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Information released Thursday by the Japanese Ministry of Finance showed that overseas investors left the Japanese equities markets in larger numbers last week than they entered it for the first time since September, and indications are that this will be the case this week as well. If this turns out to be the case, it will be the first time since last April that foreign investors have been net sellers of Japanese equities for two weeks in a row.
Data for the week ending February 11 showed that foreign investors sold a net ¥252.9 billion ($2 billion) in Japanese shares, the largest amount of foreign selling since June 2005. Information so far this week has shown net foreign selling so far every day this week.
Despite what appears to be a new trend, sparked by Morgan Stanley’s opinion last week that the rally in Japan’s market had ended, there is still optimism about the market in Japan. UBS put much of the selling to profit taking from hedge funds, and even though it cut Japan’s weighting in its global equity portfolio to “neutral” from “overweight”, one strategist insisted that he was still enthusiastic about the Japanese market. Another analyst, for Profit Research Centre, said that even if the Japanese market falls further, that could attract the interest of some hedge funds.
In Europe on Thursday, the FTSE Eurofirst 300 was up 0.6 percent to 1,339.02. That was its highest close in over 4 years. At least part of the day’s advance was due to favorable earnings reports in several sectors.
In the banking sector, Societe Generale reported a higher than predicted rise in fourth-quarter profits, which it said were up by 42 percent due to higher revenues in its investment and banking units. This news saw its shares rise 4 percent to €118. Meanwhile, Zurich Financial Services gained 6.1 percent to SFr314 on a reported rise in full-year profits last year and predictions that the trend will continue this year. Also in Switzerland, Julius Baer gained 9.3 percent on the day to SFr112 after it said that outflows had slowed due to smaller than predicted withdrawals by clients unhappy with corporate moves last year.
In the telecommunications sector, Telnor of Norway announced a jump in fourth-quarter profits due to strength in its international subsidiaries. This included a doubling of revenues in its majority-owned Ukranian company Kyivstar. Telnor’s shares saw a 4.4 percent gain on the day to NKr71.25.
Cosmetics company L’Oreal was up 1 percent to €69.60 on news that it had its twenty-first consecutive yearly rise in profits. However, some analysts were worried that the profits had been achieved by cutting advertising and promotion, which was called unhealthy for the company’s long-term prospects.
Not all positive earnings reports translated into gains in share price on the day, however. Although its luxury Mercedes unit helped DaimlerChrysler beat fourth-quarter earnings predictions, the carmaker saw its shares decline 3.5 percent on the day to €48.33.
Other losers on the day included Deutsche Post, which dropped 2.2 percent to €22.08 on disappointing full-year earnings news and a downgrade from Deutsche Bank from “buy” to “hold”. Autostrade, the largest toll road operator in Italy, lost 0.8 percent to €22.18 on a warning that its estimates of the increase in traffic volume on its roads in 2005 had been significantly higher than actual traffic increases.
Following a trend among exchanges worldwide, the Johannesburg Securities Exchange will decide at a meeting in March whether to float an initial public offering as a way of improving corporate governance in the face of increased competition. Many of its largest companies have moved their primary listings to London in the past few years, with listings on the JSE falling from 600 to around 400 since 1999.
The exchange became a public company last year, and its shareholders will be asked to endorse the decision to list, should that action be decided on by the board of directors next month. According to Russel Loubser, the president of the JSE, the board could make the decision on its own, but the company is determined to be “ultra-transparent” in its decision-making process.
The possible listing comes at a time when the South African economy has reached record-low inflation, the budget is close to being balanced, and the market is up due to strong prices in the precious metals market. In addition, with a relaxing of strict foreign-exchange controls in 2004, a few foreign companies have listed on the JSE and the exchange is currently engaged in pursuing listings from foreign multinationals based in South Africa as well as from other companies in Africa.
Wall Street results were mixed by midday on Tuesday as the homebuilding sector was affected by bad news from luxury builder Toll Brothers, even as firms in other sectors released better-than-anticipated quarterly reports. While the Dow Jones Industrial Average had gained 0.1 percent to 10,805.63 by the middle of the trading day, the Nasdaq and the S&P 500 had each lost 0.3 percent to 2,251.86 and 1,260.79 respectively.
Homebuilder Toll Brothers released a report saying that sales in the first quarter were down 29 percent and cutting is sales guidance for the year. This was seen as yet another sign that the US housing market is not as robust as it has been in recent times. Toll Brothers was down 3.1 percent to $30.23. In addition, DR Horton lost 2.7 percent to $34.01, while Pulte Homes dropped 1.6 percent to $37.33.
Besides affecting homebuilders, the news from Toll Brothers also had an effect on the retail home improvement sector. Home Depot was down 1.6 percent at midday to $38.86, while Loews dropped 0.9 percent to $62.36.
The Dow was helped by good news from Walt Disney and Coca-Cola. Disney’s report of an unexpected rise in first-quarter profits, combined with the announcement that it’s radio division was merging with Citadel Broadcasting sent shares in Disney up 5.1 percent to $26.24. This wasn’t quite as advantageous for Citadel, which dropped 4.8 percent to $11.42.
Meanwhile, Coca-Cola also reported quarterly gains, which sent its shares up 0.7 percent to $41.22.
September 19, 2005
New York markets down on interest rate expectations
The New York equities markets fell on Monday as investors seemed to be waiting for Tuesday‘s interest rate decision by the Federal Reserve.
By the end of the trading day, the Dow Jones Industrial Average had dropped 0.8 percent to 10,555.80, the Nasdaq composite was down 0.7 percent to 2,145.21, and the S&P 500 had lost 0.6 percent to 1,231.13.
Amid these general declines, the energy sector saw advances as the price of crude oil went up again and plans were announced of a takeover of Spinnaker Exploration by Norsk Hydro for a cash price of $2.5 billion.
On the news, shares in Spinnaker gained 31.5 percent to $64.12. Elsewhere in the sector, Amerada Hess gained 4.3 percent to $139.31 on a ratings upgrade by JP Morgan.
ExxonMobil was up 1.4 percent to $64.63, ConocoPhillips gained 1.6 percent to $70.24, and Marathon Oil advanced by 1.8 percent to $69.19. Meanwhile, rising oil prices took their toll in the airlines sector.
Low-cost carrier Air Tran lost 5.7 percent to $10.43, while Continental Airlines fell by 6.3 percent to $10.98. Athletic equipment manufacturer Nike was up on the day on third-quarter profits that were above predictions, gaining 6.4 percent to $83.45.
The company reported profits were up 32 percent on strong sales.
The German election on Sunday, the outcome of which is seen key to economic reform in Germany, ended in a virtual stalemate, with Angela Merkel’s Christian Democrats claiming only three more seats in parliament than Gerhard Schroeder’s Social Democrats.
Each side is claiming victory, and a mandate to rule, even though neither has enough votes to form a majority with their usual allies.
Most analysts think that the eventual outcome will be a “grand coalition” government between the two main parties, but personal animosity between Schroeder and Merkel spurring hostility between the parties, negotiations could take weeks.
The financial markets reacted to the outcome of the election with declines on Monday. German stocks fell by 1.7 percent, while the euro reached a 7-week low in relation to the US dollar.
Analysts feel that economic reform in Germany will be slowed no matter what sort of coalition government emerges, and that the uncertainty about what the final outcome will be will not benefit the German economy.
The parties have until October 18, when parliament must meet, to form a government.
The price of gold on US markets reached a 17-year high on Friday morning as December gold futures on the New York Mercantile Exchange’s COMEX index gained $2.40 to $461.70 per troy ounce in early trade after having gone as high as $464 per troy ounce in the opening few minutes of trade.
The increase in prices has been put to buying as a hedge against economic uncertainty and inflation in the face of rising gasoline prices, worries about the strength of the dollar on global currency markets, and the damage caused by Hurricane Katrina along the US Gulf Coast at the end of August.
Most analysts are saying that they expect gold to rise to at least $475 per troy ounce in the short term, and that a rise to $500 per troy ounce in the coming months is not out of the question.
September 15, 2005
FTSE to upgrade South Korea and Taiwan to developed markets after 2007
The FTSE said on Wednesday that South Korea and Taiwan will not be upgraded to developed market status until at least 2007.
This is not expected to have much impact on the two nations’ equities markets, it will delay the time when longer-term redistribution of some global fund flows could begin.
The upgrade from their current status as advanced emerging markets would allow funds with low-risk strategies that only invest in developed markets to buy Seoul and Taipei-listed stocks, which would bring new funds inflows into those markets.
On the other hand, an upgrade would remove two of the largest markets from the emerging markets group.
The FTSE said that before it could upgrade the two markets, they would have to further liberalize their foreign exchange markets and trading regulations for foreign investors.
It did acknowledge that both markets had made strides in that direction but that more progress must be made.
South Korea and Taiwan both said they would continue their reforms but that they believe that the foreign investors do not fully see and understand the steps toward reform that they have already taken.
Analysts do not expect either market to make an effort to address investor complaints about foreign exchange restrictions any time soon.
Shares of foreign stocks traded in the United States were down overall on Monday, while Asian companies did well on the outcome of parliamentary elections in Japan on Sunday, which returned the ruling part of Prime Minister Junichiro Koizumi to power by a landslide vote.
The Bank of New York’s index of leading ADRs fell by 0.8 percent, while the index of leading Asian ADRs gained 0.3 percent to 119.24.
The index of leading Latin American ADRs was down by 0.4 percent to 181.54, while the index of leading European ADRs fell by 1 percent to 133.20. Among New York-listed shares of Asian companies, Mitsubishi Tokyo Financial Group and Millea Holdings, a property and casualty insurer, each gained 2.7 percent, to $10.65 and $75.10 respectively.
Additionally, Nippon Telephone and Telegraph gained 0.6 percent. Oil companies and companies that make equipment for them did not do nearly as well as crude oil prices dropped. Tenaris SA, which makes pipes and casings for oil companies, lost 3.5 percent to $113.99. Total SA lost 1.4 percent to $133.87, Royal Dutch Shell fell 1.2 percent to $64.11, and BP Plc was down by 1.1 percent to $70.03.
Shares in foreign companies that trade on US stock exchanges were down as a whole again on Friday as the Bank of New York’s index of leading ADRs fell 0.41 percent.
Crude oil prices were up and down in early trading and remained at about Thursday’s closing level, and shares in oil companies were down as investors waited to see what effect Hurricane Katrina would have on oil producing areas.
Royal Dutch Shell Plc fell almost 1 percent to $63.03, while French oil company Total lost more than 1 percent to $126.60. China Petroleum was down to $44.86 and Petrobras was down by 1.8 percent to $57.59.
An exception to the declines in the oil sector was Australian gas and oil company Santos Ltd., which gained over 3 percent to $35, a tripling of its first-half profit on higher oil prices and increased production.
In the mining sector, Anglo-Dutch company Corus Group Plc gained almost 4 percent to $8.44 on doubled first-half earnings.
The index of leading European ADRs fell by 0.48 percent, while leading Asian ADRs fell 0.08 percent and leading Latin American ADRs were down 0.72 percent.
The Bank of New York’s index of leading foreign shares traded in the United States saw little movement on Monday as oil prices went up.
However, strong performances in the telecommunications sector and an easing of political concerns in Brazil balanced out concerns raised by Hurricane Katrina.
Shares in Brazilian companies were up as no new corruption allegations appeared over the weekend. Petrobras was up 1.5 percent to $58.34, while Banco Bradesco gained 2.1 percent to $41.40.
The oil sector was mixed as oil prices rose above $70 per barrel in Asian trade on fears that Hurricane Katrina would cause serious supply disruptions. South Africa’s Sasol Ltd. gained nearly 2 percent to $32.38 and UK company BG Group was up a percent to $44.38.
On the other hand, US-traded shares of Royal Dutch Shell lost 0.1 percent to $63.19 on the possibility that some of its Gulf of Mexico facilities might take damage from the hurricane. Concerns about the effects of the hurricane also hurt insurers, which stood to face large claims for storm damage.
New York-listed shares of German company Allianz AG dropped 0.4 percent to $12.70. In the telecommunications sector, Nokia Corp. gained 0.2 percent to $15.53 after settling a claim with a Turkish company.
The Asian automobile manufacturing sector fell on worries of what higher oil prices might do to their sales. Honda Motor Co. slipped 0.7 percent to $26.47, while Toyota Motor lost 1.1 percent to $81.10. The Bank of New York’s index of leading Asian ADRs lost 0.8 percent to 114.63.
The index of leading Latin American ADRs were up 0.4 percent to 166.21, while the index of leading European ADRs were up 0.2 percent to 128.30.
August 24, 2005
Bank of New York’s index of leading ADR’s down again
Although most foreign oil stocks traded in the United States were up on Wednesday as crude oil prices rose again, mining and telecommunications shares fell, taking the Bank of New York’s index of leading ADRs down by 0.1 percent on the day.
The index of leading European ADRs fell 0.1 percent to 129.72, while the index of leading Asian ADRs was unchanged at 115.75 and the index of leading Latin American ADRs fell 0.4 percent to 164.64.
New concerns about storms in the Caribbean and gasoline stockpiles that were reported lower than expected sent crude oil prices up, taking shares of BP and Petrobras up although PetroChina was down.
BP was up 0.4 percent to $67.36 and Petrobras gained almost 1 percent to $57.55, while PetroChina dropped by 1.9 percent to $80.10.
In the mining sector, Australian-British miners BHP Billiton fell 3 percent on a warning that the commodity market growth was slowing and on a profit report that failed to make expectations even though it doubled its profits in the second half. Rio Tinto was down as well, by 3.8 percent to $140.82.
In the telecommunications sector, France Telecom dropped 1.8 percent to $30.60 on the New York Stock Exchange as it was reported that it could face serious fines if its cellphone divison was found to have been in collusion with the cellphone unit of Bouygues.
Meanwhile, Telekom Austria was down by 0.3 percent to $41.80 as second-quarter profit margins did not live up to expectations.
August 22, 2005
Investors assured as Palocci denies scandal involvement
In Brazil on Monday, both the equities markets and currency were up after Finance Minister Antonio Palocci held a press conference Sunday to deny that he has any involvement in the bribes-for-votes scandal currently rocking the country.
He said that he would not resign his post and that Brazil’s economy would survive the current political turmoil.
Analysts said that Mr. Palocci’s speech had been convincing and would go a long way to calming investor speculation over whether or not he would quit his job.
One analyst, however, said that investors would probably remain cautious with testimony scheduled for Wednesday from a former aide of Mr. Palocci’s who accuses the finance minister of taking bribes.
The Bovespa index in Sao Paulo gained 1.97 percent to 27,169, while the real gained 2 percent to rise to 2.402 to the US dollar.
The real had lost 2.8 percent on Friday, while the Bovespa had fallen by 2.75 percent on the accusations against Mr. Palocci, who allegedly took the bribes when he was mayor of Ribeirao Preto.
August 18, 2005
Falling energry stocks hurt foreign company stocks
Shares of foreign companies traded in the United States were down again on Thursday as falling prices for crude oil and other commodities hurt results in the oil and mining sectors.
Insurance and banking stocks also fell. In the banking and financial sector, American-traded shares in Kookmin Bank of South Korea were down 1.8 percent on the New York Stock Exchange, to $52.08, while Nomura Holdings of Japan was down 1.6 percent to $13.18. Bucking the trend was Banco de Chile, which gained 1.2 percent to $41 on the NYSE.
In the insurance sector, French company AXA lost 0.9 percent to $27.37 and Allianz, out of Germany, fell 1.8 percent to $13.18.
In the oil sector, US-traded shares in China Petroleum were down 3.9 percent to $44.43, while UK company BG Group declined by 2.2 percent to $44.41.
In the mining sector, CRVD, based in Brazil and the world’s largest producer of iron ore, lost 2.4 percent to $33.33 and Aluminum China fell 5.2 percent to $57.66.
The Bank of New York’s index of leading ADRs was down by 0.9 percent on the day. The index of European ADRs was down 0.9 percent as well, to 130.25, while the index of leading Asian ADRs fell 1.2 percent to 116.13 and the Latin American index was down 0.5 percent to 168.19.
Brazil markets disappointed as politics scandal grows
In Brazil on Thursday, the real weakened and the stock market lost almost 1 percent on new allegations growing out of the current political scandal and on frustration that an interest rate cut expected by some investors did not materialize.
The Bovespa index in Sao Paulo lost 0.95 percent to 27,156.
Some analysts called the decline a “correction” after the disappointment that rates were not cut, and said that they do not expect the decline to last. The index had risen over 1 percent on Wednesday in anticipation of the hoped-for cut.
Meanwhile the real was down 0.64 percent to 2.369 on the dollar as investors paid close attention to the testimony before parliament of the former treasurer of the Workers’ Party, Delubio Soares, who was accused by another congressman of paying off legislators in return for their votes.
Soares has denied the bribery accusations but has admitted to using off-books funds to pay for the party’s campaign expenses. He would not, however, directly answer some of the questions put to him during his testimony.
His testimony is being closely watched to see if he will make a direct connection between his admission of using illegal funds to pay for campaigns and the 2002 presidential campaign of President Luiz Inacio Lula da Silva.
Profit-taking and higher than expected gains in crude oil inventories in the US sent crude oil prices down sharply during the day on Wednesday, although a much larger decrease than expected in gasoline inventories sent gasoline prices into record territory before retreating later.
October contracts for Brent crude on the International Petroleum Exchange fell $2.52 to $62.56 per barrel by the close of trade in London, a drop of over 5 percent from its record high Monday. West Texas Intermediate crude for September delivery lost $2.83 to $63.25 per barrel by the end of the session on the New York Mercantile Exchange.
That took WTI down 4 percent from it’s record high prices of $67.10, which it reached on Friday.
US inventory figures showed that crude oil stockpiles grew by 300,000 barrels last week, while distillates added 1.2 million barrels to inventories on the week. Gasoline inventories, however, fell by 4 million barrels, much more than had been expected.
This drop, brought about largely by difficulties at several US refineries, sent Nymex gasoline for September delivery to a record high of $2.0290 per gallon before it dropped back to $1.9400 per gallon, which was a drop of 4.36 cents.
Analysts said that gasoline supply concerns were trailing off as the US summer driving season draws to a close.
In a related development, the Organization of Petroleum Exporting companies revised its projection of 2006 demand up by 30,000 barrels per day to an average of 85.2 million barrels per day. OPEC also lowered its estimate of supply from non-OPEC oil producers and raised the amount of oil it would have to produce next year to satisfy demand.
Shares of foreign companies trading in New York were mixed on Monday as European companies did not do as well as did Latin American companies trading in the US.
The Bank of New York’s index of leading European shares fell 0.3 percent to 132.58, while the Latin American index gained 1.7 percent to 171.23.
The bank’s index of ADRs as a whole fell 0.2 percent.
One reason for the European index’s decline was the fall of European oil companies as crude oil prices backed off the record highs of last week. British oil company BP Plc were down nearly 1 percent to $69.90 and Royal Dutch Shell was down 0.6 percent to $66.86.
On the other hand, Brazil’s Petrobras gained 1 percent to $60.28 when Nigeria chose the company to help it develop ethanol production. Copper prices that reached new highs had mining stocks up, however.
With analysts saying that copper prices could go even higher, Brazilian miner Companhia Vale do Rio Doce’s US-traded shares gained 1.7 percent to $35.26.
When Swiss-based Xstrata Plc announced that it had bought 20 percent of Canadian base metal mining company Falconbridge Ltd. For $1.7 billion, Falconbridge’s New York-traded shares gained 2.1 percent to $24.20.
The FTSE 100 reached its highest level in 44 months to close at 5,327.5, a gain of 36.7 points on the day.
The FTSE 250 was up as well, closing at 7,636.6. 2.6 billion shares were traded on the day.
The FTSE 100’s gains were helped by advances in mining stocks and on the expectation that the Bank of England will lower UK interest rates when its monetary policy committee meets later in the week.
Shares in mining companies were higher on new record high prices for copper brought about by production interruptions in Zambia and Chile that raised the possibility of tight supplies becoming even tighter.
BHP Billiton was up 2.5 percent to 810p, Antofagasta gained 1.6 percent to £13.46, Rio Tinto added 2.1 percent to £19.15, and Xstrata rose by 1.7 percent to £12.13.
In the air transportation sector, Ryanair gained 1.8 percent on record high quarterly earnings, even though it raised cautions about results for the rest of the year due to high fuel costs.
Fund manager Amvescap lost 1.6 percent to 420p on results that were a bit below predictions. Other fund managers saw gains on the day after rumors that CI Financial might be readying a hostile takeover of Amvescap. Henderson Group gained 3.1 percent to 67 ½p, Rathbone Brothers was up 1.3 percent to 847 ½p, and Schroders added 1.2 percent to 869 ½p.
The FTSE Eurofirst 300 reached its highest level since May 2002 when it ended the day on Monday at 1,180.16, a gain of 0.1 percent.
Advances in the oil and gas sector were key in the day’s advance. Royal Dutch Shell gained 1.5 percent in Amsterdam to stand at €25.75, while OMV was up 2.2 percent to €39.25 and Neste Oil advanced by 0.6 percent to €23.07.
Statoil remained unchanged as it reported second-quarter profits that did not meet expectations, closing at NKr141.
In the automobile manufacturing sector, Volkswagen lost 1.6 percent to €44.03 on differing recommendations from analysts after it released its quarterly profits report on Friday. DaimlerChrysler was up 0.8 percent to €40.43, BMW was up 0.5 percent to €38.97, and Renault gained 1.5 percent to €76.70.
In the banking sector, ABN Amro lost 1.1 percent to €20.39 even though it reported an 11 percent gain in second-quarter net profits, as it warned that second half net profits would be lower than those in the first half.
Erste Bank in Austria gained 1.3 percent to €42.55 on a 41 percent rise in first half net profits and reiterated its projected full-year profits on the strength of strong performance in Eastern Europe.
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