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Fixing credit markets could prevent a depression, but a nasty recession looks all but guaranteed. Among those expected to be most affected are retailers, who have been slashing profit forecasts, and the already beleaguered carmakers. The latter have used customer-finance to prop up sales in recent years. General Motors’ shares went into free-fall on Thursday, dropping 31% after a rating agency threatened to downgrade its debt. The once mighty firm now has a market capitalisation of just $2.7 billion.
Finance ministers of the group of seven rich countries are set to meet in Washington, DC, on Friday. The rest of the world’s finance ministers and central bankers join them this weekend for the annual meetings of the IMF and World Bank. As the damage to the real economy is becoming apparent, the challenge is to come up with a comprehensive, co-ordinated intervention that might just begin to restore confidence.
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Off a cliff
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sambala
Markets in America, Asia and Europe plummet, as fears grow over financial and economic conditions
MARKETS in Asia and Europe plummeted on Friday October 10th. Japan’s stockmarket ended the week in disarray: the Nikkei 225-share index fell by 24% on the week, twice the weekly fall of the 1987 crash. It is now at five-and-a-half-year lows. Europe followed suit. London’s FTSE 100 slumped by more than 10% within minutes of opening; by mid-morning European stocks were also down, with Germany`s DAX index down by more than 8%. Amid widespread anxiety the oil price also tumbled, to around $81 a barrel, its lowest level in a year.
The falls underline that stockmarkets, traumatised by the near-paralysis in credit markets, the collapse of once-mighty banks and the prospect of global recession, are suffering what has been dubbed a “cascading crash”: a series of blows which, added together, are stomach-churning.
Wall Street is unimpressed by the TARP, America’s much-vaunted $700-billion bail-out. The Dow Jones Industrial Average had plunged by 679 points, or 7.3% on Thursday. Nor are markets reassured by a bevy of bank rescues, a co-ordinated rate cut by the world’s leading central banks, the Federal Reserve’s radical decision to buy commercial paper, Britain’s £500 billion ($861 billion) bail-out package, nor the raft of piecemeal rescues by other European governments. On Thursday the International Monetary Fund activated a procedure to offer emergency loans to threatened countries, such as Iceland, which took over its largest bank on Thursday.
In Asia, which had been relatively insulated from recent woes, panic selling set in, as markets slumped in Hong Kong, South Korea and Taiwan, among others. Indonesia`s fell by 10.4% on Wednesday before regulators suspended trading. (Equity trading was also suspended in several European exchanges, including those of Russia, Austria and Iceland.)
At the start of this latest phase of the credit crisis, Japan`s financial markets had seemed to float over the top of the global turmoil. Lehman Brothers` collapse, admittedly, had shut off the samurai market used by overseas companies to issue yen-dominated bonds, while overseas banks had trouble getting overnight funds until the Bank of Japan stepped in with assurances. Otherwise Japan`s financial markets had functioned pretty smoothly, with well-capitalised banks lending freely to each other and, in the case of Mitsubishi UFJ, one of the big three, snapping up the apparent bargain of a 21% stake in Morgan Stanley for $9 billion. (Morgan Stanley`s shares tumbled by 25% on Thursday as investors once again bet that its days as an independent firm are numbered.)
Now all hope that Japan might remain aloof is gone. Overseas hedge funds have been panic sellers of shares. Even cast-iron Japanese government bonds are being shunned in favour of cash—leaving questions about how the government is to refinance a lot of debt coming due over the next month or more. On Friday Yamato Life, a medium-sized insurer, filed for bankruptcy, the first Japanese life insurer to go under in seven years.
In America the scale of the fall is dramatic. A year ago the Dow, resilient in the face of what then seemed only a subprime-mortgage crisis, hit an all-time high of a whisker over 14,000. It is now some 40% lower, having fallen double the distance that signals a bear market. In the past seven trading days alone it has lost 21% of its value.
There is a good deal of bewilderment, as well as fear. Many had assumed that the strenuous, if belated, actions by governments to restore confidence in debt markets would bring a semblance of calm. But these efforts have so far done little to convince markets that the worst is over.
Private-sector predictions of the pain to come are getting darker by the day: Weiss Research reckons that more than 1,600 American banks and thrifts, with $3.2 trillion of assets, are at risk. AIG, an American insurer that had already needed an $85 billion loan, has tapped the Federal Reserve for a further $38 billion to keep itself liquid. And cracks have appeared in the industry’s last remaining pillars of strength as it becomes clear that big losses are coming in consumer and corporate credit as well as mortgages. There were signs on Thursday that confidence was ebbing in another relatively unscathed American titan, Wells Fargo, whose shares finished down by some 15%.
Not only are buyers of stocks conspicuously absent, but much of the selling is forced. All agree that there will be no meaningful recovery until the credit markets are unclogged. The rates at which banks lend to each other are still at or near records. The rate at which companies can borrow over short periods is starting to fall, but only slightly. Longer-term borrowing markets are still mostly shut.
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Markets in America, Asia and Europe plummet, as fears grow over financial and economic conditions
MARKETS in Asia and Europe plummeted on Friday October 10th. Japan’s stockmarket ended the week in disarray: the Nikkei 225-share index fell by 24% on the week, twice the weekly fall of the 1987 crash. It is now at five-and-a-half-year lows. Europe followed suit. London’s FTSE 100 slumped by more than 10% within minutes of opening; by mid-morning European stocks were also down, with Germany`s DAX index down by more than 8%. Amid widespread anxiety the oil price also tumbled, to around $81 a barrel, its lowest level in a year.
The falls underline that stockmarkets, traumatised by the near-paralysis in credit markets, the collapse of once-mighty banks and the prospect of global recession, are suffering what has been dubbed a “cascading crash”: a series of blows which, added together, are stomach-churning.
Wall Street is unimpressed by the TARP, America’s much-vaunted $700-billion bail-out. The Dow Jones Industrial Average had plunged by 679 points, or 7.3% on Thursday. Nor are markets reassured by a bevy of bank rescues, a co-ordinated rate cut by the world’s leading central banks, the Federal Reserve’s radical decision to buy commercial paper, Britain’s £500 billion ($861 billion) bail-out package, nor the raft of piecemeal rescues by other European governments. On Thursday the International Monetary Fund activated a procedure to offer emergency loans to threatened countries, such as Iceland, which took over its largest bank on Thursday.
In Asia, which had been relatively insulated from recent woes, panic selling set in, as markets slumped in Hong Kong, South Korea and Taiwan, among others. Indonesia`s fell by 10.4% on Wednesday before regulators suspended trading. (Equity trading was also suspended in several European exchanges, including those of Russia, Austria and Iceland.)
At the start of this latest phase of the credit crisis, Japan`s financial markets had seemed to float over the top of the global turmoil. Lehman Brothers` collapse, admittedly, had shut off the samurai market used by overseas companies to issue yen-dominated bonds, while overseas banks had trouble getting overnight funds until the Bank of Japan stepped in with assurances. Otherwise Japan`s financial markets had functioned pretty smoothly, with well-capitalised banks lending freely to each other and, in the case of Mitsubishi UFJ, one of the big three, snapping up the apparent bargain of a 21% stake in Morgan Stanley for $9 billion. (Morgan Stanley`s shares tumbled by 25% on Thursday as investors once again bet that its days as an independent firm are numbered.)
Now all hope that Japan might remain aloof is gone. Overseas hedge funds have been panic sellers of shares. Even cast-iron Japanese government bonds are being shunned in favour of cash—leaving questions about how the government is to refinance a lot of debt coming due over the next month or more. On Friday Yamato Life, a medium-sized insurer, filed for bankruptcy, the first Japanese life insurer to go under in seven years.
In America the scale of the fall is dramatic. A year ago the Dow, resilient in the face of what then seemed only a subprime-mortgage crisis, hit an all-time high of a whisker over 14,000. It is now some 40% lower, having fallen double the distance that signals a bear market. In the past seven trading days alone it has lost 21% of its value.
There is a good deal of bewilderment, as well as fear. Many had assumed that the strenuous, if belated, actions by governments to restore confidence in debt markets would bring a semblance of calm. But these efforts have so far done little to convince markets that the worst is over.
Private-sector predictions of the pain to come are getting darker by the day: Weiss Research reckons that more than 1,600 American banks and thrifts, with $3.2 trillion of assets, are at risk. AIG, an American insurer that had already needed an $85 billion loan, has tapped the Federal Reserve for a further $38 billion to keep itself liquid. And cracks have appeared in the industry’s last remaining pillars of strength as it becomes clear that big losses are coming in consumer and corporate credit as well as mortgages. There were signs on Thursday that confidence was ebbing in another relatively unscathed American titan, Wells Fargo, whose shares finished down by some 15%.
Not only are buyers of stocks conspicuously absent, but much of the selling is forced. All agree that there will be no meaningful recovery until the credit markets are unclogged. The rates at which banks lend to each other are still at or near records. The rate at which companies can borrow over short periods is starting to fall, but only slightly. Longer-term borrowing markets are still mostly shut.
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Asia Stocks Plunge This Week as Global Credit Crisis Deepens
Oct. 11 (Bloomberg) -- Asian stocks plummeted this week, sending the region`s benchmark index to its biggest weekly drop on record, as the deepening credit crisis threatened to push more companies into bankruptcy.
Mitsubishi UFJ Financial Group Inc. slumped 20 percent as Asian money-market rates climbed even as the Federal Reserve and other central banks cut borrowing costs to revive credit lending. BHP Billiton Ltd., the world`s biggest mining company, sank 8.8 percent, while Toyota Motor Corp. plunged 21 percent on concern a worldwide slowdown will hurt demand for metals and automobiles.
``It`s pure panic,`` said Ivan Tham, Singapore-based head of funds management at the state-backed Kuwait Finance House, which has about $24 billion in assets. ``You`re seeing companies start to fail because they can`t refinance. Good companies are being sold down aggressively with the bad.``
The MSCI Asia Pacific Index fell 18.7, or 17.8 percent, to 86.0. That`s the biggest weekly decline since the index was created on Dec. 31, 1987.
Japan`s Nikkei 225 Stock Average plunged 24 percent for the biggest weekly decline in its more than 50-year history. Australia`s S&P/ASX 200 Index slumped 16 percent, the biggest rout since 1992. Hong Kong`s Hang Seng Index fell 16 percent, the most since January 1998.
Singapore`s Straits Times Index declined 15 percent as the city-state sank into a recession.
`It`s Scary`
More than $6 trillion was erased from global equities this week even as central banks in China, Australia, South Korea, Taiwan and Hong Kong`s monetary authority joined a global effort to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.
``It`s scary,`` said Prasad Patkar, who helps manage $1.8 billion at Platypus Asset Management in Sydney. ``Equity markets are pricing in a very severe, deep recession as a function of people not getting credit.``
Mitsubishi UFJ fell 20 percent to 710 yen. Babcock & Brown Ltd., an infrastructure assets manager, tumbled 45 percent to A$1.01. ICICI Bank Ltd., the Indian lender with the biggest losses on overseas investments, plunged 10 percent to 504.35 rupees.
Asian money-market rates climbed as the interest-rate cuts and injections of more than $32 billion by Japan and Australia failed to unlock credit. The three-month interbank offered rate in Tokyo climbed to the highest to the highest since March 1998. Hong Kong`s three-month rate rose to the highest in a year.
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What Asian countries are most at risk of an Iceland-like debacle? The countries especially vulnerable, says S&P’s Elena Okorotchenko, who does sovereign research from the Singapore office, include Indonesia, Pakistan, the Philippines, Sri Lanka and Vietnam. S&P (which is owned by McGraw-Hill, which also owns BusinessWeek) came out with a report on Oct. 8 with the ominous title “Asia-Pacific Sovereign Report Card: As the Financial Storm Spreads, Major Uncertainties Loom.” While there aren’t any Asian countries in quite as bad shape as Iceland, the situation could get worse pretty quickly. “With the financial crisis spreading, more and more sovereigns are coming under pressure,” she says. “Nobody is completely immune.”...
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David John Marotta, president, Marotta Wealth Management, Charlottesville, Va....
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SHANGHAI, China (AP) -- Asian markets bounced back Thursday after central banks around the world slashed interest rates to ease the global credit crunch, although fears of further turmoil kept investors jittery.
South Korea, Hong Kong and Taiwan lowered their interest rates, joining a series of cuts Wednesday in the U.S., Europe and China aimed at stabilizing global markets that have plunged sharply this week.
Japan`s benchmark Nikkei 225 index was up 2.1 percent to 9,397, a day after it plummeted 9.4 percent in its biggest one-day drop since the 1987 market crash.
Hong Kong`s Hang Seng Index jumped nearly 3 percent to 15,871 after the territory cut interest rates for a second day. And a surprise rate cut in South Korea also cheered investors, who lifted the Kospi index 1.8 percent.
Mainland China`s main index was up 0.6 percent after its central bank lowered rates Wednesday evening.
China`s move came as six other central banks, including the U.S. Federal Reserve and European Central Bank, joined to lower rates to contain the spreading financial crisis. Japan`s central bank, constrained by already-low rates, said it backed the moves.
"Investors bought back shares as sentiment slightly improved on measures including coordinated rate cuts," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co. Ltd. in Tokyo.
Investor reaction in Asia to the string of moves was more positive than in the U.S. and Europe, where an initial perk in markets soon dissipated amid severe stresses in lending markets and worries about a global recession.
On Wall Street, the Dow Jones industrial average ended a volatile session down 2 percent -- disappointing, but a milder decline than in previous days. U.S. stock index futures were up less than a percent, suggesting trading would open higher in New York.
European markets fell sharply Wednesday, with Britain`s FTSE 100 sliding more than 5 percent.
Wavering investors in the U.S. were gripped by anxiety again after comments Wednesday afternoon by U.S. Treasury Secretary Henry Paulson that it would be several weeks before the government`s $700 billion financial rescue package makes its first purchases of banks` troubled mortgage-backed assets.
Joining the worldwide efforts to ease the crisis, Taiwan`s Central Bank reduced its key interest rate for the second time in two weeks.
"Our economy has come under pressure for a slowdown," Governor Perng Fai-nan said. "We hope the rate cut can stimulate consumption to spur economic growth."
South Korea lowered its key rate by a quarter point to 5 percent, lifting the benchmark Korea Composite Stock Price Index 2.5 percent to 1,319.25 at midday after sinking 5.8 percent Wednesday.
In Indonesia, trading on the Jakarta Stock Exchange was canceled Thursday after the benchmark JSX index sank 10.4 percent Wednesday before trading was suspended by late morning. Authorities ordered the market to stay closed, possibly through Friday, following a late night Cabinet meeting.
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Asian markets rebound after global rate cuts
Posted by : sambala
Asian markets bounce back after global rate cuts, but gains capped by fears of further turmoil
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Asian markets bounce back after global rate cuts, but gains capped by fears of further turmoil
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An interesting report has come out today from the pages of bus. std. Please assess the companies involved for your selves.
Indian companies that raised large sums of foreign funds to finance growth and acquisition plans during the bull run in the stock markets are in a Catch 22 situation. The conversion price of their foreign currency convertible bonds is several times higher than their current market prices.
This leaves them with two options. One is to reset the price at current market price, a move that could dilute promoter holdings (since it would entail issuing more equity shares). The other is to redeem the bonds, which could increase debt obligations that are already substantial in some cases.
The maturity of many of the FCCBs is expected to start in October 2009 and peak in 2010-11. Most analysts say the market is unlikely to recover so significantly over the next two years that market prices will match the conversion prices.
In some cases, the outstanding amount on account of FCCBs is higher than or around the current market capitalisation of the companies concerned (see table). For instance, Hyderabad-based Subex Auzure raised 0 million (Rs 846 crore) in 2007 to finance the acquisition of Azure. The company’s market capitalisation as of September 30 was Rs 298 crore.
Should the management decide to re-set the conversion price and link it to the current market price, the company’s equity would be diluted. If it decides to repay these bonds, the redemption amount with interest would be around Rs 1,150 crore. The company has already raised debt of around Rs 1,050 crore.
The 0 million FCCB raised by pharmaceutical major Wockhardt is slated for conversion in October 2009 at Rs 629.80 against a current price of around Rs 155. If the company chooses to redeem the bonds, it will have to pay 0 million or Rs 658 crore. The company already has a debt obligation of around Rs 3,000 crore.
Firstsource, which is being put on the block by its promoters ICICI Bank, had mopped up 5 million through FCCBs, for which the conversion rate is Rs 128.60 against its current share price of around Rs 28
The outstanding amount at the time of conversion is Rs 1,292 crore against a current market capitalisation is Rs 1,222 crore. If these bonds are redeemed, the company will have to repay around Rs 1,800 crore. With debt of Rs 1,300 crore, the company will face an uphill task redeeming the bonds.
Similarly, the conversion price for companies such as Aurobindo Pharma and Ranbaxy are Rs 732 and Rs 908 against the current price of Rs 277 and Rs 255 respectively and both have significant debt obligations.
This gives a clear idea od the turn of events that is to put a hole in their balnce sheets
v.krishnamoorthy....
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Stock market is a GAMBALING sports. Is not.????????????...
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The London-based Hinduja conglomerate has begun work on the $15 billion investment plan for India’s power sector that will result in generating 10,000 MW for the national electricity grid.
“These are the initial phases of a plan to develop, over the next few years, a pipeline of power projects aiming at a capacity of 10,000 MW. This means a total investment of some $15 billion,” the Hinduja Group head in France Nader Hakimi said.
For information,with regards
rvk41...
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With Indo-US nuclear deal just a few days away, large private sector companies have begun hunt for people to spearhead nuclear power initiatives. Reliance Power, Tata Power, Larsen & Toubro (L&T) and the Godrej group are set to add more people for its nuclear power divisions.
The Godrej group, which already has a nuclear power equipment division, is in the process of finalising plans to hire more people.“We have to expand facilities and hire people.” said Adi Godrej, chairman,Godrej group. “We are in the process of doing that. A lot depends on how the government frames its policies,” he said.
Reliance Power, which is exploring opportunities in the nuclear power industry, has formed a team.“80-100 people are required in the initial stages. Extensive training is needed to equip people with the demands of the nuclear power industry,” said a Reliance Power official who is in charge of the nuclear power division.L&T has set up a team of engineers, headed by its senior vice president (Heavy engineering and construction) and member of board, MV Kotwal, for its nuclear power generation projects. L&T will mainly produce equipment used for setting up plants.
“We have been supplying reactors and firewalls to the existing projects including Tarapore and Koodamkulam. We have formed a team specifically for the nuclear projects and are developing various technological instrumentations,” said MV Kotwal, senior vice president, L&T. Companies like L&T will enter the business after the government amends the Atomic Energy Act which allows only public sector companies to produce nuclear power. Two days ago, the US congress had passed Indo-US nuclear deal.
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rvk41...
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With India receiving an NSG waiver, several homegrown firms have lined up investments worth Rs1,00,000 crore for foraying into nuclear power generation and are negotiating deals with companies from France.
“Nuclear Power Corporation of India Ltd (NPCIL) has already done exploratory meetings and technical discussions with three global reactor suppliers including Areva of France,” Federation of Indian Chambers of Commerce and Industry (FICCI) Secretary General Amit Mitra said
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rvk41...
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PANIC
Panic is a word which spreads faster than the fire in the Jungle.
Panic is the reason which has forcibily made our Indian markets rely wholly on the International markets.
Over the last two decades, foreign stock-market dependency has increased even as real-economy dependency has decreased.
However, do not assume that stock-market dependency means that Indian markets will always plunge along with US bourses in a US recession. The growing muscle of China and India, and their ability to grow reasonably fast even in a global recession, means that they will one day be viewed as the safe havens of the future. That is, we could see a switch of funds from the US to India in a recession. It may be premature to expect this to happen in 2008. But do not rule it out.
Developing countries have accelerated phenomenally. China and India have done exceptionally well, but so have Russia and many others in Asia, Latin America, Africa, Eastern Europe.
A halo effect is always seen in the global market whenever there is a change of 2.75% or more. Indian economy is also strong enough to be self dependant and it is we people who sell our stocks in Panic with the fear of losing more money. But the fact is when we lose money it isnt gained by anyone, but it is vanished from the Indian economy itself.
For example, I buy \\`X\\` stock for 100 rs and global markets fall, I panic and sell it back in 80 Rs. I had a loss of 20 rs. This 20 Rs is now vanished from the Indian economy, India becomes poorer by 20 rs.
The people who lose maximum of money are the traders, but not the long term investors. The reason is quite simple, they take the stock and forget about it. As Warren Buffet has said be a Investor not a trader. He says that buy a stock and forget about it for a long...very long period and one fine day see how it grew. The current market scenario has made the Investors very fussy to buy the stocks even though most of the best company stocks are at 52 week lows.
Let us understand that it is WE who make the economy and it is WE who break it. It depends how we have to take it.
Thanks,
Jas
(Ref: ET)...
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With rising consumer demand and greater disposable income, the country's retail sector is projected to grow to US$ 700 billion, while organised business is expected to be 20 per cent of the total market by 2010, says a report.
According to the report prepared by global consultancy Northbridge Capital, the retail market, which is currently worth US$ 400 billion, is clocking an annual growth rate of 30 per cent.
"The market is expected to grow to US$ 700 billion by the end of 2010. Of the total retail market, the share of organised retail in 2008 is only 7.5 per cent, valued at US$ 300 million," the report said.
Noting that organised retail market is growing at the rate of 40 per cent, Northbridge Capital said that faster growth rate would be maintained in the next three years, especially with the entry of major global players and Indian corporate houses.
The retail sector comprises pharmacy, grocery, coffee, apparel, footwear and consumer durables chains.
At the current growth rate, organised retail is expected to touch US$ 60 billion by 2010. Further, the report pointed out, the Indian organised retail sector is estimated to grow to about 20 per cent of the total retail market by 2010.
"The growth of retail market in India is driven by consumer demand, which in turn is driven by increase in disposable income, increasing number of dual-income nuclear families, easy availability of credit, economic growth and so on," the report said.
Pointing out that currently, apparel is the "largest organised retail category," accounting for 39 per cent of the organised market, the report said it is growing at the rate of 12 to 15 per cent annually.
Further, the report noted, the organised apparel retail is projected to touch US$ 200 million by 2010 from the current worth of US$ 120 million.
Meanwhile, tier II cities like Noida, Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector with their huge growth potential.
Rising disposable income coupled with lower real estate prices, as compared to metros, are among the major factors turning the tide in favour of tier II and smaller cities.
"...New retail malls, commercial complexes and townships are coming up in tier II cities along with infrastructure projects which is leading to the development of cities," Northbridge said.
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rvk41...
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Asian stocks fell for a fourth day after talks on a USD 700 billion US financial bailout plan stalled, Washington Mutual was seized in the largest US bank failure in history, and shipping rates sank the most in 23 years.
China Merchants Bank slid almost 2.5% in Hong Kong on concern the credit crisis is deepening after a group of Republicans said they wouldn`t back the rescue proposal and WaMu was taken over by regulators. Mitsui O.S.K. Lines Japan`s largest operator of dry-bulk ships, lost more than 6% as Chinese demand for steel imports weakened. BHP Billiton dropped after crude oil prices declined.
Japanese benchmark index Nikkei lost 113.37 points, or 0.94%, to end at 11,893.16.
Hong Kong`s index Hang Seng decreased 252.34 points, or 1.33%, to end at 18,682.09.
China`s Shanghai Composite slipped 3.72 points, or 0.16%, to end at 2,293.78.
South Korea`s Kospi index dropped 25.30 points, or 1.68%, to end at 1,476.33.
Where it will end?,with regards
rvk41...
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