Month: January 2016

China regulators flood markets with cash

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

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Chinese authorities Tuesday flooded the banking system with the largest cash injection since September, likely helping soothe equity markets a day after a stock rout that rocked global financial markets.

The People’s Bank of China (PBOC) injected 130 billion yuan (USD 19.95 billion) during its open market operations. A Dow Jones report Tuesday noted that the move followed a PBOC decision Monday to not renew a credit line of the same amount to policy bank China Development Bank, a move which may have spurred investor worries that the central bank might tighten policy.

“Around this time of year, the PBOC does typically do large repo injections just for seasonal reasons,” noted Julian Evans-Pritchard, a China economist at Capital Economics, citing an increase in demand for cash for the Lunar New Year holiday period.

“That said, it seems a bit early to do that now given Chinese New Year is still a few weeks away. There might be an element of easing liquidity conditions a bit following the stock market fall yesterday.”

In Monday’s trading session, Chinese equities plunged after feeble manufacturing surveys revived concerns over the country’s economic slowdown. The CSI300 index dipped 7 percent in afternoon trade Monday, resulting in trade being suspended for the day. The Shanghai Composite had tumbled 6.8 percent and the Shenzhen Composite plummeted 8.1 percent Monday.

On Tuesday, mainland markets gyrated between positive and negative territories.

Other factors may also have spurred liquidity concerns among equity traders.

The PBOC’s decision to push more yuan into the markets may also be related to the continued flow of capital out of China. In the third quarter, total net capital outflows continued for a sixth straight quarter, reaching a record of USD 221 billion, according to data from Societe Generale.

That’s likely to continue pressuring the renminbi, Societe Generale said. Because the PBOC appears to be targeting a slow depreciation of the currency, it’s had to buy renminbi in the market, effectively tightening liquidity.

On Tuesday, Reuters reported that the PBOC was suspected of intervening to support the renminbi after the central bank set the daily mid-point fixing for the dollar to fetch 6.5169 yuan, marking the Chinese currency’s weakest since 2011. China’s central bank lets the yuan spot rate rise or fall a maximum of 2 percent against the dollar relative to the official fixing rate.

Additionally, a ban on share sales by company shareholders with stakes larger than 5 percent was set to expire on January 8. That could free up more than 1.1 trillion yuan worth of holdings, or around 5.8 percent of total A-share free float, to be sold, Goldman Sachs estimated in a note Tuesday.

China may have more than 600 initial public offerings (IPOs) in the pipeline after a change to a “registration-based” system from one that required regulators’ approval. Goldman Sachs estimated around 1.2 trillion yuan worth of equity financing may head to market, up 20 percent on year.

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

Saudi Arabia vs Iran: The oil war that isn’t coming

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

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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

Stagflation in US?: Ghost of ’70s could make return

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

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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

Mideast oil exports unlikely to face disruptions: Analyst

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

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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

Chinese markets turn positive after tumbling at open

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

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Chinese markets tumbled at the open Tuesday, but quickly erased early losses as Asian markets recovered from a sharp selloff in the previous session.

The Shanghai Composite tacked on 0.95 percent after initially trading down as much as 3.1 percent. The smaller Shenzhen Composite was off 0.2 percent after initially falling as much as 5 percent, while the CSI300 erased its opening losses of as much as 2.58 percent to trade up 1.4 percent. In Hong Kong, the Hang Seng Index added 0.56 percent.

In Monday’s trading session, Chinese equities plunged after feeble manufacturing surveys revived concerns over the country’s economic slowdown. The CSI300 dipped down 7 percent in afternoon trade Monday, resulting in trade being suspended for the day. The Shanghai Composite had tumbled 6.8 percent and the Shenzhen Composite plummeted 8.1 percent Monday.

Goldman Sachs said in a note Tuesday that other factors cited as explanations for the sell-off include market concerns over near-term liquidity, capital outflows, monetary tightening and policy stimulus inaction.

During yesterday’s sell-off, China tested out its new system-wide circuit breakers linked to the benchmark CSI300 index, dominated by large cap stocks. When there is a 5 percent decline in the CSI300 index, trading is halted for 15 minutes. When that index drops 7 percent, the market closes for the day. Hong Kong does not have a circuit breaker.

Deutsche Bank said in a note Monday that the top 50 largest weighted constituents on the CSI300, which are mostly financials, property, and industrial names, accounted for 42 percent of the 7 percent loss yesterday. They are, the note suggested, more sensitive to macroeconomic developments and policy dynamics, and hence, “macro conditions and policymakers could have a greater influence on market trading.”

The bank also noted that the 5 percent/7 percent stop-trading threshold in China is comparatively lower than other markets, adding to volatility and possibly heightening concerns on market liquidity. In the U.S., if the S&P 500 moves reach 7 and 13 percent, trade is halted for 15 minutes and is then completely stopped when it hits the 20 percent mark in either direction.

Reuters reported that China’s securities watchdog, the China Securities Regulatory Commission, said Tuesday that it would continue to hone its circuit-breaker mechanism, but that its use on Monday had helped calm markets and protect investors’ interests. This was at odds with the views of most market commentators, who blamed the circuit breaker for exacerbating panic selling by retail investors.

Before trading started, the People’s Bank of China set Tuesday’s yuan fix at 6.5169 against the dollar, compared with Monday’s fix of 6.5032, representing a 0.21 percent increase.

Other Asian equities traded mixed Tuesday with the Australian ASX 200 index down 51 points, or 0.97 percent, at 5,219.5. In Japan and South Korea, markets erased early losses to trade positively, with the Nikkei 225 up 0.28 percent at 18,502.8 and the Kospi up 0.61 percent at 1,930.52.

Oil prices saw some uptick during Asian trade with the US West Texas Intermediate (WTI) futures up 10 cents, or 0.27 percent, at USD 36.85 a barrel. The global benchmark Brent was up 12 cents, or 0.32 percent, at USD 37.32 a barrel. In U.S trading hours, U.S. crude was at USD 36.76 a barrel and Brent at USD 37.24 a barrel.

In Australia, resource plays remained under pressure with shares of Rio Tinto down 1.14 percent. BHP Billiton erased morning losses to trade up 0.22 percent while other miners remained mostly in the red. Energy stocks saw losses between 1.25 and 3 percent as a result of falling oil prices overnight, while gold miners traded mixed, with Newcrest up 2.83 percent.

Electronics retailer Dick Smith, which had asked for a trading halt Monday, announced it had appointed voluntary administrators after it was unable to secure short-term funding. Its stock was de-listed only two years after it made its debut on the Australian stock exchange.

Meanwhile, the Australian dollar traded lower at 0.7184 against the U.S. dollar.

Japanese blue chip stocks traded mostly lower, with the likes of Toyota and Honda falling more than 1 percent each. The dollar-yen pair, which fell below the 120-benchmark against the dollar in the previous session, was at 119.50 on Tuesday morning, with the Japanese currency likely boosted by safe-haven flows.

In South Korea, Samsung Electronics shares erased losses to trade up 017 percent. In the previous trading session, the share was down over 4 percent after the company’s chief executive, Kwon Oh-hyun, warned employees of challenging conditions ahead, due to low global growth and greater competition. Samsung is expected to issue earnings guidance for the fourth quarter ended December on Friday.

CapitaLand shares were up 0.3 percent in morning trade.

Arthur Lang, CapitaLand chief financial officer, noted that the company, which has around 50 percent of its assets in China, had guided that it expected 14 billion yuan in residential sales on the mainland in 2015. While he told CNBC he couldn’t provide the exact figure as full-year results weren’t released yet, “if we achieve the guided 14 billion yuan, it would be the highest ever we’ve achieved in our 14 years there.”

Elsewhere, low-cost carrier Tiger Airways saw its shares up 9.76 percent after reports said Singapore Airlines was revising its initial offer price for the airline from an initial SUSD 0.41 a share to SUSD 0.45 a share. Singapore Airlines shares traded up 0.18 percent.

Overnight, US and European equity markets were also hammered on renewed concerns of a global economic slowdown and increased tensions in the Middle East. The drop in Chinese stocks also put pressure on sentiment.

The Dow Jones Industrial Average closed 276 points, or 1.5 percent, lower at 17,148.94, while the S&P 500 shed 31.28 points, or 1.5 percent, at 2,012.66. The Nasdaq Composite was down 104.32 points, or 2 percent, at 4,903.09. The Dow had been down more than 2.5 percent in intraday trade before recovering.

In Europe, major markets all ended more than 2 percent down.

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

‘Oil may hit $18 amid Saudi-Iran tensions’

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

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Oil prices could break below USD 20 this year as tensions simmer between Iran and Saudi Arabia, two of the world’s largest oil players, Again Capital founding partner John Kilduff said Monday.

“I think you’re going to get as low as USD 18 and maybe get as high as USD 48 … It’s going to get really ugly,” he told CNBC’s “Squawk Box. “The Iranians doubled down again, if that’s even possible, by saying that they could put 500,000 more barrels on the market within weeks after the sanctions get lifted.”

Kilduff was referring to the anticipated lifting of sanctions related to Iran’s nuclear program, which have locked the country out of international oil markets.

Saudi Arabia on Sunday cut diplomatic ties with Iran after the former’s supreme leader Ayatollah Ali Khamenei said the Saudis would face “divine revenge” for its execution of prominent Shiite cleric Sheikh Nimr al-Nimr, one of 47 put to death over the weekend. Protesters stormed the Saudi embassy in Tehran following the announcement of Nimr’s death.

Saudi Arabia is the dominant Sunni Muslim power in the Middle East, while Iran is led by Shiites.

The Organization of the Oil Exporting Countries (OPEC), led by Saudi Arabia, has declined to impose production caps to prop up crude prices, accelerating a rout that has cut the cost of oil by two-thirds from its highs in 2014.

“OPEC maybe as we know it is over because these two are not going to be coming together any time soon on modifying or moderating production,” Kilduff 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

Chinese markets halt trading for day after shares plunge

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

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Chinese stocks plunged Monday, spurring a trading halt for the rest of the session and leading stock markets in Asia Pacific lower after feeble manufacturing surveys revived concerns over the durability of the country’s economic recovery.

The Shanghai Composite tumbled 6.85 percent to 3296.66 and the Shenzhen Composite plunged 8.1 percent. The CSI 300 was down 6.98 percent; when that index rises or falls 7 percent, a trading halt in China’s markets is triggered for the rest of the session.

Stocks in Australia, Japan, South Korea and India also fell. Energy plays, however, saw gains after oil prices bounced during Asian trading hours.

Hong Kong’s Hang Seng index was also down 2.87 percent at 21,286.6

Gavin Parry, managing director at Parry International Trading, said several factors could explain the sell-off in the Chinese markets. First, he noted the lower-than-expected manufacturing report that was out over the weekend, followed by the Caixin survey released earlier in the morning.

Parry said everyone is “still focusing on the industrial side of things.”

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

Caixin PMI falls to 48.2 in December, below expectations

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

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The Caixin Purchasing Managers’ Index (PMI) fell to 48.2 in December, from 48.6 in November, contracting for a tenth month and coming in below a Reuters poll forecast for 49.0.

“Data suggested that client demand was weak both at home and abroad, with new export business falling for the first time in three months in December,” the data release said.

“As a result, manufacturers continued to trim their staff numbers and reduce their purchasing activity in line with lower production requirements.”

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

How the S&P 500 experts got it wrong in 2015

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

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Proving that forecasting isn’t all plain sailing, analysts from the world’s biggest banks had mixed success with their predictions for the S&P 500 last year.

The S&P 500, which tracks the biggest US-listed companies closed down almost 1 percent on Thursday at 2,043 points. It ended the year down 0.73 percent after three straight years of double digit gains.

It marks a significant change from the 11.5 percent gain posted in 2014 and is also some way off forecasts collated by CNBC in December 2014. A mean average of the ten analysts’ calls suggested the benchmark would finish 2015 at 2,185 points, with a gain of just over 6 percent.

Many, if not all, banks updated or changed their outlooks as the year progressed – and some still got it wrong.

Societe Generale’s 2015 outlook was among the most bearish – and also the most accurate. In November 2014, the French bank predicted that global equity markets, including the US, would suffer a “hiccup” ahead of a rate hike by the US Federal Reserve.

At the time, the S&P 500 was at 2,067 points and Societe Generale’s global strategy team forecast the index would fall to 2,050 points by the end of 2015.

Societe Generale’s call proved to be one of the closest calls on the S&P 500 from the major banks. It was roughly as accurate as Goldman Sachs’ and Credit Suisse’s prediction for a closing level of 2,100 points.

“The difficulty of being right in 2015 (was that it relied on) going against the crowd, which was very (too) optimistic about the U.S. economy at the end of 2014,” Alain Bokobza, head of global asset allocation at Societe Generale, told CNBC via email.

“The Fed was clear that after (tapering asset purchases) would come tightening. And this cap on US equities happened especially at a time when European and Japanese equities had much better growth potential through more monetary policy easing in the pipeline.”

Despite the S&P 500’s tiny gains, the overall bull market for stocks entered its seventh year in 2015. A wave of global liquidity from central banks has helped to prop up developed economies in recent years and has been the main driver behind stock markets, according to many economists.

Canadian investment bank, RBC Capital, was among the most bullish of forecasters. It projected a 2015 year-end target of 2,325 points for the S&P 500, driven by a “combination of earnings growth and multiple expansion.”

Instead, the index remained below 2,150 for the duration of the year and suffered some volatility, including when the Fed raised rates. The main market move, however, happened in August when the Chinese stock market crash spilled over into global markets and caused a correction in several US benchmarks, including the S&P 500.

Goldman Sachs isn’t much more optimistic on 2016 than it was for 2015. David Kostin, chief U.S. equity strategist at the bank, told CNBC that stock markets could be mostly flat in 2016.

“The margins for the market have been virtually static for the last four years,” he told CNBC’s “Squawk on the Street.” in early December. “Finding companies with margin expansion opportunities is a key focus; one of our key strategies.”

SocGen’s Bokobza has a similar view, predicting that the S&P 500 would absorb the recent Fed rate hike and finish the year flat at around 2,050 points.

“US dollar strengthening and high bond yields offset the strong US GDP (gross domestic product) growth already priced in. The presidential election in November 2016 could also be a source of volatility for US equities.” Bokobza said in the French bank’s 2016 outlook.

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 factory activity shrinks in soggy start to 2016

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

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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