Month: January 2015

Will gold ever top $1,300 again?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In the wake of a sharp drop Thursday, gold may struggle to see heights over USD 1,300 an ounce again as the tailwinds from central banks on an easing bent stalled when faced with the Federal Reserve’s resolve.

“Gold is set for another bearish year,” Howie Lee, an analyst at Phillip Futures, said in a note Thursday before the metal’s decline in US trading hours. He cited a “strong signal” of interest rate hikes ahead based on changes in the US Federal Open Market Committee statement Wednesday.

“A hawkish US Federal Reserve adds negative pressure on gold, as higher interest rates and a stronger dollar dims the appeal of gold as an alternative asset,” Lee said.

Read More: Hedge funds snap up gold, but where’s it heading?

In a unanimous vote, the FOMC said that “it can be patient in beginning to normalize the stance of monetary policy,” but dropped “considerable time” from its assessment of how long rates would remain in its 0-0.25 percent target range.

The unanimity really drives the interest rate nail in gold’s coffin, he said. “Even the strongest of doves agree that given the pace of economic activity in the US, a rate hike now looks more necessary than ever,” Lee said. He expects gold will test levels below USD 1,200 an ounce once the Fed actually hikes rates.

Gold plunged more than 2 percent during trade Thursday in the US, with the spot price trading as low as USD 1,251.86 an ounce. In early Asian trade Friday, the spot price was around USD 1,260 an ounce.

The yellow metal had received a fillip earlier this month after the Swiss National Bank (SNB) on January 15 surprised the markets by scrapping its currency peg against the euro and cutting its interest rates deeper into negative territory.

Read More: Is this the start of a gold bull market?

A second bump higher came after the European Central Bank (ECB) announced a larger-than-expected quantitative easing (QE) program to counter concerns the Eurozone may fall into deflation amid low growth. Gold shot up to around USD 1,307.80 an ounce, over the USD 1,300 technical level and its highest since August, as speculators sought out the metal as both a safe haven and as it is seen as a hedge against inflation and currency weakness.

But it’s since erased much of its rise from the pre-SNB level around USD 1,230, likely in part due to the surge in the Swiss franc – considered a safe-haven asset on its own – creating competition for safe haven flows that might have sought out gold as a safe harbor as market went risk off on the SNB’s move.

To be sure, some see the easing steps of central banks outside the US as remaining supportive of gold ahead. LGT Capital said it was trimming its elevated cash position to buy gold, citing the ECB’s and SNB’s recent moves.

“Both the ECB and SNB have made it clear that negative nominal bond yields and interest rates are here to stay for a while. The same is true for the Bank of Japan. Even the US Federal Reserve might not start raising interest rates later this year. These developments make gold a more attractive liquid alternative to cash,” LGT said in a note Wednesday.

“While gold also has a negative yield (due to storage and roll-over costs), that yield is not subject to central banks’ macroeconomic policy considerations, and can thus be considered as a more predictable cost,” it added.

But others don’t expect gold prices will see the top of USD 1,300 again anytime soon. The recent catalysts from the ECB’s QE announcement, the surprise SNB decision to depeg the franc and weaker-than-expected US economic data are likely priced in, Goldman Sachs said in a note this week.

While it expects gold at USD 1,290 an ounce on a three-month view, it forecasts the yellow metal at USD 1,175 an ounce on a 12-month view. It cut its 2016 forecast to USD 1,050 from USD 1,200.

“A material slowdown in global economic growth would be required to push the gold price sustainably higher from current levels,” Goldman said, adding that it expects above-trend growth in the US will continue, with easing lending conditions and lower oil prices helping other developed markets to improve as well.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Google misses on earnings, blames strong dollar

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Google reported quarterly earnings and revenue that missed analysts’ expectations, as foreign exchange and falling ad prices weighed on the company.

Reporting Thursday after the bell, the technology giant posted fourth-quarter adjusted earnings of USD 6.88 per share, up from USD 6.00 a share in the year-earlier period. Revenue rose to USD 18.1 billion from USD 16.86 billion a year ago.

Wall Street had expected Google to report earnings of USD 7.11 per share on revenue of USD 18.46 billion, according to a consensus estimate from Thomson Reuters.

Read More: Why Google was hit with downgrades

The company’s stock initially fell more than 3.5 percent in after-hours trading, but moved to a more than 1 percent gain as the earnings call progressed.

Google CFO Patrick Pichette said on the earnings call that revenue was hurt by a combination of a strong US dollar and Nexus 6 inventory problems that meant the company was unable to meet forecast demand—he originally pointed to the Nexus 7, but then later clarified his statements.

He added that “unusual charges” affected the company on the expense side—these included compensation charges and real estate write downs.

Pichette said 2014 was “a year of significant investment growth,” adding that the company will “continue to seek a healthy balance between growth and discipline.”

In Google’s earnings news release, Pichette said the company achieved the USD 18.1 billion revenue figure “despite strong currency headwinds.”

Google said that its fourth-quarter revenues would have been USD 541 million higher if foreign exchange rates had remained constant form the previous quarter. On the call, Pichette said the net revenue impact of a strong dollar cost the company USD 468 million.

The tech giant said its aggregate paid clicks increased about 14 percent over the fourth-quarter of the prior year, and increased approximately 11 percent compared to the last quarter.

Read More: Why Google’s Schmidt says ‘Internet will disappear’

 As for average cost-per-click, the company said this number decreased about 3 percent over the year-ago period, and also decreased approximately 3 percent over 2014’s third-quarter. Pichette pointed to foreign exchange, geography, and device mix to explain the decrease.

In other words, the average price of Google’s digital advertisements continued to fall, at the same time that the company saw an increase in people clicking on those ads.

Still, Pichette said the company “saw continued strength in our core advertising business.”

Omid Kordestani, Google’s chief business officer, said YouTube now has a billion users, and that watch time has grown 50 percent compared to the prior year. The platform’s mobile revenue rose more than 100 percent, he added.

Read More: Google to expand Fiber networks to 4 more cities

As for other platforms, Kordestani said Google for Work had a “great quarter,” the cloud platform is making “good progress,” and Google Play has seen internal growth at an “unprecedented speed.”

He also reported that Chromecast continues to be a “hit” (with a 60 percent increase in usage since its launch), and Chromebooks are enjoying “strong success” in schools.

In regard to Google search, Pichette declined to comment on Mozilla switching to Yahoo as a partner, but he said that people can still find the search engine online.

Google said it had USD 64.40 billion worth of cash, cash equivalents, and marketable securities as of Dec. 31, 2014. Pichette said that he had nothing to announce on Thursday regarding a potential capital return.

Google has underperformed relative to the Nasdaq, recently. The stock has fallen nearly 6 percent in the last three months, while the index has climbed about 3 percent.

Despite its struggles, including in monetizing the user transition from desktop to mobile devices, the Internet and technology giant has started 2015 with a flurry of activity. While search and advertising still form the core of its business, Google has continued to delve into unrelated ventures this year.

The company announced on Tuesday that it would expand its high-speed fiber-optic network, or Google Fiber, to four new metropolitan areas in the United States. It also contributed to a USD 1 billion funding round for Elon Musk’s SpaceX, which the aeronautics company announced last week.

—CNBC’s Josh Lipton contributed to this report.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asia outperforms world markets in January

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian stock markets are off to a winning start this year, getting a boost from lower oil prices and looser monetary conditions in the region.

The MSCI Asia-Pacific Index has risen almost 2 percent so far this year, ahead of the MSCI World Index, which is down around 1 percent.

“The monetary environment in the region is turning more accommodative, creating more liquidity. That’s positive for risk sentiment and equities,” Stephen Sheng, chief investment strategist at SHK Private told CNBC, citing recent monetary easing in China, India and Singapore.

“Meanwhile, lower oil prices are strengthening the outlook for many economies in the region since cheaper oil is favorable for domestic demand,” he added.

India races ahead

Leading the pack are Indian equities, which racked up gains of almost 8 percent in January, extending last year’s solid run.

The benchmark Sensex Index’s gains have been powered by an improving economic outlook thanks to the cheaper price of oil – which accounts for 35 percent of the country’s total imports – and easier monetary conditions after the Reserve Bank of India jumped on the easing bandwagon with a surprise interest rate cut mid-month.

“India’s performance came in stronger than most had expected. The recent rate cut helped – we were surprised they moved so quickly,” said Uwe Parpart, chief strategist at Reorient Group.

Parpart expects Indian stocks will continue to outperform this year. He is also upbeat on the outlook for Chinese and Japanese equities. The latter, however, have not kicked off the year with the same gusto as their South Asian counterparts. The benchmark Shanghai Composite and Nikkei 225 are both up 1 percent year to date.

Read More: Asian stocks fall on oil, corporate earnings concerns

“Recent risk-off sentiment has led to a re-strengthening of the yen, but we won’t see if for that much longer. The yen will weaken to 125 against the dollar at some point this year and that will be a powerful driver of profits for Japanese companies,” he said. Parpart expects yen depreciation to be driven by a stronger dollar as the Federal Reserve gets closer to tightening its monetary screws.

Southeast Asia’s shining stars

Southeast Asian markets were not far behind India, with Vietnam, Thai and Philippines stocks rising 6.9 percent, 5.9 percent and 5.4 percent, respectively, in the first month of the year.
Gains in Vietnam have been fueled by attractive valuations and improving macroeconomic fundamentals. Meanwhile, cheaper oil has helped fuel gains in the Thai and the Philippine stock markets as both countries are net-oil importers, say strategists.

Oil prices have more than halved since last summer amid an environment of feeble global demand and strong supply growth.

While the fall in oil is a blessing for most of Asia, this is not the case for net-oil exporter Malaysia. Regardless, its stock market managed to eke out a gain of 1.2 percent.

“Malaysia’s will struggle because of lower oil prices, I expect it will underperform the region this year,” said Parpart.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Amazon Q4 earnings above Wall Street’s expectations

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Amazon.com blew past Wall Street’s earnings expectations on Thursday as holiday sales climbed some 15 percent, sending the company’s shares rallying 14 percent in after-hours trading.

Amazon issued fourth-quarter earnings of 45 cents a share, down from 51 cents per share a year ago, but soaring past expectations of 17 cents.

Revenue rose 15 percent year-over-year, to USD 29.33 billion, but that trailed analysts’ estimates of USD 29.67 billion. Excluding currency headwinds, the company said revenue increased 18 percent.

Amazon Prime, its annual membership program that costs USD 99 a year, was a bright spot for the e-commerce giant.

The company said worldwide Prime memberships grew 53 percent last year—up 50 percent in the US and “even a bit faster” abroad.

“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping,” said Jeff Bezos, founder and CEO of Amazon. “[I]n 2014 alone we paid billions of dollars for Prime shipping and invested USD 1.3 billion in Prime Instant Video.”

Operating income for the quarter totaled USD 591 million, up 16 percent from USD 510 million in the fourth quarter of 2013. During the company’s earnings call, Amazon said first-quarter operating income could take a hit. Citing the unfavorable impacts of foreign exchange rates, Amazon projected that it could hand in an operating loss of USD 450 million or operating income of USD 50 million.

Amazon sees first-quarter sales of between USD 20.9 billion and USD 22.9 billion, falling below StreetAccount estimates of USD 23 billion.

Shares soared in extended-hours trading, but David Garrity, principal of GVA Research, said now is the perfect time to sell the stock.

“I think coming off of the fourth-quarter, which seasonally is the highest quarter for the company, we’re going to see weaker numbers,” Garrity said, citing Amazon’s exposure to weaker economies overseas.

Read More: Google misses on earnings, blames strong dollar

The company is betting big on a handful of offerings, including Fire TV Stick, its speech recognition device, Echo, and a selection of cloud services.

Amazon Web Services, the company’s cloud business, grew about 90 percent, year-over-year, to about 1 million active customers. The company plans to start bulking up that area sometime this quarter.

“We know there’s going to be a point where they just don’t need to build anymore servers and they can start to scale that business,” said Michael Pachter of Wedbush Securities. “It’s going to be a commodity business, meaning that its going to squeeze out all of the little guys; the only guys who can offer this is going to be guys with scale.”

He predicted that the company could start to scale its cloud as early as 2017, which will cause its earnings to soar.

The company’s operating margin was 2 percent during quarter that ended Dec. 31, 2014, unchanged from a year ago.

Frustrated investors have sent shares of Amazon down 19 percent in the past year even as the broader S&P 500 has risen 13 percent. The company is well-known for its razor-thin operating margins as the e-commerce giant plows money it earns back into new initiatives.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asia rallies as oil gets a reprieve; earnings in focus

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian equity markets were mostly higher on the final trading day of the week, following a halt in the sell-off in energy markets and as traders digest the raft of earnings releases in Tokyo and Seoul.

After touching a multi-year low, US crude futures’ front-month contract settled up 8 cents, at USD 44.53 a barrel. Front-month Brent showed a 70-cent gain at USD 49 a barrel.

Overnight, US stocks bounced back from a two-day rout, buoyed by a reverse in the price of US crude and strong job market data, which helped to offset dismal earnings from the likes of Alibaba and Qualcomm. The Dow Jones Industrial Average closed up 1.3 percent, while the S&P 500 and Nasdaq Composite added 1 percent each.

Nikkei gains 0.4%

Japanese shares halved gains as dollar-yen fell below the 118 handle early Friday. The key Nikkei 225 index had finished 1.1 percent lower – its biggest one-day drop in two week – in the previous session, as a stronger yen and a slew of disappointing earnings took a toll on sentiment.

While inflation data released before the open eased in December for a fifth straight month, raising doubts about the Bank of Japan’s (BOJ) 2 percent inflation target, markets appeared unaffected. The consumer price index (CPI) rose 2.5 percent in December from the year-ago period, government data showed on Friday, compared with Reuters’ forecast for a rise of 2.6 percent and down from the 2.7 percent print in November. The world’s third-largest economy also released other monthly indicators, including factory output, trade, jobs and household spending for the month of December.

Index heavyweight Softbank languished more than 3 percent following a miss in Chinese e-commerce giant Alibaba’s quarterly revenue, in which the Japanese mobile carrier owns a 32 percent stake.

Toshiba rose nearly 3 percent after reporting a jump in third-quarter net income. Broker giant Nomura also traded 2.4 percent higher, on the back of a surprise 45 percent leap in fourth quarter earnings to 70 billion yen – the highest in almost two years.

More corporate report cards will be handed in as well, from the likes of Honda, Sumitomo as well as Japan Airlines and All Nippon Airways. Shares of the carmaker slipped 0.2 percent, as analysts forecast profits to fall 17 percent from a year earlier in the last three months of 2014.

Mainland indices up

China’s benchmark Shanghai Composite index inched up 0.1 percent in early trade, after settling at a more than two-month low on Thursday following reports that the mainland’s stock regulator will inspect the stock margin trading business of 46 companies.

Brokerages recovered modestly after steep losses in the previous session, with Haitong Securities and Citic Securities elevating 0.2 percent each.

In Hong Kong, the Hang Seng index opened flat to hover near a one-week low.

ASX up 0.7%

Australia’s benchmark S&P ASX 200 index was on course for a seven-session winning streak, supported by expectations of a rate cut by the Reserve Bank of Australia (RBA) next Tuesday, said IG market strategist, Stan Shamu. Meanwhile, the Australian dollar traded at $0.7783 to the greenback, near multi-year lows.

The banking sector traded higher, with Commonwealth Bank of Australia rallying 1 percent after hitting a record high in the previous session. National Australia Bank and ANZ Banking scaled up 0.6 percent, respectively, while Westpac inched up 0.3 percent.

The resources sector also saw a broad-based rally; Fortescue Metals was the top gainer, adding 5.4 percent, after leaping 10 percent on Thursday. Other big miners like Rio Tinto and BHP Billiton also climbed over 1 percent, while oil-related counters including Santos and Oil Search got a rare lift from overnight gains in crude prices, up 1 and 1.2 percent each.

Kospi flat

South Korean shares pared gains after briefly hitting a seven-and-a-half-week high at the open, as dismal corporate earnings curbed buoyant sentiment.

Posco skidded nearly 7 percent as a slowdown in its top consumer China kept steel prices weak, which weighed on the steelmaker’s fourth-quarter operating profit. LG electronics – the world’s number 2 TV maker – sagged 3.2 percent on the back of weaker-than-expected profit for the October-December period due to weak television earnings stemming from higher price competition and adverse exchange rate effects in markets like Brazil and Russia.

Amid the negative corporate releases, SK Telecom bounced up nearly 4 percent after reporting better-than-expected fourth-quarter profit late Thursday. Samsung Electronics, the heaviest weighted stock on the Kospi index, rose 0.6 percent, recouping some of Thursday’s losses due to a 36 percent on-year fall in fourth quarter profit.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why surprise parties are central banks’ new thing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After years of carefully telegraphing their outlooks to the market, central bankers are loosening up with surprise parties, with Singapore the latest to jump in.

“The Monetary Authority of Singapore (MAS) is the third central bank in Asia to significantly surprise the market (after the Bank of Japan and the Reserve Bank of India) and the market will increasingly question who will be next,” HSBC said in a note Wednesday.

The Singapore central bank`s move Wednesday to ease between its usual April and October meetings follows in the footsteps of larger-than-expected quantitative easing steps from the European Central Bank (ECB) and the Swiss National Bank`s (SNB) shock move to unpeg its currency from the euro and slice its interest rates deeper into negative territory. Last week, the Bank of Canada also surprised markets by cutting its benchmark rate for the first time since 2010.

Unfortunately, the parties aren`t to celebrate the health of economies, analysts say. The plunge in oil prices has raised red flags on slowing inflation, which could ultimately impact growth.

For the MAS, the fact that it`s made an unscheduled policy announcement for the first time since just after the 2001 terrorist attacks in the US, is quite telling.

“MAS is more concerned than it let on about the global economy and disinflationary forces,” HSBC said. “The urgency and the magnitude of the decision [Wednesday] reflect more than just concern about the domestic inflation outlook owing to lower oil prices.”

The MAS reduced the slope of the Singapore dollar`s appreciation against an undisclosed, trade-weighted basket of currencies, its first easing move since 2011, citing low domestic inflation. Rather than using interest rates, Singapore sets its monetary policy by adjusting the currency`s trading range. In December, the city-state`s consumer price index fell 0.2 percent on-year after declining 0.3 percent in November.

It`s a pattern being repeated globally, and some analysts expect more monetary easing ahead.

“Inflation rates are falling globally, which are panicking central banks to do more than what even the most pessimistic analyst may have predicted,” Bank of America Merrill Lynch said in a note Tuesday. “Central bankers globally are underestimating the deflation threat, and once recognized, they will be surprised at how much they have to ease to fight it.”

But some think “panic” mischaracterizes the moves.

“For Asia, it`s not panic. You could call it panic in Europe,” said David Carbon, chief economist at DBS. “Growth is relatively weak, especially in the G-3,” but Asia has been a “steady Eddie,” growing around 6 percent a year for a while, he said.

Carbon believes Asia`s central bank surprises aren`t entirely about oil and deflation fears, with the moves likely related to the region`s less-than-obvious currency strength.

“All are down against the dollar, but they`re way up against the euro and the yen” he noted, estimating the region`s currencies are up 7-10 percent against the three-currency basket over the past six months.

Indeed, some believe that central bankers` surprise parties can be happy ones.

“These surprises tend to be market supportive,” Dariusz Kowalczyk, senior economist at Credit Agricole, said. “The surprise that provides additional cash or cheaper funding is not so dangerous.”

-By CNBC.Com`s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

First quarter ‘even bigger’ for Apple in China

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China was a knockout success for Apple in the fourth quarter where demand for its latest iPhones propelled a 70 percent on-year rise in revenue, and analysts are now tipping the first quarter to be even better.

Gift-buying in the lead up to Chinese New Year holiday, which falls on February 19-20, will likely drive iPhone sales even higher this quarter, say analysts. The first quarter is typically the strongest for smartphone sales in the mainland due to the holiday season.

“Apple has not yet reached its maximum level in China. January and February is the big shopping season leading up to Chinese New Year,” said Tom Kang. “I think the first quarter may be even bigger than the fourth quarter for Apple.”

Apple generated $16.1 billion in revenue from Greater China- which includes China, Hong Kong and Taiwan – in the three months to December – up from $9.5 billion in the same period a year earlier. The region accounted for 22 percent of the company`s overall revenues.

According to data firm Canalys, Apple was the top smartphone vendor in China in terms of units shipped in the fourth quarter, surpassing rivals Samsung  and Xiaomi for the first time.

“This is actually all done ahead of the Lunar New Year, so clearly you`ve got more momentum going into what`s going to be a critical first quarter in China for Apple,” said David Garrity, principle at GVA Research.

The 4.7-inch iPhone 6 and 5.5-inch iPhone 6 Plus – released in September – have been a hit among consumers across Asia, where there is a growing preference for phablets – or smartphones with a screen size of 5-inches and above.

Read More Apple posts blowout quarter, will ship Watch in April

For example, the iPhone maker captured a record 33 percent of smartphone sales in Samsung`s home market of South Korea in November, according to Counterpoint Research, the first time a foreign brand has exceeded the 20 percent market share in the history of the country`s smartphone industry.

“Apple`s phablet really hit the sweet spot in East Asian markets, where screen size is critical,” said Tom Kang, research director at Counterpoint Research.

Beyond the first quarter

After the first quarter, Apple`s blockbuster growth in China is likely to cool.

The bulk of consumers waiting for the iPhone 6 and iPhone 6 Plus would have likely made their purchases by the end of the first quarter, so growth will be more gradual thereafter, said Kang.

“Unless, they come out with a mid-range iPhone…below $300,” he added. “If they had a mid-ranged iPhone, they would probably reach 40-50 percent market share in China – levels seen in U.S. and Japan.”

Kang, however, doesn`t think Apple will head in that direction any time soon.

For now, Apple needs to work on keeping consumers in the mainland loyal to its brand, he said, to prevent flip-flopping between iOS and Android devices.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China to set 2015 growth target at ‘around 7%’: Sources

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China plans to cut its growth target to around 7 percent in 2015, its lowest goal in 11 years, sources said, as policymakers try to manage slowing growth, job creation and pursuing reforms intended to make the economy more driven by market forces.

The growth target, which is set to be announced by Premier Li Keqiang at the annual parliament session in March, was endorsed by top party leaders and policymakers at a closed-door Central Economic Conference in December, said a number of people with knowledge of the outcome of meeting who spoke to Reuters.

The target, which is in line with market expectations, has not been previously reported.
“This year’s economic growth target will be around 7 percent, but the 7 percent should be the bottom line,” said one of the sources, an influential economist who advises the government.
“The government will have to balance economic growth, employment and structural reforms this year,” said the economist, who requested anonymity due to the sensitivity of the matter.

Read More: China economy grows at slowest pace in 24 years

The use of “around” to qualify the growth forecast repeats terminology used last year by authorities to show they were not fixed on a hard target.

Although the target was endorsed in December, it is still possible for it to be adjusted before the parliament convenes.

The State Council Information Office, the public relations arm of the government, had no comment on the growth forecast when contacted by Reuters.

Deflation concerns

Officials have said slowing growth reflects reforms to put the economy on a more sustainable path, but they are wary of a sharp slowdown that could cause job losses and debt defaults.
China’s pursuit of rapid growth in recent decades has helped fuel overinvestment in some sectors and a sharp build-up of debt by local governments. Almost USD 7 trillion was wasted on ineffective investment since 2009, a government official and economist said last year.
Central Bank Governor Zhou Xiaochuan has acknowledged a lower growth target was on the cards for 2015, saying it would be discussed by the parliament in March.

The government is also looking at lowering its forecast for consumer price inflation to around 3 percent, the sources said.

Consumer prices rose 2 percent in 2014, coming in well below a target of 3.5 percent as deflation fears intensified, while producer prices have been falling for almost three years.
“Fighting deflation could be the top priority in the near term, but that won’t contradict with structural adjustments,” said another source, who is a senior economist at a well-connected think-tank in Beijing.

Quarter-century low

The last time China set its national growth target at 7 percent was in 2004, when theeconomy actually grew 10.1 percent. The growth target was 7.5 percent last year.

Data last week showed growth in the world’s second-largest economy plumbed a 24-year low of 7.4 percent in 2014, and a Reuters poll of more than 40 economists found growth was expected to slow to 7 percent this year and 6.8 percent in 2016.

Some local governments have already lowered their growth targets for this year, often after significantly undershooting their 2014 goals, and Shanghai said it would not even set a growth target because its focus was on reforms and developing a free-trade zone.

Fifteen of 17 regions, provinces and municipalities, including Beijing, that have released local growth plans for 2015 have cut their GDP targets by between half a percentage point to 2.5 percentage points from last year, local media reports and government websites showed. 

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian stocks lower on oil, earnings concerns

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian indices were broadly lower early Thursday, with the exception of New Zealand and the Philippines, following a sell-off on Wall Street overnight as US crude tumbled to near six-year lows.

Meanwhile, the Federal Open Market Committee stuck to its vow to be “patient” on hiking interest rates and raised its view of the economy and labor market, even as the central bank anticipates a further decline in inflation.

Overnight, US stocks declined as the energy sector expanded losses after US crude settled down USD 1.78 at USD 44.45, its lowest since March 2009. Brent crude oil for March delivery was down USD 1.22 at USD 48.38 a barrel.

The Dow Jones Industrial Average ended down 1.1 percent while the tech-heavy Nasdaq Composite shed 0.9 percent. The S&P 500 fell 1.4 percent, a day after it took its biggest hit in more than three weeks.

Mainland indices down

China’s benchmark Shanghai Composite index opened down 0.8 percent to a one-week low, with financials among the hardest-hit, following reports from state media Xinhua that the mainland’s stock regulator will inspect the stock margin trading business of 46 companies.

Brokerages were lower, with Haitong Securities losing 2.1 percent. Citic Securities and Founder Securities also slumped 1.9 percent, respectively.

Apart from insurers like China Pacific Insurance and China Life Insurance which retreated more than 2 percent each, China Minsheng Bank and China CITIC Bank fell 2.5 and 2 percent each.

In Hong Kong, the Hang Seng index opened down 0.7 percent.

Nikkei drops 0.4%

Japan’s benchmark Nikkei 225 slipped in early trade, as dollar-yen retreated below the 118 handle and as traders digest December’s retail sales data, which rose a lesser-than-expected 0.2 percent from a year earlier.

Nintendo slumped nearly 8 percent, after the video games maker issued a profit warning on Wednesday. Canon also made losses of 4.7 percent despite reporting a slight rise in fourth-quarter profit thanks to a weaker yen and solid office equipment sales.

Broker giant Nomura, NTT DoCoMo, Toshiba and Advantest made losses between 0.4 to 1.2 percent ahead of their corporate earnings reports.

Meanwhile, Skymark Airlines is in focus after it filed for bankruptcy protection late on Wednesday, putting the blame on Airbus and fierce competition at home. Shares of the budget carrier was de-listed following the bankruptcy filing.

Kospi falls 0.3%

South Korean shares fell modestly amid a pullback among index heavyweights. Samsung Electronics, the heaviest weighted stock on the Kospi index, was flat amid choppy trade after announcing a 36 percent on-year fall in fourth quarter profit, confirming its first annual earnings decline in three years.

Steelmaker Posco eased 0.4 percent while Kepco and KB Financial Group rebounded 0.1 and 1.2 percent each. LG electronics, due to hand in fourth quarter earnings later in the day, sagged 1.1 percent.

ASX flat

Australia’s key S&P ASX 200 index erased early losses to edge up into positive territory, as a rebound in the banking sector offset losses in the energy sector.

As Westpac traded 0.3 percent lower, trimming a decline of 0.8 percent. National Australia Bank, Commonwealth Bank of Australia and ANZ Banking recouped earlier losses to rebound 0.6 percent, respectively.

Oil and gas producer Santos plunged 3.8 percent, while Liquefied Natural Gas and Oil Search fell 3.3 and 2.7 percent each.

New Zealand’s NZX 50 index pared earlier gains but remained at record highs, while the kiwi dollar recovered to trade at USD 0.7344. The currency fell to a three-and-a-half-year low earlier after the Reserve Bank of New Zealand held its benchmark rate steady, but turned dovish as it said its next move could be either up or down after an extended period on hold.

PSE Composite jumps 0.8%

Philippines’ benchmark index surged in Thursday’s morning session following data that showed an upside surprise in the country’s fourth quarter gross domestic product (GDP). The Philippine economy grew an annual 6.9 percent in the October-December period, faster than market expectations of 6.0 percent, bringing full-year growth to 6.1 percent.

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Yahoo’s Mayer saves her job with Alibaba spin-off

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Marissa Mayer likely extended her life as Yahoo’s CEO by spinning off the company’s stake in Alibaba. The next challenge will be acting fast enough to fix the company’s core business.

After months of anticipation, Yahoo announced late Tuesday it would spin off its massive stake in China’s Alibaba Group directly to shareholders in a tax-free transaction. The stake, worth about USD 40 per Yahoo share, accounts for the bulk of the company’s valuation, and investors including activist Starboard Value have recently pressured the company to divest it.

Shares of Yahoo jumped 7 percent to USD 51.42 in after-hours trade on the news, approaching their highest level since the dot com bubble.

Best outcome

Large Yahoo shareholders interviewed by CNBC Tuesday said the move is the best possible outcome for the Alibaba stake. It’s also likely sufficient to protect Mayer and the current Yahoo board from opposition during the upcoming proxy season. Shareholders are allowed to nominated new directors before a deadline of March 27.

Yahoo declined to comment.

 “If they hadn’t announced the spin it would have been a fiasco and Mayer probably would have been fired,” said one large Yahoo shareholder. “Now, Marissa and (CFO) Ken Goldman are on the clock for the next three quarters.”

The Alibaba spinoff was critical because it effectively created about USD 14 per share in value through cost savings (assuming the stake would have been taxed at 35 percent in a traditional sale).

That is the most valuable of a number of steps Starboard suggested in the fall. The activist also urged the company to pursue a tax-free spinoff of its stake in Yahoo Japan and consider a merger with rival AOL. Assuming a normal tax rate, there is about USD 2 per share to unlock from a tax-free divestment of the Yahoo Japan stake and a merger with AOL could generate several dollars per share in synergies, according to analyst estimates.

It’s unclear whether Starboard will be satisfied with the Alibaba spin or continue to pressure the company. Starboard declined to comment.

Read More: Yahoo to spin off its remaining Alibaba stake

Other shareholders have mixed views on what Mayer should do in coming months. Some hope for a tax-free spinoff of Yahoo Japan or a potential merger with a suitor like AOL.

But even if neither of those hopes materialize, it’s likely that Yahoo’s core business will come into much greater focus. With the Alibaba stake in the picture, core Yahoo had been almost too small to matter.

Core business

Now, it’s much easier to notice what’s going on in the core business. After subtracting the roughly USD 40 per share in value that the Alibaba stake is currently worth, there’s about USD 11 per share remaining in the stock. The company also has about USD 6 per share in net cash and the Yahoo Japan stake is worth about USD 7 per share. That suggests the market continues to put a negative valuation on core Yahoo.

What can be done to improve the valuation on the core business? The main issue is that the company continues to incur higher costs while advertising revenues stagnate. In fairness, there are some promising signs: the company said Tuesday it expects revenue from new areas like mobile, video, and social to offset traditional display revenue declines in 2015.

The trouble is that the company still struggles to generate enough revenue for the ads it sells. In the fourth quarter, the price per display ad from Yahoo properties fell 20 percent. That may be a result of difficulty competing with the likes of Google and Facebook, which are adept at selling ads based on a fairly specific profile of the person who sees them.

After giving investors the gift of Alibaba just as they wanted it, the pressure on Yahoo is likely to ease up considerably. But with the core business now in focus, Mayer will face a new test altogether.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow