Tuesday, 28 October 2008

India tops political and social risk table in 09

India, Malaysia and Thailand face the highest political and social risk among Asia-Pacific countries in 2009, mainly because of internal
instability, a political risk consultancy said.

India's highest risk score of 6.87 on a scale of 10 also reflected fears over Pakistan, the Hong Kong-based Political & Economic Risk Consultancy (PERC) said in a report, warning of social unrest and insecurity if things worsened in the neighbouring nation.

The consultancy assessed 16 countries on factors such as the risk of disruptive political change, the threat posed by social activism and vulnerability to policy changes by other governments.

A score of zero represented the best socio-political situation and 10 the highest risk.

Contributing to India's high score was uncertainty over the outcome of general elections next year, rising communal violence and increased militant attacks, PERC said in the report released on Monday.

"India, Thailand and Malaysia are not so much vulnerable to negative fallout from the global financial crisis as they are to factors that are mainly internal," Robert Broadfoot, managing director of PERC, told Reuters.

"For these countries, the coming global economic storm is only going to make a bad situation worse," he said.

"India's underlying attractions to foreign investors should remain no matter who wins the next election," the report said.

Thailand is the the second riskiest country in Asia for 2009 with a score of 6.28, as the current political turmoil threatens to drag into 2009 and is eroding the country's key institutions.

The consultancy projected Thailand's worst case scenario to be if the King of Thailand dies before the turmoil is resolved.

As for Malaysia, the third riskiest in the region, the report said the struggle for political power was aggravating racial and religious tensions.

"The status quo is changing in ways that will see a stronger political opposition than in the past," said the report.

Japan, Hong Kong, Singapore and Australia were ranked most stable and low in political risk for 2009 even though their economies are likely to be hurt by the global financial crisis, PERC said.

Source: EconomicTimes

Job losses in US worse than last two recessions: WSJ

The labour market in the US is at its worst since the previous two recessions of 2001 and early 1990s, with the number of people jobless fo
r 27 weeks or more reaching two million in September, which could chill consumer spending and delay recovery from the economic downturn.

According to new job data from the Labour Department, the two million who have been unemployed for 27 weeks or more is 21 per cent of the total unemployed, and the rate is approaching the prior peaks of about 23 percent in 2003 and 1992, the Wall Street Journal reported.

The prospects of the job seekers become worse as layoffs spread beyond financial, home-building and automobile industries. In September, over 2,000 mass layoffs - in which at least 50 people were fired at once - by companies were reported, more than at any time since September 2001.

While the unemployment rate is at a five-year high of 6.1 per cent, a broader measure of economic weakness that includes people who have stopped looking for work or whose hours have been cut to part-time is 11 percent - the highest in 15 years.

What worries many economists, the Journal said, is that labour markets usually reach their bottom after a recession has ended. During the so-called "jobless recovery" following the 2001 recession, jobs continued to be shed after it was officially declared over. But the current weakness comes as the country heads into a recession that is now forecast to be deeper and longer than previously thought.

As many may remain jobless for some time, their ability to pay mortgage and credit card bills is bound to suffer, leading to more foreclosures, chill consumer spending and delay recovery from the recession.

Source: EconomicTimes

Falling market makes stocks cheaper than Diwali snack

In yet another attempt to salvage a sinking stock market, market regulator SEBI has made it easier for promoters with over 55% stake in companies to increase their holdings through creeping acquisition. However, though stock prices are at their extreme lows, it’s unclear how many promoters would use this opportunity, given the liquidity crunch and turmoil in financial markets.

SEBI has now allowed promoters to buy up to 5% stake every year to increase their holdings up to 75%. In order to ensure that such buying is reflected in the stock prices and provides an opportunity for retail investors to exit, the regulator said that such share purchases should be in the open market. “This is aimed at bringing in the promoters as natural buyers. In the absence of buyers, even a small offloading by FIIs is difficult for the market to absorb,” said a senior investment banker.

Also, promoters are automatically exempt from SEBI regulations for a 5% increase in stake annually as a result of a buyback by the company. This again will make it easier for companies to carry out stock buyback.

SEBI announced the relaxation on Monday, when the Sensex broke yet another psychological level, slipping below the 8,000-mark intra-day before recouping a major portion of losses. The rupee dipped below Rs 50 a dollar intra-day, but closed higher following RBI intervention and dollar selling by a large US bank. The Sensex plunged to a three-year low of 7,697.39, before bouncing back to close the day at 8,509.56, down 191.51 points, or 2%, from the previous close.

The 50-share Nifty closed at 2524.20, down 59.80 points, or 2.3%, from the previous close. Bears were clearly unruffled by reports that the regulator was analysing data to find out attempts to hammer down prices. It is also becoming obvious by now that the ban on overseas lending of Indian shares by FIIs is not having the desired impact. As per provisional data, FIIs pulled out a net Rs 1,027 crore on Monday. However, the only silver lining is that domestic institutions still appear to be flush with funds: they bought shares worth Rs 916 crore net on Monday.

Source: EconomicTimes

Goldman called Citi for merger in September

Goldman Sachs Chief Executive Lloyd Blankfein called Citigroup Inc head Vikram Pandit last month about a possible merger, but Pandit rejected the proposal, a source familiar with the matter said on Monday.

Goldman Sachs declined to comment, while no one at Citi was immediately available for comment.

Blankfein's call was made shortly after Goldman got the approval to become a commercial bank on September 21 and with the knowledge of regulators, the source said.

With Morgan Stanley, Goldman is one of only two large investment banks that have survived independently, though the two have subjected themselves to closer regulatory scrutiny in return for access to central bank funding.

A newspaper reported the call first on its website on Sunday. The conversation between the two bankers was brief as Pandit turned down the proposal immediately, the paper said, citing unnamed sources. The newspaper added that a deal would have been structured as a Citi takeover of Goldman.

Source: EconomicTimes

Hiring by top 5 cos down 36%

The financial crisis in the US continued to dampen hiring sentiments with net manpower addition by top 5 Indian IT companies combined tanking 36 per cent in July-September quarter.

The net additions by TCS, Infosys, Wipro, Satyam and HCL Technologies were nearly 17,000 professionals in the just-concluded quarter, against 26,500 professionals in the year-ago period.

Seen sequentially, the cumulative net addition is significantly higher than 10,700 professionals added during the quarter ended June 2008, but HR honchos attribute that to second quarter being a traditionally strong one for freshers and campus hires to join, as also the impact of `staggered onboarding' being witnessed in the industry.

"The overall recruitments are lower for the industry this time as companies remain cautious amid the global financial crisis," Mr D. K. Srivastava - Global Head HR, HCL, said.

While most companies have retained hiring targets, Satyam has trimmed its hiring targets for the year by around 33 per cent to hire between 8000 and 10,000 in the current fiscal.

"IT companies are still visiting campuses and handing-out offer letters, but joining dates are getting pushed by a quarter or so," Mr Rajan Kanagasabai, global head sourcing - Satyam said.

Attrition falls

The prevailing uncertainty has also had a sobering effect on attrition - once considered the biggest nightmare of HR managers in these IT bellwethers. While Infosys' attrition dropped from 14.2 per cent to 12.8 per cent between the September 2007 and September 2008 quarters, Satyam's fell from 13.89 per cent to 12.27 per cent in the same period.

According to TCS, while the company's IT Services attrition is stable, the BPO attrition has gone up slightly in the current quarter. Overall, TCS was the only, among the top five, to show a rise in attrition from 11.5 per cent to 13.2 per cent.

A TCS spokesperson said that the company has made gross additions of 18,664 in the first six month in line with its plans to add 30,000-35,000 people during FY09. "We have also not delayed any campus joinings," he added.

Significantly, companies have also increased utilisation rates (number of people billed per hundred, as against people on the 'bench' who are yet to find a client). Including trainees, utilisation rates for TCS (73.7 per cent to 74.7 per cent) and HCL Tech (69.2 per cent to 74.4 per cent) have seen improvement.

Source: TheHinduBusinessLine

L & T bounces back

At 18:27 pm, Larsen and Toubro was quoting at Rs 774.20, up Rs 50.40, or 6.96%. It has touched an intra day high of Rs 795.00 and an intra day low of Rs 750.00.

It was trading with volumes of 101,568 shares, compared to its five-day average of 1,388,417 shares, an decrease of 92.68%.

Yesterday the share closed down 7.13% or Rs 55.60 at Rs 723.80.

Source: Moneycontrol

Reliance Industries forges ahead

At 6:33 pm, Reliance Industries was quoting at Rs 1,142, up Rs 67.30, or 6.26%. It has touched an intraday high of Rs 1,159 and an intraday low of Rs 1,111.

It was trading with volumes of 278,585 shares. Yesterday the share closed up 5.83% or Rs 59.20 at Rs 1,074.70.

Source: Moneycontrol

Hindalco Industries shines

At 6:48 pm, Hindalco Industries was quoting at Rs 44.90, up Rs 4.50, or 11.14%. It has touched an intraday high of Rs 46.90 and an intraday low of Rs 43.

It was trading with volumes of 1,782,401 shares. Yesterday the share closed down 6.81% or Rs 2.95 at Rs 40.40.

Source: Moneycontrol

Jaiprakash Associates recovers sharply

At 6:53 pm, Jaiprakash Associates was quoting at Rs 59.15, up Rs 5.75, or 10.77%. It has touched an intraday high of Rs 61 and an intraday low of Rs 57.

It was trading with volumes of 681,405 shares. Yesterday the share closed down 10.33% or Rs 6.15 at Rs 53.40.

Source: Moneycontrol

Key indices make auspicious start, gain over 5 pc

Samvat 2065 gave some sort of breather to the markets as key indices gained by more than 5% on the auspicious day. The strong uptick in Dow J
ones futures and the robust performance of other Asian markets helped spread a positive mood after several days of brutal hammering.

The 30-share Sensex closed the day with a gain of 498.52 points or 5.86% while the broader S&P CNX Nifty of the National Stock Exchange (NSE) closed the day with again of 154 points or 6.12% at 2,678.80.

Tuesday's trading was a special trade held to celebrate the start of the calendar year for the Hindu community.

Beaten down sectors such as realty and metal witnessed some buying with their respective indices gaining the most. All the other sectoral indices ended in the green gaining in the range of 4% to 7%. M&M, J P Associates and Hindalco were the top gainers gaining around 12% each.

Considered being a sacred day for the broking industry broker members did trades mainly on their proprietary books. Muhurat trading is historically a trader's day which depict some interest in the small cap stocks and sell in the next trading session enabling the markets to fall in the next trading session.

The Advances and the declines were inclined towards the advances with around 80% rising 18% losing and around 2% stocks remained unchanged.

Hansal Thakkar, lalkar Securities said, "With the investors making a voyage through the painful times in the markets- with the Sensex losing more than 30% in the month of October it self. It is a good beginning for the investors for the New Year. However it would be to early to make a call on the markets bottom and much is depedend on the US elections and how the liquidity situation pans out across the globe."

Source: EconomicTimes

Global finance could lose $2.8 trillion in crisis

The global financial system could lose $2.8 trillion to the credit crisis, the Bank of England said on Tuesday, before an expected interest rate cut in the United States that others are poised to match.

Governments have agreed to inject around $4 trillion into banks and markets to contain the worst financial crisis in 80 years, which has forced stock markets to tumble and banks out of business, hastening a recession in much of the world.

Japan restricted investor bets on falling share prices with immediate effect to try to end a stock market slide, which has particularly hit its banking sector, and tried to talk down a rallying yen that threatens to deepen its economic downturn.

European shares gained 0.9 percent and Japan's Nikkei climbed 6.4 percent after hitting lows not seen in 26 years.

Prime Minister Taro Aso delayed a parliamentary election to take steps to concentrate on protecting Japan, the world's second biggest economy, from global recession.
The Bank of England (BoE) said the work so far in containing the crisis should calm the banking system but was cautious about the impact on the wider economy. It projected losses globally at $2.8 trillion.

"The instability of the global financial system in recent weeks has been the most severe in living memory," said Deputy Governor John Gieve. "And with a global economic downturn under way, the financial system remains under strain."

The BoE is expected to cut interest rates next week, a move the European Central Bank and the Federal Reserve are also expected to take to try to encourage more spending in economies increasingly fearful of a long, deep recession.

The consensus among Fed watchers is for a half-point cut in overnight rates to 1 percent, the lowest level since June 2004. It has already cut the benchmark federal funds rate to 1.5 percent from 5.25 percent over the past 13 months.

It will announce its decision on Wednesday. The ECB and Bank of England are expected to cut rates on Thursday next week.

Source: EconomicTimes

US Treasury clears way for $700 bn bailout to begin

The government has cleared the way to ship out $125 billion this week to the country's largest banks, beginning the biggest government bailout in history.

"The money will go out the door for those institutions early this week," predicts Assistant Treasury Secretary David Nason, one of the chief architects of the rescue plan.

Not only is the money ready to be sent to nine major financial institutions, including Bank of America, Citigroup Inc. and JPMorgan Chase, but the government is reaching preliminary agreements with a group of more than a dozen major regional banks, who will share a part of an additional $125 billion the government hopes to pump into the banking system.

Before the end of the year, Treasury Secretary Henry Paulson intends to have spent $250 billion of the $700 billion bailout package buying ownership stakes in US banks. The goal is to improve their balance sheets so that they will resume more normal lending practices and prevent the country from sliding into a deep recession.

Another $100 billion is earmarked to be spent buying troubled assets from banks such as bad mortgage loans as another way to spur banks to resume lending.

However, a long line of other industries are hoping the government will decide to help them as well. Insurance companies, automakers, hedge funds and foreign-owned banks are all making appeals to be included in the rescue package, contending that they need assistance as well.

Treasury and White House officials signaled on Monday that their cases are being reviewed. That review is coming in the closing days of a heated election campaign when the country will be electing a new president and a new Congress for next year.

The beleaguered auto industry is making its appeals to both presidential candidates and lawmakers running for re-election and their are indications those pleas are being heard.

Presidential press secretary Dana Perino told reporters Monday that officials at the "highest levels" of the Treasury, Energy and Commerce departments have listened to automakers make their cases. She said the administration is "working as quickly as we possibly can" to finalize the rules needed for automakers to start tapping a $25 billion loan fund that Congress approved last month.

The fund is designed to help automakers develop new energy-efficient technology but is seen as a way to help keep the companies afloat during hard times. The expectation is that an initial $5 billion could be freed up soon.

Perino said Treasury was also trying to determine whether the financing arms of the automakers might be eligible for federal help under the bank stock-purchasing program of the rescue package.

Source: EconomicTimes

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.