Month: April 2015

BP profits fall as oil price bites

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

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Oil major BP reported a fall in profits on Tuesday, as the plunging price of oil continues to hit revenues for the sector.

Underlying replacement cost profit — which takes into account the fluctuations in the price of oil — came in at USD 2.577 billion for the first quarter, below the USD 3.225 billion reported in the same period the previous year but above the USD 2.239 billion reported in the last quarter of 2014.

It managed to beat a set of analyst consensus figures provided by the firm, however, which had predicted a replacement cost profit of USD 1.28 billion. It added that its oil production was 8.3 percent higher than the first quarter of 2014.

BP noted that its upstream operations – which involve oil exploration and production – had weighed on its results, especially its US market, which showed a loss of USD 545 million for the quarter.

It also announced a quarterly dividend of 10 cents per share, to be paid on June 19, and said production for the second quarter was expected to be lower than the first quarter, reflecting significant seasonal turnaround and maintenance activity.

The price of oil has seen a dramatic drop of around 50 percent since mid-June last year but has managed to pare some losses in recent months. BP CEO Bob Dudley has previously indicated that prices could linger at these levels for “several years.”

Speaking at Egypt’s Economic Development Conference in April, Dudley said that oil prices had been a “huge shock” for companies like BP. The industry had been living in a “world of luxury” over the last few years, he said, when prices were above USD100 a barrel.

BP was the first European major to sound the alarm on tumbling oil prices – on December 10, it warned that it was implementing a cost-cutting program as a result. In January, BP announced job cuts in its onshore operations in the UK.

It told CNBC that it expected a reduction of around 200 staff and 100 contractor roles in light of “major reshaping” for the business and “toughening market conditions.”

BP’s shares have seen some softness over recent trading sessions after a report in the Financial Times said that the British government had told the company it would oppose any potential takeover.

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

Gold surges: World’s ‘biggest pawnbroker’ makes deal

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

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Gold surged above USD 1,200 an ounce Monday in its best day since January, amid market intrigue surrounding a deal between Venezuela and Citigroup to swap USD 1 billion in cash for part of the country’s gold reserves.

The swap, reported last week, provides cash to President Nicolas Maduro’s socialist government as the country reels from a steep drop in oil revenue. Reuters reported Friday that the Venezuelan central bank was expected to have provided 1.4 million ounces of gold in exchange for the cash, and the country would have to pay interest on the funds.

“He had to pawn their gold. That’s what they’ve done. They can buy it back. They have rights of first refusal,” said Dennis Gartman, publisher of The Gartman Letter. “They went to the biggest pawnbroker of gold—Citibank.”

Read More: Gold sees best day since January as shorts cover

The deal was cited as one of several things that helped drive gold futures to the highest level in two weeks. Futures for June jumped 2.4 percent to 1,203.20 an ounce. Gold stocks also rallied, with Freeport-McMoran up 5 percent and Newmont Mining up almost 3 percent.

“That was a huge potential seller taken out of the market. It’s not an overhang anymore,” Gartman said of the Venezuela deal. GLD, the Spdr Gold Trust ETF, was up 2 percent, its best day since late January.

Kevin Grady, president of Phoenix Futures and Options, said while there was talk about the big gold swap, he said the bigger factor driving prices was the expiration of May options Monday and short covering.

“If we didn’t have the options positions rolling off again, I don’t think we would have had the market going to USD 1,200,” Grady said. On Tuesday, the April futures contract expires. There also was an increase of 13,000 shorts in the market, a positive since those traders could be forced to buy gold when they cover, he said.

“I’m bearish until gold settles at USD 1,230 … every time you get up there, there’s a major wall of selling that comes into the market. Even this rally today—as impressive as it is—USD 30 on the day. We’re stuck in this range,” Grady said. He said gold rallied to the middle of the range, which is between USD 1,177 and USD 1,220.

Even so, George Gero of RBC said he believes the Venezuela deal juiced the market. “I think that has a lot to do with raising awareness of institutions. Where they are in the second quarter, in the second week—how they haven’t allocated to gold. … This was like a wake-up call,” he said.

Read More: Venezuela may have missed USD 24 billion in oil revenues

Gero said the market may now be able to hold USD 1,200. Gartman agrees. “It’s important, yes it will hold,” he said.

For Gartman, the decision by the Peoples Bank of China to buy regional and national securities was a big factor for the market. “The Peoples Bank of China has gone full in for QE,” he said. “Finally, you’ve got the PBOC, which is a monstrous bank making an implied bet on inflation.”

Strategists also said the market was positioning ahead of Wednesday’s Federal Reserve statement.

“I think there’s some short covering prior to the Fed meeting,” said Gero, adding traders think the US central bank will promote a dovish mood.

Howard Wen, precious metals analyst at HSBC, also said the market was moving on speculation about what the Fed would say after its meeting Wednesday..

“We have the FOMC meeting ahead and from a historical perspective, prices tend to be more volatile ahead of FOMC meetings,” said Wen. He said the market also will be watching the coming data including Tuesday’s consumer confidence and Wednesday’s first-quarter GDP, both potentially dollar-moving data points.

“It seems like the USD 1,200 level hasn’t been that significant lately. It’s kind of been trading in a range so far in April, in and out of USD 1,200. That might be the middle point between the upper and lower bound,” he said.

If the Fed sounds in any way hawkish, gold could decline and the dollar would rise, he said.

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

Apple boosts buybacks, earnings beat on strong iPhone sales

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

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Apple reported quarterly earnings and revenue that beat analysts’ expectations. The company reported second-quarter earnings of USD 2.33 per share on revenue of USD 58 billion on Monday. Analysts expected tech giant Apple to report earnings of USD 2.16 a share and USD 56.08 billion in revenue, according to a consensus estimate from Thomson Reuters.

During the same period last year, Apple posted earnings of USD 1.66 per share on USD 45.6 billion in revenue.

Read More: Apple’s beat: ‘These are amazing numbers’

The firm also announced Monday that it would expand its capital return program to USD 200 billion from a previously announced USD 130 billion. This estimated figure comes from Apple increasing its share repurchase authorization to USD 140 billion from the USD 90 billion announced last year, and boosting its dividend 11 percent to 52 cents per share. The planned program goes through March of 2017, Apple said.

CEO Tim Cook said on the firm’s earnings call that the buyback reflects “our strong confidence in what lies ahead for Apple.”

The tech giant said its cash horde had risen to a record USD 193.5 billion—over USD 171 billion of which was located offshore. Last quarter the total cash figure came in at USD 178 billion, according to the company.

Apple’s stock rose more than 1 percent in after-hours trading immediately following the Monday announcements.

“How long do we ride this rally? As long as possible,” said Ross Gerber, CEO of Gerber Kawasaki.

As for its devices, Apple said that it had sold 61.17 million iPhones, compared to a StreetAccount consensus estimate of 57.26 million. Apple CFO Luca Maestri said demand for iPhone 6 and iPhone 6 Plus “has remained incredibly strong.”

The company said it sold 12.62 million iPads, compared to expectations of 13.94 million. Mac units came in at 4.6 million (compared to a 4.64 million estimate).

Cook touted the year-over-year growth of its Mac products while much of the personal computer industry languishes.

“We are thrilled by the continued strength of iPhone, Mac and the App Store, which drove our best March quarter results ever,” Cook said in an earnings release.

Read More: How BlackBerry plans to win your heart again

“We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch,” he added.

Cook told CNBC that he is “very confident” that iPad sales “will come back” (although he declined to predict on the call when this would occur), and he also said he’s happy with the Apple Watch performance so far.

The CEO said on the call that the response to the new wearable device has been “overwhelmingly positive,” and boasted of the more then 3,500 apps that are already available for the product. He later added that demand is “hard to gauge,” but it is outstripping supply for the product. The company anticipates selling the Apple Watch in additional countries by June, he said.

Maestri said that margins on the wearable product will be lower than company average.

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 shares choppy, while rest of Asia mostly lower

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

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Asian shares outside Japan declined early Tuesday, tracking Wall Street’s lackluster finish overnight, and as investors eyed a slew of corporate earnings due in the region.

Overnight, US stocks ended down, failing to hold Friday’s records, as investors eyed earnings and looked ahead to the beginning of the two-day Federal Reserve meeting on Tuesday. The tech-heavy Nasdaq led losses, down 0.6 percent as biotech stocks lagged. The Dow Jones Industrial Average shed 0.2 percent, while the S&P 500 index dropped 0.4 percent.

Nikkei gains 0.6 percent

Japan’s benchmark Nikkei 225 hurled itself back over the psychologically-important 20,000 mark early Monday, overlooking a larger-than-anticipated fall in retail sales, which slumped 9.7 percent on-year in March. This compared with a drop of 1.8 percent in the preceding month.

Heavyweight components provided the bourse with positive support; Fanuc, which doubled its dividend payout to 60 percent, climbed 6.3 percent, while Fast Retailing scaled up 1.7 percent.

Earnings season remain underway; Honda Motor firmed up 1.4 percent ahead of the release of quarterly earnings after the market close today.

Meanwhile, a merger between US-based Applied Materials and Tokyo Electron to create one of the world’s largest chip-making equipment fell apart due to opposition from US anti-trust regulators. Shares of the latter slumped 14.6 percent on the news.

Mainland markets down

Chinese stocks saw choppy trade at the open; the Shanghai Composite slipped 0.2 percent after rallying 3 percent to a seven-year peak on Monday, while the Hang Seng Index also reversed a higher open to drop by the same margin in early trade. The Hong Kong bourse had rose to its highest level since December 2007 in the previous session.

The breakneck rally in China have spurred concerns over its durability, but some experts says the rally remain well-supported.

“There is an element of the ‘Greater fool theory’ in China, but there is also something fundamental going on. China is in the early stages of liquefying its economy, in both fiscal and monetary perspectives,” Viktor Shvets, head of Strategy Research for Asia at Macquarie, told CNBC.

“China has one of the highest real interest rates, but this is going to zero. China is also capable of fiscal stimulus that other countries can’t so all the improvements in the equity market can be supported not necessarily by economics, but by much more aggressive monetary and fiscal policy,” he added.

Kospi flat

South Korean shares held near neutral territory in early trade, losing early upward momentum as the tech sector traded mixed ahead of earnings releases.

The top weighted stock Samsung Electronics and Samsung SDI lost 1 and 0.8 percent, respectively, while SK Hynix climbed 1.3 percent.

On the corporate news front, Samsung Heavy Industries said early Tuesday that the company is not seeking a merger with Samsung Engineering. Shares of the latter appeared unaffected, up 1.3 percent, but Samsung Engineering reversed a higher open to tank 1.5 percent.

ASX drops 0.4 percent

Australia’s S&P ASX 200 index retreated from Monday’s seven-year closing highs, still hovering close to the 6,000 mark.

Reserve Bank of Australia governor Glenn Stevens gave a speech early Tuesday, but said he would not comment on whether the central bank would be cutting rates as the next policy meeting is only a week away.

As such, banking shares struggled in early trade; Westpac fell 1 percent, while Australia and New Zealand Banking and National Australia Bank shed 0.6 and 0.2 percent, respectively.

However, firmer gold and base metal prices overnight provided some support for the resource sector. Evolution Mining and Newcrest Mining rallied more than 3 percent each, while Fortescue Metals elevated 1.2 percent each.

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

India’s scope for progress is ‘enormous’ on infra spending

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

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India is one of the most prominent examples of a large growth payoff from infrastructure investments. A continuing progress in that area will help India to relax supply constraints, ease inflation pressures and make a significant contribution to public health and safety.

The scope for progress is enormous. The World Bank says that logistics costs in India are nearly three times above the global average, and the UN Food and Agriculture Organization estimates that 40 percent of India’s fresh produce is wasted before reaching the market. Similarly, a report from the Indian government indicates that about 21 million metric tons of wheat – equivalent to Australia’s annual production – is lost due to inadequate storage and distribution facilities.

The food costs being the key source of inflation, it is clear that these infrastructure problems present a serious obstacle to India’s economic growth because, among other things, they compromise price stability. That, in turn, forces the monetary authorities to keep interest rates higher than might be necessary for steady and sustained gains in demand and output.

Other development objectives may also be negatively affected. The “Make in India” project is one of them. The goal of establishing India as the global manufacturing hub may be impossible to achieve without a fast and significant progress in building and upgrading transportation, energy, public health and sanitation facilities.

Modi goes to China

What is India doing about all that? This year’s budget includes plans for five large power projects to ease energy problems, and infrastructure spending is being increased by more than USD 11 billion. Difficulties created by inadequate sanitation facilities – estimated to cost more than 6 percent of the gross domestic product — are also being addressed. The official objective is to achieve “total sanitation” by 2019.

It is quite likely that additional funding of major energy and transportation projects will come from the Asian Infrastructure Investment Bank (AIIB). That will probably be more acceptable than official foreign financing of roads, railroads, power plants and water supplies.

Read More: India goes all out to court foreign investors

Such an impression is clearly conveyed by Indian media reports about Prime Minister Narendra Modi’s forthcoming visit to China on May 14-16, 2015. These reports indicate that unresolved border issues and India’s estimated USD 40 billion trade deficit with China will be the main items on the summit’s agenda. Nothing is transpiring with regard to the USD 20 billion that China’s President Xi Jinping promised during his visit to India last September for investments in Indian infrastructure over the following five years.

I believe, however, that infrastructure investments cannot be ruled out because it is impossible to meaningfully narrow the two country’s trade imbalance without direct (as opposed to portfolio) capital inflows from China — even if a major progress is achieved with Beijing on market access for Indian products and services. In that context, some agreements on China’s financial involvement in Indian infrastructure projects are very likely during Mr. Modi’s visit to Beijing and Shanghai.

It may also be that this sensitive topic is being handled discreetly in the wake of a USD 46 billion Chinese-Pakistani deal agreed in Islamabad on April 20, 2015 to build roads, railroads and energy pipelines. Most of these infrastructure projects are part of the China-Pakistan Economic Corridor, binding together the two countries’ transportation networks and offering China an efficient shortcut to its Persian Gulf energy supplies through the Balochistan’s port of Gwadar.

Asia’s cranes are cranking up

Apart from that, the investment package includes a number of other important building programs in Pakistan. A 1,240 km six-lane Karachi-Lahore highway is expected to be completed in 2017, and a modernization of the 1,300 km Karakoram highway, running from Kashgar on the Silk Road to the center of Punjab, Pakistan’s largest province. The agreement also provides funds for upgrades of the public transportation systems in Pakistan’s major urban centers, and for the construction of an energy grid over the next two years that will combine coal, solar and hydroelectric power.

Indonesia – South-East Asia’s largest economy and the world’s fourth-most populous nation – is the latest regional player to announce last week a USD 50 billion program of development (mainly infrastructure) financing in order to keep the economy close to its 7 percent growth target.

Read More: Chinese, Japanese investors are looking here

This sprawling archipelago of more than 18,000 islands has a USD 6 billion project to build and upgrade the country’s ports. Whether that will make Indonesia a “maritime bridge” between Asia and Africa, as President Widodo pledged at the60th anniversary of the Bandung Conference on April 22, 2015, does not matter much. That was a good political statement to fit the occasion of the two continents’ summit meeting — but there is no doubt that such a huge improvement in Indonesia’s transport efficiency will have enormously positive growth effects.

China’s vast urbanization program and large-scale infrastructure investments in India, Indonesia and Pakistan are currently the most important growth-enhancing policy actions in Asia.

But that’s not all. A number of smaller Asian economies are also making big efforts to build and upgrade their transportation, energy and public health facilities in order to provide jobs and incomes and to raise their growth potential. Many of these countries will benefit from China-sponsored “silk road” projects planned to connect East Asia to Central Asia, Middle East and Europe via land and sea routes. And then their modernization efforts will receive support from AIIB and The New Development Bank. These two lending institutions will mainly focus on Asia, where annual infrastructure needs are estimated by the Asian Development Bank at a whopping USD 800 billion.

Investment thoughts

Infrastructure investments are development foundations for (a) stronger economic activity and (b) an increasing growth potential for demand, output and employment.

These are eminently bankable investment propositions offered by the world’s largest and most populous continent that is home to two-thirds of humanity.

Asia’s development efforts, easily financed by its prodigious excess savings, should give some perspective to investors looking beyond “high frequency” noise and transitory interest rate realignments.

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 stocks rise to multi-year highs; earnings in focus

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

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Shanghai and Hong Kong led Asian equities higher on Monday as record highs in the U.S. last week boosted sentiment and as investors monitored earnings reports.

On Wall Street, the Nasdaq Composite and S&P 500 both closed at record highs on Friday following tech third-quarter earnings reports. Among big movers, Microsoft rallied 10 percent after posting earnings of 61 cents per share on USD 21.73 billion on revenue that beat estimates.

China stocks higher

Both the Shanghai Composite and Hang Seng Index jumped over 1 percent in early trade, with the former hitting another seven-year peak and the latter index rising to its highest level since December 2007. Investors brushed off weak data released at the market open; industrial profits for the first three months of the year fell 2.7 percent on year, the Statistics Bureau said.

“What’s happening in the market right now is retail money moving back into stocks after a long 5-6 year bear market. With yields going down from deposits to wealth management products and the property market not jumping back, retail investors have nowhere else to go except stocks,” said Stephen Sheung, Head of Investment Strategy at SHK Private.

In Hong Kong, HSBC surged nearly 5 percent after announcing that it was considering moving its headquarters to Hong Kong from London. Property developer Vanke rose 0.5 percent despite reporting a 59 percent decline in first-quarter core profit.

ASX 0.7 percent higher

Australia’s resource-heavy benchmark S&P ASX 200 clinched a new one-week high for the second straight session, outperforming the rest of its Asian peers.

Miners led the gains after iron ore prices surged by more than 5 percent to a six-week high of USD 57 a ton. Fortescue Metals popped 7 percent, Rio Tinto rose 2 percent and BHP Billiton was up by more than 1 percent.

Telco M2 sank 5 percent after confirming it plans to buy rival iiNet for USD 1.25 billion; iiNet rallied 17 percent on the news.

Nikkei flat

Japan’s benchmark index reversed earlier losses to hover along the flatline as investors concentrated on first-quarter earnings results from heavyweights Canon and Fanuc, due later in the day.

Sony lost over 1 percent on media reports that former executives accused CEO Kazuo Hirai last week of diminishing the company’s creativity. This offset news from the Nikkei daily that Sony is expecting an operating profit of 300 billion yen next fiscal period, which would mark its best performance since 2008.

Oil firm Inpex was flat on reports that it is in talks to take a 5 percent stake in a U.A.E. oil concession for USD 1.1 billion.

Kospi flat

South Korean shares reversed early gains, retreating from a four-year high of 2,189 points briefly hit last week. Among blue-chip stocks, Samsung Electronics fell nearly 2 percent.

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

Is the raging rally in Indian equities over?

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

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Indian equities appear to be losing their mojo since hitting a lifetime high in March, as weak corporate earnings, soft growth momentum and uncertainty over the government’s tax policy discourages investors.

The S&P BSE Sensex has fallen almost 8 percent since March 4, when the benchmark index touched an all-time peak of 30,024.74. Year-to-date, the gauge is up just 1 percent, trailing regional peers such as the Shanghai Composite, which is up 36 percent.

With a number of challenges hanging over the market, it’s likely to move sideways in the months ahead unless positive catalysts emerge, say strategists.

“There are a number of reasons to explain the reversal of fortunes. For a start, confidence over the government’s reform agenda may be waning a little. In particular, the Finance Ministry’s plan to retrospectively tax both foreign and domestic companies is likely to have unnerved investors,” Shilan Shah, India economist at Capital Economics, wrote in a note.

“Looking ahead, with valuations still looking stretched and uncertainty over the government’s tax policy, a spectacular rebound in the equity market seems unlikely,” said Shah, who expects the Sensex to end the year at 30,000.

Potential catalysts

According to Simon Grose-Hodge, head of South Asia investment strategy at LGT Group, an interest ratecut could help inject fresh life into the market.

“Some people are disappointed that the Reserve Bank of India (RBI) hasn’t been more aggressive with cutting interest rates,” he said. “I think we’ll get at least one more cut, which will be beneficial for the stock market.”

At its last meeting on April 7, the RBI kept rates on hold at 7.5 percent, saying that it would wait longer to assess inflationary pressures before making its next move.

Read More: India’s IPO market is heating up: BSE Head

Nevertheless, Grose-Hodge believes the pullback in the market is temporary and presents a buying opportunity.

“There’s a fair amount of reform going on, and the foreign direct investment (FDI) channel looks encouraging. As for corporate earnings, I think the pessimism is unwarranted, profitability seems to be underestimated,” he said.

“As a medium-to-long term investor, there’s still a lot of value. We’re advising clients to buy into the weakness,” he added.

Land Acquisition Bill

Jigar Shah, CEO of Maybank Kimeng Securities India said another potentialmarket stimulant would be the passage of the controversial Land Acquisition Bill.

Opponents of the bill argue it will hurt the interests of farmers, while the government says it’s required for economic development.

During the first leg of its budget session, which ended on March 20, the government won parliamentary approval for three key bills crucial to its reform agenda: the Mines and Minerals Bill, the Coal Mines Bill and the Insurance Bill.

However, it was unable to pass the Land Acquisition Bill through the upper house and had to re-introduce the ordinance in early April.

Investors are waiting to see if the bill to make it easier to acquire land will be passed during the second leg of the budget session from 20 April to 8 May 2015.

“If they can pull through on the Land Acquisition Bill it will provide a catalyst for the market,” said Shah.

Aside from reforms, further evidence of a turnaround in the economy will help the stock market, he said.

“The recovery is still elusive, I think in another 6-9 months we’ll see some stronger evidence on the ground to suggest the Indian economy is performing to potential.”

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 mostly higher on US lead; Greece eyed

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

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Asian stocks were higher across the board on Friday following a mildly positive lead from Wall Street.

Uncertainty over a “Grexit” is back on the radar as the debt-stricken nation prepares for a meeting with the Eurogroup later in the day, which analysts say won’t yield results.

“It is now clear that the chances of Greece reaching a deal to unblock the funds during the coming meeting on 24 April are very slim. This means that Greece is unlikely to receive official funds until at least the next Eurogroup meeting scheduled for 11 May, which given the lack of progress on negotiations so far, also seems unlikely at this stage,” IHS analysts wrote in a note.

“This creates significant uncertainty regarding Greece’s ability to pay its bills over the coming weeks and months,” the note added.

Overnight, US stocks closed near highs, with the tech-heavy Nasdaq adding 0.4 percent at an all-time high, as investors cheered corporate earnings reports. The S&P 500 added 0.2 percent, while the blue-chip Dow closed up 0.1 percent.

Nikkei slips 0.6 percent

Japan’s Nikkei 225 underperformed early Friday as profit-taking kicked in after the bourse charged up to 15-year highs for the second straight session yesterday.

Airlines were among the laggards in early trade; Japan Airlines plunged nearly 2 percent, while ANA Holdings ticked down 0.3 percent following lower oil prices overnight.

Carmaker Honda, which is in the news for unveiling its first business jet on Thursday, notched up 0.7 percent.

Meanwhile, brokerage houses Nomura Holdings and Daiwa Securities continued to attract buy orders, up 1.5 and 0.6 percent.

Mainland indices mixed

China’s Shanghai Composite opened down 1.2 percent, with blue-chip developers and lenders leading the decline.

Bank of China and Industrial and Commercial Bank of China fell nearly 2 percent each, while China Vanke and Poly Real Estate receded 1.5 and 2.3 percent, respectively.

Hong Kong’s Hang Seng index ticked up 0.3 percent at the open.

ASX jumps 1.1 percent

Australia’s S&P ASX 200 index touched a one-week high amid a broad-based rally.

The materials and energy sectors were off to a positive start, on the back of support from firmer iron ore, gold and crude oil prices. Fortescue Metals and BC Iron led gains by rallying 6.5 and 15 percent each. Oil-related counters Santos and Origin Energy opened up more than 2 percent, respectively.

Banks were also buoyant; National Australia Bank and Commonwealth Bank of Australia advanced 1 percent each.

Kospi gains 0.3 percent

South Korea’s benchmark Kospi index opened up to a near four-year peak, with the spotlight remaining on corporate earnings.

Kia Motors firmed up 2.4 percent despite seeing a drop in first-quarter operating profit and revenue due to weakness in key markets like Russia. Its bigger affiliate Hyundai Motor shrugged off a 2.2 percent drop in first-quarter net profit to open up 1.1 percent.

The country’s top builder Samsung C&T tanked 2.6 percent on the back of a 25.9 percent plunge in first-quarter earnings.

Meanwhile, the European Court of Justice upheld a 210 million euros (USD 224.8 million) fine imposed on LG Display for participating in a cartel of LCD panel makers between 2001 and 2006. Shares of LG Display gained 0.6 percent.

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

Petrobras loses $9 billion in Q4 in wake of scandal

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

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Brazilian oil giant Petrobras lost 26.6 billion reais (USD 8.8 billion) in the fourth quarter after taking a write-down of 50.8 billion reais (USD 16.8 billion) due to corruption and other disruptions, the company said on Wednesday, according to Reuters.

Write-downs linked to a corruption scandal amounted to 6.19 billion reais (about USD 2 billion), while remaining losses came from cost overruns at refineries and oil price pressures, among other factors, Reuters said.

U.S.-listed shares in Petrobras were choppy in extended trading after the company released heavily-anticipated audited fourth-quarter financials. Markets eyed the results for impairments to the company’s assets.

Read More: Long-awaited audit may shed light on Petrobras scandal

The delayed release was Petrobras’ first audited financial statement since August. It marked a key step for the state-controlled oil company’s future in international stock and credit markets and held implications maybe even for the future course of the world’s seventh-biggest economy.

“The audited results are likely to improve overall expectations and reduce the risk of further downgrade from credit rating agencies for the time being,” the Eurasia Group, a political consulting firm, wrote in a Wednesday note.

Petrobras is engulfed in what’s probably the largest financial scandal in Brazil’s history — a high bar, given the country’s record of corruption.

The scandal started with the arrest early last year of a company director, who subsequently struck a deal with prosecutors in September. Since then, details have emerged almost daily of a decade-long, alleged bribery scheme involving company officials.

The executive alleged to investigators that for nearly 10 years, Petrobras contracts were routinely padded by 3 percent, with the extra money used for bribes and kickbacks. Much of that money was supposedly funneled to the country’s ruling political parties.

If the earnings report is deemed credible by markets, the next step will be to convince investors that the company has a plan to establish a positive cash flow. Petrobras started a borrowing binge years before the price of oil began plunging in 2014, and it quickly became the most indebted company in the world.

Petrobras commands oil and gas reserves of about 13 billion barrels.

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Greek crisis talks as Tsipas, Merkel meet

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

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Just one day ahead of a crucial meeting of euro zone finance ministers, Greek Prime Minister Alexis Tsipras is due to meet German Chancellor Angela Merkel to discuss Greece’s ongoing solvency crisis.

A spokesperson for the German government confirmed to CNBC that the pair were due to have a “private discussion” in Brussels Thursday, but that the meeting was not officially scheduled.

Greece’s bailout program, the reform agenda and progress on reforms would be discussed by the leaders, according to the spokesperson.

The conversation – which will be on the sidelines of a European Union (EU) summit to discuss the region’s migrant crisis — comes ahead of Friday’s crucial Eurogroup meeting of euro zone finance ministers, where Greece’s progress in its reform pledges will be top of the agenda.

Greece’s leftwing government is reluctant to impose reforms that entail more austerity, but the organizations overseeing the country’s bailouts — the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission — have refused to release a last tranche of aid until concrete reforms are in place.

Read More: Greece facing ‘Lehman moment’ as debt costs soar

Germany, the biggest contributor to Greece’s bailout, has been particularly keen to avoid showing Greece the money before it commits to completing its bailout program, which is now due to end in June.

High hopes

Hopes are high that Friday’s Eurogroup meeting will result in agreement between Greece and its creditors. But there is also the risk of disappointment – particularly as some of the main players have played down the chances of a deal.

Greek Finance Minister, Yanis Varoufakis, told reporters earlier this week that there was “convergence” with creditors, but a deal would not necessarily come Friday.

Read More: ECB staff mull plans to curtail bank funding

“There will be a deal, a comprehensive agreement,” Varoufakis told reporters in Athens, Reuters reported. “But this does not mean that there will be an agreement at Friday’s Eurogroup”.

Meanwhile, Germany’s Finance Minister, Wolfgang Schaeuble, said he was sceptical the meeting will lead to a solution.

Markets watching

Investors are keeping a close eye on the meeting, however. In the last week, Greece’s borrowing costs have spiked and its banking stocks fallen on the back of fears that the country is about to default on its debt repayments to the IMF and ECB.

It came as the Greek government ordered local state bodies to transfer their idle cash reserves into the country’s central bank in a bid to cover its funding needs.

The move raised eyebrows among economists who have been wondering how much longer Greece can pay its domestic and international bills.

“Greece remains at the forefront of the markets mind, with one of the major questions being when exactly will the country run out of cash,” a note from Rabobank’s rate strategy team said Thursday.

They said Greece could “hold out” until at least the end of May before having to choose between external creditor payments and politically unavoidable domestic payments. But whether the ECB was willing to keep on extending emergency liquidity assistance (ELA) to Greek lenders was another matter, they added.

As such, Rabobank said a deal Friday was unlikely.

“This simply reinforces the point that a resolution to the Greek crisis is very unlikely at the 24th April informal Eurogroup meeting or the formal one in Brussels on 11th May,” the note said. “The other factor to consider is that the ECB may be unwilling to let things drag on for as long as the cash position implies.”

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