June 8 (Bloomberg) -- India delayed a decision to raise prices of fuels including gasoline and diesel on concern higher costs will stoke inflation, already running at the fastest clip among the Group of 20 nations. Shares of state refiners fell.
Ministers led by Finance Minister Pranab Mukherjee met yesterday to discuss a recommendation made by a panel in February that India free gasoline and diesel prices from state control and increase kerosene and cooking gas rates. The ministers are likely to reconvene in 10 days, Oil Secretary Sthanunathan Sundareshan told reporters in New Delhi.
Raising prices will help the government cut expenditure on fuel subsidies, which were 260 billion rupees ($5.5 billion) last year. India, which more than doubled prices of natural gas sold by state-run Oil & Natural Gas Corp. and Oil India Ltd. last month, is seeking to limit losses of state refiners that help cap inflation by selling fuels below cost.
“Sooner or later, they will have to take a call as they can’t allow refiners to continue to suffer losses indefinitely,” said Mridul Saggar, a Mumbai-based economist at Kotak Securities Ltd. “At this moment, political-economic compulsions are weighing on policy makers.”
The ministers concluded that further discussions are needed before they can reach a decision, according to a government statement yesterday.
Euro IV Fuels
The government increased auto fuel prices on Feb. 27 the first increase this year, after Finance Minister Mukherjee imposed import duty and excise tax on crude oil and refined products. State refiners were then allowed to raise rates on April 1 after they started selling Euro IV compliant motor fuels.
The current price of gasoline in Delhi is 47.93 rupees a liter, according to Indian Oil Corp.’s website. Diesel costs 38.10 rupees a liter.
Indian Oil, the nation’s biggest state-owned refiner, declined as much as 6 percent to 322.25 rupees in Mumbai trading today and was at 333.50 rupees at 9 a.m. local time. Bharat Petroleum Corp. fell 3.1 percent and Hindustan Petroleum Corp. dropped 2.7 percent. The benchmark Sensitive Index gained 0.2 percent.
Crude oil for July delivery climbed as much as 30 cents to $71.74 a barrel on the New York Mercantile Exchange, and was at $71.59 at 10:15 a.m. Singapore time. Crude has declined 13 percent this year, reducing revenue losses of Indian state refiners and giving the government room to raise prices by a smaller amount.
Inflation
Indian Oil is still hopeful that gasoline and diesel prices may be freed from government control, Chairman and Managing Director B.M. Bansal said in New Delhi yesterday. The refiner is losing 1.1 billion rupees a day on fuel sales, he said.
The inflation rate for industrial workers in India climbed more than 13 percent in April, while prices paid by farm workers rose about 15 percent. This compares with inflation rates of 2.2 percent in the U.S., 1.5 percent in the euro zone and 2.8 percent in China.
India’s Oil Minister Murli Deora said in May last year that he would seek Cabinet approval for lifting a cap on retail prices of gasoline and diesel.
India last removed prices of oil products from government control in April 2002, giving state-owned refiners freedom to set retail fuel prices twice a month. That stopped in December 2003 after the then Bharatiya Janata Party-led government barred them from raising rates before the May 2004 elections.
Chinese Refiners
Refiners in China, the world’s second-biggest oil user, are assured of profits because they can adjust gasoline and diesel prices when oil changes by 4 percent over 22 working days.
Indian refiners depend on government bonds and discounts on crude from ONGC and other state-run explorers to compensate for losses from selling fuels at fixed prices.
China cut gasoline prices by 230 yuan (34 cents) per ton and diesel by 220 yuan a ton starting June 1, the National Development and Reform Commission said.
India will support the Group of 20 leaders on withdrawing subsidies for fossil fuels “over time,” Shyam Saran, then the country’s special envoy on climate change, said during the Group of 20 meeting in Pittsburgh in September.
Monday, June 7, 2010
Asia shares rise as investors pick favourites
HONG KONG, June 8 – The euro bounced from a four-year low and Asian stocks rose on Tuesday as traders paused in their selloff of risky assets ahead of Chinese economic data and a European Central Bank meeting later in the week.
Fears about a spreading European sovereign debt crisis, a slowdown in China and a weak US job market have combined to sap investors’ willingness to take risks for higher returns, prompting them to dump global equities, high-yield bonds, the euro and emerging market currencies.
However, the euro has fallen 12 per cent so far in the second quarter – on track for the biggest quarterly decline since being launched in 1999 – and global equities are the cheapest since the latest bull market started in March 2009.
The pace of decline has enticed some buyers to sift through the market, with an eye for value.
Japan’s Nikkei share average rose 0.4 per cent while the MSCI Asia ex-Japan index added 0.6 per cent.
“We’re seeing cherry-picking of shares today. Caution pervades after the US market’s substantial losses and continued foreign selling, but investors are scooping up some shares that they’re bullish on in the longer-term,” said Kim Jeong-hoon, a market analyst at Korea Investment & Securities in Seoul.
The euro climbed 0.3 per cent to $1.1955, causing dealers to cover their bets against the currency and push it up from a four-year low of $1.1875 plumbed overnight.
Ben Bernanke, chairman of the Federal Reserve, offered his verbal support, saying European leaders were committed to ensuring the survival of the euro and have the means to support every heavily indebted member of the currency union.
After a policy meeting on Thursday, ECB president Jean-Claude Trichet will likely face tough questioning on liquidity provisions in the eurozone and the stability of the European financial system.
The Australian dollar, a favourite of investors because of its relatively high interest rate, rose 1.2 per cent to US$0.8200, retracing almost all of Monday’s losses.
The Nikkei rebounded after suffering its biggest one-day fall in 14 months on Monday.
“Though pension funds are likely to emerge to buy at the lows, even retail investors are starting to get a bit spooked at this point, so whether they’ll buy or not is key,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.
Hong Kong’s Hang Seng index was up 0.3 per cent on the day, with gains in index heavyweight HSBC winning out over small losses in other banks and land developers.
As worries grew about the health of the global economic recovery, short-selling of Hong Kong-listed equities picked up on Monday to 10 per cent of trading volume, with banks making up the three of the top four most-shorted stocks, a dealer said.
Valuations of global equities have come down quickly in the last several weeks. The MSCI index of world equities is trading at 11.4 times its expected 12-month earnings, the lowest since March 2009.
The uncertain global economic outlook could have an impact on earnings forecasts, though economists as a whole have not changed their growth predictions in a big way.
Asian investors are awaiting a flurry of data from China this week after reports last month indicated growth may have peaked in the world’s third-largest economy.
Though the number of property sales in big Chinese cities is decreasing, likely pointing to an easing in price pressures, other indicators do not reflect a massive slowdown in the world’s fastest-growing economy or its demand for imported goods.
On the contrary, Taiwan’s exports to China in May rose 66 per cent on a year-on-year basis, indicating sustained demand from a key trade market.
The benchmark 10-year US Treasury yield rebounded to 3.18 per cent after finishing trade in New York around 3.15 per cent.
Still, in the last two months the yield has tumbled 65 basis points, squashed by investors exiting risky trades and buying Treasuries, particularly late-dated maturities. The spread between 10-year and 2-year yields has narrowed 37 basis points since April.
The sliding US dollar put some upward pressure on crude prices. The July contract was up 0.2 per cent to $71.59 a barrel.
Fears about a spreading European sovereign debt crisis, a slowdown in China and a weak US job market have combined to sap investors’ willingness to take risks for higher returns, prompting them to dump global equities, high-yield bonds, the euro and emerging market currencies.
However, the euro has fallen 12 per cent so far in the second quarter – on track for the biggest quarterly decline since being launched in 1999 – and global equities are the cheapest since the latest bull market started in March 2009.
The pace of decline has enticed some buyers to sift through the market, with an eye for value.
Japan’s Nikkei share average rose 0.4 per cent while the MSCI Asia ex-Japan index added 0.6 per cent.
“We’re seeing cherry-picking of shares today. Caution pervades after the US market’s substantial losses and continued foreign selling, but investors are scooping up some shares that they’re bullish on in the longer-term,” said Kim Jeong-hoon, a market analyst at Korea Investment & Securities in Seoul.
The euro climbed 0.3 per cent to $1.1955, causing dealers to cover their bets against the currency and push it up from a four-year low of $1.1875 plumbed overnight.
Ben Bernanke, chairman of the Federal Reserve, offered his verbal support, saying European leaders were committed to ensuring the survival of the euro and have the means to support every heavily indebted member of the currency union.
After a policy meeting on Thursday, ECB president Jean-Claude Trichet will likely face tough questioning on liquidity provisions in the eurozone and the stability of the European financial system.
The Australian dollar, a favourite of investors because of its relatively high interest rate, rose 1.2 per cent to US$0.8200, retracing almost all of Monday’s losses.
The Nikkei rebounded after suffering its biggest one-day fall in 14 months on Monday.
“Though pension funds are likely to emerge to buy at the lows, even retail investors are starting to get a bit spooked at this point, so whether they’ll buy or not is key,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.
Hong Kong’s Hang Seng index was up 0.3 per cent on the day, with gains in index heavyweight HSBC winning out over small losses in other banks and land developers.
As worries grew about the health of the global economic recovery, short-selling of Hong Kong-listed equities picked up on Monday to 10 per cent of trading volume, with banks making up the three of the top four most-shorted stocks, a dealer said.
Valuations of global equities have come down quickly in the last several weeks. The MSCI index of world equities is trading at 11.4 times its expected 12-month earnings, the lowest since March 2009.
The uncertain global economic outlook could have an impact on earnings forecasts, though economists as a whole have not changed their growth predictions in a big way.
Asian investors are awaiting a flurry of data from China this week after reports last month indicated growth may have peaked in the world’s third-largest economy.
Though the number of property sales in big Chinese cities is decreasing, likely pointing to an easing in price pressures, other indicators do not reflect a massive slowdown in the world’s fastest-growing economy or its demand for imported goods.
On the contrary, Taiwan’s exports to China in May rose 66 per cent on a year-on-year basis, indicating sustained demand from a key trade market.
The benchmark 10-year US Treasury yield rebounded to 3.18 per cent after finishing trade in New York around 3.15 per cent.
Still, in the last two months the yield has tumbled 65 basis points, squashed by investors exiting risky trades and buying Treasuries, particularly late-dated maturities. The spread between 10-year and 2-year yields has narrowed 37 basis points since April.
The sliding US dollar put some upward pressure on crude prices. The July contract was up 0.2 per cent to $71.59 a barrel.
Indian Stocks Fall Most in Two Week on Global Recovery
June 7 (Bloomberg) -- India’s stocks fell, snapping a three-day rally, as investors withdrew funds from riskier assets amid concern Europe’s sovereign-debt crisis will slow a global economic recovery.
DLF Ltd., India’s biggest developer, dropped the most in four months. Reliance Industries Ltd., the nation’s most valuable company, retreated to the lowest in almost two weeks. A rebound in the global economy faces “significant challenges,” Group of 20 finance chiefs said over the weekend.
“This bumpy ride is likely to continue for some more time because the global economy is under threat,” said Deven Choksey, chief executive officer at K.R. Choksey Shares & Securities in Mumbai, who manages about $123 million for wealthy individuals.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, declined 410.35, or 2.4 percent, to 16,707.34 at 11:52 a.m. in Mumbai, poised for its steepest drop since May 25. The S&P CNX Nifty Index on the National Stock Exchange lost 2.2 percent to 5,021.30. The BSE 200 Index retreated 2 percent to 2,129.97.
DLF sank 6 percent to 264.85 rupees, heading for its worst decline since Jan. 27. Reliance dropped 2.2 percent to 1,008.85 rupees, its lowest level since May 26.
Investors are worried that the “global economy is going to decelerate as fiscal stimulus wears off,” said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank. “It may not be time to add risk.”
Wipro, Sterlite
Tata Consultancy Services Ltd., the biggest software- services exporter, retreated 1.8 percent to 751.5 rupees. Infosys Technologies Ltd., the No. 2, dropped 2.3 percent to 2,665.05 rupees, while Wipro Ltd., the third-biggest, dropped 1.9 percent to 643 rupees. The companies derive about a fifth of their sales in Europe.
Sterlite Industries (India) Ltd., India’s largest copper producer, dropped 3.9 percent to 623 rupees. Hindalco Industries Ltd., the biggest aluminum producer, lost 4.9 percent to 140.4 rupees. Tata Steel Ltd., the biggest producer of the alloy, decreased 3.4 percent to 468.75 rupees.
A gauge of raw-material producers in the MSCI Asia Pacific Index slumped 4.1 percent, the second-most of 10 industry groups, after commodity prices extended declines from June 4. Copper futures in New York sank as much as 3.1 percent, while crude dropped as much as 2.8 percent.
‘Grave Situation’
India’s rupee slid as much as l.4 percent per dollar, the lowest since May 26, on speculation fund outflows from local stocks will accelerate as investors shun emerging market assets. The currency may slip 2.4 percent this year to the lowest since September as funds favor safer investments, Mohan Shenoi, head of Treasury at Kotak Mahindra Bank Ltd. in Mumbai, said in a June 4 interview.
The MSCI Asia Pacific Index retreated as much as 3.5 percent today, set for its biggest decline since March 30, 2009. The gauge has slumped 15 percent from its high this year on April 15 amid growing concern the Greece-triggered sovereign debt crisis is spilling over to other European nations.
Hungary’s economy is in a “very grave situation” and it is “no exaggeration” to talk about a default, Peter Szijjarto, a spokesman for the Hungarian Prime Minister, said June 4. State Secretary Mihaly Varga said the next day that comments about a possible default are “unfortunate.”
Finance Minister Pranab Mukherjee said June 4 that India’s economy will be hurt should the sovereign debt crisis that originated in Greece spread in Europe.
Overseas investors bought a net 4.93 billion rupees ($106 million) of Indian stocks June 3, increasing total purchases of the equities this year to 212.6 billion rupees, according to the nation’s market regulator.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.
The following were among the most active on the exchange:
Container Corp. of India Ltd. (CCRI IN) decreased 2.3 percent to 1,269.7 rupees. The state-controlled freight-train operator was cut to “neutral” from “overweight” by Aditya Makharia, an analyst at JPMorgan Chase & Co., who said margin expansion may be restricted even as the company benefits from reviving growth in foreign trade.
Reliance Communications Ltd. (RCOM IN) climbed 1.8 percent to 171.65 rupees. The board of India’s second-largest wireless carrier approved the sale of a 26 percent stake valued at 90.5 billion rupees to help pay debt and upgrade networks, the Mumbai-based company said yesterday.
Shree Renuka Sugars Ltd. (SHRS IN) lost 3.9 percent to 60.9 rupees. The company failed to agree on the purchase of Brazilian sugar maker Equipav SA Acucar & Alcool after a shareholder declined to sign the deal, O Estado de S. Paulo reported, citing unnamed bankers involved in the talks.
Shree Renuka Sugars’ Managing Director Narendra Murkumbi wasn’t immediately available at his office telephone for comment on the report.
DLF Ltd., India’s biggest developer, dropped the most in four months. Reliance Industries Ltd., the nation’s most valuable company, retreated to the lowest in almost two weeks. A rebound in the global economy faces “significant challenges,” Group of 20 finance chiefs said over the weekend.
“This bumpy ride is likely to continue for some more time because the global economy is under threat,” said Deven Choksey, chief executive officer at K.R. Choksey Shares & Securities in Mumbai, who manages about $123 million for wealthy individuals.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, declined 410.35, or 2.4 percent, to 16,707.34 at 11:52 a.m. in Mumbai, poised for its steepest drop since May 25. The S&P CNX Nifty Index on the National Stock Exchange lost 2.2 percent to 5,021.30. The BSE 200 Index retreated 2 percent to 2,129.97.
DLF sank 6 percent to 264.85 rupees, heading for its worst decline since Jan. 27. Reliance dropped 2.2 percent to 1,008.85 rupees, its lowest level since May 26.
Investors are worried that the “global economy is going to decelerate as fiscal stimulus wears off,” said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank. “It may not be time to add risk.”
Wipro, Sterlite
Tata Consultancy Services Ltd., the biggest software- services exporter, retreated 1.8 percent to 751.5 rupees. Infosys Technologies Ltd., the No. 2, dropped 2.3 percent to 2,665.05 rupees, while Wipro Ltd., the third-biggest, dropped 1.9 percent to 643 rupees. The companies derive about a fifth of their sales in Europe.
Sterlite Industries (India) Ltd., India’s largest copper producer, dropped 3.9 percent to 623 rupees. Hindalco Industries Ltd., the biggest aluminum producer, lost 4.9 percent to 140.4 rupees. Tata Steel Ltd., the biggest producer of the alloy, decreased 3.4 percent to 468.75 rupees.
A gauge of raw-material producers in the MSCI Asia Pacific Index slumped 4.1 percent, the second-most of 10 industry groups, after commodity prices extended declines from June 4. Copper futures in New York sank as much as 3.1 percent, while crude dropped as much as 2.8 percent.
‘Grave Situation’
India’s rupee slid as much as l.4 percent per dollar, the lowest since May 26, on speculation fund outflows from local stocks will accelerate as investors shun emerging market assets. The currency may slip 2.4 percent this year to the lowest since September as funds favor safer investments, Mohan Shenoi, head of Treasury at Kotak Mahindra Bank Ltd. in Mumbai, said in a June 4 interview.
The MSCI Asia Pacific Index retreated as much as 3.5 percent today, set for its biggest decline since March 30, 2009. The gauge has slumped 15 percent from its high this year on April 15 amid growing concern the Greece-triggered sovereign debt crisis is spilling over to other European nations.
Hungary’s economy is in a “very grave situation” and it is “no exaggeration” to talk about a default, Peter Szijjarto, a spokesman for the Hungarian Prime Minister, said June 4. State Secretary Mihaly Varga said the next day that comments about a possible default are “unfortunate.”
Finance Minister Pranab Mukherjee said June 4 that India’s economy will be hurt should the sovereign debt crisis that originated in Greece spread in Europe.
Overseas investors bought a net 4.93 billion rupees ($106 million) of Indian stocks June 3, increasing total purchases of the equities this year to 212.6 billion rupees, according to the nation’s market regulator.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.
The following were among the most active on the exchange:
Container Corp. of India Ltd. (CCRI IN) decreased 2.3 percent to 1,269.7 rupees. The state-controlled freight-train operator was cut to “neutral” from “overweight” by Aditya Makharia, an analyst at JPMorgan Chase & Co., who said margin expansion may be restricted even as the company benefits from reviving growth in foreign trade.
Reliance Communications Ltd. (RCOM IN) climbed 1.8 percent to 171.65 rupees. The board of India’s second-largest wireless carrier approved the sale of a 26 percent stake valued at 90.5 billion rupees to help pay debt and upgrade networks, the Mumbai-based company said yesterday.
Shree Renuka Sugars Ltd. (SHRS IN) lost 3.9 percent to 60.9 rupees. The company failed to agree on the purchase of Brazilian sugar maker Equipav SA Acucar & Alcool after a shareholder declined to sign the deal, O Estado de S. Paulo reported, citing unnamed bankers involved in the talks.
Shree Renuka Sugars’ Managing Director Narendra Murkumbi wasn’t immediately available at his office telephone for comment on the report.
Reliance Communications Gains After Stake Sale Agreed
June 7 (Bloomberg) -- Reliance Communications Ltd., India’s second-largest wireless carrier, rose in Mumbai trading after the company’s board approved the sale of a 26 percent stake to help pay debt and upgrade networks.
The board gave preliminary approval for the sale of the stake, valued at 90.5 billion rupees ($1.9 billion) at the last closing price, to a strategic or private-equity investor, the Mumbai-based company said yesterday. Reliance shares rose as much as 6.2 percent to 179 rupees, its highest intraday price since April 12.
Reliance, controlled by Indian billionaire Anil Ambani, didn’t identify any suitors. The Wall Street Journal reported AT&T Inc. is in early talks about investing in the company. Emirates Telecommunication Corp. may buy a stake valued at $4 billion, the Financial Times said last week.
Selling a stake would help the Indian company purchase network equipment as it prepares to offer third-generation wireless services in the world’s second-largest mobile-phone market. Reliance paid 85.9 billion rupees to the government for 3G licenses last month.
“With the kind of capital expenditure that the company would need going forward it may require an infusion of funds,” said Rahul Jain, a Mumbai-based analyst with Angel Broking Ltd., who has a “neutral” recommendation on the stock.
Reliance shares traded at 171 rupees at 10:47 a.m.
Overseas Expansion
AT&T, which is looking to expand outside of the U.S., has been holding informal discussions with Reliance for the past few weeks, according to the Journal report. Mark Siegel, a spokesman for AT&T, declined to comment on the report.
Reliance Communications Spokesman Anuj Bakshi declined to comment on specific companies that had expressed interest.
Indian phone operators are trying to revive earnings growth by offering data services in a market where voice calls cost as little as one U.S. cent per minute.
Revenue in the nation’s mobile-phone services industry is poised to fall 22 percent for the year after declining 25 percent in 2009, according to estimates from Bank of America Corp.’s Merrill Lynch unit.
Vodafone Group Plc on May 18 booked a $3.3 billion charge for its Indian unit, citing “intense” price competition.
“The competition in the Indian market is getting intense and is showing no signs of stabilizing at all,” said Jain.
Falling Shares
At the close of trading in Mumbai on June 4, Reliance was worth $7.4 billion. The stock dropped 49 percent in the 12 months to June 4 compared with a 15 percent gain for the Bombay Stock Exchange’s benchmark Sensitive Index. Larger rival Bharti Airtel Ltd. shed 31 percent during the same period.
Reliance said on June 2 it had received “various proposals” from overseas companies, after the Times of India newspaper reported Emirates Telecommunications, known as Etisalat, was in advanced talks to buy a 25 percent stake.
Etisalat spokesman Ahmed Bin Ali said on June 2 that Indian operators were among companies being looked at for possible investment, without specifying Reliance.
The Economic Times reported on June 1 that the Indian company may restart merger talks with South Africa’s MTN Group Ltd., after negotiations collapsed in July 2008.
Nozipho January-Bardill, a spokeswoman for MTN, said “there are definitely not any talks with Reliance.”
Reliance will sell shares at an “appropriate premium to the prevailing market price” and “examine and pursue other appropriate strategic combination or consolidation opportunities,” the company said in its statement yesterday.
The board gave preliminary approval for the sale of the stake, valued at 90.5 billion rupees ($1.9 billion) at the last closing price, to a strategic or private-equity investor, the Mumbai-based company said yesterday. Reliance shares rose as much as 6.2 percent to 179 rupees, its highest intraday price since April 12.
Reliance, controlled by Indian billionaire Anil Ambani, didn’t identify any suitors. The Wall Street Journal reported AT&T Inc. is in early talks about investing in the company. Emirates Telecommunication Corp. may buy a stake valued at $4 billion, the Financial Times said last week.
Selling a stake would help the Indian company purchase network equipment as it prepares to offer third-generation wireless services in the world’s second-largest mobile-phone market. Reliance paid 85.9 billion rupees to the government for 3G licenses last month.
“With the kind of capital expenditure that the company would need going forward it may require an infusion of funds,” said Rahul Jain, a Mumbai-based analyst with Angel Broking Ltd., who has a “neutral” recommendation on the stock.
Reliance shares traded at 171 rupees at 10:47 a.m.
Overseas Expansion
AT&T, which is looking to expand outside of the U.S., has been holding informal discussions with Reliance for the past few weeks, according to the Journal report. Mark Siegel, a spokesman for AT&T, declined to comment on the report.
Reliance Communications Spokesman Anuj Bakshi declined to comment on specific companies that had expressed interest.
Indian phone operators are trying to revive earnings growth by offering data services in a market where voice calls cost as little as one U.S. cent per minute.
Revenue in the nation’s mobile-phone services industry is poised to fall 22 percent for the year after declining 25 percent in 2009, according to estimates from Bank of America Corp.’s Merrill Lynch unit.
Vodafone Group Plc on May 18 booked a $3.3 billion charge for its Indian unit, citing “intense” price competition.
“The competition in the Indian market is getting intense and is showing no signs of stabilizing at all,” said Jain.
Falling Shares
At the close of trading in Mumbai on June 4, Reliance was worth $7.4 billion. The stock dropped 49 percent in the 12 months to June 4 compared with a 15 percent gain for the Bombay Stock Exchange’s benchmark Sensitive Index. Larger rival Bharti Airtel Ltd. shed 31 percent during the same period.
Reliance said on June 2 it had received “various proposals” from overseas companies, after the Times of India newspaper reported Emirates Telecommunications, known as Etisalat, was in advanced talks to buy a 25 percent stake.
Etisalat spokesman Ahmed Bin Ali said on June 2 that Indian operators were among companies being looked at for possible investment, without specifying Reliance.
The Economic Times reported on June 1 that the Indian company may restart merger talks with South Africa’s MTN Group Ltd., after negotiations collapsed in July 2008.
Nozipho January-Bardill, a spokeswoman for MTN, said “there are definitely not any talks with Reliance.”
Reliance will sell shares at an “appropriate premium to the prevailing market price” and “examine and pursue other appropriate strategic combination or consolidation opportunities,” the company said in its statement yesterday.
Investor group opposes Lehman plan
Published: June 6 2010 23:05 | Last updated: June 6 2010 23:05
A group of Dutch retail investors who own bonds sold by a unit of Lehman Brothers Holdings are organising to oppose the bankrupt bank’s proposal for pay-outs to its creditors.
The group believes that European creditors who own bonds issued by Lehman Brothers Treasury, an Amsterdam-based unit, are being treated unfairly and they intend to dispute Lehman’s plan in US proceedings this month, said Gerhard Zeilmaker, a bondholder and retired senior executive at ABN Amro.
Lawyers at Houthoff Buruma were named trustees for the Dutch unit.
“LBHI’s proposed creditor treatment plan favours US creditors, large financial institutions, over European individual investors,” the Dutch group said on Sunday.
As part of its bankruptcy proceedings, Lehman this year drafted a plan that lays out the estimated pay-outs to the various creditors at the holding company and subsidiaries. The bondholder group argues that the plan unfairly cuts their claim by 50 per cent, to the benefit of US creditors. Lehman was not immediately available for comment.
The Dutch group represents about 100 investors holding $650m-$1bn in face value of bonds, Mr Zeilmaker said.
Lehman Brothers Treasury raised more than $34bn from about 50,000 individual investors across Europe, the group said. It is not working directly with hedge funds, which have bought many of the bonds since the bankruptcy.
The Dutch investor group said Derk Jan Eppink, Belgian member of the European Parliament, supported the campaign and had brought it to the European Commission’s attention.
The opposition of European bondholders is the latest twist in Lehman’s complex bankruptcy.
Retail investors around the world suffered considerable losses when Lehman failed. Soon after its bankruptcy, angry Asian retail investors protested over losses in structured products arranged by Lehman, while the plan the Dutch investors dispute foresees some other bondholders with claims to Lehman Brothers Holdings – the parent company – receiving just 15 per cent of their claims or less.
In the nearly two years since its bankruptcy filing, Lehman has launched several lawsuits to boost the pool available to pay back its myriad creditors. It is trying to recover $11bn on the sale of its North American investment bank to Barclays, as well as $8.6bn seized by JPMorgan as collateral in the days leading up to Lehman’s collapse.
Last week Lehman’s former executives and Ernst & Young, the auditor, asked a judge to dismiss a class action suit that alleges offering documents for Lehman securities contained “untrue statements and omitted materials facts” related to the use of “Repo 105”, described as an “accounting gimmick” by Lehman’s court-appointed examiner.
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A group of Dutch retail investors who own bonds sold by a unit of Lehman Brothers Holdings are organising to oppose the bankrupt bank’s proposal for pay-outs to its creditors.
The group believes that European creditors who own bonds issued by Lehman Brothers Treasury, an Amsterdam-based unit, are being treated unfairly and they intend to dispute Lehman’s plan in US proceedings this month, said Gerhard Zeilmaker, a bondholder and retired senior executive at ABN Amro.
Lawyers at Houthoff Buruma were named trustees for the Dutch unit.
“LBHI’s proposed creditor treatment plan favours US creditors, large financial institutions, over European individual investors,” the Dutch group said on Sunday.
As part of its bankruptcy proceedings, Lehman this year drafted a plan that lays out the estimated pay-outs to the various creditors at the holding company and subsidiaries. The bondholder group argues that the plan unfairly cuts their claim by 50 per cent, to the benefit of US creditors. Lehman was not immediately available for comment.
The Dutch group represents about 100 investors holding $650m-$1bn in face value of bonds, Mr Zeilmaker said.
Lehman Brothers Treasury raised more than $34bn from about 50,000 individual investors across Europe, the group said. It is not working directly with hedge funds, which have bought many of the bonds since the bankruptcy.
The Dutch investor group said Derk Jan Eppink, Belgian member of the European Parliament, supported the campaign and had brought it to the European Commission’s attention.
The opposition of European bondholders is the latest twist in Lehman’s complex bankruptcy.
Retail investors around the world suffered considerable losses when Lehman failed. Soon after its bankruptcy, angry Asian retail investors protested over losses in structured products arranged by Lehman, while the plan the Dutch investors dispute foresees some other bondholders with claims to Lehman Brothers Holdings – the parent company – receiving just 15 per cent of their claims or less.
In the nearly two years since its bankruptcy filing, Lehman has launched several lawsuits to boost the pool available to pay back its myriad creditors. It is trying to recover $11bn on the sale of its North American investment bank to Barclays, as well as $8.6bn seized by JPMorgan as collateral in the days leading up to Lehman’s collapse.
Last week Lehman’s former executives and Ernst & Young, the auditor, asked a judge to dismiss a class action suit that alleges offering documents for Lehman securities contained “untrue statements and omitted materials facts” related to the use of “Repo 105”, described as an “accounting gimmick” by Lehman’s court-appointed examiner.
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Chinese bank IPO set to fall short
By Jamil Anderlini in Beijing
Published: June 6 2010 23:03 | Last updated: June 6 2010 23:03
Agricultural Bank of China’s initial public offering is likely to raise much less than the $30bn record-setting total it had hoped for when it sells shares in Hong Kong and Shanghai as early as next month.
Analysts and bankers close to the deal said that judging by investor appetite, the current state of the market and details in the IPO prospectus released on Friday, Agricultural Bank was more likely to raise a little over $20bn.
At that level the IPO would not be the world’s largest. It had been set to eclipse the IPO record set by Industrial and Commercial Bank of China, which raised $22bn in 2006.
China’s stock market has dropped about 20 per cent since mid-April on general worries about the country’s economy and concern over a huge flood of bank fundraisings hitting the market at the same time. Chinese lenders have been rushing to shore up their balance sheets following an unprecedented lending spree last year.
Bank of Communications, China’s fifth-largest bank which is almost one-fifth owned by HSBC of the UK, announced a Rmb33.07bn ($4.8bn) rights issue in Hong Kong and Shanghai on Sunday that was 21 per cent smaller than the amount it had earlier said it planned to raise.
HSBC said it would take up its full allotment of the Hong Kong portion of the rights issue, which is priced at a 37 per cent discount to the bank’s closing price on Friday.
Initial public offerings
IPO
FT In depth: News, comment and analysis on flotations
Agricultural Bank will sell up to 56.3bn new shares, or almost 17 per cent of its enlarged capital base, in Shanghai and Hong Kong, if over-allotment options are exercised in both markets.
The lender has in recent weeks on its roadshow offered potential investors an asking price roughly benchmarked to the 1.94 times price-to-book ratio ICBC sold its shares for in its IPO. But mainland Chinese fund managers have been reluctant to offer a ratio of more than 1.2 times and bankers said the eventual IPO price might be a ratio of about 1.3-1.5 times.
“The gap between the bank’s expectations and the market perception is huge and in the current market environment the bank will have to lower its sights somewhat,” said one person familiar with the IPO.
Agricultural Bank is the last of China’s large state-controlled banks to seek a public listing and is regarded as the weakest of the country’s lenders. Its net profits were Rmb65bn last year on Rmb8,880bn in total assets, while ICBC, the world’s largest lender by market value, made almost Rmb129bn on Rmb11,785bn in total assets.
Following a $19bn bail-out from China’s sovereign wealth fund at the end of 2008, Agricultural Bank’s non-performing loan ratio fell from almost 24 per cent at the end of 2007 to 2.9 per cent at the end of last year.
China’s securities regulator said it would review Agricultural Bank’s IPO plan on Wednesday. A Hong Kong hearing is expected the following day.
The IPO is almost certain to go ahead and will be supported by large state-owned Chinese enterprises such as PetroChina and China Life Insurance.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Published: June 6 2010 23:03 | Last updated: June 6 2010 23:03
Agricultural Bank of China’s initial public offering is likely to raise much less than the $30bn record-setting total it had hoped for when it sells shares in Hong Kong and Shanghai as early as next month.
Analysts and bankers close to the deal said that judging by investor appetite, the current state of the market and details in the IPO prospectus released on Friday, Agricultural Bank was more likely to raise a little over $20bn.
At that level the IPO would not be the world’s largest. It had been set to eclipse the IPO record set by Industrial and Commercial Bank of China, which raised $22bn in 2006.
China’s stock market has dropped about 20 per cent since mid-April on general worries about the country’s economy and concern over a huge flood of bank fundraisings hitting the market at the same time. Chinese lenders have been rushing to shore up their balance sheets following an unprecedented lending spree last year.
Bank of Communications, China’s fifth-largest bank which is almost one-fifth owned by HSBC of the UK, announced a Rmb33.07bn ($4.8bn) rights issue in Hong Kong and Shanghai on Sunday that was 21 per cent smaller than the amount it had earlier said it planned to raise.
HSBC said it would take up its full allotment of the Hong Kong portion of the rights issue, which is priced at a 37 per cent discount to the bank’s closing price on Friday.
Initial public offerings
IPO
FT In depth: News, comment and analysis on flotations
Agricultural Bank will sell up to 56.3bn new shares, or almost 17 per cent of its enlarged capital base, in Shanghai and Hong Kong, if over-allotment options are exercised in both markets.
The lender has in recent weeks on its roadshow offered potential investors an asking price roughly benchmarked to the 1.94 times price-to-book ratio ICBC sold its shares for in its IPO. But mainland Chinese fund managers have been reluctant to offer a ratio of more than 1.2 times and bankers said the eventual IPO price might be a ratio of about 1.3-1.5 times.
“The gap between the bank’s expectations and the market perception is huge and in the current market environment the bank will have to lower its sights somewhat,” said one person familiar with the IPO.
Agricultural Bank is the last of China’s large state-controlled banks to seek a public listing and is regarded as the weakest of the country’s lenders. Its net profits were Rmb65bn last year on Rmb8,880bn in total assets, while ICBC, the world’s largest lender by market value, made almost Rmb129bn on Rmb11,785bn in total assets.
Following a $19bn bail-out from China’s sovereign wealth fund at the end of 2008, Agricultural Bank’s non-performing loan ratio fell from almost 24 per cent at the end of 2007 to 2.9 per cent at the end of last year.
China’s securities regulator said it would review Agricultural Bank’s IPO plan on Wednesday. A Hong Kong hearing is expected the following day.
The IPO is almost certain to go ahead and will be supported by large state-owned Chinese enterprises such as PetroChina and China Life Insurance.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Friday, June 4, 2010
Asia Currencies Post Weekly Loss as Europe Debt Crisis Persists
June 5 (Bloomberg) -- Asian currencies declined this week, led by India’s rupee and South Korea’s won, as concern Europe’s debt crisis will slow the global economic recovery dimmed the outlook for exports and sapped demand for emerging-market assets.
Tensions on the Korean peninsula plagued the won, the region’s worst-performing currency this year, after a North Korean diplomat in Geneva warned “a war may break out at any moment” with its southern neighbor. Central banks in Indonesia and the Philippines kept interest rates at record lows, judging inflation isn’t yet a threat. The Group of 20 gathered for a weekend meeting in South Korea to discuss the debt crisis and the euro’s slide to a four-year low.
“There’s been a very strong correlation between Asian currencies and the euro, and that is why we haven’t seen a rise in Asian currencies this week,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “Fiscal problems in Europe have been and will be the big theme as people are thinking about the health of European banks.”
India’s rupee dropped 1 percent this week to 46.84 per dollar, according to data compiled by Bloomberg. The won fell 0.6 percent to 1,201.80, taking its loss for the year to 3.1 percent.
South Korea’s currency yesterday dropped as much as 1.2 percent after North Korea’s deputy ambassador to the UN offices in Geneva, Ri Jang Gon, said the South’s accusation that the communist nation sank one of its warships was a fabrication. South Korean President Lee Myung Bak will urge Pyongyang to forfeit its nuclear arsenal at a security conference in Singapore, the Wall Street Journal reported yesterday.
Forecasts Cut
Morgan Stanley, in a report dated June 3, lowered its forecasts for Asian currencies, including the won and the rupee, saying Europe’s debt crisis will cool demand for exports. The won will likely strengthen to 1,175 per dollar by year-end, compared with an earlier forecast of 1,050, the report said. India’s rupee may climb to 46, compared with the previous estimate of 43.50, it said.
India’s rupee dropped this week after overseas investors pared investment in the nation’s assets amid a surge in global financial-market volatility.
The currency added to last month’s 4.3 percent slide, the biggest since February 2009, as funds based abroad cut stock holdings by $2.1 billion from a record-high $79.4 billion reached on April 30. The rupee’s one-month implied volatility rate, a gauge of expected price swings, touched a 15-month high of 18.5 percent on May 26.
‘Vulnerable’ Rupee
“The rupee is the most vulnerable currency in Asia as it is reliant on support from equity inflows,” said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. “The Indian rupee is our least favorite” currency in Asia.
Losses in Asian currencies were limited this week as reports from the U.S. showed manufacturing expanded and home sales rose, fueling optimism a recovery is gaining traction in the world’s biggest economy.
Malaysia’s ringgit bucked the trend, strengthening for a second straight week. A government report released after the close of trading yesterday showed exports climbed 26.6 percent in April from a year earlier, less than the median gain of 38 percent forecast in a Bloomberg survey of economists.
The ringgit climbed 0.6 percent to 3.2750 per dollar, according to data compiled by Bloomberg. The currency has appreciated 2.9 percent since reaching a 12-week low of 3.3675 on May 26.
Thai Economy
Thailand’s baht declined for a fourth week after Bank of Thailand Deputy Governor Bandid Nijathaworn said on June 3 that expansion in Southeast Asia’s second-largest economy will slow this quarter because anti-government protests hurt tourism. The demonstrations, which began in March and ended after a military assault last month, led to riots and left more than 80 dead.
“Some people are afraid that the European debt crisis will get worse, while the Thai economy may be affected by the political turmoil,” said Paisarn Lertkowit, a currency trader at Bangkok Bank Pcl, the country’s biggest lender.
The baht slid 0.2 percent during the week to 32.61 per dollar in Bangkok. It touched 32.63 on June 1, the weakest level since March 15.
Indonesia’s rupiah and the Philippine peso declined this week after central banks left interest rates on hold to support economic growth amid the European crisis. Bank Indonesia kept its policy rate at 6.5 percent and Bangko Sentral ng Pilipinas’s stayed at 4 percent.
The rupiah fell 0.3 percent to 9,195 per dollar and the peso dropped 0.2 percent to 46.30. Singapore’s currency slipped 0.2 percent to S$1.4034.
“Global concerns are still eclipsing the very bullish fundamental stories in Asia,” said Hui at HSBC Holdings.
Tensions on the Korean peninsula plagued the won, the region’s worst-performing currency this year, after a North Korean diplomat in Geneva warned “a war may break out at any moment” with its southern neighbor. Central banks in Indonesia and the Philippines kept interest rates at record lows, judging inflation isn’t yet a threat. The Group of 20 gathered for a weekend meeting in South Korea to discuss the debt crisis and the euro’s slide to a four-year low.
“There’s been a very strong correlation between Asian currencies and the euro, and that is why we haven’t seen a rise in Asian currencies this week,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “Fiscal problems in Europe have been and will be the big theme as people are thinking about the health of European banks.”
India’s rupee dropped 1 percent this week to 46.84 per dollar, according to data compiled by Bloomberg. The won fell 0.6 percent to 1,201.80, taking its loss for the year to 3.1 percent.
South Korea’s currency yesterday dropped as much as 1.2 percent after North Korea’s deputy ambassador to the UN offices in Geneva, Ri Jang Gon, said the South’s accusation that the communist nation sank one of its warships was a fabrication. South Korean President Lee Myung Bak will urge Pyongyang to forfeit its nuclear arsenal at a security conference in Singapore, the Wall Street Journal reported yesterday.
Forecasts Cut
Morgan Stanley, in a report dated June 3, lowered its forecasts for Asian currencies, including the won and the rupee, saying Europe’s debt crisis will cool demand for exports. The won will likely strengthen to 1,175 per dollar by year-end, compared with an earlier forecast of 1,050, the report said. India’s rupee may climb to 46, compared with the previous estimate of 43.50, it said.
India’s rupee dropped this week after overseas investors pared investment in the nation’s assets amid a surge in global financial-market volatility.
The currency added to last month’s 4.3 percent slide, the biggest since February 2009, as funds based abroad cut stock holdings by $2.1 billion from a record-high $79.4 billion reached on April 30. The rupee’s one-month implied volatility rate, a gauge of expected price swings, touched a 15-month high of 18.5 percent on May 26.
‘Vulnerable’ Rupee
“The rupee is the most vulnerable currency in Asia as it is reliant on support from equity inflows,” said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. “The Indian rupee is our least favorite” currency in Asia.
Losses in Asian currencies were limited this week as reports from the U.S. showed manufacturing expanded and home sales rose, fueling optimism a recovery is gaining traction in the world’s biggest economy.
Malaysia’s ringgit bucked the trend, strengthening for a second straight week. A government report released after the close of trading yesterday showed exports climbed 26.6 percent in April from a year earlier, less than the median gain of 38 percent forecast in a Bloomberg survey of economists.
The ringgit climbed 0.6 percent to 3.2750 per dollar, according to data compiled by Bloomberg. The currency has appreciated 2.9 percent since reaching a 12-week low of 3.3675 on May 26.
Thai Economy
Thailand’s baht declined for a fourth week after Bank of Thailand Deputy Governor Bandid Nijathaworn said on June 3 that expansion in Southeast Asia’s second-largest economy will slow this quarter because anti-government protests hurt tourism. The demonstrations, which began in March and ended after a military assault last month, led to riots and left more than 80 dead.
“Some people are afraid that the European debt crisis will get worse, while the Thai economy may be affected by the political turmoil,” said Paisarn Lertkowit, a currency trader at Bangkok Bank Pcl, the country’s biggest lender.
The baht slid 0.2 percent during the week to 32.61 per dollar in Bangkok. It touched 32.63 on June 1, the weakest level since March 15.
Indonesia’s rupiah and the Philippine peso declined this week after central banks left interest rates on hold to support economic growth amid the European crisis. Bank Indonesia kept its policy rate at 6.5 percent and Bangko Sentral ng Pilipinas’s stayed at 4 percent.
The rupiah fell 0.3 percent to 9,195 per dollar and the peso dropped 0.2 percent to 46.30. Singapore’s currency slipped 0.2 percent to S$1.4034.
“Global concerns are still eclipsing the very bullish fundamental stories in Asia,” said Hui at HSBC Holdings.
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