Month: March 2015

Asian stocks mixed ahead of RBA decision

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

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Asian stocks turned mixed early Tuesday, as cautious sentiment prevailed ahead of a keenly-anticipated policy decision by Australia’s central bank.

Overnight, US stocks finished higher, with the tech-heavy Nasdaq above the psychologically key level of 5,000 for the first time since March 2000 and the blue-chip Dow Jones Industrial Average and S&P 500 at records as investors cheered US economic data and an interest rate cut in China.

Nikkei slips 0.4 percent

Japan’s Nikkei 225 index reversed gains to drift further away from Monday’s 15-year high as the dollar-yen retreated back into the 119 territory.

Embattled electronics firm Sharp is in focus following news that it plans to seek aid from lenders and reorganize its domestic operations. Shares of the Osaka-based Japanese firm plunged 7 percent, outpacing other electronic firms, such as Panasonic and Sony, which made losses of more than 1 percent each.

Steep losses in index heavyweights like Softbank and Fast Retailing, down 1.6 and 1.4 percent each, also weighed on the bourse

Shanghai Comp falls 1.2 percent

Chinese shares plunged in early trade as the country’s top political advisory body – the Chinese People’s Political Consultative Conference (CPPCC) – convenes today in Beijing, just ahead of the country’s annual National People’s Congress on Thursday.

Among top losers, China State Construction slumped 2.5 percent while Poly Real Estate tanked 3.6 percent.

ASX flat

Australia’s S&P ASX 200 index pared gains, retreating from fresh 7-year highs attained earlier in the session, as traders await the Reserve Bank of Australia’s policy decision at 1130 SIN/HK, where the central bank is widely expected to announce its second consecutive interest rate cut. Meanwhile, the Australian dollar hovered near a one-week low of USD 0.7764 to the dollar,

The banking sector led advances; Westpac rallied 1.4 percent, while the National Australia Bank, Australia & New Zealand Banking and Commonwealth Bank of Australia advanced between 0.2 to 0.7 percent each.

However, a tumble in oil prices overnight weighed on some oil and gas producers, with Woodside Petroleum and Santos down 0.9 and 1.5 percent, respectively.

On the domestic data front, Australia’s government spending for consumption rose 0.3 percent in the final quarter of 2014 to an inflation-adjusted AUSD70.3 billion, according to data by the Australian Bureau of Statistics released early Tuesday. Building approvals in January, meanwhile, rose 7.9 percent.

Kospi gains 0.1 percent

South Korea’s Kospi index held at a new five-month high, supported by gains among automakers and Samsung’s affiliates.

Hyundai Motor and Kia Motors advanced over 3 percent each, while Samsung Heavy Industries surged 1 percent following news that it won an USD 618.9 million order to build four TEU-class container ships from Mitsui OSK Lines.

Meanwhile, global mobile messenger provider Viber said Monday it will appeal a South Korean court ruling that may ban its local operation, signaling a protracted battle with South Korea’s top mobile carrier, SK Telecom. Shares of the latter traded flat.

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

Negative yields: what could go wrong?

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

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Some central banks have cut interest rates into negative territory in an effort to eke out some economic growth, but the step could spur unintended, counterproductive outcomes.

“Negative rates could backfire,” Francesco Garzarelli, co-head of macro markets research at Goldman Sachs, said in a note Friday. “At least some segments of the population could feel poorer, and less secure,” he said. “Rather than lifting consumption and borrowing, ultra-loose monetary policy could perversely lead to an increase in precautionary savings and a slower economic recovery.”

In an effort to ward off potential deflation and bolster nearly flat-lined economic growth, some central banks — including the European Central Bank (ECB), the Swiss National Bank and central banks in Sweden and Denmark — have cut rates into negative territory.

Going negative

A big chunk of the government bond market has gone negative: JPMorgan estimated that in January, around USD 3.6 trillion worth of developed market government bonds-or 16 percent of its Global Bond Index-was at a negative yield.

That`s something that can spur new problems, Goldman said, noting concerns that pension funds and insurance companies may struggle to meet guaranteed payouts.

“Today`s very low or even negative fixed income yields often are not large enough to match future liabilities,” Goldman said, noting insurance companies are generally assuming forward rates will be positive and above current rates. If low or negative yields persist, making guaranteed products work will become increasingly difficult, it said.

In addition, if banks` profitability takes a hit from negative rates, it could actually discourage bank lending, hurting efforts to revive economic activity, Goldman said.

There`s also the risk of asset bubbles forming, Garzarelli said, adding the risk is especially high for “high duration” assets such as technology stocks and high-dividend-paying stocks, which already have “eye-watering” valuations.

Upending theory

Others also believe ZYNY, or zero-yield to negative-yield, may not follow the theoretical playbook in the real economy.

“Traditional economic theory suggests that low interest rates will encourage households to borrow more, both to acquire housing and also to favor present consumption over future consumption,” Michala Marcussen, global head of economics at Societe Generale, said in a note dated Sunday. But in practice, it may not work as households are already relatively highly indebted, labor markets remain fragile and regulations have become more demanding, she said.

“Indeed, households may even opt to save more to compensate for low yields, and all the more so in ageing populations,” Marcussen said.

Corporates also aren`t really cooperating, using low yields to borrow to buy back shares or retire older debt, steps that don`t help the real economy much, she said. Societe Generale also expects banks to use some of the proceeds of the ECB`s new quantitative easing program to pay back euro-area debt and deleverage rather than increase the credit supply there.

“Yields could fall much lower and even deeper into negative territory,” but that`s no guarantee of an economic recovery, she said.

-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

It’s a big week for Australia, China

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

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A busy week ahead for Asia gets under way with financial markets digesting key economic data over the weekend: An interest rate cut by China`s central bank , a second consecutive month of contraction in China`s February official purchasing managers` index (PMI) and the unveiling of India`s annual 2015/2016 budget .

The People`s Bank of China on Saturday cut its benchmark interest rate by 25 basis points to 5.35 percent, and reduced the benchmark saving rate by a similar margin to 2.5 percent. The cuts came into effect on Sunday, according to the statement.

“This combination of policy rate cuts and interest rate liberalization is in line with our expectations, but comes slightly earlier than we thought. The timing leads us to believe that policymakers have deemed the recent data weakness more than merely seasonal,” Societe Generale`s analysts wrote in a note.

Key highlights this week include a batch of economic numbers, alongside a central bank decision from Australia and an annual meeting of China`s parliament – which should shed some insight into Beijing`s outlook for the economy in the coming year.

Australia

Down under, the spotlight falls on the Reserve Bank of Australia, which is expected to announce another 25-basis-point rate cut on Tuesday. The central bank cut rates to a fresh record low of 2.25 percent last month, as widely expected, spurring a 12-session winning streak in the benchmark SandP ASX 200 index.

“To ensure maximum impact from its February cut in boosting confidence, spending growth and maintaining downward pressure on the Australian dollar, the RBA should, and most likely will, cut rates again,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, write in a note.

A larger-than-expected drop in fourth-quarter business investment last week also fuelled the need for a second rate cut, AMP Capital`s Oliver added.

On tap for Wednesday is Australia`s fourth-quarter gross domestic product (GDP) data, which will likely show growth rising 2.6 percent, according to a Reuters poll, a tick below the 2.7 percent in the preceding quarter. However, on a quarterly basis, GDP advanced 0.7 percent, better than the 0.3 percent expansion in the July-September period.

“Business investment remains weak as the economy stutters in transitioning from mining to non-mining‐led growth. Other partial indicators of demand will confirm that weak commodity prices are also hurting Australian exports,” analysts from Moody`s Analytics wrote in a note.

Australia will also release fourth-quarter current account and January`s retail sales on Tuesday and Thursday, respectively, at 0830 SIN/HK.

China

China`s National People`s Congress – the country`s highest organ of state power – meets on Thursday and investors will be watching for comments on economic targets for 2015 and whether authorities will roll out further easing measures.

Barclays expects Beijing to lower its GDP target for the year to 7 percent, along with a reduction in consumer price index (CPI) and M2 – the mainland`s broadest measure of money supply -targets to 3 and 12 percent, respectively.

Beijing will likely strike an accommodative tone for further interest rates and reserve requirement ratio (RRR) cuts, analysts say, amid a backdrop of persistent economic slowdown. The world`s second largest economy expanded 7.4 percent last year, its slowest pace in 24 years.

“The overall macro policy framework will be `prudent` in practice, with monetary easing to neutralize capital outflows and rising real interest rates with an increase in the fiscal deficit to support social spending,” Barclays` analysts wrote in a note.

HSBC`s final reading of China`s manufacturing sector in Febuary came in at 50.7 early Monday, much higher than the flash reading of 50.1 and the official February reading announced over the weekend. The services PMI for February will be released on Wednesday at 0945 SIN/HK.

In South Korea, a raft of monthly indicators in the form of CPI and trade numbers for February, as well as industrial production and retail sales data for January, are due early in the week.

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

After rate cut, what’s next from PBOC?

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

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The Chinese central bank’s second rate cut in three months will not be enough to halt a downturn in the world’s second largest economy, with more easing steps needed, say economists.

The People’s Bank of China (PBOC) cut benchmark interest rates by 25 basis points to 5.35 percent on February 28 as deteriorating economic conditions forced the central bank to shorten the time gap between policy moves. It had already delivered a lending rate cut on November 21 and a reserve requirement ratio cut (RRR) on February 5.

The rate cut, which came sooner than some analysts had expected, was announced hours before the release of the official purchasing managers index (PMI) for February, which showed the country’s manufacturing activity contracted for a second straight month.

More steps needed

“Against this backdrop, we think more easing steps will follow,” said Louis Kuijs, chief China economist at the Royal Bank of Scotland. “This is needed to ensure that GDP (gross domestic product) growth will not fall too much below 7 percent in 2015 – what we expect will be announced as this year’s target during the NPC (National People’s Congress) meeting that starts March 5. “

A further reduction in the benchmark lending rate and RRR are in the pipeline, say economists.

“The next move is likely to be a RRR cut, likely in 2Q, but a cut towards the end of 1Q cannot be ruled out (RRR cut is also a tool of liquidity management),” said Yu Song, economist at Goldman Sachs.

“Further benchmark interest rate cuts are also possible. The government is also loosening other policies such as allowing the exchange rate to depreciate modestly against the [US dollar] and stepping up infrastructure investments,” he said.

China’s yuan fell to its weakest level against the US dollar since October 2012 early Monday.

HSBC expects one more lending rate cut and RRR reduction in the second quarter.

Read More: China cuts benchmark interest rates by 25 basis points

“More easing, beyond the latest lending rate cut, has to be carried out to bring about a material fall in cost of financing within the system,” said André de Silva, Head of Asia-Pacific Rates Research at HSBC.

“Recent money market conditions still paint a tough financing picture. The 7-day interbank repo rate reached 4.99 percent as of 28 February, way above the past year average of 3.60 percent. The money market is the basic building block of financing and with such high levels, it is extremely difficult to expect companies’ cost of funding to fall,” he said.

Just the beginning

With China’s growth under continued pressure, monetary easing is poised to become a dominant theme in the mainland – a clear policy divergence from the US, where the Federal Reserve is gearing up to tighten the monetary screws.

Steve Wang, chief China economist at Reorient Financial Markets says of all the major economies, China has the most room for monetary ease.

Inflation in the mainland has fallen from 2.5 percent in January 2014 to just 0.8 percent in January 2015 and the slowdown in domestic demand means there’s scope for inflation to ease further, say economists.

“We believe that additional monetary stimulus will be positive for Chinese equities,” he added.

The benchmark Shanghai Composite was flat early Monday as investors digested the weekend’s rate cut.

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

Samsung unveils curved Galaxy S6 Edge, payments

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

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Samsung has unveiled a curved screen smartphone and mobile payment system in an attempt to lead its fightback against US rival Apple.

The South Korean electronics giant released the Galaxy S6 and curved S6 Edge at Mobile World Congress in Barcelona as it looks to turn round its fortunes after a year dominated by the iPhone 6 and 6 Plus in the premium end of the market.

Both devices have a 5.1 inch screen with a 16 megapixel rear camera and 5 megapixel front camera. But the screen on the S6 Edge curves over the sides of the smartphone.

“This phone is more powerful than every Galaxy device before. It is a new generation of design,” Jean-Daniel Ayme, deputy president of Europe for Samsung, told CNBC in an interview.

“We are very confident that this device will be hugely successful,” Ayme added when asked by CNBC how the S6 Edge would fare against the iPhone.

Both smartphones can be charged wirelessly, a feature the South Korean company teased last week in a blog post. Other features include a heart rate monitor and ability to view apps such as the time or stocks on the side screen of the S6 Edge.

Analysts said the Galaxy S6 and S6 Edge are a step up from the Galaxy S5 which was criticized for looking and feeling cheap, despite being Samsung’s flagship product.

“These products deliver a completely new level of quality and design from Samsung which was something where they made a major misstep with the all-plastic Galaxy S5,” Ben Wood, chief of research at CCS Insight, told CNBC by phone, referring to the Galaxy S5’s plastic body. The latest S6 range is made of metal.

“The products’ three clear areas of differentiation – camera, screen and design – and have simplified software. The purchase consideration for consumers are clearer than before.”

‘Not revolutionary’

Samsung faced a tough year in 2014, losing its dominant position in both China and India to high-spec low-cost smartphone makers such as Xiaomi and Micromax. And in the fourth quarter of last year, Apple tied with Samsung to become number one smartphone vendor in the world by shipments, according to Strategy Analytics.

To top it off, the South Korean titan’s cash cow mobile division reported its fifth consecutive quarter of decline in earnings in the fourth quarter of 2014.

The S6 Edge is Samsung’s reply, but analysts said it would not lead to full-blown turnaround for the company’s smartphone unit.

“I think it’s an evolutionary, not revolutionary, step for Samsung, but it is the first step in stabilizing the company,” Neil Mawston, executive director at Strategy Analytics, told CNBC by phone.

As well as the devices, Samsung unveiled its mobile payments system called Samsung Pay. This will allow customers to store their card details in a “mobile wallet” and pay using their smartphone or any other Samsung devices.

Samsung said its payment system works using near field communication (NFC) technology. But unlike Apple Pay, Samsung Pay also uses magnetic strip technology in order for users to pay for items using their mobile devices. This, Samsung claims, will allow it to work with over 90 percent of the world’s retailers.

Initially Samsung Pay will roll out in South Korea and the US in the third quarter of this year, Ayme said, but could not say when it will be available globally. Samsung has partnered with Mastercard and Visa on its payments system and said it is looking to work with other companies such as American Express.

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’s rate cut buoys Asia stks; yuan at over two-year low

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

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Asian stocks kicked off the week at new highs, as an interest rate cut in China on Saturday offset a weaker finish on Wall Street last week and data indicating shaky growth in the world’s top two economies.

The People’s Bank of China cut the benchmark interest rate by 25 basis points to 5.35 percent and reduced the benchmark saving rate by a similar margin to 2.5 percent.

HSBC’s final reading of China’s manufacturing sector in Febuary came in at 50.7, much higher than the flash reading of 50.1 and the official February reading announced over the weekend, which showed a second straight month of contraction due to unsteady exports and slowing investment.

US equities ended lower last Friday as economic growth in the world’s biggest economy slowed more sharply than initially thought in the fourth quarter. Analysts polled by Reuters expected GDP growth of 2.1 percent, after a final reading of 5.0 percent in the third quarter.

The blue-chip Dow Jones Industrial Average and tech-heavy Nasdaq Composite shed 0.5 percent, while the S&P 500 index finished 0.3 percent lower.

Nikkei rises 0.2 percent

Japan’s Nikkei 225 index trimmed gains, but hovered near fresh 15-year highs, as the dollar-yen touched a two-and-a-half-week high of 119.9.

Among blue-chip exporter stocks, Toyota Motor tacked on 0.7 percent, while Toshiba and Canon gained 1.1 and 0.4 percent each.

Retailing giant Fast Retailing climbed 0.6 percent ahead of the release of its latest sales figures. Telecom giant NTT Communications rallied 2.8 percent on news that it is looking to acquire German data center operator e-shelter.

On the domestic data front, Japanese companies raised spending on factories and equipment in the final quarter of 2014, data from the Ministry of Finance showed early Monday, underscoring a pick-up in business investment.

Shanghai Comp up 0.5 percent

Chinese shares rebounded back to a four-week high, after wavering between gains and losses following the release of PMI data.

Robust gains among property majors provided support; China Merchants Property, Shanghai Shimao and Poly Real Estate jumped more than 2 percent each, while Gemdale and China Vanke elevated 1.6 and 1.2 percent, respectively.

Meanwhile, the yuan weakened to 6.2730 against the dollar – its lowest level since October 2012.

ASX up 0.8 percent

Australia’s S&P ASX 200 index hit its highest level since May 2008 ahead of the Reserve Bank of Australia’s (RBA) policy meeting tomorrow, where the central bank is widely expected to announce another interest rate cut.

“Those calling for a cut would say the RBA often moves in pairs. With this in mind, if the RBA doesn’t cut tomorrow, then May would almost certainly see easing of the cash rate and the markets are fully discounting this,” IG’s chief market strategist Chris Weston said.

Mining and banking heavyweights are on a roll in early trade; Rio Tinto and BHP Billiton piled on nearly 2 percent each, while Westpac led gains among the big four lenders with a rise of 1.5 percent. Australia & New Zealand Banking, National Australia Bank and Commonwealth Bank of Australia advanced more than 1 percent each.

Myer Holdings bucked the rising trend, down 12 percent, following news that the retailer named Richard Umbers as its new chief executive officer. and managing director.

Kospi adds 0.3 percent

South Korea’s Kospi index hovered near a five-month high, led higher by index heavyweights.

The heaviest weighted stock Samsung Electronics surged 3.4 percent after the electronics giant unveiled the Galaxy S6 and curved screen S6 Edge at the Mobile World Congress in Barcelona, along with a mobile payment system in an attempt to compete with US rival Apple.

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