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Sun, 22nd January 2017

Anirudh Sethi Report

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Archives of “stock exchange” Tag

China Orders No Market Selloffs During President’s Davos Trip

As we observed in yesterday morning’s market wrap, while US traders took the day off for the MLK holiday, China was busy defending an accelerating selloff across its stock markets.

During Monday trading, having traded quietly lower for the past few days, Chinese stocks tumbled in early trading on the mainland and in Hong Kong’s offshore market amid weakness in Asian equities. The Shanghai Composite Index dropped as much as 2.2% to head for its fifth loss in as many days, its longest losing streak since Aug. 2015.However a sudden bout of late afternoon buying sent the loss down to just -0.3%, on speculation China’s national team was once again back in the markets.

 

China-led consortium wins 40% stake in Pakistan bourse

A consortium led by Chinese stock exchanges has obtained approval to buy a 40% stake in the Pakistan Stock Exchange, or PSX, The Nikkei has confirmed with Haroon Askari, the bourse’s deputy managing director.

The deal marks the first time in which a Chinese exchange has become a top shareholder of an overseas bourse.

 The parties will sign a purchase agreement on Jan. 20.

The bidding took place in late December. The winning group consists of the Shanghai and Shenzhen stock exchanges, the China Financial Futures Exchange and financial institutions in Pakistan. The bid was screened by a committee consisting of existing PSX shareholders. 

The consortium will acquire a 40% stake, worth some 9 billion Pakistani rupees ($85.8 million), from some 200 local securities companies — the existing shareholders. The three Chinese exchanges will jointly own a 30% stake and become the largest shareholder of the bourse.

The PSX was founded last January through the integration of the Karachi, Lahore and Islamabad bourses. As the country’s sole stock exchange, it lists some 550 companies. Even before the integration, the PSX was planning to allocate up to a 40% stake to “strategic investors” who could contribute to its operational expansion.

BOJ taking ‘a step forward,’ says Kuroda

The Bank of Japan revised its economic outlook for the first time in 19 months during the two-day policy meeting that ended Tuesday. But that is apparently the only step the central bank is taking at this time.

“The headwinds seen in the first half of this year have ceased,” BOJ Gov. Haruhiko Kuroda told reporters following the meeting. Markets were riled by heightened concerns directed at emerging economies at the beginning of 2016, only to be shocked in June by Britain’s referendum to exit the European Union. The BOJ was forced to loosen its policy in July, raising its target for exchange-traded fund purchases.

 During the second half of 2016, the economic landscape has slowly brightened, beginning with U.S. readings. The Japanese economy has followed suit with increased exports and production. Consumption also recovered from a slump caused by a soft stock market and inclement weather at the beginning of the year.

“Japan’s economy has continued its moderate recovery trend,” the BOJ said in a statement published after the meeting. The central bank had previously qualified that view by highlighting sluggish exports and production.

World braces as US monetary policy turns

Wednesday’s U.S. rate hike has caused ripples through global markets, as investors began to contemplate the impact of American monetary tightening and beefed-up fiscal spending under a President Donald Trump.  

Turning point

 Many traders at a stock brokerage here described comments by Federal Reserve Chair Janet Yellen Wednesday as more hawkish than expected.

A 25-basis-point increase in the federal funds rate was announced at 2 p.m., following a two-day meeting of the Federal Open Market Committee. The first hike in a year, which lifted the benchmark rate to a range of 0.5% and 0.75%, was largely expected. But Yellen also revealed that the Fed was now looking at raising the rate three times in 2017, instead of the two hikes that had been indicated before.

Yellen also cautioned against guessing President-elect Donald Trump’s intentions regarding fiscal spending. “We’re operating under a cloud of uncertainty at the moment and we have time to wait and see what changes occur and factor those into our decision-making as we gain greater clarity.”

Fed watchers took this as an indication that the pace of rate hikes could hasten to more than the three estimated for 2017 as Trump’s policies are implemented.

Overnight US Market :Dow closed -9 points ( 157 points to kiss 20000 )

Stocks lost steam Friday as the Dow failed in another attempt at topping the 20,000 mark for the first time ever.

The Dow Jones industrial average lost less than 0.1%, down 8 points to finish at 19,843.41. The S&P 500 fell 0.2%, while the Nasdaq composite shed 0.4%.

After an initial jolt from the Fed’s interest rate hike decision this week, markets adjusted to the prospect of more increases that policymakers signaled were in store as they move to “normalize” interest rates. The Fed raised rates for only the second time in a decade and hinted three more hikes are on the way in 2017, rattling markets used to ultralow borrowing costs that have fueled a multiyear stock boom. The Fed’s move now shifts the focus from central bank policy to economic growth as the driver of stock market performance.

Bond yields gave up some of their big gains from the last few days.The yield on the 10-year Treasury fell to 2.58% from 2.60% late Thursday, putting at least a temporary halt to its strong rally since last month’s presidential election.

CEO of India’s National Stock Exchange resigns ahead of IPO filing

Chitra, Chitra RamakrishnaThe head of the National Stock Exchange of India has resigned weeks before the country’s largest exchange was due to file details about a public listing.

The group said on Friday that Chitra Ramkrishna had decided to step down. “Ms Ramkrishna had tendered her resignation due to personal reasons and expressed her desire to step down with immediate effect,” the NSE said in a statement.

Her decision comes as the NSE was due to announce to file with markets regulators about a stock market flotation. The NSE said in June that it would file a draft prospectus by January. Analysts have said a listing could value the NSE at around $6bn.

Most global equities trade on listed exchanges, but plans to float India’s bourses have repeatedly run into problems with the country’s markets regulator, the Securities and Exchange Board of India.

Chinese Bond Yields Jump Most In 10 Months On “Liquidity Fears”

It is probably a coincidence that one day after we commented on what is emerging as “the market’s next headache”, namely China’s (not so) stealth tightening, which in the last few weeks has led to a creep higher across the curve, the yield on China’s sovereign 10Y bond jumped 6.5bps to 2.94% on what Bloomberg dubbed were “liquidity fears.” This was the biggest one day spike for the benchmark bond since Jan. 25, according to ChinaBond data.

As a result of the selloff, the most actively traded 10-year govt bond futures were down 0.72%, while five-year futures dropped 0.74%.

The tightening was broad-based, with 1-year rate swaps rising 13bps to 19-month high at 3.17%; additionally the overnight repo rate also rose to 2.31%, the highest level this month.

Quoted by Bloomberg, Wu Sijie, bond trader at China Merchants Bank said “tightening interbank liquidity and the expectation of even higher short-term borrowing costs are driving up swap costs and affecting sentiment on the cash bond market.”

Meanwhile, signalling no change at all in its posture, overnight the PBOC drained funds in open-market operations for the fourth consecutive day, bringing the total withdrawal to 130 billion yuan.

Commodity prices show global recovery may be on the horizon

In a major shift in economic trends, prices of raw materials started surging in October, possibly signaling that emerging economies are finally regaining strength after going through a distinctly rough patch.

The shift may be behind the recent stock market rally and the jump in long-term interest rates in the U.S.

 While the surprise outcome of the U.S. presidential election triggered wild movement in stock, bond and currency markets, commodities have been mostly insulated from its impact.
 The CRB BLS Raw Industrial Sub-index, which traces the overall direction of commodity prices, took an upturn early this year after plunging until the end of 2015. The index, a measure of nearly two dozen basic commodities excluding precious metals and crude oil, then began soaring in late October.

Meanwhile, U.S. long-term interest rates shot up after Donald Trump’s unexpected win in last week’s presidential election.

The upswing in interest rates has been attributed by many to concerns over an increase in the U.S. budget deficit due to the president-elect’s campaign promises to both cut taxes and increase public spending.

While such concerns may very well be a factor contributing to higher long-term rates, they do not paint the entire picture. A “bad rise” in the cost of borrowing due to expectations of a government spending spree is not entirely consistent with the rally in the U.S. stock market.

Yields on 10-year treasurys appear to be following the CRB index. The main factor pushing up the CRB commodity prices yardstick is the apparent bottoming-out of key emerging economies.

In China, for instance, investment in electric machinery, publicservice, construction and other sectors is rebounding, shored up by massive government spending on infrastructure.

Learn from Jesse Livermore’s personal life than from his trading techniques :Jesse Livermore Boy Plunger

1929-crash

Jesse Livermore, the so called “Boy Plunger” and probably the greatest Wall Street Trader who ever lived, died $340,000 in debt.

Many look at his life to learn the secrets of his often extraordinary trading success. A better track for financial prosperity is to study and learn from mistakes he committed in his personal life.

The clues for true riches can be found there. The lessons from his personal failures are exponentially more important for modern investors than his exploits in the commodities and stock markets.

During the Stock Market Crash of 1929, Jesse Livermore made $100 million dollars betting that the stock market would plummet in spectacular fashion.

When he arrived home after another appalling day of market bloodletting in October of 1929, both his wife and mother-in-law met him at the door in tears.

Overnight US Market :Dow Closed +15 points

After yesterday’s down day on earnings worries, U.S. stocks closed mixed to slightly higher Wednesday as traders reacted to the release of the minutes of last month’s Federal Reserve meeting, which suggested an interest rate hike is coming “relatively soon.”

Most investors say the Fed minutes, which noted that it was a “close call” to hold off on rate hikes at the September meeting, suggests the Fed is still on track for a December rate hike if economic data, including the labor market, continues to come in strong. That message jibes with futures markets, which continues to price in a nearly 70% chance of a hike at the December meeting.

The Dow Jones industrial average rose 15.54 points, or 0.1%, to 18,144.20. The broad Standard & Poor’s 500 stock index gained 2.45, or 0.1%, to 2139.18 and the Nasdaq fell 7.77, or 0.2%, to 5239.02.

A poor start to the third-quarter earnings season Tuesday got Wall Street’s attention. A miss from aluminum maker Alcoa knocked the Dow down 200 points and raised concerns that the hoped-for profit rebound won’t materialize in the July-thru-September quarter. With just 27 companies in the S&P 500 having reported results so far, earnings are seen contracting 0.7%, according to earnings-tracker Thomson Reuters, putting earnings on track for their fifth straight quarter of negative growth.