and industry veterans like YM Deosthalee and Koushik Chatterjee on Monday submitted a fresh set of recommendations for takeovers including increasing the trigger limit for takeovers.
The panel has recommended sweeping changes to the country's takeover code, including raising the open offer trigger to 25 per cent from 15 per cent to prevent hostile takeovers and the open offer price will based on a 52-week average of the stock price.
NDTV Profit broke the takeover code story on Friday.
The takeover committee has also proposed to make it mandatory for the acquirer to make an offer for up to 100 per cent in the company – a move that will raise the cost for acquisition, but ensure that all shareholders especially retail investors participate in the open offer.
Among other recommendations is a cap of 10-75 per cent for voluntary offers from existing stake holders and to do away with non-compete fee – an attempt to bring more transparency since promoters of a target company will no longer get huge sums of money from the acquirer for not entering the same trade. The timeline of an open offer is also set to reduce to 57 days.
The panel also recommended that the offer price would be based on the volume weighted average of 12 weeks market price of the target company, against 26 weeks now.
Last September, the SEBI formed the Takeover Regulation Advisory Committee to review the takeover rules and make them more relevant. SEBI had last reviewed the code in 2002.
"These regulations will serve the capital markets for the next five to ten years," said CB Bhave, chairman of SEBI.
"An open offer ought to be for all shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small," C Achuthan, chairman of SEBI's Takeover Panel, said.
Most corporates have welcomed the move.
But there are worries too with takeovers getting more expensive. It remains to be seen what impact it will have on the size of takeovers in the country. Also, the cap for voluntary offers has been set at just 10 per cent and will this leave more room for manipulations? But members of the panel say these concerns have been addressed.
The final guidelines however are still a few months away. The recommendations of the takeover panel are open for public feedback till August 31 and only then will market regulator SEBI take a final call. However, looking at the representation that the committee has from SEBI, not much is likely to change.
Read more at: http://beta.profit.ndtv.com/news/show/sebi-panel-calls-for-sweeping-changes-in-takeover-norms-83392?cp
The panel has recommended sweeping changes to the country's takeover code, including raising the open offer trigger to 25 per cent from 15 per cent to prevent hostile takeovers and the open offer price will based on a 52-week average of the stock price.
NDTV Profit broke the takeover code story on Friday.
The takeover committee has also proposed to make it mandatory for the acquirer to make an offer for up to 100 per cent in the company – a move that will raise the cost for acquisition, but ensure that all shareholders especially retail investors participate in the open offer.
Among other recommendations is a cap of 10-75 per cent for voluntary offers from existing stake holders and to do away with non-compete fee – an attempt to bring more transparency since promoters of a target company will no longer get huge sums of money from the acquirer for not entering the same trade. The timeline of an open offer is also set to reduce to 57 days.
The panel also recommended that the offer price would be based on the volume weighted average of 12 weeks market price of the target company, against 26 weeks now.
Last September, the SEBI formed the Takeover Regulation Advisory Committee to review the takeover rules and make them more relevant. SEBI had last reviewed the code in 2002.
"These regulations will serve the capital markets for the next five to ten years," said CB Bhave, chairman of SEBI.
"An open offer ought to be for all shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small," C Achuthan, chairman of SEBI's Takeover Panel, said.
Most corporates have welcomed the move.
But there are worries too with takeovers getting more expensive. It remains to be seen what impact it will have on the size of takeovers in the country. Also, the cap for voluntary offers has been set at just 10 per cent and will this leave more room for manipulations? But members of the panel say these concerns have been addressed.
The final guidelines however are still a few months away. The recommendations of the takeover panel are open for public feedback till August 31 and only then will market regulator SEBI take a final call. However, looking at the representation that the committee has from SEBI, not much is likely to change.
Read more at: http://beta.profit.ndtv.com/news/show/sebi-panel-calls-for-sweeping-changes-in-takeover-norms-83392?cp
Sunday, July 18, 2010
First Browser with an Indian Origin - Epic
Bangalore based startup Hidden Reflex has announced the launch of its browser "Epic", which aims at making Indians all over the world proud.
Epic, which also happens to be the first entirely Indian made web browser, is based on the Mozilla platform and comes with quite a bunch of India centric features. We did take it for a short spin and we came out quite happy with it. Before we look at the details, let's look at details about Hidden Reflex, the company behind the browser.
The company was founded by the then U.S. based Engineer Alok Bhardwaj in 2007. However, the company is currently based in Bangalore. They initially had a team of three members and have now grown to quite a bunch of people who are working on two separate products. The first one, Epic, has already been launched. The other one is still in the making.Let's get back to the Epic browser now. After you install it, the first thing you notice is the bright colours of the browser. Epic is highly customizable and initially comes with a "Peacock" background that isn't too easy on the eyes. Of course you can change your background with any of the zillion ones provided by the browser or choose one of your own. Even at the launch, there are over 1,500 themes available and compatible with Epic. The browser has a host of applications on its sidebar from where you can launch them. These include Twitter, Facebook, and other similar services. Clicking on any of these icons will launch a widget like window on the side of the browser. The bad thing about this is that you can only open one such widget per window.
Epic also comes with anti-virus protection built-in - a first for any browser. It also supports a long list of Indian languages (currently 12) and an India content sidebar that aggregates news headlines, TV to live cricket commentary and other things that matters to us Indians. It also features a bunch of productivity applications that include a free word processor, video sidebar and my Computer Browser.
The Epic browser is now available for download from here.
Housing, Leading Index in U.S. Probably Slumped in Sign Recovery Slowing
The housing market took another step back in June as construction and purchases dropped, and a gauge of the outlook for growth signaled the expansion will lose steam, economists said before reports this week.
Builders began work on 580,000 houses last month at an annual rate, down 2.2 percent from May and the slowest pace this year, according to the median estimate of 61 economists surveyed by Bloomberg News before Commerce Department data due July 20. Other reports may show sales of existing homes decreased for a second month and the index of leading indicators declined for the first time in more than a year.
The expiration of a buyer tax credit has caused housing to retreat, showing the industry that precipitated the recession cannot sustain a recovery absent job growth. The financial turmoil caused by the European debt crisis has shaken confidence in the world’s largest economy, raising the risk that spending and employment will cool.
“At a minimum, we’re headed for a soft patch and possibly an extended period of slow growth,” said Julia Coronado, a senior economist at BNP Paribas in New York. “There is a lot of uncertainty about where housing goes from here. Now that we’re in the world ex-tax credits, it’s not clear how deep the pool of demand is for housing.”
Federal Reserve Chairman Ben S. Bernanke will deliver his semiannual report on the economy to members of Congress on July 21. Policy makers last month predicted the expansion will be too slow over the next two years to return to the 5 percent to 5.3 percent jobless rate that they consider full employment, according to minutes of the meeting released last week.
Fewer Permits
Housing’s inability to maintain a rebound is one reason the economic recovery is not gaining speed. Building permits, a sign of future construction, were little changed at a 575,000 annual pace, economists project the Commerce Department’s construction report will also show.
The projected drop in housing starts would follow a 10 percent decrease in May after the deadline to sign purchase agreements, and become eligible to receive a government credit worth as much as $8,000, lapsed on April 30.
Sales of existing homes fell to a 5.1 million annual rate in June from 5.66 million the prior month, economists forecast before a July 22 report from the National Association of Realtors. In April, purchases reached a 5.79 million pace, the highest level since the tax credit was originally due to expire in November.
Tax Credit
Existing sales, which are tallied when a deal closes, may still have been influenced by the government program last month since the closing deadline was June 30 for those meeting the April 30 signing cutoff. The closing deadline was extended this month to Sept. 30 to make sure prospective buyers have enough time to complete transactions.
Homebuilders turned even more pessimistic in July, the National Association of Home Builders/Wells Fargo confidence index on July 19 may show, according to economists surveyed. The index fell to 16 from 17 in June. Readings below 50 mean more respondents said conditions were poor.
Builders compete with inventories of existing homes that are expanding because of mounting foreclosures. Home seizures climbed 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last week, putting lenders on pace to claim more than 1 million properties this year.
KB Home, the U.S. homebuilder that targets first-time buyers, reported a wider-than-estimated loss and a drop in new orders in its second quarter.
Sales Unpredictable
“A lack of predictability in the overall sales environment will likely impact our full-year deliveries and could potentially extend our outlook for profitability,” KB Home Chief Executive Officer Jeffrey Mezger said June 25 in a conference call.
Home builders have underperformed the broader stock market this year. The Standard & Poor’s Supercomposite Homebuilder Index has fallen about 11 percent so far this year, compared with a 4.5 percent decline for the S&P 500 Index.
Housing indicators haven’t been the only ones showing weakness of late. Manufacturing contracted in June by the most in a year, figures from the Fed showed last week. Other reports showed retail sales fell for a second month and consumer sentiment this month declined to the lowest level in a year.
Firings remain elevated. A Labor Department report on jobless claims on July 22 may show initial claims rose to 445,000 last week from 429,000 the prior week, economists forecast.
The index of leading economic indicators probably fell 0.3 percent in June after rising 0.4 percent in May, according to economists’ estimates before the July 22 release of the Conference Board’s measure of the outlook for the next three to six months.
Analysts have been marking down growth forecasts this month. Economists at JPMorgan Chase & Co. in New York project the economy grew at a 2.1 percent pace from April through June, down from their 3.2 percent estimate in early July. They also reduced the average estimate for the second half of the year by a half percentage point to 2.75 percent.
Builders began work on 580,000 houses last month at an annual rate, down 2.2 percent from May and the slowest pace this year, according to the median estimate of 61 economists surveyed by Bloomberg News before Commerce Department data due July 20. Other reports may show sales of existing homes decreased for a second month and the index of leading indicators declined for the first time in more than a year.
The expiration of a buyer tax credit has caused housing to retreat, showing the industry that precipitated the recession cannot sustain a recovery absent job growth. The financial turmoil caused by the European debt crisis has shaken confidence in the world’s largest economy, raising the risk that spending and employment will cool.
“At a minimum, we’re headed for a soft patch and possibly an extended period of slow growth,” said Julia Coronado, a senior economist at BNP Paribas in New York. “There is a lot of uncertainty about where housing goes from here. Now that we’re in the world ex-tax credits, it’s not clear how deep the pool of demand is for housing.”
Federal Reserve Chairman Ben S. Bernanke will deliver his semiannual report on the economy to members of Congress on July 21. Policy makers last month predicted the expansion will be too slow over the next two years to return to the 5 percent to 5.3 percent jobless rate that they consider full employment, according to minutes of the meeting released last week.
Fewer Permits
Housing’s inability to maintain a rebound is one reason the economic recovery is not gaining speed. Building permits, a sign of future construction, were little changed at a 575,000 annual pace, economists project the Commerce Department’s construction report will also show.
The projected drop in housing starts would follow a 10 percent decrease in May after the deadline to sign purchase agreements, and become eligible to receive a government credit worth as much as $8,000, lapsed on April 30.
Sales of existing homes fell to a 5.1 million annual rate in June from 5.66 million the prior month, economists forecast before a July 22 report from the National Association of Realtors. In April, purchases reached a 5.79 million pace, the highest level since the tax credit was originally due to expire in November.
Tax Credit
Existing sales, which are tallied when a deal closes, may still have been influenced by the government program last month since the closing deadline was June 30 for those meeting the April 30 signing cutoff. The closing deadline was extended this month to Sept. 30 to make sure prospective buyers have enough time to complete transactions.
Homebuilders turned even more pessimistic in July, the National Association of Home Builders/Wells Fargo confidence index on July 19 may show, according to economists surveyed. The index fell to 16 from 17 in June. Readings below 50 mean more respondents said conditions were poor.
Builders compete with inventories of existing homes that are expanding because of mounting foreclosures. Home seizures climbed 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last week, putting lenders on pace to claim more than 1 million properties this year.
KB Home, the U.S. homebuilder that targets first-time buyers, reported a wider-than-estimated loss and a drop in new orders in its second quarter.
Sales Unpredictable
“A lack of predictability in the overall sales environment will likely impact our full-year deliveries and could potentially extend our outlook for profitability,” KB Home Chief Executive Officer Jeffrey Mezger said June 25 in a conference call.
Home builders have underperformed the broader stock market this year. The Standard & Poor’s Supercomposite Homebuilder Index has fallen about 11 percent so far this year, compared with a 4.5 percent decline for the S&P 500 Index.
Housing indicators haven’t been the only ones showing weakness of late. Manufacturing contracted in June by the most in a year, figures from the Fed showed last week. Other reports showed retail sales fell for a second month and consumer sentiment this month declined to the lowest level in a year.
Firings remain elevated. A Labor Department report on jobless claims on July 22 may show initial claims rose to 445,000 last week from 429,000 the prior week, economists forecast.
The index of leading economic indicators probably fell 0.3 percent in June after rising 0.4 percent in May, according to economists’ estimates before the July 22 release of the Conference Board’s measure of the outlook for the next three to six months.
Analysts have been marking down growth forecasts this month. Economists at JPMorgan Chase & Co. in New York project the economy grew at a 2.1 percent pace from April through June, down from their 3.2 percent estimate in early July. They also reduced the average estimate for the second half of the year by a half percentage point to 2.75 percent.
Earnings Continue to Beat Expectations - Why are Stocks Dropping?
Of the 28 major reports released yesterday and today there were only two that missed expectations. Almost all the reports beat the average analysts expectations over the last two days. That includes JP Morgan Chase (JPM), Citigroup (C), and Bank of America (BAC), three financial bell-weathers. So if things are so good why are stock prices so bad?
The answer comes down to expectations of the future. Since the end of June traders have been building prices back up on the expectation that the earnings reports this season won't be as bad as many feared a few months ago. However, now that the news is here, they are selling into the data and putting much more emphasis on the bearish future outlooks being released by many management teams. The banking stocks I mentioned above have all released very cautious statements about their future profits. The CEO of Bank of America said today during a call to shareholders that...
"we’re worried about slowing momentum as the year-over-year comparisons get harder as the second half of the year was strong with the consumer. And again, we continue to watch the housing market carefully and it stays in our focus. As we look on the loan demand side, it continues to remain weak. On the commercial side, the commercial customers remain conservative by holding large amounts of cash while waiting signs of sustained demand for their products before they need capital growth. There’s no loan demand because there’s no demand for the products.”
These are not good comments about the future. Wall Street profits tend to drive investor profits in general so an outlook like this by the CEO of one of the largest Wall Street firms will have a strong dampening impact on investors. Considering the early reaction to this earnings season we are targeting support on the major stock indexes again.
The answer comes down to expectations of the future. Since the end of June traders have been building prices back up on the expectation that the earnings reports this season won't be as bad as many feared a few months ago. However, now that the news is here, they are selling into the data and putting much more emphasis on the bearish future outlooks being released by many management teams. The banking stocks I mentioned above have all released very cautious statements about their future profits. The CEO of Bank of America said today during a call to shareholders that...
"we’re worried about slowing momentum as the year-over-year comparisons get harder as the second half of the year was strong with the consumer. And again, we continue to watch the housing market carefully and it stays in our focus. As we look on the loan demand side, it continues to remain weak. On the commercial side, the commercial customers remain conservative by holding large amounts of cash while waiting signs of sustained demand for their products before they need capital growth. There’s no loan demand because there’s no demand for the products.”
These are not good comments about the future. Wall Street profits tend to drive investor profits in general so an outlook like this by the CEO of one of the largest Wall Street firms will have a strong dampening impact on investors. Considering the early reaction to this earnings season we are targeting support on the major stock indexes again.
Saturday, July 17, 2010
FIIs lap up banking, healthcare scrips
With the economy set to grow at a scorching pace amid prolonged volatility in the market, foreign institutional investors (FIIs) have hiked exposure in banking and healthcare scrips for the quarter ended June 2010.
According to data, on a net basis, they have invested Rs 967 crore in Sensex (^BSESN : 17955.82 +46.36) firms and pulled out about Rs 7,123 crore from non-Sensex companies (largely mid-cap firms). This essentially shows that FIIs have largely been risk-averse in the past quarter.
FIIs have raised their stakes the most in companies such as Phillips Carbon (8.2%), Bank of Rajasthan (6.6%) and Srei Infrastructure Finance (6.23%). They have hiked stakes by more than 4% in GMR Infrastructure and Dhanalaxmi Bank and by more than 3% in Axis Bank, Zensar Technologies, Bajaj (BAJAJAUTO.NS : 2101.05 0) Finserv and South Indian Bank.
In terms of actual investments, FIIs have invested the most in State Bank of India (SBIN.NS : 2449 +9.15) (Rs 2,126 crore). They have also pumped in a sizeable amount in private sector banks like Axis Bank (Rs 1,776 crore), HDFC Bank (Rs 937 crore) and ICICI Bank (ICICIBANK.NS : 902.4 +20.55) (Rs 693 crore). Major Sensex firms in which they have invested substantially include HDFC (Rs 759 crore), Larsen & Toubro (Rs 645 crore) and Hero Honda (Rs 478 crore). Banks, with their larger weight in major indices, have been the clear favourites with FIIs. "The economy is on a firm footing and is set to grow by 8-9%. This will spur credit growth, which in turn will help the banking industry," said Andrew Holland, CEO - Equities, Ambit Capital. The 3G auction, which has eased the fiscal burden on the government, will also help the banking sector, feel experts.
Among Sensex firms, FIIs have invested Rs 5,839 crore in nine companies and pulled out Rs 4,872crore from six others. They have reduced their stakes in heavyweights like Tata Steel (TATASTL.BO : 509.2 -2.1) (4%), Maruti Suzuki (1.03%), Infosys Technologies (INFOSYS.BO : 2778.3 +19.35) (0.52%) and Reliance Industries (RELIANCE.NS : 1062.95 -10.5) (0.39%). The outlook for Tata Steel has been negative because commodity prices have taken a hit in the last quarter due to turmoil in global economy, reckon experts.
According to data, on a net basis, they have invested Rs 967 crore in Sensex (^BSESN : 17955.82 +46.36) firms and pulled out about Rs 7,123 crore from non-Sensex companies (largely mid-cap firms). This essentially shows that FIIs have largely been risk-averse in the past quarter.
FIIs have raised their stakes the most in companies such as Phillips Carbon (8.2%), Bank of Rajasthan (6.6%) and Srei Infrastructure Finance (6.23%). They have hiked stakes by more than 4% in GMR Infrastructure and Dhanalaxmi Bank and by more than 3% in Axis Bank, Zensar Technologies, Bajaj (BAJAJAUTO.NS : 2101.05 0) Finserv and South Indian Bank.
In terms of actual investments, FIIs have invested the most in State Bank of India (SBIN.NS : 2449 +9.15) (Rs 2,126 crore). They have also pumped in a sizeable amount in private sector banks like Axis Bank (Rs 1,776 crore), HDFC Bank (Rs 937 crore) and ICICI Bank (ICICIBANK.NS : 902.4 +20.55) (Rs 693 crore). Major Sensex firms in which they have invested substantially include HDFC (Rs 759 crore), Larsen & Toubro (Rs 645 crore) and Hero Honda (Rs 478 crore). Banks, with their larger weight in major indices, have been the clear favourites with FIIs. "The economy is on a firm footing and is set to grow by 8-9%. This will spur credit growth, which in turn will help the banking industry," said Andrew Holland, CEO - Equities, Ambit Capital. The 3G auction, which has eased the fiscal burden on the government, will also help the banking sector, feel experts.
Among Sensex firms, FIIs have invested Rs 5,839 crore in nine companies and pulled out Rs 4,872crore from six others. They have reduced their stakes in heavyweights like Tata Steel (TATASTL.BO : 509.2 -2.1) (4%), Maruti Suzuki (1.03%), Infosys Technologies (INFOSYS.BO : 2778.3 +19.35) (0.52%) and Reliance Industries (RELIANCE.NS : 1062.95 -10.5) (0.39%). The outlook for Tata Steel has been negative because commodity prices have taken a hit in the last quarter due to turmoil in global economy, reckon experts.
Cabinet approves symbol for Indian Rupee
BANGALORE: Now that the Indian rupee has an identity, the question is: how soon will our computer keyboards start reflecting it? Very quickly, it seems. Vendors say they will roll out the symbol as soon as the Bureau of Indian Standards (BIS) sets the guidelines, since it takes only a minor software change to incorporate it.
Techies say what is required is simple internal coding to assign an additional function to any one of the existing keys that currently holds a single function. The IT industry is awaiting standards from BIS on where and how the new function has to be allocated. "We are fully equipped to integrate the rupee symbol; it requires only a software code change. It would not take more than a production cycle, or about three months, once the standard guidelines for adoption of the same are introduced," said an HCL Infosystems spokesperson.
It would be interesting to see which single-function key (Insert, Page Up, Page Down, Delete or some function key) will bear the rupee symbol. According to S Rajendran, chief marketing officer, Acer India, technically it's an almost inconsequential issue.
Techies say what is required is simple internal coding to assign an additional function to any one of the existing keys that currently holds a single function. The IT industry is awaiting standards from BIS on where and how the new function has to be allocated. "We are fully equipped to integrate the rupee symbol; it requires only a software code change. It would not take more than a production cycle, or about three months, once the standard guidelines for adoption of the same are introduced," said an HCL Infosystems spokesperson.
It would be interesting to see which single-function key (Insert, Page Up, Page Down, Delete or some function key) will bear the rupee symbol. According to S Rajendran, chief marketing officer, Acer India, technically it's an almost inconsequential issue.
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