Fri, 30th September 2016

Anirudh Sethi Report


Archives of “stock” Tag

Corporate China faces earnings headwinds

Listed Chinese companies logged a decrease in combined January-June net profit due to an economic slowdown and efforts to address industrial overcapacity and bad debts, on the heels of the first full-year decline in seven years in 2015.

Comparable year-earlier data was available for 2,928 enterprises on the Shanghai and Shenzhen bourses. They logged a combined profit of 1.38 trillion yuan ($206 billion) for the half, down 5%, financial data from Shanghai DZH shows. The decline reaches double digits if banks are excluded.

 The government’s structural reform efforts dealt a blow to resource-related businesses. Net results worsened at 36 of 58 such concerns among the listed companies. Twenty-four, or about 40%, bled red ink.

Henan Province coal producer Henan Dayou Energy reported a nearly 1 billion yuan net loss, having reportedly held down production volumes in compliance with government instructions.

Machinery builders were hit by slowing growth in capital investment. Zoomlion Heavy Industry Science and Technology ended the half 800 million yuan in the red. A year earlier, the construction machinery maker had sustained its first net loss since its 2000 listing.

Overnight US Market :As Expected PANIC Continue…..DJIA Closed down -258 points

Yesterday’s big bounce on Wall Street didn’t stick.

Stocks were deep in the red Tuesday and investors saw another day of sizable price swings after a long period of calm due in large part to a steep slide in oil prices amid a cut in crude demand and continued angst over U.S. interest rate policy.

The Dow Jones industrial average fell 258 points, or 1.4%, to 18,066 after rallying nearly 240 points Monday following Friday’s nearly 400-point decline. The broad Standard & Poor’s 500 stock index was also deeply in the red, falling 1.5% to 2127. The Nasdaq composite was down 1.1% to 5155.

Today’s stock market slide follows a downgrade of daily crude demand for 2016 and next year by the International Energy Agency (IEA). The IEA lowered its demand estimates by 100,000 barrels a day this year and by roughly 200,000 daily barrels in 2017. The IEA cited “wobbling” Asian demand as one reason for slashing its forecast.

Japan Inc. on track to float record 4.5tn yen in bonds this quarter

Japanese companies are poised to issue a record amount of debt this quarter to fund activities such as acquisitions, a sign that rock-bottom interest rates have begun prodding firms to ramp up investment.

SoftBank Group and seven other companies on Friday set conditions for 741 billion yen ($7.2 billion) in corporate bond offerings, bringing the running total for the July-September quarter to 4.19 trillion yen, 2.7 times the year-earlier level. Floats planned through the end of the month are seen boosting that figure to 4.46 trillion yen or so, the largest for any quarter since 1978, the first year for which data is available.

 The current record comes from January-March 1998, when Japan Inc. issued 4.42 trillion yen in bonds. Financial turmoil stemming from such developments as the 1997 collapse of Yamaichi Securities had made banks reluctant to lend, forcing cash-strapped companies to turn to the bond market.

The situation now is a good deal sunnier. The Bank of Japan’s monetary easing, including its negative interest rate policy, has caused rates on corporate debt to plunge, “whetting companies’ appetite for fundraising,” said Toshiyasu Ohashi of Daiwa Securities.

Demand for growth funding is particularly noteworthy. SoftBank’s new subordinated bonds will bring in 471 billion yen from retail investors and institutions, replenishing cash following the acquisition of U.K. chip designer ARM Holdings.

Companies such as Sony, meanwhile, are taking advantage of low borrowing costs to improve their financial standing. The electronics and media giant on Friday set conditions for its first bonds since June 2013. The bonds total 200 billion yen, and aim to lighten the current burden of interest payments.

Cross-Asset “Contagion” Risk Indicator Worse Than Lehman

Nowhere else is the impact of central banks more evident than the total decoupling of global stock markets from global economic developments.

However, Bloomberg reports that as money managers attempt to diversify away from what they all know will not end well, Credit Suisse warns the overwhelming flow from central bank interventions “are driving everything” pushing their so-called cross-market contagion indicator to levels more worrisome than anytime since 2008’s Lehman-inspired financial crisis.

European Indices give up gains. End the day lower.

Dax down -0.63%

The European major stock indexes reversed earlier gains in the day after worse than expected US data discouraged investors. The IMF also was hinting about lowering global growth.  As a result, stocks in Europe are ending near low levels for the day.
  • The German Dax is down -0.63% and closed below the 200 hour MA
  • UK FTSE is down -0.53%
  • France’s CAC is down -0.09%
  • Italy’s MIB is down 0.1%
  • Spains Ibex bucked the trend and closed up 0.37%
In the European 10 year debt market sector, are ending unchanged to up 4 or so basis points
  • Germany -0.70%, unchanged
  • France 0.176%, unchanged
  • Italy 1.176%, +3 basis points
  • Portugal 3.047%, +1 basis point
  • Spain 1.059%, +5 basis points
  • Greece 8.110%, +2 basis points
  • UK 0.668%, +3 basis points

Market cap of BSE companies at Rs 110 lakh crore

Boosted by a strong stock market show today, the total market capitalisation (m-cap) of BSE-listed companies surged to an all-time high of Rs 110.7 lakh crore ($1.64 trillion). Following the sharp rally in stocks, investor wealth rose by Rs 1,39,948 crore to Rs 1,10,70,610 crore.

TCS is the most valued Indian company with a market valuation of Rs 5,02,202.97 crore, followed by Reliance Indu-stries Ltd (Rs 3,45,650.10 crore), HDFC Bank (Rs 3,22,240.25 crore), ITC (Rs 3,11,383.66 crore) and Infosys (Rs 2,39,111.94 crore).

Among the 30 Sensex companies, 29 scrips ended higher, led by Asian Paints and Bajaj Auto. Bharti Airtel fell by 2.82 per cent.

BSE is among the world’s 10 largest exchanges in terms of market value, while it is the biggest in terms of number of firms listed on its platform. Over 2,900 companies trade on BSE. On the exch-ange, 1,638 scrips adv-anced, while 1,073 dec-lined and 216 remained unchanged.

Japanese Government Now The Largest Shareholder Of 474 Big Companies

The two biggest buyers of Japan Inc. are flying blind and don’t care.

The Bank of Japan and the Government Pension Investment Fund (GPIF) have been buying stocks to inflate the market, create some kind of “wealth effect,” and bamboozle regular Japanese into pouring once again into stocks, after many of them lost a big chunk of their savings when the prior bubble imploded without ever recovering.

In 2014, the GPIF – buckling under the pressure from the Abe administration – decided to plow about 25% (“±9%”) of its assets into Japanese stocks. With assets at the time of still about $1.4 trillion, 25% would amount to about $350 billion. So the fund has been buying a lot! And it has been a disaster! [Read…  Japan Mega-Pension Fund Dives into Stocks, Foreign Assets, Loses Shirt. People Not Amused]

But even after Japanese stocks took a licking over the past year, the fund’s allocation to domestic equities is still 21%, so near its range and no longer a powerful buyer. But to make up for any holes left behind by the pension fund, the BOJ announced on July 28 that it would nearly double its annual purchases of equity ETFs to ¥6 trillion ($59 billion).

DII ownership in stocks at six-year high

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DII ownership in stocks at six-year highThe 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.