The shareholding of domestic institutional investors (DIIs) in listed companies has risen to a six-year high, following an increase of 10 per cent in the value of their holdings, despite flat markets.
At the end of the June quarter, DII shareholding in National Stock Exchange-listed companies was 11.7 per cent, up nearly 100 basis points in 12 months, from data compiled by Prime Database. The value of their holdings touched a record high of Rs 11.74 lakh crore, a 12 per cent increase over the Rs 10.5 lakh crore at the end of the June 2015 quarter. The BSE 500 index remained flat in this period. By stock exchange data, DIIs had pumped nearly Rs 40,000 crore in the Indian markets in the four quarters ending June 2016. DIIs comprise domestic mutual funds, insurance companies and pension funds. The increase in DII ownership and value of their holdings is a positive sign for the Indian markets, largely dependent on foreign institutional investors (FIIs). The value of the latter FII holdings at the end of June was almost double that of DIIs, at Rs 20.1 crore. Their ownership stood at 20.1 per cent, making them the country’s largest non-promoter stakeholders. Within DIIs, state-owned Life Insurance Corporation of India (LIC) is one of the biggest investors. At the end of June, the value of its holding was Rs 4.6 lakh crore.
Some of the companies with high DII shareholding are Balmer Lawrie & Co (72.8 per cent), Gammon India (66.3), Consolidated Construction Consortium (56.4), IVRCL (52.6) and Monnet Ispat & Energy (50.1). During the June quarter, Bombay Rayon saw the highest increases in DII shareholding in percentage points, at 26.3. Sakthi Sugars (18.9 percentage point increase) and Rainbow Papers (11.45) were other companies which saw substantial increase.
The computerized portfolio management wave is hitting Japan, with a total of nearly 20 companies here and abroad to offer the algorithm-based solutions to retail investors by next spring.
A robo-adviser automatically puts together a portfolio in line with the individual investor’s wishes. After answering such simple questions as age and investment experience, the user is presented with an asset mix such as “developed-market stocks,” “emerging-market bonds” and “gold.” The entire process takes only minutes and can be handled on a personal computer or a smartphone. Roughly $40 billion alone in outstanding assets are managed by big U.S. investment firms through this method.
The biggest advantage of robo-advising is the low costs for investors. Commissions amount to just 0.2% to 1% of the investment capital. This is cheaper than the fees that private banking services offer to the affluent, or the roughly 2-3% commissions charged by existing wrap accounts overseen by financial institutions.
Direct comparisons of performance are difficult, owing to the vast diversity of portfolios that robo-advisers generate. But robo-advised investors very likely enjoy an edge in returns simply by virtue of the low commissions.
The Bank of Japan is not buying exchange-traded funds as aggressively as expected after its decision in July to double annual purchases — a move seen as a deliberate attempt to retain policy firepower for later.
The central bank said Aug. 2 that financial authorities had given the all-clear to a policy change raising the target for ETF purchases from roughly 3.3 trillion yen ($32.8 billion) a year to around 6 trillion yen. But the bank actually bought the instruments on just three days between then and Wednesday: Aug. 3, Aug. 4 and Aug. 10. Purchases on Aug. 3 totaled 34.7 billion yen, the amount typical before the policy shift, before finally doubling to 70.7 billion yen on the other two dates.
Doubling annual buying requires the BOJ to snap up 24 billion yen in ETFs per trading day, putting the central bank a good deal behind schedule at present. Investors had expected the expanded policy to give the stock market a lift. But many now wonder when the BOJ will finally show its strength.
The BOJ does not make public the process by which it buys ETFs, for fear of unduly influencing the market. But an official offered a passing reference to “last October” by way of explanation for the conservative approach.
U.S. stocks rose Tuesday, temporarily moving back into record territory as the Nasdaq set a new intraday high.
The rebound comes as quiet summer trading drags on and investors look ahead to a key speech from Federal Reserve chair Janet Yellen on Friday.
The stock market has been relatively calm in recent weeks, with up and down price swings — or volatility — in the past 20 days for the benchmark Standard & Poor’s 500 stock index at its lowest level “in several decades,” according to Strategas Research Partners.
Finishing up 18 points, or 0.1%, was the Dow Jones industrial average. The S&P 500 gained 0.2%. The Nasdaq composite climbed 0.3%, rising as high as 5275.74, an intraday record.
All three indexes are near their record closing highs.
Pledging of shares by promoters of India Inc is at a seven-year high. The percentage of promoter holding pledged with lenders was at 16 per cent at the end of the June quarter, compared to 15.43 per cent in the preceding one and 15.57 per cent a year ago, according to PRIME Database.
The value of pledged shares at the quarters end was Rs 1.97 lakh crore, or 8.5 per cent of India’s market capitalisation. Around 16.2 per cent of promoter shareholding, valued at Rs 2.08 lakh crore, is currently pledged.
Share pledging is a common practice among promoters for raising capital. The increase in value is largely due to rise in prices of the underlying shares. The benchmark Sensexhad rallied 6.5 per cent in the quarter. According to the primary market monitor, 522 of the 1,538 companies listed on the National Stock Exchange have at least some share pledging .
The average pledging in these 522 companies is 46.7 per cent, compared to 47.4 per cent a year before.
Over the past several months, Morgan Stanley – together with the sellside strategists at Goldman, JPM, BofA and most other banks – has had a rather bleak view of not only the economy, but also the ongoing market rally (which as we showed earlier has climbed a fascinating wall of hedge fund worry). The latest weekend comments by the bank’s head of European Strategy, Graham Secker, confirm that despite the market hitting nearly daily record highs on negligible volume, the brokerage refuses to throw in the towel on its cautious outlook despite admitting that the bear capitulation has arrived and warns that “this is potentially the most dangerous time for investors as hope and greed overtake fear and loathing.“
From the Sunday Start column by Morgan Stanley’s Graham Secker, head of European Equity Strategy
Is the Tide Rising?
It is often said that a rising tide lifts all boats, but perhaps the more pertinent question just now is whether this logic works in reverse. July saw over 80% of European companies post a rise in their share price, and performance has remained strong so far this month. This breadth of positive returns has been a rare occurrence in Europe in recent years, but does this augur an upturn in economic activity ahead or is it a sign that investor optimism has overreached?
A new wave of investors is making inroads into the Japanese stock market — and ruffling some feathers along the way. Called activist short sellers, they issue reports advising people to sell a certain stock and often make money by shorting the stock themselves.
Shares in robotics venture Cyberdyne, maker of the robotic-assistance suit HAL, at one point plunged nearly 11% to 1,852 yen in Tuesday trade after U.S. activist short seller Citron Research issued a report labeling Cyberdyne shares as “the most ridiculously priced stock in the world.”
While the report acknowledged HAL as being innovative in 2005, it said “time and competitors have eclipsed Cyberdyne” and that “the company is yet to effectively commercialize any products,” calling the company’s R&D spending “nonexistent.” The report said, “Despite the advances made in technology and by its competitors over the last decade, there is nothing new [in terms of patents] from Cyberdyne since 2005,” adding that it sees an 85% downside to the stock price.
Cyberdyne Chief Financial Officer Shinji Uga told Nikkei that such claims were untrue. “The report has many factual errors, such as on patents,” Uga said. “Citron only points out the basic HAL patents. Basics aside, we’ve had 11 new patents approved just counting the period after 2015.” He also said the company was considering various responses to Citron’s report, including legal action.
Warren Buffett’s Berkshire Hathaway increased its headline-making stake in Apple in the second quarter, from $1.1bn at the end of March to $1.5bn at the end of June.
The share buying has just been revealed in Berkshire’s 13F filing with the US Securities and Exchange Commission, which also shows that Mr Buffett cut his stake in the retail giant Walmart over the same period.
Apple’s appearance in Berkshire’s investment portfolio raised eyebrows in May because of Mr Buffett’s famous aversion to technology stocks, but it has emerged that it was one of his deputies, Todd Combs or Ted Weschler, who has picked the stock.
As Apple’s share price declined 12.3 per cent over the quarter, they bought 5.4m more shares, taking the total to 15.2m. So far, that looks like a winning bet: the stock has rebounded by more than 14 per cent since quarter-end.
Stocks sunk in lazy and quiet summer trading as major U.S. equity indexes retreated from record highs and U.S. oil slipped 2.5%.
All three major market gauges rose a tad at the opening but very quickly lost steam. The Dow Jones industrial average, which started the day 0.3% shy of its July 20 record, closed down 0.2%. The broader Standard & Poor’s 500 stock index, which kicked off Wednesday a single point shy of Friday’s all-time high, finished down 0.3%. And the Nasdaq composite, which notched a record close Tuesday, was off 0.4%.
The “sleepy” stock market is suffering from the summer doldrums. If you strip out the Dow’s 191-point surge Friday after the blowout July jobs report, the blue-chip stock gauge has moved just 7 points on average in the past three of four trading sessions.
“The low-volume drifting is not unexpected given the time of year and the fact earnings season is winding down,” Andrew Adams, an analyst at Raymond James, told clients in a morning report.
When it comes to the Bank of Japan’s actions (or inactivity as case may be), traditionally the market’s focus has been on whether or not Kuroda would expand QE and/or cut rates. However, while far less noticed, the central bank’s aggressive purchases of ETFs are becoming a troubling reality. Recall that in April the BOJ was revealed to already be a top 10 holder in about 90% of all Japanese stocks.
As Bloomberg reported, as of April the BOJ ranked as a top 10 holder in more than 200 of the Nikkei gauge’s 225 companies. “The central bank effectively controls about 9 percent of Fast Retailing Co., the operator of Uniqlo stores, and nearly 5 percent of soy sauce maker Kikkoman Corp. It has an estimated shareholder rank of No. 3 in both Yamaha Corp., one of the world’s largest makers of musical instruments, and Daiwa House Industry Co., Japan’s biggest homebuilder.”
The news followed the just as striking disclosure that the BOJ is already an owner of more than half of all Japanese ETFs.