Market Gazer: HSBC

European bourses ended up on Tuesday, helped by US data which came in above the expectation. German DAX was lifted 12.81 points to 5,925.22 (+0.2%), and FTSE 100 index was up 23.66 points to 5,225.22 or up 0.5%. European data released on the same day also showed improvements.

In August, GfK consumer confidence survey index was edging higher from -22 to -18, beating the consensus of a drop to -24. German data continued to be encouraging. The jobless number was down 17,000 in August, although the unemployment rate remained at 7.6%. Euro-Zone’s unemployment rate stayed high however, at 10% in August. Another economic data from Europe showed CPI slowed from increasing by 1.7% in July to 1.6% in August.

This Wednesday, along with US ISM for manufacturing sector, PMI for manufacturing sector will be released in Germany and UK. German PMI is expected to be unchanged at 58.2, the same as in July, while UK PMI is seen to slip to 57.0 from 57.3.

On the corporate front, Bayer AG successfully proved that its Xarelto was as effective as the old warfarin drug. The medication could land Bayer in a lucrative market worth $10 billion to $20 billion of annual profit. Bayer gained 2.43% by the end of the day and closed at €48.18.

Allianz SE aimed at China and India as potentially strategic markets with high potential of both life and non-life insurance business growth in Asia Pacific. Throughout the first half of 2010 Allianz achieved 31% increase in written premiums worth €5.6 billion with life insurance as the lead contributor. For Asia Pacific, life insurance worth $4.1 billion with Taiwan as the biggest contributor, while for non-life, India and Malaysia led the market. Allianz was at €80.94 at the end of the day.

Siemens Enterprise Communications, jointly owned by Siemens AG and The Gores Group acquired a contract to build communication infrastructures for 165,000 ports from the German Federal Employment Agency. The contract was worth over 100 million euros and will span for eight years. It will be a full service contract which includes provision of software and hardware as well as end-user devices. Siemens was up 0.59% to €71.78 on Tuesday.

HSBC plann

ed to exit its entire consumer lending business in the US by the end of 2014. The most recent move from the British bank was to sell its auto loans business to Santander Consumer USA with the price tag of $3.56 billion. The value of the loans obtained by Santander was $4.3 billion. HSBC was settled at 643.70 pence or up 1.05%.

Joining Bayer and HSBC as the top gainers, Vodafone advanced 2.31% to 157.15 pence. At the bottom, Barclays Plc, BT Group, and the bourse operator Deutsche Boerse ended down 1.1%, 0.75% and 0.65%, respectively.

The North American market was boosted earlier by data from the Conference Board but unable to withhold the gains as the Dow pulled back to near flat along with S&P 500 and Nasdaq Composite indexes. Dow Jones index inched up 4.99 points to 10,014.70, S&P 500 index went 0.04% higher to 1,049.33, but Nasdaq slipped 5.94 points to 2,114.03.

Consumer confidence improved in August, according to the data from the C

onference Board. The index went up to 53.5 from the upwardly revised July’s 51.0. Initially, July’s index was at 50.4. The current situation index fell to 24.9 from 26.4, while the expectations index went up to 72.5 from 67.5. Another data due on Tuesday was the house prices from Case-Shiller. In June, prices went up 1% compared to May; while year-on-year the prices were 4.2% higher. Despite the data was positive, it should be noted that the data lagged two months as it reported June, not the most recent August market conditions. The Dow’s late slip back to the flat area was mostly due to the FOMC minutes which was lacking new leads to lift the mood, turning the market back to the cautionary mode as it waits for more data to come.

Motorola which would be split in early next year would have the mobile phone division some cash amounting to $3.5 billion, which would be used for operational needs and business expansions as well as potential acquisitions. Motorola stayed flat by the end of Tuesday at $7.52.

Microsoft was reportedly developing a search application for the Google Android platform. The application which going to be available for free for Verizon Wireless users will be the mobile version of Microsoft’s Bing. Microsoft ended at $23.47 or down 0.74%.

Google and Associated Press reached an agreement in the distribution of AP’s news materials. Google will have the right to host AP’s materials for two years ahead. Google was down 0.59% at $450.02 by the end of the session.

3M acquired

Cogent in a deal worth $943 million. The maker of the fingerprint identification systems for government and civilians was bought at $10.50 a share, or 18% above Cogent’s closing price on Friday. 3M fell however, to $78.55 or 1.38%.

JP Morgan Chase & Co. would shut down its proprietary trading desk for commodities to abide the Volcker Rule. Consequently, all of its proprietary trading desk will be closed completely. Volcker Rule, which was a result of the recent banking reform in the US, was expected to reduce JP Morgan’s annual profit by $1.4 billion. JP Morgan was at $36.36 in late New York, up 1.42%.

On downgrades and upgrades, Intel Corp. was downgraded at Charter Equity from BUY to MARKET PERFORM on the back of the recent earnings revision for 3Q 2010. Gleacher & Co. maintained Intel at BUY, while FBR Capital also kept Intel at MARKET PERFORM. Intel was down 1.64% to $17.67.

Gainers on Tuesday include AT&T (+1.5%), JP Morgan & Chase (+1.42%), and Merck & Co. (+1.24%). Languishing at the bottom were AMD (-2.94%), Dell (-2.08%) and Starbucks (-1.92%).

Wednesday’s focus will be on the ADP employment data, a guide to Friday’s non-farm payrolls figure. Another key data for the day will be ISM for manufacturing sector. ADP employment figure is expected to show an increase of private sector’s hiring by 20,000 compared to July’s 42,000. ISM for manufacturing sector however, is seen to edge down to 53.0 from 55.5.

Tuesday, August 24, 2010

European and North American Markets Review – August 24th 2010

Housing Data Sent Bulls Running for Cover

The release of the existing home sales sent the shares south as economic prospects grew even dimmer in US. In July, sales dropped 27.2% to 3.83 million from 5.26 million in prior month. Last year the existing home sales amounted to 5.14 million. The figure was worse than consensus which had forecast a drop to 4.7 million. Expiry of government incentive in the form of tax credit was cited to be taking the steam off the housing market.

Shares in Germany mostly fell as DAX index retreated deep into the red at 5,935.44 or down 1.3%, while in London FTSE index shed 1.5% to end at 5,155.95.

Economic data coming from Germany reaffirmed that the Europe’s biggest economy grew 2.2% in 2Q10. Exports increased 8.2% and imports rose 7%, underlining the significance of overseas markets to German economy. Domestically, consumer spending was reportedly up 0.6%, construction spending also jumped 5.2%, while government spending increased 0.4%.

The bigger news came from S&P who downgraded Ireland’s credit rating on late Tuesday. Long-term sovereign rating was downgraded to AA- from AA due to high cost to prop up its financial sector, with the outlook set to negative.

HSBC, who in a process of acquiring Nedbank, has been downgraded to SELL from NEUTRAL at Miller Tabak. HSBC fell 1.45% at 629.90 pence.

Most stocks ended up in red in London, with BP dropped 3.35% to 377.50 pence, Barclays slipped 3.16%, and GSK at 1,200 pence by the end of the day. Marks & Spencer bucked the trend as it gained 0.42%. In Frankfurt, Commerzbank shed 2.5%, ThyssenKrupp retreated 2.43%, and insurer Allianz closed the day at €80.71, down 2.17%.

Across the Atlantic, American shares bled again as existing home sales sent DJIA 133.96 points down to 10,040.45, Nasdaq Composite to 2,123.76 or down 1.66%, and S&P Index to 1,051.87 or falling 15.49 points. The Dow briefly pierced the 10k level before the index later recovered.

On the corporate front, HP announced a technology services contract with Alabama Medicaid Agency worth $135 million. HP also had its bid worth $1.6 billion for 3Par ready to be counter-offered by Dell as Dell prepares its new bid. Both company ended down on Tuesday, with Dell down 2.97% to $11.53 and HP down 1.66% to $38.39.

J&J has been warned by the FDA regarding its hip implant sale for unapproved uses and also on another case of the marketing of an unapproved high tech system to guide doctors in knee replacements implants. J&J fell to $58.01 or down 1.46%.

3M is seen bearish by JP Morgan as the company is likely to have some hard time delivering profit and revenue growth that match up to the investors’ expectations. Its rating has been downgraded to UNDERWEIGHT from NEUTRAL.

Wrapping up the market, Boeing tanked 3.74%, Starbucks fell 3.63%, while Ford Motor skid 3.17%.On the positive side, AT&T gained 0.87%, Adobe was up 0.4%, and Wal Mart edged 0.31% higher.

On Wednesday the markets will again brace for another possible slap from new home sales figure in July. The consensus saw an increase from 330,000 to 339,000. The other data, the durable goods orders are seen rising in July by 2.7%, reversing the 1% fall in June.

Asian Market Review – August 24th 2010

Nikkei Tripped Below 9K, Hang Seng Fell

Hong Kong and Japanese shares sunk in the red as investors steered clear away from the market ahead of the housing data due on Tuesday, coupled with renewed yen’s strength. Hang Seng Index slumped 230.30 points to end at 20,658.71 while Nikkei 225 index fell 1.33% to 8,995.14, piercing the psychological 9,000 level. Shanghai composite however, edged up 10.94 points to 2,650.31.

At the bottom, Nikon Corp lost 4.02%, Tokyo Electron fell again by 3.76%, and Sony Corp. tumbled 3.72%.

Sony Corp. reportedly has planned to join Sumitomo Mitsui Finance and Leasing in a general leasing venture. Sony will have 34% stake, while Mitsui holds the rest of the stake.

Meanwhile, Toyota predicted that sales will grow in China by over 10% next year. This year’s target of 800,000 units is also expected to be achieved. Toyota fell 0.83% as it settled the day at ¥2,980.

China Resources, Hang Lung Properties, and Wharf Holdings gained 1.29%, 0.88%, and 0.85%, respectively, thus averted them from the red zone where most HK shares were at on Tuesday. In contrast, CITIC Pacific, China Mobile, and Cheung Kong Holdings were at the bottom with 2.4%, 2.14%, and 2.07% losses, respectively.

Following up the takeover news of South African lender Nedbank by HSBC, the shares of HSBC fell 1.49% to end at HK$76.00. Despite the fall, the deal may benefit HSBC as the trade relationship between China and Africa is seen to grow as China imports of commodities from Africa to support its economic expansion.

Cheung Kong Infrastructure Holdings and HK Electric shared 40% each of a consortium offering £5.78 billion for three electricity distribution networks in UK operated by the French Electricite de France. CKIH fell 0.66% to HK$29.90, and HK Electric dropped 1.04% to HK$47.40.Li Ka-Shing will hold the rest of the stakes (20%) in the consortium.

HK & China Gas Co. reported a decline in net profit to HK$2.97 billion from HK$3.00 billion in prior year. Revenue increased however, to HK$10.41 billion or 66% from HK$6.26 billion. The shares fell 1.79% to HK$18.68.

Ping An also reported its earnings for H1 on Tuesday. The insurer’s net profit jumped 28.5% from 7.477 billion yuan to 9.611 billion yuan. The consensus was for a net profit of 7.9 billion yuan. EPS was 1.30 yuan vs. 1.02 yuan a year ago, while total income amounted to 96,980 million yuan against 75,171 million yuan in H1 2009.

Another company reporting on Tuesday in Hong Kong was the port operator Cosco Pacific. Net profit was said to have increased 82% to US$189.9 million from US$104.5 million in prior year. Revenue was 40% higher at US$222.7 million from US$159.0 million. Dividend was set to HK$0.137 vs.HK$0.144 last year. Cosco ended at HK$10.32 or 0.39% higher.

Monday, August 23, 2010

Asian Market Review - Monday, August 23rd 2010

Asian Shares Soft As No Positive Catalysts Are Seen

Japan’s Nikkei 225 Index fell 62.69 points to end at 9,116.69 or 0.68% lower on Monday while Hong Kong’ Hang Seng Index also fell to 20,889.01 or down 0.4% as it hit a new 4-week low. In Shanghai, Shanghai Composite ended down as well as it settled at 2,639.37.

Regional markets followed up the last week’s theme of global economic slowdown concern, especially after the worsening of US initial jobless claims which was released on Thursday. Nikkei’s weakness also came from the government’s inaction regarding the current yen’s strength. Finance Minister Yoshihiko Noda said on Monday that he has not heard about a meeting – which has been expected by the market – between PM Naoto Kan and Bank of Japan’s governor Masaaki Shirakawa to discuss yen’s strength and the economic slowdown in Japan.

Amid losers, Daikin was hit 2.75%, Tokyo Electron was down 2.52#, while Advantest ended 2.09% lower.

Daikin later reported that its sales in Europe increased by 30% in July against previous year. For the year ending March 31, the company has now increased the sales forecast to £7.5 billion.

Hong Kong airliner Cathay Pacific went up 1.65% after the company’s HK Dragon Airlines managed to prevent a strike. Cathay Pacific settled the day at HK$19.76. Meanwhile, Sinopec was at the bottom as the refiner reported a 6.7% rise in 1H net profit to 35.46 billion yuan, slightly better than expectations. Revenue rose 75% in the first half to 936.5 billion yuan. Higher oil prices were cited behind the rise, overcoming lower margins from refining due to the government’s control over prices. Refining business posted a net profit of 5.69 billion, a 71% lower than last year’s 19.9 billion yuan.

Defensive stocks from the utilities sector gained as well. HK & China Gas was up 1.28% to HK$18.98, the railroad operator MTR Corp increased to HK$28.10, while HK Electric ended 0.84% higher at HK$47.65.

China Telecom was reportedly to have added 2.80 million mobile users in July, slightly below June’s addition of 3.02 million users. Since the beginning of the year a 21.23 million users have been added, bringing the total number of users to 77.32 million. By the end of July, total broadband users were 59.23 million. Fixed-line division however, fell by 960,000 users, bringing the total number of fixed line users down to 8.45 million.

From corporate deals, HSBC said that it was in a discussion with Old Mutual over a planned purchase of Nedbank’s stake. The company said that any agreements will require the regulatory approvals.

Friday, August 20, 2010

Asian Market Review – Friday, August 20th 2010

Gloomy US Data Hit Japanese & HK Shares

Hong Kong’s Hang Seng Index fell 0.43% to end at 20,981.82 while Shanghai Composite Index ended 1.7% lower at 2,642.31 on Friday. Wall Street’s losses and worries over China’s plan to keep the red-hot property market in check were the catalysts of the fall. HSBC’s fall of 1.6% also weighed on the index as it contributed 52.37 points to the overall index decline. Another heavyweight constituent, China Mobile, rose to end at HK$82.80 or 1.3% as bargain-hunters bought shares following its 3% decline recently.

In Japan, Nikkei 225 Average ended at 9,179.38 or slipping 183.30 points by the end of Friday’s session. Wall Street factor was a factor behind the fall, with an addition of stubbornly strong yen fueling the decline. Government’s inaction regarding yen’s strength has disappointed exporters like Sony (-2.46%), Nikon (-2.48%), and auto stocks like Nissan (-2.37%), Toyota (-1.78%) and Honda (-1.57%). Only Tokyo Electron stayed unchanged at 4,370 yen. Bottom three were Advantest (-3.2%), Kyocera (-3.08%), and Mitsubishi Estate (-2.57%).

As mentioned previously on another post, US economic outlook grew dimmer as Thursday’s jobless claims data hit 500k. Moreover, the Philly Fed Index which measures manufacturing activity had fallen to negative territory. Although it has not indicated a recession, leading economic indicator released on Thursday also suggests that the economy has slowed.

Local factor came from the mainland as China’s Ministry of Land and Resources vowed to step up its efforts to cool down the red-hot local property market. The news sent property shares to the red zone.

PetroChina was reportedly announcing its cancellation of the purchase of an exploration and production firm from China National Petroleum Corp. (CNPC). PetroChina closed at HK$8.68 or down 0.57%.

HSBC Holdings Plc got its outlook raised by S&P Ratings Services on Friday to STABLE from NEGATIVE with AA-/A-1+ ratings. S&P saw HSBC’s credit losses to have likely peaked last year while internal capital generation will likely to continue in the future. The group’s business and geo diversity should contribute to strong earnings and to keep growth conservative.

From the banking sector, Bank of China Ltd. has been approved to add 60 billion yuan in a share placement at the extraordinary shareholder meeting. About 19.6 billion renminbi-denominated A shares for 42 billion yuan and a maximum of 8.4 billion HK$-denominated H shares for 18 billion yuan. The bank is now to seek approval from China Banking Regulatory Commission (CBRC) and the China Securities Regulatory Commission (CSRC) to complete the placement by the end of this year. The bank’s capital base will be boosted by the proceeds from this placement. Bank of China ended 0.25% lower at $4.03 on Friday.

Airliner Cathay Pacific is to resume collecting passenger fuel surcharges for September but at 5% less as international fuel prices fall. Short-haul surcharges will be at HK$97 per journey while the long-haul will be HK$481.

China Resources, China Mobile and Cathay Pacific were the top gainers as each gained 1.28%, 1.16%, and 1.14%, respectively. Slumping at the bottom were New World Development, HSBC Holdings, and China Merchants Holdings with losses of 1.93%, 1.65%, and 1.3%, respectively.

Week Ahead

A flood of earnings reports will feature next week’s local events. Hong Kong and China Gas Co. Ltd. will release its interim results on Tuesday (24/8) along with COSCO Pacific and Ping An Insurance. On Wednesday, PetroChina, China Telecom and China Life’s results will due. Henderson Land, China Resources, ICBC, BOC Ltd. and BOC HK will deliver their results the next day. China Shenhua will close the reports-packed week.

International events will be the housing data from the US and the release of the GDP estimate for 2Q, which has been anticipated to be revised lower after the widening of US trade deficits recently.