Singapore Stock Picks

Asia Trader & Investor Convention 2009

2009-04-18T17:03:00.004+08:00

Make your way to Suntec Singapore Hall 401 this Saturday and Sunday (18th and 19th April) or visit http://www.theatic.net/

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

The week ahead: April 13

2009-04-13T22:00:00.002+08:00

Apologies to all as I have been busy.

These are the counters to look out for this week:
1) ARA Asset Management Ltd
2)Golden Agri
3)Indo Agri
4)Noble
5)Olam
6)SPC
7)SPDR Gold Share
8)UE
9) Wilmar

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

The Week Ahead: 06/04/2009

2009-04-05T15:09:00.004+08:00

From this week going forward, Singapore Stock Picks will present an outlook of the Singapore stock market for the week ahead and highlight 1-2 counters likely to be in the limelight.

Outlook:

Encouraging news from US are increasing the buying volume in Asia and it seems likely that there will be some consolidations next week in the Singapore market. However, Singapore economic figures does not look encouraging in the first quarter and a further slide is expected for 2Q2009. Despite attractive valuation, my personal opinion is that it is still premature to buy in aggressively.

Counter in focus: Golden Agri

High buying volume on friday as well as low stochastic makes it a good stock to look at and buy for the short term.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

A sound long-term investment: MIDAS HOLDINGS

2009-04-05T15:07:00.000+08:00

Source:DMG

Right place, right time. Midas Holdings, which has investments in aluminium alloy extrusion products and polyethylene pipes, is set to enjoy strong growth on the back of the railway sector. It will also get a boost from 32.5%-owned associate NPRT, being one of the four entities with a licence to assemble/produce Metro train cars in China.Order book flow should remain robust going forward. Midas’ current order book is worth S$120m, with deliveries stretching out over the next two years. NPRT has a much bigger order book, clocking up RMB4.5b worth of orders (784 train cars) for delivery between FY09 and FY11. With many more railway systems to be added in major cities and also connecting various cities, we are confident Midas and NPRT will be adding to their current tallies.Direct beneficiary of the China stimulus package. Approximately RMB2t is budgeted by the Ministry of Railways (MOR) for expansion of China’s existing railway system between FY09 and FY12, mostly for intercity train systems. As much as RMB600b will be spent in FY09 out of this RMB2t. The MOR has also announced it will spend at least RMB500b on rolling stock alone in the next four years. We have estimated that Midas will see a RMB2b surge in orders, based on its 80% market share in AA train car body extrusion.Stable earnings growth. From FY04 to FY08, Midas grew its top line 140% from S$60.2m to S$144.5m, a CAGR of 24.5%. Despite the current credit and economic crisis, we believe Midas will continue its path of strong and stable earnings growth with the construction of a third AA production line and higher contributions from NPRT going forward.Valuation. We derive a 12-month fair-value target price of S$0.73 using our DCF model, applying a WACC of 15.5%, a beta of 1.1 and a terminal growth rate of 1%. At the last traded price, the stock is trading at 10.1x FY09 and 7.5x FY10 P/E, offering a yield of 2.3% and 2.9% respectively. Its China-based peers trade at 21.8x FY09 and 16.5x FY10 P/E. Initiate with BUY.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

MobileOne: S$1.52 NEUTRAL (TP: S$1.52) - Prospects largely priced in

2009-01-22T08:03:00.000+08:00

source:DMG

Below expectations. In the year to 31 Dec 08, M1 saw net profit fall 12.6% to S$150.1m on the back of a 0.3% dip in revenue to S$800.6m. The telco was hit with higher acquisition and retention costs as competition intensified in response to mobile number portability (MNP). FY07 also benefited from tax adjustments and excluding which, net profit fell a slimmer 4.5%. The results were below our expectations.

Pressures lifting. EBITDA marginimproved to 44.0% in 4Q08, up from 40.9% in 4Q07 and 41.6% in 3Q08, as competitive pressures tailed off. However, due to compressed margins over the first three quarters, EBITDA margin came in at 42.9% for FY08 - 1.2ppt lower YoY. Other signs that competition is easing –lower churn rate as well as falling acquisition and retention costs per customer.

Balance sheet strengthens. Gearing has been reduced from 130% in FY07 to 104% in FY08. It has a net debt/EBITDA of 0.7x, with a healthy EBITDA/Interestof 41.8x. This ensures that that pay outs will continue to be healthy. In FY08, it dished out dividends of 13.4 S¢ per share, equivalent to an 80% payout.

Little key updates. Management kept plans very close to their chests. Theyindicated that the market is going to be a lot more rational this year, a point which has already been factored by the market. What investors were more interested in was the hunt for the new CEO, but little was said about that.

Earnings and target price lowered. We have lowered our earnings estimates for FY09 by 5% to S$141.6m (-5.6% YoY). In FY10, we expect earnings to grow 4.6% to S$148.1m. Payout, assuming that it is maintained at 80%, works out to a prospective yield of 8.3%. Based on DDM, we attain a target price of S$1.52, down from S$1.58 previously. We believe that the prospects have already been priced in. Downgrade to NEUTRAL.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Sinotel Technologies: S$0.18 BUY (TP: S$0.32) - New order from China Unicom

2009-01-21T16:58:00.000+08:00

source: DMG

New order worth RMB32.8m from China Unicom. Sinotel announced that it won the bid for the development of a Network Optimization & Business Analysis System for China Unicom in six major locations, namely Beijing, Jiangsu, Chongqing, Guangxi, Hebei and Shanxi.

Proprietary software. The technology is a proprietary solution offered by Sinotel. This would allow China Unicom to record and monitor signal strengths emitted by individual base stations. This would also allow China Unicom to monitor and improve its network coverage, so that subscribers can enjoy better coverage and mobile services (higher signal strength, greater area coverage and more consistent data transfer speeds).

Expects more contracts as telcos move to upgrade quickly. The race is on for the telcos to speed up 3G upgrading works and to be the first to secure market dominance. Management expects more contracts to be up for bids.

Both China Unicom and China Mobile have been Sinotel’s customers before the restructuring of the telecommunications industry. Following the restructuring, China Unicom sold off its CDMA network (which was developed by Sinotel) to China Telecom. Therefore, when China Telecom upgrades the CDMA network, it is likely that it will engage Sinotel to do the job. Management also indicated that China Unicom needs to boost up its central system first, before it can commence on any upgrading works. Hence, we believe that Sinotel is in a good position to secure 3G network upgrading contracts from all three telcos.

Maintain BUY. Sinotel is expected to release its FY08 results in mid-February. We estimate earnings of RMB109.4m (EPS: 39.1 RMB¢) for FY08 and RMB133.4m (EPS: 47.6 RMB¢) for FY09. Sinotel is trading at 1.7x forward P/E or 0.8x P/B. We maintain our target price of S$0.32, based on 3.0x FY09 earnings. Maintain BUY.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

source:DMG

CapitaCommercial Trust: S$0.875 NEUTRAL (TP: S$1.00) - Unencumbered Assets, But Economy Encumbers

2009-01-21T16:55:00.000+08:00

source:DMG
CCT notched a 16.3% YoY jump (-12.5% QoQ) in 4Q08 DPU to 2.71¢, which was within expectations. For FY08, DPU came in at 11.00¢, matching the Street’s (11.10¢) and exceeding DMG’s (10.38¢) estimates. CCT’s portfolio of assets devalued by 3.0% HoH to S$6.7b, attributable to valuers’ usage of higher cap rates (4.5 to 4.75%), premised on a weakened macroeconomic outlook, lower rents and occupancies. As such, NAV dipped 5.7% QoQ to S$2.97 per share. While gearing remain at a decent 37.6%, we believe this is prone to further upside pressures upon CCT’s subsequent semi-annual revaluation exercises this year and 2010. Given banks’ current comfortable LTV ratios of 30 to 40%, fresh refinancing concerns could surface when CCT’s S$850m worth of loans expire in 2010, from our view. From current levels, we estimate that CCT’s assets would need to drop by 7.0% (-S$467m) and 38.8% (-S$2.6b) to hit gearing of 40% and 60% respectively. Remain NEUTRAL at lower S$1.00. Earnings visibility for this year should be rather stable for CCT, having locked in 79% of FY09 gross rental income, helped by full year contribution from 1 George Street and Wilkie Studio. While financial institutions’ confidence in CCT’s quality of assets has been affirmed with the respectable terms pertaining to its recent S$580m loan (a single securitized asset and spread of ~ 250bps), we believe the counter, similar to other landlords, would continue to be in the eye of the office re-rating storm, which should continue to stretch into 1H11. In light of the above, coupled with a continued deteriorating economic environment, we are lowering our occupancy levels and average rentals for CCT for FY10 and FY11 (portfolio occupancy: 85 – 90%, prime Grade A rentals: S$8 - 10 psf per mth, down from S$10 – 12, Rest of Central Area: S$6 – 8 psf per mth, down from S$8 - 10), but keeping our assumptions for FY09 intact as majority of the leases have been locked in. As such, FY09 DPU remains at 10.86¢ and FY10 DPU falls by 8.3% to 10.16 ¢. Maintain NEUTRAL at lower fair value of S$1.00. The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned
Source:DMG

Indofood Agri Resources: S$0.54 NEUTRAL (TP: S$0.51) - Cooking Oil Selling Price Dropped 10-15%, Lowering Earnings Estimates

2009-01-02T18:40:00.000+08:00

Source:DMG

Cooking oil selling prices easing. An update with management uncovers that IFAR’s selling prices of cooking oil and fats in Indonesia has been revised downwards by 10-15% on average, due to the steep decline of CPO price since its highs in mid July. We have adjusted our FY09 valuations to take into account a 10% decline in margarine’s and a 15% decline in cooking oil’s selling prices, from 9M08 average selling prices.

Capex plans under review. During the update, management has said that they are maintaining their target to expand oil palm planted area to 250,000 ha by end 2010. Assuming no new plantings were carried out in 4Q08, this works out to approximately 38,000 ha of new plantings per year in 2009 and 2010. However, in view of the current credit tightening environment, management has also indicated that they are reviewing non-essential capital expenditure currently.

Downgrade to neutral, new fair value of S$0.51. We are maintaining our CPO price assumption of RM1,500/tonne for FY09 (CPO futures for Jan 09 delivery is RM1,675/tonne) and a 10% YoY CPO production growth per management’s guidance. However, taking into account the reduction in selling prices for cooking oil and margarine, FY09 earnings has been revised downwards by 48% to IDR802b. Factoring in a P/E of 7x our FY09F earnings (7x being the average of 10-year historical low P/E valuation for Indonesian and Singapore listed plantation companies), we derive a new target price of S$0.51 (S$1.12 previously) and downgrade our call on the stock to neutral.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

CentraLand: S$0.48 Unrated - J-Expo Exploration

2008-12-19T13:06:00.001+08:00

source:DMG

We recently visited J-Expo, CentraLand’s first commercial development in the nucleus of Zhengzhou City, Henan province. Spanning 65,890 sm, the building comprises of six levels of 2,560 retail units and seven storeys of 192 office units. Although Zhengzhou is a lower tier and developing city, we were pleasantly surprised by the reasonable standards of J-Expo’s architecture, as well as its well-diversified and well-organized tenant mix. Further, as J-Expo represents CentraLand’s maiden foray into commercial properties, we believe that it is a commendable effort. At present, 93% of J-Expo’s 1,792 retail units for sale have already been snapped up and the 768 retail units for rental have a decent occupancy rate of ~ 90%. The robust demand is unsurprising given that it is located within the main wholesale centre of Zhengzhou, coupled with close proximity to key bus and rail transport stations. More importantly, Zhengzhou’s status as China’s transportation hub makes it one of the most vibrant wholesale centres in China, thus supporting a thriving demand for retail units within the city as people across China constantly travel there to purchase wholesale goods for resale in their respective provinces and cities. For CentraLand, we believe that this is also positive for its upcoming new development – Tianrong Fashion City, a fashion apparel wholesale centre. In the medium-long term, it could also look at acquiring or developing sites which can benefit from the wholesale trade.

On the back of the handing over of ~ 1,000 retail and office units in J-Expo, CentraLand recorded a 1,292% YoY surge in 3Q08 PATMI to RMB74.3m. For the next 2 - 3 quarters, we reckon CentraLand can still recognize income contribution from 803 pre-sold retail and office units which have yet to be delivered, as well as potential sales of 184 other unsold ones. However, we are less certain of its 2H09 performance, as J-Expo’s contribution should come only in the form of rental income (estimated at RMB20.9m p.a.) as a bulk of its sales contribution would have been recognized then. Simultaneously, we are not expecting a robust take-up for GLSS Phase 3. From our view, some of the more likely avenues for topline enhancement could be the acquisition of another commercial development which has a higher probability of asset turnaround, possible sales of some of J-Expo’s retail rental units and quickened finalization of Tianrong Fashion City.

Following a pledge to construct more low-income housing and cutting mortgage rates and down payments for first-time home buyers, the Chinese government has introduced more concrete measures. These include the trimming of business and transaction taxes for property sales, as well as policies to make it easier for developers to obtain credit. Given that real estate investment accounts for about 10% of China’s GDP, we are not surprised by the recent slew of favorable policies. Nonetheless, we believe that it could take a longer than expected time for the policies to fully filter to each individual province and city in China. As such, we estimate a recovery in China’s property sector sometime beginning 2H09. Chinese property developers on the SGX are currently trading at 1.2x their book value, while CentraLand has a P/B ratio of 3.4x. We do not have a rating for CentraLand. Catalysts for the counter include the finalization of the purchase of an adjacent site sitting next to Tianrong Fashion City, acquisitions of more commercial sites, as well as global recovery in buying sentiments within the property sector. Risks include its over-dependence on one city and two projects for its current income contribution.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SGX: S$5.40 SELL (TP: S$3.95) - Nov futures turnover volume plunged

2008-12-19T12:59:00.001+08:00

Dec stockmarket turnover value remains soft. Average daily stockmarket turnover value was S$0.96b for the first 11 trading days of Dec 08. Though this is close to Nov 08’s S$1.04b, it represents a sharp 31% decline from Oct 08’s S$1.40b. The average value per share traded has also fallen from Oct 08’s S$1.03 to Dec 08’s S$0.86 – suggesting a shift towards trading of smaller cap stocks. However, we note that Dec is seasonally a month of weaker trading volumes due to the holiday season. Hence, despite the weakness in Dec, we are maintaining our FY09 and FY10 ADT assumptions of S$1.19b and S$1.24b respectively.

Futures turnover strength has abated. After recording very strong futures trading volume of 6.47m and 6.84m in Sep and Oct 08 respectively, futures turnover fell to 4.44m in Nov 08, with a 1.69m MoM decline in Nikkei futures trading volume. We do not read this positively as derivatives clearing fees account for 29% of 1QFY09 overall revenue. As the weakness only occurred for one month, we maintain our FY09 and FY10 futures turnover volume of 72m and 75m respectively, and will review the numbers, if necessary, at a later date.

Is an assumption of FY10 ADT of S$2.1b reasonable? We do not think so, given that Dec 08’s was S$0.96b. SGX traded at mid-teens P/E in 2005, when FY05 ADT fell 14.5% YoY. We believe a fair P/E rating is 13x, factoring in the more severe decline this time round – we are assuming FY09 ADT to fall 47%. Our target price of S$3.95 is pegged to this 13x P/E rating. Based on the current price of S$5.40 (and applying a 13x P/E rating), the market is assuming a FY10 ADT of S$2.1b, which we feel is unachievable. Maintain SELL on SGX.

source: DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Pan Hong Property Group: S$0.20 NEUTRAL (TP: S$0.25) - A Modest But Reasonable Take-Up in Huzhou

2008-12-18T13:04:00.002+08:00

A Modest But Reasonable Take-Up In Huzhou

Pan Hong attained a modest take-up rate of 41% for Huzhou Liyang Jingyuan (HLJ) Phase 2, a 150-unit residential project which it launched two weeks ago. A total of 61 units (~7,000 sm in GFA) were transacted at an average selling price of RMB4,950 psm, slightly under our estimates of RMB5,000 psm. Assuming a breakeven price of RMB3,000 psm, they would contribute 0.41¢ / share to NAV when completed and handed over in 2Q09. Despite the weakening sentiments surrounding China’s real estate sector and deteriorating operating environment for property developers, Pan Hong was able to sell close to half of the project within a short period of time from the launch date. We view this positively, and attribute it to a confluence of factors, including Pan Hong’s proven track record in Huzhou (having completed 7 projects here), the buyers’ genuine owner-occupier profile, as well as the project’s quality and good location. Of late, there has been a slew of government policies aimed at bolstering the role of the financial sector in supporting economic growth. At the same time, the Chinese government could be implementing more sector-specific policies in the near term. While the government’s increasing ardor in its introduction of expansionary policies are positive, we would like to stress that implementation is the key here. Judging from the size of the country and historical lead time of policies meted out, it could take a longer than expected time for the intended impact of the policies to filter down to each of the different provinces and cities. Since our initiation report, Pan Hong’s share price has remained flat. Given its residential-centric business model, Pan Hong is not spared from the current weakening sentiments, sales volumes and take-up rates that are plaguing the property sector across China, including the lower-tier cities which Pan Hong is exposed to. Any available catalyst would have to rely on the rate at which the government’s various policies hit the ground running, coupled with a global recovery in real estate sentiments. On the bright side, Pan Hong does have a relatively strong balance sheet - current net gearing ratio of 0.33x and cash position of RMB111.9m. In light of the above, we maintain our NEUTRAL call for the stock with a target price of S$0.25.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Parkway Holdings: S$1.20 BUY-Initial (TP: S$1.45) - Strong branding will help it ride out challenging times

2008-12-18T13:04:00.001+08:00

Strong branding will help it ride out challenging times

Thanks to a strong brand name, Parkway has been able to execute its strategies in growing revenue intensity. In 9M08, it recorded a 5.9% YoY increase in net revenue per adjusted patient day to S$1,850. Going forward, Parkway plans to focus more on complex cases that would generate more revenue. This would help to offset the expected lower hospital admissions due to the economic downturn. Its achievements in the medical field have given Parkway the edge over peers, to draw patients to its medical facilities.

New 350-bed Novena hospital. Parkway secured the 1.7ha Novena Terrace / Irrawaddy Road hospital site, with a bid of S$1.284b. The land parcel has been fully paid on 20 May 2008. This site can be developed into a 500-bed private hospital with a maximum GFA of 778,500 sf. Parkway intends to put in 350 beds in this new Novena hospital. The hospital is expected to be operationally ready in 2011 and Parkway would be in a good position to capture the influx of medical tourists.

Regional footprint contributes to earnings. Parkway operates hospitals and medical centres across the region, allowing it to draw foreign patients to its Singapore operations, and also contribute to earnings. Having a regional exposure also helps to boost Parkway’s brand name. On top of that, with hospitals in the region, Parkway is also in a position to capture the portion of medical tourists who opt for treatments in the neighbouring countries where Parkway has a presence, given the current economic climate. In that sense, Parkway may not lose out that much, from the potential dip in foreign patients.

Initiate coverage with BUY recommendation. With a strong brand name and regional footprint, Parkway is positioned to draw patients to its medical facilities, even in the economic downturn. Parkway is a larger healthcare provider, compared with its peers, in terms of market capitalization and operations. Hence, we ascribe a PE of 13x for its healthcare services and hospital business. Based on our SOTP valuation, we arrive at a 12-month target price of S$1.45 for Parkway.

Source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Low Keng Huat Q3 profit trebles

2008-12-17T07:43:00.002+08:00

Property and hospitality group Low Keng Huat (Singapore) yesterday reported a net profit of
$12.95 million for the third quarter ended Oct 31, 2008 - more than treble the $3.75 million for
the previous corresponding quarter. This drove earnings per share for the quarter to 1.75
cents, up from 0.51 cents in the year-ago period. Higher earnings came on the back of a near
doubling in revenue to $52.26 million from $26.45 million. For the nine months ended Oct 31,
Low Keng Huat's net profit surged 105 per cent from a year ago to $23.36 million. The higher
earnings were mainly due to higher development profit from associated companies.
Contributions from projects such as the one-north Residences, Duchess Residences and
Regency Suites had increased, while those from Domain 21 had dropped.
Low Keng Huat also benefited from lower construction losses, partly because it managed to
recover some cost increases. Net earnings in the nine months would have been higher if not
for lower profits from the hotel and investment segments. Net profit before tax and minority
interests for the hotel business dropped as concessionary income from gaming centre
operations fell. Overall hotel revenues were also lower as the weaker Australian dollar shaved
revenues from Duxton Hotel Perth. Investments also booked a lower net profit before tax and
minority interest. This was due to the sale of some quoted equities which had to be marked to
market. Group revenue in the nine months soared 66 per cent from a year ago to $148.09
million, driven largely by an increase in construction revenue.
There was a higher percentage of completion for ongoing projects and new projects - the
Hardrock Hotel at Sentosa and Meritus Mandarin Hotel - had also started. Low Keng Huat said
that it is 'in a strong financial position'. Its net gearing as at Oct 31 was 15.4 per cent, lower
than the 24.2 per cent at end-January. The group also expects its two hotels in Perth and Ho
Chi Minh City to perform well despite more challenging economic conditions in Western
Australia and Vietnam. Low Keng Huat won a $295 million project last month to construct a
shopping mall cum bus interchange complex at Serangoon Central. Its order book as at
November was $900 million.
Source: Business Times and Bloomberg

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SIA Nov traffic slump biggest in 5 years

2008-12-17T07:43:00.001+08:00

(Singapore) Singapore Airlines, the world's largest carrier by market value, reported its biggest
slump in traffic in more than five years as a global recession cuts travel demand. Passenger
numbers slid 6.1 per cent last month to 1.54 million, the airline said in a Singapore stock
exchange statement yesterday. That's the biggest drop since a 7.6 per cent decline in August
2003, according to data compiled by Bloomberg.
SIA's traffic has declined in two of the past three months as financial firms cut business travel
and people cancel leisure trips. Global air traffic will decline 3 per cent next year, the first drop
since 2001, the International Air Transport Association has said. The airline gained 0.2 per cent
to $11.06 in trading yesterday. The shares have declined 36 per cent this year.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Cambridge Industrial Trust: S$0.28 BUY (TP: S$0.49) - Change at the Helm, Refinancing Overhang Removed

2008-12-17T07:41:00.001+08:00

source: dmg

Cambridge Industrial Trust (CIT) has appointed Christopher Dale Calvert as the new CEO of Cambridge Industrial Trust Management (CITM), CIT’s REIT manager. While we reckon that CIT could gain from Christopher’s vast array of expertise in various segments of the property sector, we note that aside from his 1-year stint as CEO of Macarthurcook Industrial REIT, the bulk of his real estate experience evolved around the Australian market. However, as the previous CEO will remain with CITM, we believe CIT can still benefit from his wealthier experience within the Singapore industrial property sector. Additionally, we think that the new appointment could signify CIT’s intention to look into cross-border assets, as well as further enhancing its Australian identity. On a separate note, CIT has agreed to the terms of an S$390.1m syndicated 3-yr term loan from RBS, HSBC and nabCapital. With an effective annual interest rate of 6.6%, the loan will be used to refinance CIT’s all existing debt facilities of S$490.0m, of which it has drawn S$369.2m. While the agreed interest rate is higher than our assumed estimates of 5.6%, we believe this is reasonably lesser than what the market was pricing in (we forecast to be 10 – 12%). Our last sensitivity analysis has shown that for every 0.5% increase in funding cost, DPU would head down by 0.22¢. Until the final facility documentation is agreed and loan drawdown, we are maintaining our DPU estimates and fair value. We conjecture that CIT’s successful debt refinancing is an encouragement for S-REITs as a whole. Even though it is a smaller-cap REIT, CIT was able to secure a clean debt (which we view as most optimal amongst all refinancing options despite the higher funding costs eating into DPU), thus not risking a potential share dilution from issuance of equity or convertible bonds, or asset sales to pare down debt levels. More importantly, as CIT is the REIT with the first major loan due for refinancing in 2009, we believe that this event could be a harbinger of better things to come for other REITs with major debt due in 2009. The removal of the refinancing overhang is music to the ears of existing unitholders, and we thus advise prospective investors to buy the stock on its relatively higher yield of 17 - 21% compared to the sector average of 13 – 14%. Maintain BUY at S$0.49.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Jardine Cycle & Carriage: NEUTRAL - Downgrade (TP: S$11.18) - Outlook is less rosy

2008-12-10T14:39:00.000+08:00

Sales of Komatsu equipment may decline in 2009. Overall Indonesian sales of heavy equipment vehicles may drop to 6,000 units in 2009, from an estimated 10,000 in 2008, as buyers face problems obtaining loans, and customers in the mining and plantation industries scrap expansion plans. Astra’s subsidiary in the Heavy Equipment business, United Tractors, which has a 45% market share, indicated in an announcement that it may also fail to reach its target of 4,750 units in 2008.

Plans to boost coal extraction capacity. United Tractors has also announced that it plans to spend US$315m to increase its coal extraction capacity, by 14% to 65m tons a year. It plans to add equipment to its coal mining services unit. This may somewhat offset the decline in its heavy equipment vehicles sales.

Motorcar sales continue to decline MoM. Overall Indonesian motorcar sales reached 47,000 units in November, up 2.6% YoY, but lower than the 54,810 units recorded in October. According to Astra, its November sales were 20,839 units.

Motorcycle sales improved slightly. Overall Indonesian motorcycle sales fell 4.4% YoY to 492,903 units in November, with Honda maintaining the lead with total sales of 230,544 units. This was slightly more than the 222,012 units achieved in October for Honda. Motorcycle unit sales for the first 11 months have already overshot the industry’s target of 5.8m units for 2008, and sales are expected to reach 6m units for the whole year. Automotive sales are expected to be lower in 2009,

We are lowering our target price for JC&C, as we adjust our valuation for its business units. Based on our SOTP valuation, we arrive at a target price of S$11.18, down from S$12.28 previously. This presents a marginal potential upside from current levels. Given the less rosy outlook for 2009, we are downgrading our recommendation to Neutral.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Property Sector: NEUTRAL - 1H09 GLS - Good But Not Good Enough

2008-12-09T16:27:00.000+08:00

Citing the expected weak global economic outlook in 2009, the Government has decided against adding new sites to the 1H09 Government Land Sales (GLS) Programme. We believe another factor could be attributable to the considerable quantum of remaining sites backlogged from 2H08, where only 2 sites were successfully tendered off, paling in comparison to the average of 15 sites in the previous three semi-annual periods. Further potential supply was trimmed, as a mere 40,000 sm of commercial space would be made available through non-GLS avenues, representing a 72% HoH plunge. Although the move could help to re-calibrate the supply-demand dynamics, we surmise that the crux of the measure is essentially an affirmation of the current sentiments. While we welcome the Government’s move to pare down the potential pipeline of properties and not crowd the market with unnecessary supply when sentiments are already dampened, we hold the view that at this moment, the property market is more in need of demand-side catalysts than supply-side measures. Some of these could come in the form of temporary exemptions of stamp duty and decreased property taxes, as well as a fine-tuned Deferred Payment Scheme (i.e. 30 – 50% of sale price upon purchase to be paid initially, instead of 10 – 20%). Further, we reckon that the market has already priced in this measure following the earlier announcement on 31 Oct 08. As such, we believe the impact on developers’ share prices would be minimal. With the global macroeconomic climate still running its course, the operating environment for property developers has inevitably become increasingly challenging. We believe this is just the inception of a downcycle for the property market. There remain no near-term boosters to galvanize the share-price performance for developers. Aside from more concerted and effective measures by governments worldwide to shore up the economy and assist corporates in tiding through the current rough climate, we look forward to January’s Budget statement for Singapore. For now, we keep our NEUTRAL rating on the property sector and stick to developers which are well-capitalized, have less exposure to the residential segment and equipped with sources of recurring income. We thus maintain our BUY call for CapitaLand at S$3.05.

source:DMG
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Singtel:Key takeaways from Investor Day

2008-12-05T02:56:00.000+08:00

Increasing mobile leadership. SingTel doesn’t seem to be contended with its comfortable lead in both the post-paid and pre-paid mobile segments. It has an overall market share of 46%, up from 40% a year ago. The launch of the iPhone 3G was an integral part of SingTel’s strategy to extend its lead. In fact, Allen Lew, CEO of SingTel Singapore, proclaims that it is the “best thing to happen to SingTel”. The telco garnered important lessons on key information, like what datasavvy subscribers are likely to watch and what are some of the most popular applications. Approximately 30% of the activations are new mobile clients and ARPU is about 1.5 times higher than its post-paid base. Management is confident that the company will reap good returns in time to come, and the knock in margins (due to higher SAC arising from handset subsidy) is a sacrifice it has to make in the near term.

Growing and diversifying ICT business. SingTel aims to sell its one-stop converged ICT services. Corporates that go with SingTel will be able to enjoy bundled services like e-mail, web-hosting, security and network solutions. The proposition has become even stronger with the acquisition of Singapore Computer Systems (SCS), which has 2,000 employees and is expected to be completed this month at a cost of S$240m. This acquisition will allow SingTel’s systems integrator arm NCS to diversify away from Singapore government projects, which currently accounts for a big chunk of its business.

Repositioning the fixed line. The fixed line copper service, where it has a 94% market share, is still very important to SingTel, as it allows the company to “upsell” its mio TV service. In doing so, it has successfully repositioned the traditional home telephone socket. mio TV has 46,000 subscribers, still small compared to StarHub’s 500,000, but nevertheless a credible base. It also claims to have a “critical mass” of channels, with 56 currently.

Update on Next Gen NBN. As a key partner in the winning OpenNet consortium, SingTel is confident of benefiting from the award of the NetCo. As mentioned in previous reports, the red camp will have a few bites of the cherry – OpenNet’s use of its passive infrastructure, sale of the same infrastructure to AssetCo and the participation in profits of OpenNet. Mr Lew assesses that the cost to households post-NBN will be close to S$80 per month, which is apparently higher than its rivals’ estimates.

soource:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

China Aviation Oil: A rebirth to stability? (NEUTRAL\S$0.655\Target S$0.705)

2008-11-27T02:49:00.000+08:00

Post-restructuring story. China Aviation Oil (CAO) was brought to its knees by rogue trading of
jet fuel derivatives that amounted to more than US$550m in losses in 2005, but was given a new
lease of life in 2006 through restructuring and a subsequent re-listing. Since then, it had totally
done away with its trading arm and focused on its core business activities, which are mainly the
jet fuel procurement business and investments in complementary businesses.
A gradual swing towards synergistic strategies. As time passed after its re-listing and
subsequent stability in its operations, management realised the importance of streamlining the
business towards more value-adding activities by cutting out irrelevant or non-related investments
and concentrating on business targets that would complement its business-chain, be it going
upstream or downstream. This is evident when the Group disposed of its 5% stake in Compania
Logistica de Hidrocarburos, S.A (a Spanish logistics company) during 1H07, and purchased a
49% stake in the Beijing – Tianjin oil pipeline that should be completed by Jan 09.
Re-visiting trading and hedging activities. The Group announced about six weeks ago that it
will resume its petrochemicals trading business from 4Q08 onwards. Products traded will be
substances such as Benzene, Styrene and Toluene through the inheritance of BP’s Asian
petrochemicals and trading team. The Group also recorded a gain of S$4.8m on a close-out of a
swap deal backed by underlying physical cargo (jet fuel) with a customer in 2Q08. Management
has stressed that such activities are all carried out with the strictest supervision of its newly
established risk-management committee.
Overall business direction. Any expansion of its current operations will revolve around its three
main business segments: 1) Jet fuel supply & trading. 2) Oil-related assets. 3) Trading of other oil
products.
Valuation. We derive a 12-month fair-value target price of S$0.705 using our DCF model,
applying a WACC of 14.8%, a beta of 1.2 and a terminal growth rate of 1%. At the last traded
price, the stock is trading at 6.8x FY08 and 7.9x FY09 P/E, offering a yield of 4.8% and 1.1x P/B.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SGX: S$4.73 SELL (TP: S$3.95) - Sharp decline in Nov stockmarket turnover value

2008-11-21T11:16:00.000+08:00

source:DMG

Nov stockmarket turnover value is down sharply. Average daily stockmarket turnover value was S$1.06b for the first 12 trading days of Nov 08 – a sharp 20% plunge from the S$1.40b for Oct 08. Concerns on global economic weakness and lack of investor interest have contributed to this trend. The average value per share traded has also fallen sharply from S$1.24 in Sep 08 to only S$0.78 in the first part of Nov 08 – we attribute this to the recent sharp fall in share prices which lowered market capitalization from end-Sep 08’s S$506b to end-Oct 08’s S$383b. We expect stockmarket turnover value to remain weak over the next few months, and have therefore cut both our FY09 and FY10 ADT assumptions by 11% to S$1.19b and S$1.24b respectively.

Futures turnover remain robust. Oct 08 futures trading volume of 6.84m is 86% higher YoY, driven by the Nikkei 225 Index & the CNX Nifty Index futures trading. We believe this strength can persist and have raised our assumption of FY09 & FY10 futures turnover volume both by 7% to 72m & 75m respectively.

Earnings forecasts reduced. Factoring in the above two developments, we are lowering our FY09 and FY10 net profit forecasts by 7% and 8% to S$315.7m and S$323.9m respectively. We believe more market players will cut their earnings forecasts and therefore expect the current consensus expectations of S$335.3m and S$382.5m (for FY09 and FY10 respectively) to fall closer to our forecasts over the next few weeks.

Target price cut from S$5.20 to S$3.95. Given the recent P/E compression across all sectors, we have reviewed our assumptions for SGX target price. Our new target price of S$3.95 is pegged to 13x FY10 P/E – lower than the 16x P/E which we adopted earlier. This target P/E rating is close to the level recorded in FY05, when ADT fell 14.5% YoY. Our sensitivity analysis shows that market players are assuming an ADT exceeding S$1.62b based on the current share price of SGX – a level which we feel is unachievable over the next few quarters.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

MobileOne: S$1.25 BUY (TP: S$1.58) - Value emerges

2008-11-21T11:15:00.001+08:00

source:DMG

Stock slides. Since our last note on M1 on 20 Oct 08, the stock has dived 26% on the back of weak sentiments in the market, as well as negative newsflow from the telecommunications industry. The other two telcos, particularly SingTel, painted a bleak outlook for the next few quarters. Consequently, despite the fact that the industry is largely seen to be defensive, the telco index FSTTC fell by 8% in the past month. Before the recent slump, M1 has been one of the most resilient stocks. It only fell 4% for the first nine months of the year, far outperforming the STI’s 32% slump.

Recapping results. While M1’s revenue fell a mere 1.7% to S$196.7m in 3Q08, earnings took a bigger 21.1% knock to S$34.4m due to higher acquisition and retention costs, following the introduction of mobile number portability in Jun 08. EBITDA margin came in at 42.5%, down from last year’s 45.2%. Gearing, at 128.2%, is seemingly high for M1. But this is not very much of an issue, considering that it has strong operating cash flows that will enable it to comfortably pay off its debts and reward shareholders. It has a Net debt/EBITDA of 0.8x (SingTel 1.1x, StarHub 1.2x), while its EBITDA/Interest stands at 40.6, an improvement over the previous year’s 33.1.

Recession’s not the main curse. Looking back at the past recessions, management revealed that the bad debts are quite insignificant – less than 0.5% of revenue. What investors need to be more worried about is competition. The aggressive marketing by all three telcos have led to surging subscriber acquisition and retention costs, and consequently margins being driven down. Our recent discussions with the telcos suggest that this intense competition will be dying down, at least for now.

Churn rate eased. In 3Q08, M1 was hit with a high churn rate of 1.8%, a jump from 1.2% in the previous corresponding period due primarily to SingTel’s launch of the iPhone. This should be reduced to the 1.5% level as competition tames.

Target price down, but value emerges. We have left our earnings estimates at S$160.1m for FY08 (-6.8% YoY) and S$149.1m for FY09 (-6.9% YoY). At S$1.25, it is trading at 7.0x FY08 and 7.5x FY09 P/E, which compares favourably against the industry average of 9.4x. The yields, at 12.2% for FY08 and 11.4% for FY09, are also the best among the three telcos. We have downgraded our target price for M1 from S$1.89 to S$1.58, based on our revised DDM model. We are upgrading the stock to a BUY despite cutting the target price, as it is looking attractive after the recent fall with a potential upside of 26% from current levels.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Swiber Holdings: S$0.55, Downgrade to NEUTRAL (TP: S$0.62) - Margins decline paint a difficult operating environment

2008-11-20T09:41:00.000+08:00

Growth in topline, but decline in bottomline. Swiber Holdings (Swiber) announced its 3Q08 results last Friday. 3Q08 revenue grew 186.5% YoY (4.5% QoQ) to US$130.1m buoyed by increased activities in the offshore construction projects in Malaysia, Brunei, Indonesia and India. However, as a result of higher administrative expenses & finance costs, Swiber’s 3Q08 PATMI declined 7.4% YoY (-18.1% QoQ) to US$16.0m. On a 9M08 basis, Swiber’s revenue turned in US$325.5m, representing 91% of our FY08 estimates, while core PATMI, excluding exceptional gains from disposal of assets, was approximately US$44m, accounting for 74% of our FY08 forecast.
Compression in profit margins faced. Gross profit margin declined by 13.8 ppt YoY (-6.1 ppt QoQ) to 21.6% as a result of the increased usage of third party vessels. Core operating profit margin, excluding gains from disposal of property, plant and equipment and assets held for sale, slid 17.5 ppt YoY (-9.5 ppt QoQ) to 11.9% primarily due to higher administrative expenses of US$10.1m (+85.9% YoY, 46.7% QoQ) as well as finance cost of US$2.9m from bond and bank loans (+215.7% YoY, -7.2% QoQ).
Financing concerns still valid. Swiber’s net debt to equity ratio increased from 0.53x as at 31 Dec 07 to 1.05x as at 30 Sept 08 mainly due to the increase in borrowings (comprising of bank borrowing and issuance of Multi-currency Term Notes bonds). The management assured that it has adequate funding for total committed outstanding capex of US$336m. The management also added that Swiber is exploring other strategies such as asset transfer to further lighten the balance sheet.

Decline in margins reflected difficult operating environment. We have left our FY08 estimates unchanged, but lowered our FY09 revenue by 21% on the back of slowing new contract orders. Consequently, our FY09 net profit is reduced by 29% with further considerations from expected higher administrative and finance expenses. We have also cut our valuation parameter from 8.7x to 3x in line with its peers owing to P/E compression. We have rolled over our valuation based of 3x FY09 recurring earnings. In view of Swiber’s high gearing, we opine Swiber may not pay dividends for the next two years in a bid to preserve cash. Our target price is reduced to S$0.62 (from S$2.17 previously). Downgrade to NEUTRAL.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Sembcorp Marine: S$2.05, BUY (TP: S$2.49) - Don't underestimate its value

2008-11-18T13:00:00.001+08:00

We valued SCM from another angle and concluded that SCM’s intrinsic value could possibly exceed S$2.90.
S$2.18 from repair and conversion projects - We performed a simple calculation on the net cash flow generated from the repair and conversion projects (assuming debt-free, capex equals depreciation and conservative operating profit margin (OPM) of 22%) and discounted at the rate of 8%. Our simple arithmetic calculation shows that if this counter-cyclical business division is to generate S$2b of revenue per year (to perpetuity), the net present value (NPV) would be S$2.18 (or 88% of our TP).
S$0.72 from rigbuilding division - We ran an analysis of this scenario in a similar fashion, assuming one semi-submersible and one jack-up to be delivered per year. We took both as individual annuity of net cash flow at OPM of 8-10% and discounted rate of 8%, deriving a combined NPV of S$0.72 per share. We believe our assumptions are not unreasonable, given that the management’s mid-term strategy is to deliver 2 semi-submersibles and 2 units of jack-ups/floating production units per year.

We believe the stretched-test for SCM’s worst case scenario would imply business activity constricted to only repair and conversion projects (assuming no new contracts secured – which we believe to be unrealistic) at an intrinsic fundamental value of S$2.18 (and this is still 6% higher than Friday's closing price of S$2.05). However, we believe this is unlikely to be so, as SCM has progressed into an internationally-renowned rig-builder, just second to Keppel Corp.

We chose the conservative S$2.49 as target price, which is based on to sum-of-the-parts valuation:
P/E of 12x FY09 blended earnings for SCM’s rigbuilding, repair and conversion sectors;
Implied value of SCM’s 30% stake in Cosco Shipyard Group (with reference to the implied P/E of 3x FY09 EPS of our valuation in Cosco Corp)
4.98% equity interest of Cosco Corp at Cosco’s TP of S$0.68

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

ComfortDelgro: S$1.30 BUY (TP: S$1.63) -Fuel price strength dampened earnings, but 2010

2008-11-16T18:06:00.000+08:00

CD recorded 3Q08 net profit of S$48.3m, down 18.1% YoY, despite a 5.2% YoY increase in turnover. 9M08 net profit of S$155.3m represents 78% of our raised 2008 forecast.

Global bus turnover fell a marginal 1.2% YoY to S$397m, but high fuel prices led to a more severe 36.1% YoY decline in bus operating profit.
Singapore bus turnover expanded 8.7% YoY to S$156m, due to a 6.1% YoY ridership increase to 2,375k rides/day. But high diesel prices led to operating profit (inclusive of advertisement and rental income) falling 32% YoY to S$5.9m.
UK Metroline recorded a 13% YoY turnover contraction due to the weaker Sterling Pound. The 64% YoY plunge in operating profit to S$8.5m was due to higher fuel costs and the benefit of a write-back of pension provision in 3Q07.
Australia bus turnover grew 11.7% YoY to S$54.4m due to indexation of contract revenues, higher mileages operated and more charter work but was partly offset by the weaker Australian Dollar. Its operating profit of S$8.8m is up 3.5% YoY.

Mild growth for global taxi operations. Global taxi turnover was up 2.7% YoY to S$238m, though operating profit fell 16% YoY.
Singapore taxi operating profit fell 29% YoY due to higher provision for accident insurance claims and higher diesel subsidies paid to taxi drivers.
China taxi turnover rose 13% YoY to S$28.6m due to higher rentals on the newer fleet in Beijing and increases in fleets in Chengdu, Jilin and Nanning.

2010 earnings could jump on the back of lower fuel costs. High WTI crude oil price in 3Q08 contributed to the weakness in CD earnings. However, WTI prices has since fallen from Aug 08 monthly average of US$116.70/barrel to 1H Nov 08 average of US$61.70. This is positive for CD earnings going ahead. However, as CD has already partially hedged its fuel price till Jun 09, the expense reduction will be muted until 2H09. We are assuming WTI crude oil price of US$70/barrel for 2009 and US$63/barrel for 2010. However, given the price hedge, the effective price for CD is estimated at US$88/barrel for 2009 and US$63/barrel for 2010. We see this contributing to a S$75m YoY fall in energy and fuel costs for 2010, which is 22% of our forecast 2009 PBT.

Earnings forecasts have been adjusted. We raise our 2008 net profit forecast by 4% to reflect the recent declines in WTI crude oil price. Our 2009 net profit forecast remains unchanged.

Maintain BUY on CD. Our S$1.63 target price is derived from sum-of-the-parts valuation. CD also offers an attractive 2009 dividend yield of 7%. We believe further falls in WTI prices will be the catalyst for investors to relook at investing in CD.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Li Heng Chemical Fibre: S$0.295 BUY (TP: S$0.685) - 4Q08 will be a clearer gauge of conditions

2008-11-16T18:05:00.001+08:00

3Q08 numbers in-line. Li Heng clocked RMB1.02b worth of revenue for 3Q08, up 53.7% versus 3Q07 of RMB666.7m. The stronger revenue YoY was achieved despite lower ASPs across all product segments, as it was more than compensated by higher production capacity due to its capacity expansion. As a result of weaker ASPs, gross margin was down from 34.2% in 3Q07 to 31.0% in 3Q08. NPAT grew 19.2% YoY for 3Q08 from RMB217.1m to RMB258.7m, a much lower quantum than its top line growth mainly due to inclusion of income tax after enjoying a tax-free status due to its WOFE status in the previous two years.

Our prognosis. In our recent company update report, we highlighted that the textile industry would be severely hit due to slowing Chinese exports and a relatively stronger RMB. This would impact Li Heng directly in terms of its ability to continue to secure future sales and also put further pressure on its ASPs and gross margins. Hence, especially in the next two quarters, we expect to see margins come under even more pressure alongside price drops in PA chips and nylon yarns, albeit at a slowing rate of decline. This will inadvertently result in quarterly financial performances taking further dips in light of the current crisis.

Management key takeaways 1: ASPs. Management concurs with our view that the global economic slowdown has posed very challenging times ahead for the company. Hence they expect ASPs of nylon products to continue their downward slide for 4Q08 and possibly into 1Q09.

Management key takeaways 2: Dividend policy. The dividend of 1.5 S¢ for 3Q08 represents a 45% payout of NPAT. Management mentioned that they will seriously consider maintaining this payout ratio going forward after carefully accounting for business conditions going forward. If this actually gets implemented, based on Li Heng’s last traded price of S$0.295, the dividend yield would jump from 10.8% to 19.4% for FY08 and from 11.4% to 20.5% for FY09. We have earlier based our assumption on a payout of 25%.

Management key takeaways 3: Phase III expansion. Management has been prudent enough in our view, to acknowledge the slowdown in its operating environment, and has hence recognised the point that it can afford putting off its target of expanding nylon yarn capacity by 3Q09. This possible move will allow them to cut back on capex (reduced from RMB600m to RMB 200m for FY09), increase working capital, and improve overall cash flow.

Valuation and recommendation. Li Heng has done quite well in terms of meeting the investment community’s expectations so far in terms of its financial performance. However, 4Q08 and beyond is proving to be an uphill battle for management due to the worldwide economic slowdown. Hence, we are cautiously optimistic of the Group’s ability to deliver on our already reduced FY09 estimates. We will wait till the Group announces its 4Q08 to see if further adjustments to our FY09 forecasts are necessary. For now, we maintain our BUY call with a 12-month price target of S$0.685, which is an undemanding 5.2x our FY09 EPS forecast. The stock currently trades at 2.5x FY08 P/E and 2.2x FY09 P/E, giving an attractive yield of 11.4%.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

City Developments: S$6.09 NEUTRAL (TP: S$5.53) - A Subdued 3Q08

2008-11-16T18:03:00.000+08:00

City Developments Limited (CDL) registered an 11.0% YoY dip in 3Q08 PATMI to S$150.8m. On a 9-month basis, PATMI came to S$481.0m, which was slightly under expectations, accounting for 64.5 – 68.0% of our projections and the Street’s. Development plans for South Beach have been deferred. Aside from the expectation of softening construction costs, we surmise it could also be attributable to capital preservation being top of the participating companies’ agenda given the ongoing tight credit conditions. Despite delaying the launch of The Arte and The Quayside Collection, their constructions are set to continue due to the low building costs secured and land costs of under S$400 psf ppr. As such, we believe CDL could launch them at attractive prices when sentiments improve, and book in a relatively higher amount of cashflow. Only a third of CDL’s pre-sold DPS-qualifiable projects were sold under the scheme, while a bulk of CDL’s projects under development would only be completed in 2010 and 2011, which should allow buyers to have a reasonable amount of time to secure bank loans especially with interest rates expected to remain soft. From our view, CDL’s share price in the near-term would be weighed down by an ongoing global slowdown within the hospitality sector, as well as weak sentiments in the domestic property sphere. However, its portfolio of more mass-mid market residential landbank and current/future projects suggests that it is in a better position to ride on any remaining interest from genuine owner-occupiers, and any potential spillover from the still-buoyant activity within the HDB segment. For the next two years, we estimate that CDL should be able to book in approximately S$400 – 500m worth of PBT from previously sold units. Further, with a cash position of S$813.3m and net gearing of 0.47x, its balance sheet remains healthy. Nonetheless, in view of the anticipated residential slowdown, we have delayed our sale & launch schedules for CDL’s domestic residential projects, as well as assumed price declines of 3 – 8% for the remaining 2008 and 10 – 20% for 2009, with a slight 1 – 5% improvement in 2010. Additionally, we have accounted for a higher cap rates (+25 – 50bps) for its investment properties, as well as pegging the target prices of its two listed entities to current market prices. As such, earnings estimates for FY08F and FY09F are trimmed by 9.4 – 22.1% to S$640.5m and S$600.2m respectively. Discounting our new base case end-09 base case RNAV of S$11.05 by trough metrics of 50%, we trim our fair value for CDL to S$5.53 (previously S$11.25). Maintain NEUTRAL.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Obama Says Paulson May Be Disappointed by Parts of Rescue Plan

2008-11-16T18:01:00.001+08:00

Nov. 15 (Bloomberg) -- President-elect Barack Obama said Treasury Secretary Henry Paulson may be disappointed with some aspects of the federal government's $700 billion bailout of the banking industry.

``Hank Paulson has worked tirelessly under some very difficult circumstances,'' Obama said in an hourlong interview to be aired on ``60 Minutes'' tomorrow night, according to excerpts released by CBS News. ``I think Hank would be the first one to acknowledge that probably not everything that's been done has worked the way he had hoped it would work.''

Obama said he has assigned someone on his presidential transition team who ``interacts'' with Paulson daily.

``We are getting the information that's required, and we're making suggestions in some circumstances about how we think they might approach some of these problems,'' Obama said.

Obama also said the government must do more to help distressed homeowners.

``We have not focused on foreclosures and what's happening to homeowners as much as I would like,'' Obama said, according to the excerpts. He called for setting up ``a negotiation between banks and borrowers so that people can stay in their homes.''

CBS also reported that Obama said during the interview that he would name a Republican to his Cabinet.

A number of influential congressional Democrats and the military favor the idea of asking Defense Secretary Robert Gates to remain for an interim period. As the new president focuses on the financial crisis, they argue, this would offer continuity.

``He's done an extraordinary job,'' Senator Jack Reed, a Rhode Island Democrat, said of Gates earlier this month. ``I would hope that in some capacity he could continue to serve.''

source: bloomberg

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Asian Stocks Fall, Extend Global Rout, on U.S. Treasury, Intel

2008-11-13T11:49:00.000+08:00

Nov. 13 (Bloomberg) -- Asian stocks and U.S. futures fell, extending a global rout, as the U.S. Treasury scrapped plans to buy mortgage assets, Intel Corp. cut its sales forecast and Best Buy Co. warned of a slowdown in spending.

Mitsubishi UFJ Financial Group Inc. dropped 4.4 percent as Treasury Secretary Henry Paulson shifted the focus of the government’s $700 billion bailout plan to consumer credit. Citigroup Inc. and the Standard & Poor’s 500 Financials Index slid to 12-year lows yesterday. Toshiba Corp., Japan’s largest semiconductor maker, dropped 4.8 percent after Intel lowered its fourth-quarter sales prediction by about $1 billion. Best Buy, the largest U.S. electronics retailer, lost 8 percent in New York after saying profit will decrease.

“With Paulson’s plan change, investors think the initial $700 billion won’t be enough,” Mitsushige Akino, who oversees about $468 million at Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. “Best Buy’s forecast illustrates the dimming spending climate in the U.S.”

The MSCI Asia Pacific Index fell 3.9 percent to 83.12 at 9:28 a.m. in Tokyo. All Asian markets open for trading slumped. Japan’s Nikkei 225 Stock Average dropped 5.2 percent to 8,246.22. Australia’s S&P/ASX 200 Index declined 4.3 percent.

Futures on the Standard & Poor’s 500 Index lost 0.6 percent. Financial stocks led the gauge down 5.2 percent yesterday, leaving it less than 0.5 percent above its lowest close in five years. Europe’s Dow Jones Stoxx 600 Index sank 3.3 percent.

BHP Billiton Ltd., the world’s largest mining company, dropped 7.5 percent after oil sank to $55.43 a barrel and metals prices slumped. Exxon Mobil Corp., the biggest oil company, fell 5.1 percent in New York.

New Facility

The collapse of the U.S. mortgage market sparked $950 billion in losses and writedowns at financial companies and now threatens a global economic recession. Central banks in the U.S., U.K. and Japan are among those that have lowered benchmark interest rates to stimulate spending and growth as consumer confidence wanes.

Treasury and Federal Reserve officials are exploring a new “facility” to bolster the market for securities backed by assets, Paulson said. Officials are considering using a portion of the $700 billion financial bailout money to “encourage private investors to come back to this troubled market,” he said.

Mitsubishi UFJ, Japan’s biggest bank, lost 4.6 percent to 587 yen. Commonwealth Bank of Australia, the nation’s biggest mortgage lender, fell 5.2 percent to A$33.29 after saying bad debts may double this year.

Citigroup, Bank of America Corp., and Goldman Sachs Group Inc. dropped more than 9 percent each in U.S. trading yesterday.

“It’s hard to get away from the drumbeat of negatives,” said Liam Dalton, who oversees $1.3 billion as New York-based chief executive officer of Axiom Capital Management.

‘Significantly Weaker’

Best Buy, the largest U.S. electronics retailer, yesterday slashed its earnings forecast for the year through February, citing a “seismic” slowdown in consumer spending. The report preceded Intel’s announcement that its fourth-quarter sales will be lower than its earlier estimate by about $1 billion amid “significantly weaker” demand.

Toshiba slumped 4.8 percent to 337 yen in Tokyo. Sony Corp., the world’s second-largest consumer electronics maker, dropped 7.3 percent to 2,030 yen. Samsung Electronics Co. lost 2.8 percent to 467,000 won.

Japan’s exports to the U.S., which accounted for about a fifth of the total, fell 11 percent in September, while companies from Sony to Toyota Motor Corp. cut earnings forecasts in the past month.

Commodity Prices Slump

Energy companies on the MSCI Asia Pacific Index lost 1.4 percent as a group, while raw-material producers declined 4.4 percent collectively. Melbourne-based BHP tumbled 8.5 percent to A$25.89, while Rio Tinto Group dropped 5.1 percent to A$71.37.

Oil sank 5.3 percent to $56.16 a barrel at the close of New York trading on forecasts that tomorrow’s Energy Department report will show U.S. crude inventories grew last week amid decreased energy demand. Nickel, gasoline and crude led declines in the Reuters/Jefferies CRB Index of 19 raw materials.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

CapitaLand: S$2.76 BUY (TP: S$0.3.05) - Capitalising on Capitulation

2008-11-13T11:43:00.000+08:00

source:DMG

CapitaLand recently posted a 25.6% YoY slide in 3Q08 PATMI to S$419.4m, boosted by gains of S$317.4m from asset divestments. While we recognise CapitaLand’s proven track record of seeking out new residential geographies, we note that a majority of its current projects and landbank (80% of total residential GFA) are situated in Singapore and China. As such, it is not immune from current negative sentiments from these two regions. Although we take heart from recent country and sector-specific policies, we reckon that sentiments would remain soured as long as the global macroeconomic climate does not improve. For CapitaLand, this implies further dampeners on core earnings. In view of the anticipated residential slowdown, we have delayed our sale & launch schedules, as well as assumed price declines of 13 – 28% and 13 – 21% from 2H08 through 2H09 for Singapore and China respectively, with a slight recovery beginning 1H10. Since its listing, CapitaLand has moulded a productive capital recycling model, exemplified today by S$24.8b worth of five REITs and 17 PE funds. While we acknowledge that their contributions would not be as significant as its residential business units, we believe that their recurring and stable nature would help to mitigate the uncertainty and present weakness of the cyclical and lumpy-earnings residential sector. Despite the credit squeeze, recent successful asset divestments suggest that CapitaLand is still able to tap on its private funds and other third parties. Further, with a low net gearing of 0.51x and a cash coffer of S$4.2b, CapitaLand is well-poised to seize any upcoming business opportunities in the different regions which it is operating in. At current levels, CapitaLand is trading at 23% discount to its end-3Q08 NAV of S$3.60. Historically during the past few crises, CapitaLand has been trading at 40 – 60% discount to its NAV. Taking the view that CapitaLand is now of a different stead compared to then, we have thus pegged our RNAV base-case value of S$5.05 to the lower end of that range at 40% discount, implying end-FY09 fair value of S$3.05. Maintain BUY.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Sarin Technologies: S$0.16 (NOT RATED) - Limited impact from current economic crisis

2008-11-12T15:54:00.000+08:00

As pre-warned. In-line with the profit guidance that the company had issued prior to releasing its financials, 3Q08 net earnings fell 49% to US$1m while turnover declined 6.9% to US$8.8m. Due to the global financial crisis and the tight credit market, Sarin had seen an overall slowdown in demand from diamond manufacturers. However, 3Q08 gross margins as seen in Figure 1, were higher at 65.7% due to a change in product mix although the company was badly hit on the operating front due to higher R&D and SG&A expenses while the weakening US$ was also a factor.

Robust balance sheet and cash flows. Sarin continued to be debt-free in 3Q08 while its current ratio stood at a very healthy 3.4x. Presently in a net cash position of US$11.1m, this equates to US$0.043/share and 39.9% of its current price. The company also continued to be operationally positive as it generated free cash flows of US$4.0m during the quarter.

Macro outlook is not positive. Management has mentioned that the global economic slowdown has affected its business. Consumers in the US – the world’s single largest market for polished diamonds – have cut back on their purchase of luxury items, such as diamonds, during the current financial crisis. Should this downturn continue to linger, we believe that the company may be further affected.

Valuation & Recommendation. At S$0.16, it is currently trading at 3.4x FY07 P/E. We presently do not have a rating on Sarin although we will be initiating coverage on the stock. To the best of our knowledge, there are currently no consensus forecasts on Sarin while all of its main competitors are unlisted companies.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

HL Asia: S$0.67 BUY (TP: S$1.00) - One-time items key to 3Q08 earnings plunge, although core earnings softness is also evident

2008-11-12T15:53:00.000+08:00

HLA reported 3Q08 net profit of S$3.7m, down 85% YoY, way below our expectations. Excluding one-time items of 1) warranty provisions of S$9m, 2) professional fees of S$2m and 3) part-time employees insurance of S$3m, net profit would have been closer to S$15m. 3Q07 net profit of S$25.3m included one-time gains from sale of CDL shares of S$3.8m. Hence, core net profit would have fallen a smaller 30% YoY.

Revenue rose 7% YoY to S$838m. Xinfei unit sales of 766k white goods (comprising refrigerators, freezer and air-cons) was close to 3Q07’s 777k. For Yuchai, diesel engine unit sales was 76.7k units, marginally lower than 3Q07’s 81.1k units. However, ASP for diesel engines was higher YoY due to higher raw material prices, and this contributed to the revenue expansion. For the building materials group (BMG), lower selling prices were recorded on an essentially flat sales volume in ready-mix concrete.

Expect soft earnings going ahead. Management indicated that BMG has a backlog of orders till end-2009, but margins may come under pressure from lower selling prices. In addition, some developers are postponing completion dates of projects and this could adversely affect BMG revenues going ahead. Management also said that 4Q08 earnings would be impacted by another S$3m one-time expenses for employees’ insurance for part-time staff (similar to that for 3Q08).

We cut our 2008 and 2009 net profit by 41% & 56% to S$66m & S$55m respectively. This factors in slowing demand for its China operations, lower margin for its BMG business and the one-time expenses expected for 4Q08.

Lower target price but remains a BUY. We use sum-of-the parts valuation methodology, which gives us a S$1.00 target price. This is lower than our previous S$2.70 target price primarily due to our lower earnings forecast for 2009, as well as P/E compression for its peers (which we factor into the valuation). We believe the future earnings weakness has already been largely factored into HLA share price. Even with our lower earnings forecast, HLA trades at a 2009 P/E of 4.6x, which is relatively low. Though there could be temporary share price weakness following this set of results, we believe any softness offers investors to BUY into a company with good potential for long term growth in China.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SingTel: S$2.42 NEUTRAL (TP: S$2.67) - Earnings drag

2008-11-12T15:52:00.000+08:00

Below expectations. In the second quarter to 30 Sep 08, revenue increased 5.3% to S$3.89b while underlying net profit slid 12.3% to S$801m. The bottom line came in below our expectations due to a confluence of negative factors – high acquisition and marketing costs for the iPhone 3G initiative, weaker regional currencies, lower earnings from Indonesia’s Telekomsel resulting from price competition and post-tax loss from Pakistan-based Warid Telecom. Taking away the impact of the depreciation in Australia and regional currencies, SingTel would have registered a fall of 5% in earnings, which would still have been lower than our estimates.

No more clear blue skies. SingTel expects its core markets in Singapore and Optus to grow its revenue and EBITDA. But the weaker A$ will have an adverse impact on the earnings for the Group. What will hit it further is the lacklustre performance of its regional associates. Telekomsel, in particular, saw pre-tax profit slump 40% (in S$ terms) to S$113m. In our recent note where we downgraded SingTel, we had anticipated the associates’ to grow 3% in FY09, down from our earlier target of 9% growth. However, we are now expecting the associates’ contribution to be 15% lower compared to a year ago.

Earnings downgraded. As a result of the revised outlook, we have lowered our earnings by 9.5% from S$3.81b to S$3.45b (-12.3% YoY) in FY09 and 9.9% from S$4.12b to S$3.71b (+7.6% YoY) in FY10. We have also reduced our sum-of-the-parts valuation from S$2.80 to S$2.67, mainly due to the bleaker forecast for its associates. Maintain NEUTRAL.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

U.S. Stocks Drop on Concern Over Worsening Economy; GM Slumps

2008-11-12T01:24:00.001+08:00

Nov. 11 (Bloomberg) -- U.S. stocks dropped for a second day as a deteriorating outlook for American industry and oil's decline below $60 a barrel signaled the recession may deepen.
General Motors Corp. tumbled to the lowest price since 1942 as the automaker crept closer to bankruptcy, while Tyco International Ltd., the world's largest maker of security systems, sank the most in six years on a profit forecast that trailed analysts' estimates. Prudential Financial Inc. slid 10 percent after Goldman Sachs Group Inc. said investment losses may force insurers to raise more capital and threaten credit ratings. Exxon Mobil Corp. slumped as much as 3.3 percent as crude declined on speculation demand will slow.
``We're going to see a lot of corporate grief,'' Harvey Pitt, former chairman of the Securities and Exchange Commission and chief executive officer of Kalorama Partners, said in an interview on Bloomberg Radio. ``We'll see companies laying off a lot of people and the market reflecting a lack of confidence in a lot of companies' values.''
The Standard & Poor's 500 Index dropped 2.9 percent to 892.17 at 11:27 a.m. in New York. The Dow Jones Industrial Average lost 249.7 points, or 2.8 percent, to 8,620.84, with 29 of its 30 companies retreating. The Nasdaq Composite Index fell 2.7 percent to 1,573.48. More than five stocks declined for each that rose on the New York Stock Exchange.
Financials and raw material producers led the S&P 500 to a 39 percent retreat this year as profits for the world's biggest banks slumped and commodities tumbled. Credit Suisse AG lowered its mid-2009 target for the S&P 500 to 1,050 from 1,200 today.
Europe's Dow Jones Stoxx 600 Index lost 3.7 percent and the MSCI Asia Pacific Index declined 3.6 percent.
Profit Erosion
The S&P 500 dropped yesterday on a worsening profit outlook for companies, including Goldman Sachs and Google Inc. Third- quarter earnings shrank 17 percent for S&P 500 companies that reported results, according to Bloomberg data. Profits for 2008 will decrease an average 8.5 percent and rise 12 percent next year, based on a survey of analysts' estimates.
``No one is really willing to stick their neck out in this market,'' said Craig Hodges, a fund manager at Dallas-based Hodges Capital Management Inc., which oversees $1 billion. ``If you listen to the company forecasts and the news going on, there's no overwhelming reason to do so.''
GM dropped for a fifth straight day, losing as much as 18 percent to $2.75, the lowest price since December 1942, according to Global Financial Data in Los Angeles. The largest U.S. automaker, burning cash as U.S. sales slide, is being pushed closer to bankruptcy as it waits to learn whether the auto industry will win a new round of government loans.
`Huge Deal'
``If GM disappears or goes into bankruptcy, I think politically and psychologically it's a huge deal,'' said Stephen Wood, who helps manage $181 billion as a senior portfolio strategist at Russell Investments in New York. ``Worrying about earnings is a luxury right now. We're worried about survivorship.''
Tyco lost 15 percent to $21.54, its steepest intraday tumble since July 2002. The company said fiscal 2009 and first- quarter profit will trail analysts' estimates, hurt by a higher U.S. dollar and slowing global economies.
Financial stocks in the S&P 500 slumped 3.8 percent after Goldman Sachs reduced its rating on the life-insurance industry to ``cautious'' from ``neutral.'' The analysts advised selling shares of Prudential, Lincoln National Corp., Principal Financial Group Inc. and Hartford Financial Services Group Inc. on concern the companies will need to raise more capital and their credit ratings may get cut.
Prudential slid $3 to $27.95 and the S&P 500 Insurance Index declined 5.6 percent.
Credit Losses
American Express Co. lost 5.4 percent to $22.68. The company won U.S. Federal Reserve approval to become a commercial bank, which may give it access to the Treasury's $250 billion bank rescue program. Worsening credit losses will continue to plague the largest U.S. credit-card company by purchases, said Oppenheimer & Co. analyst Meredith Whitney.
Yesterday's revised bailout of American International Group Inc. marked the first time cash from the rescue fund Congress created last month has been committed to a failing company. Banks around the world lost more than $900 billion since the middle of last year as forecloses reached record highs and complex, illiquid securities backed by mortgage loans plunged in value.
Energy Slump
Energy companies and raw-material producers in the S&P 500 fell 4.4 percent and 5.4 percent respectively.
Exxon Mobil declined 3.1 percent to $71.75. Chevron Corp. slumped 3.4 percent to $71.82. Peabody Energy Corp., the largest U.S. coal producer, retreated 11 percent as the S&P 500 Energy Index lost 4.3 percent.
Crude oil fell below $59 a barrel in New York amid speculation the International Energy Agency will lower its 2009 demand forecast as slowing economic growth cuts fuel consumption.
Tyson Foods Inc. slumped 25 percent to $5.01. The second- largest U.S. chicken producer was downgraded to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which said the stock may drop 40 percent as losses next year put the company in danger of violating debt agreements.
Toll Brothers Inc. lost 3.3 percent to $18.32. The largest U.S. luxury homebuilder reported its 10th straight quarterly revenue decline as home prices plunged and consumer confidence fell. Homebuilding revenue dropped to about $691 million in the fiscal fourth quarter from $1.17 billion a year earlier.
Fannie Mae, Freddie Mac and housing industry officials plan a new mortgage modification program designed to cut payments for hundreds of thousands of homeowners facing foreclosure, according to people briefed on the matter.
Under the proposal, mortgage servicers will work with borrowers to reduce monthly payments to 38 percent of their income, a level considered a threshold for affordability, using a combination of lower principals, interest-rate reductions and extensions, the people said.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

GRP Limited: S$0.14 Initiating Coverage-NEUTRAL (TP: S$0.13) - A cash-rich company facing headwind

2008-11-11T15:36:00.000+08:00

GRP Limited (GRP) engages in several diverse autonomous business units, namely 1) Hose and Marine, 2) Measuring Instruments/Metrology, 3) uPVC Pipes and Fittings and 4) Industrial Property Management.

Cash-loaded, no debt financial position. As of Jun 08, GRP holds cash of S$12.3m, and has neither short-term nor long-term debt in its balance sheet. While we acknowledge GRP’s healthy balance sheet position to a prudent management team who is mindful of the tight credit situation and high refinancing costs, we believe GRP’s strong financial position is attributed largely to GRP’s lacklustre growth strategies, even in boom years. Undoubtedly, GRP has no immediate plans for M&A activities or extensive capital spending. We believe GRP is likely to return capital to its shareholders through dividends. We have assumed dividend payout of 60% for both FY09 and FY10, translating to dividend yields of 13.1% and 10.6% respectively.

Nonetheless, business would be hit by both offshore marine and global economy outlook. GRP’s core business drivers stem from Hose and Marine as well as Measuring Instruments/Metrology. GRP liaises directly with the shipyards to provide customized hoses and fittings. Its measuring instruments division is dependent on the global economy. In the face of a looming outlook for both offshore marine and the global economy, we are expecting declining net profit for both FY09 and FY10.

Initiating coverage with a NEUTRAL rating. GRP is currently trading at 4.6x FY09 and 5.6x FY10 P/E. We value GRP based on 0.7x FY09 P/B (pegging to post-crisis levels) to derive a target price of S$0.13. We initiate coverage of GRP with a NEUTRAL rating

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

First Resources: S$0.37 NEUTRAL (TP: S$0.36) - To Face Headwinds

2008-11-11T15:34:00.000+08:00

Robust 3Q08 results. First Resources (FR) released a decent set of 3Q08 results. YoY revenue growth was up 50.8%, bringing its 3Q08’s revenue to IDR636b from IDR422b. This can be attributed to an increase in sales volume as well as average selling prices of CPO and PK. Gross profit margin improved from 57.5% in 3Q07 to 67.6% in 3Q08, reflecting the sensitivity of CPO price increases on FR's profitability. PATMI also improved 117% YoY from IDR93.5b to IDR202.9b in 3Q08.

Large proportion of debt are non current in nature. We are comforted by the fact that 99% of borrowings/ debt securities repayable (about IDR1.9t) are non current in nature. This allows management some time before repayment is due, to pay extra attention to financial liquidity and cost management issues.

Low cash cost of production. Not all is gloom and doom – FR has managed to maintain a relatively low cash cost of production of US$200/tonne (for nucleus) for 9M08, in spite of a rising cost environment. This low cash cost of production would put them in good stead to weather the upcoming headwinds of low CPO prices, tight credit conditions amid a slowing economic environment.

CPO price assumption revised down, new fair value of S$0.36. Current CPO futures’ prices (Nov delivery) is RM1,625/tonne. However, it has hovered in the RM1,400–1,500/tonne range prior to the recent rebound. With the deteriorating global economic front and crude oil prices currently hovering the US$60-70/bbl range (versus its peak of US$147/bbl in July), we opt to be cautious and revise our CPO price assumption to RM1,500/tonne, down from
RM2,600/tonne previously.

Reflecting the change in our CPO price assumption, our FY09F revenue has been adjusted to IDR1.6t (from IDR2.4t, -32.9%). In addition, earnings for FY09F has also been adjusted to IDR501b (from IDR856b, -41.5%). We have also projected a conservative 5% YoY growth of CPO production in FY09, against FY08’s 10% YoY growth from FY07. This is due to management‘s disclosure that they had observed some form of biological tree stress in 3Q08 – the YoY FFB growth in 3Q08 was only approximately 4%, as compared to prior quarters’ double-digit YoY growth. This is attributable to the high output in the last 12 months. As it is uncertain at this point in time whether this significant reduction in FFB growth rate is short term or longer term in nature, we have decided to err on the side of caution and cut our YoY growth rate by 5 ppt.

At this point in time, we are maintaining our P/E valuation matrix of 7x our FY09F earnings (7x being the average of 10-year historical low P/E valuation for Indonesian and Singapore listed plantation companies). Taking into account the above revisions, we derive a new fair value of S$0.36 for FR (from S$1.00 previously). We downgrade the stock from buy to neutral.

source:dmg

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Sembcorp boosts Q3 net profit by 24.8% to $144.9m

2008-11-10T09:46:00.001+08:00

SembCorp Industries has boosted third-quarter profit 24.8 per cent to $144.9 million on an 11.7
per cent increase in revenue to $2.5 billion. For the first nine months, the main profit contributors
continued to be marine and utilities, which accounted for 96 per cent of group profit. Overall,
turnover rose 18.8 per cent to $7.2 billion, while profit increased 8.5 per cent to $406.2 million.
The utilities business continues to do well. Turnover increased 30 per cent to $1.3 billion in Q3
and by 33 per cent to $3.5 billion in the first nine months. Nine-month profit fell to $170.4 million
from $179.4 million previously, although in the previous corresponding period the UK's
performance was boosted by a profit on the sale of land. Singapore and UK operations
contributed $118.6 million and $52.9 million respectively. Q3 profit rose by a third to $66.3
million, but this was primarily due to gains from the transfer of transmission and distribution
pipeline assets to PowerGas.
Turnover for the marine business increased 8 per cent to $3.4 billion in the first nine months on
better performance by Sembcorp's rig-building, offshore, conversion and repair businesses. But
Q3 revenue was flat at $1.1 billion. Profit, however, continued to be strong, rising 68 per cent in
Q3 to $86.1 million and 48 per cent for the first nine months to $220.5 million. This was due to
higher operating margins from rig-building and shiprepair work and better contributions from
associates. While contributing only a small part to Sembcorp's overall profit, the environment,
industrial parks and others/corporate businesses performed badly. Industrial parks profit fell 37
per cent to $7.2 million, mainly due to lower contributions from parks in Indonesia and Vietnam,
which was partly offset by a higher contribution from an industrial park in China.
The environment and others/corporate businesses turned in losses of $4.1 million and $10.6
million respectively. The environment's loss ballooned from $460,000 in the previous Q3 as
business was hit by impairment charges for plant and machinery. The others/corporate segment
turned to a loss from a $3.9 million profit previously, mainly due to the weak performance of an
offshore engineering associate in China.

Source: Business Times

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Venture Corporation: CDO losses remain a dragV

2008-11-10T09:40:00.002+08:00

Hit by CDOs. 3Q08 revenue inched up 3.2% to S$965.6m although the increase would have
been greater at 13.8% should turnover had been measured in US$. Net profit, however, fell
47.8% to S$40.1m as Venture was hit by a S$29.8m non-cash charge on its CDOs in 3Q08.
Management also noted that EBITDA would have stood at S$84.6m and S$263.1m for 3Q08 and
9M08 respectively should the CDO charges were to be excluded.
Lacklustre results even if CDO charges were excluded. We note that bottomline in 3Q08 and
9M08 excluding the mark-to-market adjustments came up to S$69.9m and S$219m respectively
– still lower than the year ago period at S$76.3m and S$225.7m. With several of the major CMs
reporting lower earnings for their latest quarterly results due to the global economic slowdown,
we believe that Venture may not be spared from this trend either.
Full recovery of the CDOs? While we had previously expected Venture to fully recover the
S$167.8m host value on its CDO when it matures in Dec 09, we had not foreseen such a drastic
downturn in the global credit market. According to Venture, the spread for its CDOs had widened
from 138 basis points in end-Jun 08 to 168 during end-Sep 08.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Emerging Economies Pledge New Stimulus to Tackle Global Slump

2008-11-09T16:46:00.001+08:00

Nov. 9 (Bloomberg) -- Finance ministers from emerging economies said they'd take new measures to tackle the global economic slowdown at a meeting of finance officials from the Group of 20 nations meeting in Sao Paulo yesterday.
Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows between their economies, Russian Finance Minister Alexei Kudrin said in an interview. Mexican Deputy Finance Minister Alejandro Werner said slower economic growth and lower food and commodity prices justify cutting interest rates.
The ministers are meeting amid evidence the financial crisis that is pushing the world's biggest industrialized economies into recession is dragging down growth in Asia and Latin America. India, Russia and Brazil have already injected funds into commercial banks and South Korea last week unveiled a 14 trillion won ($10.8 billion) fiscal stimulus plan.
``This is a global crisis and demands global solutions,'' Brazilian President Luiz Inacio Lula da Silva told delegates. ``The participation of the developing world is essential.''
Finance ministers and central bankers from the G-20 are meeting in Sao Paulo to lay the groundwork for a Nov. 15 heads of state summit in Washington. The meeting concludes today.
``Finance ministers of BRIC countries have worked out measures for the near future,'' Kudrin said yesterday. ``We have agreed that we can jointly increase trade and capital flows. The major thing is that we are prepared to coordinate.''
International Monetary Fund
The International Monetary Fund is forecasting that the U.K., Japan, the euro region and the U.K. economies will all contract next year, their first simultaneous recessions since the Second World War. With slower growth damping inflationary pressures, central banks are likely to cut borrowing costs further, Canadian Finance Minister Jim Flaherty said.
``There are ongoing conversations about who plans to do what when'' on interest rates, Flaherty said. ``I expect that these discussions will lead to some degree of coordinated action.''
Canada's central bank joined the Fed, the European Central Bank and the Bank of England in an unprecedented coordinated interest rate cut on Oct. 8 after the collapse of Lehman Brothers Holdings Inc. sent credit markets into seizure. The Reserve Bank of India on Nov. 1 lowered its main interest rate for the second time in two weeks while China cut its key interest rate for the third time in two months on Oct. 29.
``We are closely watching the development of the financial crisis and the situation regarding global activity,'' Zhou Xiaochuan, governor of the People's Bank of China, said yesterday. ``If China can maintain domestic demand, it's helpful for global stability.''
Government Spending
Calls from the IMF and U.K. Prime Minister Gordon Brown for coordinated fiscal stimulus will probably fail to win backing from the group because some countries are concerned about increasing public spending, Flaherty said.
``Ideally that would be so -- it's just not likely to happen,'' Flaherty said. ``Some countries feel that they are more constrained than others.''
China's willingness to stimulate its economy may play an important role in supporting world growth, Flaherty said. China's economy grew at the slowest pace in five years in the three months through September as export orders shrank and industrial production waned.
``Chinese authorities talked about having a strong fiscal expansion,'' World Bank President Robert Zoellick said in a briefing yesterday. ``China is in a very good position.''
Companies from Paris to Mexico City are feeling the heat as credit dries up. PSA Peugeot Citroen is cutting staff in China, Mexican homebuilder Consorcio Ara SAB's middle-class clients are struggling to raise home-loans and Brazilian aircraft maker, Empresa Brasileira de Aeronautica SA, slashed its 2009 forecast for deliveries by a quarter.
``Clearly, a lower interest rate would be very favorable to stimulate aggregate demand and to lessen the impact of the international crisis,'' said Mexico's Werner, a former central bank economist.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

OCBC earnings release

2008-11-07T21:13:00.001+08:00

Results review OCBC reported a decline in core net earnings to S$396mil (-6.8%
yoy, +3.9% qoq, 2Q08: S$381mil) due to higher operating profits but negated by
higher allowances.
Net interest income grew to S$684mil (+20.9% yoy, +1.0% qoq) attributable to 20.2%
growth in loans and improved NIM of 13bps to 2.18% due to lower cost of funds and
higher spreads. Non-interest income was 4.0% lower at S$462mil from lower fee
income, lower foreign exchange income and net losses of S$26mil on disposal of
investment securities. Expenses increased to S$492mil (+15.5% yoy, +4.0% qoq)
due to increased salaries and headcount, overseas investment, business-volume
related costs and consolidation of PacificMas Berhad’s expenses. Cost to income
was higher at 43.0%.
Gross loans expanded to S$81.4bil (+19.6% yoy, +3.8% qoq), driven by corporate
and SME loans in Singapore. Building and construction loans grew 38.9% to
S$16.5bil while housing loans increased 5.6% to S$19.7bil.
The Bank took a S$156mil allowance for loans and other assets comprising of S$
30mil for specific allowances, S$9mil for portfolio allowances, S$4.0mil for corporate
CDOs and S$113mil for debt securities.
NPLs fell 19.0% over the year to S$1.20bil while the NPL ratio improved to 1.3% from
2.1% last year. Total cumulative allowances amounted to 128% of NPLs as
compared to 107% last year. CAR ratio increased to 14.7% with Tier 1 higher at
14.4% after the issuance of S$2.5bil of Tier 1 preference shares.
Revise earnings estimate From history, OCBC recorded higher impairment charge
of 291bps of loans in 1998 as Singapore went through a recession during the Asian
Financial Crisis. Similarly in the Dotcom bust, OCBC charge off 108bps of loans as
impairment both in 2001 and 2002 following the contraction of the Singapore
economy in 2001.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Delong Holdings: In the red

2008-11-07T10:28:00.001+08:00

Margins hit heavily. Despite posting a 59.7% gain in revenue YoY for 3Q08 from S$399.3m to S$637.5m due to higher sales volume from expanded production capacities and higher ASPs, Delong’s gross profit fell a hefty 85.4% from S$39.7m to S$5.8m during the same period. This also meant that gross profit margins plummeted YoY from 10.0% to 0.9% for 3Q08. Consequently, it slumped into net losses of S$11.9m for 3Q08, against profits of S$24.7m.

Comparison of exceptional gains. Almost 73% of the S$11.2m exceptional gains comprised of a foreign exchange gain of S$8.2m, which resulted from a revaluation of bank borrowings denominated in USD as it weakened against the RMB during the third quarter. This was against a foreign exchange loss of S$2.7m in 3Q07. Therefore, stripping out these differences, the Group’s slump would have been more pronounced - a net loss of S$20.1m in 3Q08 versus NPAT of S$27.4m in the previous corresponding period.

Increase in finance costs. Total debt (interest-bearing only, hence the convertible zero-coupon bonds are excluded) as of 9M08 stood at S$340.2m versus S$188.0m a year ago, which represents an 81.0% increase YoY. As a consequence of taking on more debt, finance costs surged by 140.7%, from S$6.9m in 3Q07 to S$16.6m in 3Q08. The huge increase in borrowings brings the Group’s gearing to 77.7%, and provided another drag to its bottom line for 3Q08.

Our synopsis. The Group sold 650k tonnes of HRCs and 32k tonnes of steel billets in 3Q08, versus 601k HRCs and 10k tonnes of steel billets in 3Q07, representing a small gain in tonnage sold of 11.7%. This was an underachievement on the back of production capacity having increased from 2.4m tonnes in Jan 07 to 3.0m tonnes in Jan 08. There has been a considerable slowdown in the Chinese steel industry, exemplified by the shutting down of production by as much as 20% by the largest players, lower raw material prices, and battered prices of steel products.

Another obvious reading of a deteriorating operating environment is the Group’s gross profit margin, which slumped from 10.0% to 0.9% in the third quarter. This boiled down to higher input costs locked-in or procured earlier in the year versus falling ASPs of steel products as prices started coming off from late Jul 08 onwards

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Olam: risk management system in place

2008-11-07T10:25:00.000+08:00

Prices of most inventories are hedged. Olam’s business model is to earn a margin from providing the supply chain management service to its clients, and Olam does not speculate on soft commodity prices to get its margin. Olam typically hedges 80-85% of its inventories with futures contracts (futures contract exist for cotton, coffee, cocoa and sugar) and forward agreements. Price volatility for these hedged commodities will therefore not impact on Olam’s profitability. However, there remains a 15-20% of its inventory which is unhedged, and this is estimated at S$269-358m (based on Jun 08 inventories of S$1.79b). Management indicated that the price volatility of these unhedged commodities is typically less than that for commodities with futures contracts. If the prices of these unhedged positions were to hypothetically fall 10%, then PBT could fall S$27-36m. However, we note that the impact is only one-time and the situation will normalize when commodity prices stabilize.

Olam controls its customer exposure according to some grading system. For the larger customers, Olam deals with them on a cash-against-documents basis. For the next level of customers (which are the smaller ones), the price exposure is limited to 3-6 months and not more than US$200k per invoice. Lastly, for some African customers, sales is done on the spot. This management system helps Olam control its counter-party risk.

Balance sheet strength remains comfortable. Olam has a net debt to equity ratio of 3.17x. After adjustments for stocks and debtors (which are liquid and cash-like in nature), the ratio falls to 0.74x. As of Jun 08, Olam has S$1.86b of working capital loans repayable by Jun 09. Management sees continued support from banks for its working capital financing, as these are rolling in nature (upon delivery of commodities to customers, Olam receives payment and pays off the working capital loans, and takes another loan when customers give new orders). Besides these working capital loans, Olam’s next refinancing obligation is US$200m at the end of FY10.

Olam has guided volume growth of 16-20% pa for FY09 and FY10. However, we have cut our revenue forecasts to factor in lower commodity prices. We have also cut our FY09 and FY10 net profit forecasts by 9% and 6% respectively to factor in losses from unhedged positions and slower demand growth given the global economic downturn.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

U.S. Stocks Drop, Dow Average Posts Worst 2-Day Loss Since '87

2008-11-07T04:38:00.000+08:00

Nov. 6 (Bloomberg) -- U.S. stocks slid and the Dow Jones Industrial Average posted its worst two-day loss since 1987 after jobless claims jumped and the shrinking economy decimated earnings at companies from Blackstone Group Inc. to News Corp.

Exxon Mobil Corp. dropped 4.3 percent, leading energy companies to the biggest declines in the Standard & Poor's 500 Index, as oil slid to a 19-month low below $61 a barrel. News Corp. sank 16 percent after the media company controlled by Rupert Murdoch said ad sales decreased. Blackstone, the world's largest private-equity firm, lost 9.5 percent after posting the biggest quarterly loss in its 18 months as a public company.

``We're a long way from the end of the economic challenges,'' said Mike Morcos, who helps manage $1 billion at Old Second Wealth Management in Aurora, Illinois. ``Earnings next year are going to be significantly lower and estimates are going to continue to come down.''

The Standard & Poor's 500 Index fell 4.8 percent to 907.52 at 3:22 p.m. in New York. The Dow Jones Industrial Average retreated 411.86 points, or 4.5 percent, to 8,727.41, extending its two-day loss to almost 10 percent. The Russell 2000 Index of small U.S. companies declined 2.6 percent to 501.06. The MSCI World Index of 23 developed markets lost 5.8 percent to 925.71.

The two-day tumble wiped out more than half of the S&P 500's rebound from a five-year low on Oct. 27. An industry report showing an unexpected decline in sales at chain stores in October also weighed on stocks as 23 of 27 companies in the S&P 500 Retailing Index slumped.

Europe Slides

BP Plc led a 5.6 percent retreat in Europe's benchmark index even after the Bank of England unexpectedly cut its benchmark interest rate by 1.5 percentage points to 3 percent to contain damage from a recession. Switzerland's central bank and the European Central Bank reduced their main lending rates by 50 basis points.

The S&P 500 is down almost 38 percent this year, the steepest annual retreat since 1937. The benchmark for U.S. equities has plunged 41 percent since its record in October 2007 as the U.S. economy shrunk in two of the last four quarters.

``It's just been a steady, steady sell,'' said Alan Gayle, the Richmond, Virginia-based senior strategist at Ridgeworth Investments, which oversees about $70 billion. ``The pain and frustration and anxiety of these volatile moves from one day to the next has discouraged a lot of investors to move to the sidelines.''

The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 16 percent to 63.24. The measure tracks the cost of using options as insurance against declines in the S&P 500.

About 481,000 workers filed initial jobless claims last week, the Labor Department said today in Washington, exceeding the 477,000 projected by economists surveyed by Bloomberg News. The number of people staying on benefit rolls was the most since February 1983.

A report tomorrow will probably show U.S. employers eliminated jobs in October for a 10th consecutive month, based on economists' estimates.

Earnings Watch

Earnings at companies in the S&P 500 that have reported third-quarter results fell 7.2 percent on average, Bloomberg data show. Analysts expect full-year profits to drop 7.7 percent, according to estimates compiled by Bloomberg.

S&P 500 energy companies lost 4.7 percent as a group, as oil declined for the third time this week. Crude for December delivery retreated 7 percent to $60.71 a barrel.

Exxon Mobil, the world's largest oil company, slipped $2.43 to $71.26, while Chevron Corp. slid 4.9 percent to $71.25.

Cisco declined 26 cents to $17.13 after earlier dipping as low as $16.67. Chief Executive Officer John Chambers said sales will drop as much as 10 percent in the second quarter because of the financial crisis. In August, Chambers predicted an advance of 8.5 percent from a year earlier.

Advanced Micro Devices Inc. tumbled 11 percent to $3.18. The second-largest maker of personal-computer processors plans to cut 500 jobs, about 3 percent of the workforce, as part of its effort to return to profitability.

Technology companies in the S&P 500 lost 4 percent collectively. Dell Inc., Intel Corp. and Hewlett-Packard Co. fell more than 4 percent.

`Macro Concerns'

Amazon.com Inc. slid 7.3 percent to $48.18. The largest Internet retailer was cut to ``hold'' from ``buy'' at Citigroup, which noted the shares' surge of as much as 36 percent since third-quarter results and ``heightened macro concerns'' including slower consumer spending.

Tyco Electronics Ltd. tumbled 10 percent to $17.03. Fiscal fourth-quarter profit fell 55 percent on restructuring costs and the company forecast a ``significant'' drop in sales and earnings this period.

News Corp.'s Class A shares tumbled $1.43 to $8.36. Fiscal 2009 profit will drop in the ``low to mid teens'' in percentage terms, the company said after previously forecasting a gain of 4 percent to 6 percent.

Financial stocks in the S&P 500 fell 5 percent as a group, dragged down by Bank of America Corp. and Wells Fargo & Co. The group is down 52 percent in 2008 as the slowing economy raises concern banks will be hit by more bad loans after the subprime mortgage market's collapse led to $690 billion in credit losses worldwide.

Blackstone's Loss

Blackstone Group LP tumbled 8.8 percent to $7.84. The world's largest private-equity firm posted the biggest quarterly loss in 18 months as a public company as the financial crisis eroded the value of the businesses and real estate it has acquired. Blackstone had been expected to break even, based on the average estimate of seven analysts in a Bloomberg survey.

Wells Fargo declined 9.3 percent to $28.74 after the biggest bank on the U.S. West Coast said it plans to sell stock to fund the purchase of Wachovia Corp. The bank also said losses from the acquisition will be less than previously expected.

The bank, which disclosed the share offering yesterday in a statement, had said it would raise as much as $20 billion to fund the deal. That was before the Treasury said it was buying $25 billion of Wells Fargo's preferred shares.

Big Lots Inc. plunged 24 percent to $17.67 for the steepest decline in the S&P 500. The largest U.S. seller of overstocked and discontinued items said third-quarter profit may be below its prediction.

Retail Slump

October same-store sales fell 0.9 percent at U.S. chain stores, the first drop in seven months, and declined 4.2 percent excluding Wal-Mart, the International Council of Shopping Centers said. Economists surveyed by Bloomberg had projected a 0.7 percent increase.

Excluding the effect of the shifting Easter holiday, it's the first decline since at least 2000, according to research firm Retail Metrics LLC.

Wal-Mart Stores Inc., the world's largest retailer, increased as much as 4.1 percent before surrendering its gain as the market extended its retreat. October sales climbed more than the company projected after consumers, battered by job losses and shrinking credit, bought discounted groceries and Halloween costumes.

Analysts are lowering fourth quarter and 2009 profit forecasts for U.S. companies as third-period results miss projections at the highest rate in almost 11 years.

Companies in the S&P 500 may see fourth-quarter earnings advance 15 percent, down from 42 percent projected at the end of August, according to a Bloomberg survey of analysts. Profits in 2009 may grow 13 percent, analysts say, compared with the 24 percent predicted two months ago. Yahoo! Inc. climbed 3.1 percent to $14.35. Chief Executive Officer Jerry Yang, coping with the cancellation of an advertising agreement with Google Inc., said at a conference in San Francisco that he's open-minded about forging other deals.

The London interbank offered rate, or Libor, for three-month loans in dollars dropped 12 basis points to 2.39 percent today, the lowest level since November 2004, according to the British Bankers' Association.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Jadason Enterprises:Outlook has not improved

2008-11-06T17:26:00.000+08:00

Topline up, bottomline down. PCB driller Jadason saw a 72% increase in its 3Q08 revenue to S$58.5m although net profit was 58% lower at S$2.1m. This was mainly due to growth in the company’s lower-margined Equipment and Supplies (ES) division outstripping that of the Manufacturing and Support Services (MSS) segment.

Higher demand from the PCB manufacturers had boosted Jadason’s ES business, although the improved numbers from the company’s PCB drilling factory in Dongguan failed to shore up the whole MSS division. Additionally, FX losses of S$0.5m as compared to a S$1m gain in 3Q07 also impacted bottomline during 3Q08.

Plunge in margins. As seen in Figure 1, overall margins were drastically lower. While revenue for Jadason’s ES business had jumped 140% to S$40.2m in 3Q08 as shown in Figure 2, operating margins dived from 11.7% to 3.8% due to an unfavourable change in sales mix. Additionally, the company’s MSS segment also saw operating profit tumble 67.4% to S$1.3m despite the 6.1% increase in turnover as dismal performances from the PCB drilling facilities in Suzhou and Malaysia proved to be a drag.

Balance sheet concerns linger. Net gearing remained high at 61% although it was slightly better from 65% in 2Q08 while current ratio remained relatively flat at 1.3x. The company was also unable to generate a positive operating cash flow in 3Q08. In light of the current credit conditions, we note that Jadason may risk incurring higher borrowing costs should it continue to fail to generate cash to repay its debt which mainly consists of short-term loans. Earnings may therefore be hit as a result.

Murky outlook. Revenue from the company’s ES division is expected to stay healthy in 4Q08 although visibility for its MSS segment is clouded due to the on-going financial crisis. As management looks to focus on cash and cost management rather than capital expenditure going forward, we believe that bottomline growth in the company, if any, will be limited.

The North American PCB book-to-bill ratio currently stands at 0.95 which has been below the parity mark since May 08. Although Jadason is currently trading at 0.4x FY08F P/B which is in-line with the industry average, we are maintaining our SELL recommendation and slashing our price target to S$0.05 (from S$0.075 previously) due to its bearish prospects. We also note that save for Elec & Eltek, the other two SGX-listed PCB drillers (Multi-Chem and Eucon) are also expected to see dismal results for at least the rest of the year

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Election Day Boosts Markets After Steepest Declines Since 1970s

2008-11-05T10:49:00.001+08:00

Nov. 5 (Bloomberg) -- Election Day in the U.S. is proving a haven for investors around the world contending with the worst stock, bond and commodity markets in more than three decades.

Japan’s Nikkei 225 Index added 2.8 percent at 11:32 a.m. in Tokyo, while the MSCI Asia Pacific Index climbed 3.8 percent. The Standard & Poor’s 500 Index gained 4.1 percent to a three-week high of 1,005.75 after plunging faster over the past year than any time since 1974. Oil, copper and gold surged, the dollar dropped, and the cost of protecting corporate bonds from default through 2013 fell to the lowest in two weeks.

The election of Democrat Barack Obama or Republican John McCain may help cement the government’s strategy for overcoming a recession, investors said. Whoever wins will face a U.S. economy battered by declining corporate profits and the highest unemployment in five years. Concern that $680 billion in bank writedowns will halt growth pushed the S&P 500 down 17 percent last month, the most since 1987, and sent corporate bonds to their worst return in 32 years.

“We’re finally getting all this uncertainty surrounding the election behind us,” said Jeffrey Kleintop, chief market strategist at LPL Financial, which has $274 billion under management. “The market is feeling like there’s finally an outcome. We’re finally putting behind us a lot of the worries that have plagued the market.”

The S&P 500’s rally, its biggest during a presidential vote since the New York Exchange first opened for Election Day in 1984, brought its gain since reaching a five-year low on Oct. 27 to 18 percent. Money-market rates fell for a 17th day, helping push Europe’s Dow Jones Stoxx 600 Index up 4.5 percent.

Early Returns

Obama won at least 195 electoral votes, including those of Pennsylvania and Ohio, while McCain claimed 90, networks projected. A candidate needs 270 electoral votes to win.

The energy-weighted Standard & Poor’s GSCI Index of 24 commodities jumped 7.5 percent to 467.26, the biggest one-day gain since it was created in 1970. The Reuters/Jefferies CRB Index gained 5.3 percent. Crude oil jumped as much as 12 percent, gold rose the most in six weeks and corn hit a three-week high.

Stocks and commodities plunged globally since last year as a nationwide decline in U.S. home prices spurred record foreclosures and saddled banks with bad mortgage loans. Money markets seized up, sending the so-called TED spread, a gauge of credit-market stress, to 4.64 percentage points Oct. 10, the highest level on record.

Steepest Drop

The S&P 500’s drop since its peak is the steepest for a comparable period since it declined 43 percent in the 13 months ended in October 1974, according to data compiled by Bloomberg. The MSCI World Index’s 37 percent retreat is its worst since the measure began in 1970.

Investment grade corporate bonds lost 7.4 percent in October, their worst month as measured by Merrill Lynch & Co.‘s bond indexes since the firm began compiling monthly data on the debt in 1976. The spread between investment grade company bonds and Treasury debt of similar maturity is the widest since 1932, according to Moody’s Investors Service.

S&P 500 companies are on pace for their fifth straight quarter of declining profits, with companies from Texas Instruments Inc. to Freeport-McMoRan Copper & Gold Inc. reporting earnings and revenue that failed to meet analysts’ estimates.

Earnings are down 10.4 percent for the 392 companies that have reported third-quarter results so far. The U.S. economy contracted 0.3 percent in the July-September period, and growth is expected to slow to 1.15 percent in 2009 from 1.6 percent this year, economists’ estimates compiled by Bloomberg show.

‘Slow-Motion Crash’

“October was a slow-motion crash,” said Joseph Keating, chief investment officer at RBC Private Asset Management in Birmingham, Alabama, who oversees $3 billion.

Credit markets started to loosen up as Treasury Secretary Henry Paulson began deploying $700 billion to recapitalize banks and purchase mortgage-related securities.

The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars slid 15 basis points to 2.71 percent today, the lowest level in almost five months, data from the British Bankers’ Association showed.

“You’re starting to work off a lot of the risk parameters,” said Andrew Brenner, co-head of structured products in New York at MF Global Inc. “Having this election behind us, I think the country will be much more optimistic.”

After pulling ahead of Obama in some polls following the Republican National Convention in the first week of September, McCain’s support slid as the financial crisis deepened, with voters considering Obama better able to manage the economy.

Democratic Edge?

Should either party have an edge in reviving the stock market, history suggests it is the Democrats.

Since 1928, the S&P 500 climbed 9.3 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of six Democrats from Franklin D. Roosevelt to Bill Clinton.

Only once did the benchmark for American equities decline, after Jimmy Carter‘s victory in 1976.

Among the six newly elected Republicans, five -- including Herbert Hoover, Richard Nixon and George W. Bush -- preceded stock-market declines, with a median retreat of 4.3 percent for the group, data compiled by Bloomberg show. The data excludes incumbents that won re-election.

Overall, the S&P 500 generated a median 62 percent advance from the time a Democrat is elected in November or elevated from the vice presidency until the next president is chosen. For Republicans, the gain is 28 percent.

History may not be an accurate indicator this time.

“In a normal year, you would expect some kind of relief rally after the election is over with, just because we won’t be talking about this anymore,” said Brian Barish, the Denver-based president of Cambiar Investors LLC, which oversees about $6 billion. “But I would throw in that there’s been nothing normal about 2008.”

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

ST Engineering: Performing within expectations

2008-11-05T10:44:00.001+08:00

Higher top and bottomline. 3Q08 revenue rose 11.8% to S$1,382.4m as STE recorded higher
turnover from all sectors except its Marine division while net profit inched up 2.7% to S$128.9m
due to lower taxes. The decrease in profit before tax (PBT) was mainly due to the weakening
US$ which continued to take its toll on the company and higher Passenger-to-Freighter (PTF)
prototyping costs, although higher depreciation expenses within the Aerospace business was
also a factor.
The Aerospace segment continued to be the mainstay of STE as it contributed 36.3% and 47.8%
to top and bottomline respectively for 3Q08.
Margins hit across the board. PBT margin in 3Q08 was lower at 10.4% as STE was dragged
down by its Aerospace and Electronics sectors which had recorded lower margins. While the
Land Systems division continued to depict a 5% PBT margin, a better showing from the Marine
segment that was attributed to a favourable sales mix had failed to improve the overall picture.
Remains in net cash position. STE’s cash balance decreased from S$1.2b to S$935.8m in
3Q08 YoY mainly due to higher capex and the payment of dividends. STE’s current cash hoard
is still higher than its total borrowings of S$886m.
Outlook has not turned bearish. Notwithstanding the currently weak global economic
environment, STE’s order book increased from S$9.29b in 2Q08 to S$9.54b in 3Q08, where
S$1.25b is expected to be delivered in 4Q08. Management also stressed that despite several
airliners presently operating under bearish conditions and a potential further weakening of the
US$, it remains confident of riding through this rough patch given its capabilities.

Aerospace. This segment should continue to determine the overall profitability of STE.
Management highlighted that despite its drop in operating profit for 9M08, it remains one of the
most profitable entities among the various aviation MRO companies. Of note, although STE’s
capex for its PTF prototyping capabilities had dragged down the company’s performance in
3Q08, this sub-segment is expected to provide a lift to its overall business in the near future.
According to aviation consulting firm TeamSAI, the global MRO market is expected to reach
US$45.1b in 2008 and is forecasted to hit US$56b by 2013 while projected to grow at a 4%
CAGR from 2008 – 2018. Given that revenue from STE’s MRO business has only been
US$904m for the year so far, we believe that there are further opportunities that the company
can tap into.
Electronics. With earnings coming in almost flat during 3Q08 although revenue had increased
26%, management is expecting a comparable PBT for the current year. However, it is
noteworthy that profitability in FY07 had included some divestment gains – stripping that off, the 5 November 2008
company believes that PBT would actually be higher for FY08. Turnover recognition from several
of the ongoing projects are to be expected going forward.
Land Systems. Due to the higher taxes paid, net profitability for this division saw the biggest
decline percentage-wise as it fell 19.8% to S$13m in 3Q08. As the company continues with its
pursuit of defence programmes and the contractual deliveries of its munitions & weapon
products and specialty vehicles, FY08 PBT is forecasted to be higher.
Marine. Net earnings for this sector rose 6.6% to S$16.5m in 3Q08. According to management,
the higher profitability in its Shipbuilding sub-division was largely offset by the lower earnings in
the Shiprepair and Engineering sub-segments. Going forward, due to the one-off S$10m gain
seen in 4Q07, management is guiding for a lower PBT in 2008.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SingTel: Downbeat Update

2008-11-05T10:41:00.003+08:00

SingTel issued an update on its performance yesterday, a week before it is due to release its
second quarter financial results. It touched on a few areas, including the impact of iPhone and the
strengthening S$.
iPhone 3G update. The Group first launched the iPhone 3G in Australia on 11 Jul 08, before
rolling out in Singapore, India and the Philippines on 22 Aug 08. All in, there were more than
170,000 iPhone activations for the Group and its associates. It managed to win over new
subscribers with its new service. Some 30% of the subscribers who signed up with SingTel were
new customers. For Optus, new sign-ons were as high as 55% of total activations.
Given that mobile subscriber acquisition and retention costs are expensed immediately upon
activation, the telco warns that iPhone initiative will actually have a "dilutive impact on earnings
and margins in the near term" despite a successful launch. Thus, the launch of iPhone is expected
to hit EBITDA by S$27m in Singapore and A$44m in Australia.
Telekomsel lowers guidance. Its Indonesia business Telekomsel is also facing some challenges,
with operating revenue expected to grow at low single digit and margins to decline around 5%.
This is largely within expectations.
Strengthening S$ a drag. SingTel derives two-thirds of its income from overseas and hence a
strengthening S$ has an adverse impact on the company’s bottom line. This is particularly true for the A$, which has fallen from 1.3 in Jul 08 to 0.99 currently against the S$. Based on
sensitivity analysis, a 1% fall in A$ vis-à-vis the S$ will result in a 0.2% fall in Group earnings.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Sembcorp Marine: Strong margins in 3Q08

2008-11-05T10:41:00.001+08:00

3Q08 net profit better than expectations. Sembcorp Marine (SCM) announced its 3Q08
results last evening. 3Q08 topline fell 2.3% YoY (and -17.4% QoQ) to S$1.1b as there was no
major initial revenue recognition, other than one unit of jack-up rig during the quarter. Gross
profit margin increased significantly from 9.4% in 3Q07 to 15.5% in 3Q08 (vs. 11.2% in 2Q08).
Excluding S$12.5m net gain in foreign exchange due to the revaluation of US dollar monetary
items, core profit before tax (PBT) achieved S$168.4m, surpassing our estimates by 23% due to
higher margins as well as increased contributions from SCM’s associated company, Cosco
Shipyard Group.
On track for record year. On a 9M period basis, SCM’s turnover increased 8.5% to S$3.4b
from S$3.2b in 9M07. PATMI surged 50.0% to S$360.5m from S$240.2m in the same
corresponding period.
However, outlook remains cautious as tight credit market has put on hold big ticket
purchases. The Offshore Marine sector is capital intensive in nature. With tightening of the
capital markets and easing oil price, we opine that our earlier beliefs of possible contract inflows
such as the Petrobras’ new production platform, P62, a repetition of P-54, (approximately valued
at more than US$1.0b) and other piecemeal Floating Production Units (FPU) contracts may be
shelved and/or not be materialized. This point may be illustrated from Atwood Oceanic’s recent
press announcement on its choice not to exercise the option to build a third semi-submersible at
SCM.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Another set of dismal results for chartered semiconductor

2008-11-04T12:10:00.001+08:00

Losses inline with guidance. Chartered saw 3Q08 topline (excluding Silicon Manufacturing
Partners) come in 30.7% higher at US$463.6m which was below its guidance of US$469 – 481m
but exceeded market consensus at US$455.4m. Net losses in 3Q08 meanwhile stood at
US$26.9m, within the company’s guidance of US$24 – 34m but beating market consensus of
US$29.1m although it was way lower than the US$112.3m profit seen in 3Q07 when it was
boosted by a US$118.5m tax benefit. Margins were generally lower as the company experienced
lower selling prices and higher costs per wafer although shipments had increased 31.2% to
0.51m wafers YoY.
A litany of woes. Chartered’s dismal results were attributed to lower demand which was
worsened by the economic outlook. The company had also noted a decline in orders from mid-
Aug and customer requests to delay inventories. More importantly, management has also
mentioned that it is not certain as to when the bottom might occur and is forecasting for more
losses in 4Q08.
Outlook remains lacklustre. Chartered is expecting contracting demand in the foundry industry
going forward. This is inline with the macro outlook, as even the world’s largest chip contractor TSMC is forecasting declining 4Q sales and profit as the global economic downturn reduces
demand for wafers. Meanwhile, Chartered has guided for 4Q08 sales and net losses to be
around US$368m and US$57m respectively.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Hong Leong Finance results

2008-11-04T12:08:00.001+08:00

HLF reported 3Q08 net profit of S$30.9m, down 16.2% YoY. This is stronger than our expectations, as net interest income came in above our forecasts. Net interest income rose a marginal 1.4% YoY to S$51.9m, which led to a resilient pre-provisioning operating profit (down 1.3% YoY). However, 3Q08 provisions was S$1.7m, versus the S$7.7m writeback for 3Q07, which led to the weakness in net profit.

HLF is one of the distributors of the Lehman Minibond series of products. On 22 Oct 08, HLF announced a proposal to purchase Lehman Minibond notes from its most vulnerable customers. HLF said this proposal is not expected to have a material adverse effect on the current year results.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

UOB: Weakness in non-interest income

2008-11-03T09:59:00.001+08:00

UOB reported 3Q08 net profit of S$475m, down 5.1% YoY and 20.9% QoQ.
Net interest margin widened 28bps YoY. Net interest income performed well, expanding 25.1%
YoY to S$893m, though the QoQ growth was a milder 2.3%. This was driven by 1) a 9.7% YoY rise
in average interest bearing assets to S$160.8b, and 2) net interest margin widening 28bps YoY to
2.21%, due to improved asset mix and lower funding costs.

Non-interest income performed badly, recording a 18.6% YoY decline and and a 41.9% QoQ
contraction to S$319m. Fee & commission recorded a 14.1% YoY decline, and accounted for
85.9% share of non-interest income. The weakness was due to fund management and investment
related income. The sequential collapse in non-interest income was mainly due to a net loss of
S$49m from non-trading activities versus 2Q08’s S$193m gain.
Asset quality remained high, with a 3Q08 NPL ratio of 1.5%, similar to 2Q08’s 1.5% and lower
than 3Q07’s 2.3%. However, UOB’s 3Q08 impairment charges of S$158m is significantly higher
than 3Q07’s S$4m (though close to 2Q08’s S$180m), due to collective impairment provisions.
Loans still expanding. Gross global loans expanded 17.6% YoY and 3.2% QoQ to S$102.5b.
Manufacturing loans expanded 8.4% QoQ to S$11b whilst general commerce loans was up 7.7%
QoQ to S$14.7b.
Capital adequacy ratio remains strong at 11.2% for Tier 1 and 15.5% for Total CAR. This
remains much higher than regulatory requirement of 6% and 10% respectively. The high capital
ratios are a positive in the current environment of slowing economic growth.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

First Resources: Well supported

2008-11-03T09:57:00.000+08:00

Share price of First Resources (FR SP) may have bottomed out earlier during late-Oct as
suggested by the various technical indicators. The 14-day ADX has been on a decline since mid-
Sep, implying that the downtrend has been losing steam. Also, the MACD chart has produced a
bullish moving average crossover, an indication that price action may make further gains.
Support is seen at the 0.185 – 0.19 area as depicted by the all-time lows attained during 28 & 29
Oct. On the other hand, any potential bullish price action should meet with resistance at the 0.265– 0.27 range, courtesy of the 21-day moving average and the daily high on 20 Oct.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

CapitaLand: Boosted By Divestment Gains

2008-11-03T09:56:00.001+08:00

CapitaLand Limited (CapLand) posted a 25.6% YoY drop (-18.6% QoQ) in 3Q08 PATMI to
S$419.4m, which accounts for 38.2 - 38.6% of our FY08 estimates and the Street’s. Stripping
away divestment gains, namely from the sale of Capital Tower Beijing, Raffles City China
portfolio and 1 George Street, 3Q08 PATMI would have been S$102.0m.
3Q08 Topline was down 33.3% YoY to S$597.2m, on the back of lower sales from development
projects as fewer projects were launched for sale in China. On the bright side, this was mitigated
by new malls in Malaysia and, as well as better performance from REITs and investment
properties.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

India, China Attempt to Cushion Economies From Global Crisis

2008-11-03T09:52:00.001+08:00

Nov. 3 (Bloomberg) -- India and China are accelerating efforts to prop up growth as a global slump threatens the world's fastest-expanding major economies.

The Reserve Bank of India on Nov. 1 lowered its benchmark repurchase rate for the second time in two weeks, and for the first time in 11 years reduced the amount of money lenders are required to keep in government bonds. The People's Bank of China on Oct. 29 cut its key rate, three days before a weekend report showed manufacturing shrank in October.

``The gathering crisis in more advanced economies is forcing Asian policy makers to jettison assumptions about the health of export sectors,'' said Mark Williams, an international economist at Capital Economics Ltd. in London. ``Interest rates will tumble.''

Emerging Asian economies that account for one-fifth of world growth are being dragged down as their main markets in the U.S. and Europe contract, increasing the likelihood of a global recession. Policy makers in India and China are also boosting spending to prevent their economies from going under.

India's Finance Minister Palaniappan Chidambaram is planning to spend an extra 2.4 trillion rupees ($49 billion) this year, telling parliament last month that now was ``the right time'' to stimulate the economy.

China's Premier Wen Jiabao says sustaining economic growth is the government's ``first priority.'' China has already raised export incentives, cut costs for home buyers and pledged infrastructure spending.

`Extremely Aggressively'

India and China need to move fast to implement their stimulus plans, with growth already slowing in Asia's second-and third-largest economies amid weaker foreign demand.

Asian policy makers understand the importance of ``reacting extremely quickly and extremely aggressively to try to stimulate growth and prevent the worst-case scenario,'' said David Mann, senior strategist at Standard Chartered Plc in Hong Kong.

China's $3.3 trillion economy grew at the slowest pace in five years in the three months through September as export orders shrank and industrial production waned. The expansion cooled for a fifth straight quarter, to a 9 percent gain from a year earlier.

The Purchasing Managers' Index prepared by China Federation of Logistics and Purchasing fell to a seasonally adjusted 44.6 in October, the lowest reading since the gauge was launched in July 2005, according to a Nov. 1 statement. A reading below 50 reflects a contraction in manufacturing.

Slowing Growth

India's central bank said last month that growth in that $1.2 trillion economy may be as little as 7.5 percent in the year to March 31, compared with 9 percent in the previous 12 months. That would be the weakest pace since 2005.

The People's Bank of China and India's central bank, along with the U.S. Federal Reserve and the Bank of Japan, are already moving to lower borrowing costs and stimulate consumer spending and investment.

Over the weekend, India cut its repurchase rate to 7.5 percent from 8 percent, reduced the amount of deposits that lenders need to set aside as reserves to 5.5 percent from 6.5 percent, and lowered the amount of money lenders are required to keep in government bonds to 24 percent from 25 percent.

India's decision was taken ``to address concerns relating to the moderation in the growth momentum,'' the central bank said in a statement in Mumbai. ``Global financial conditions continue to remain uncertain and unsettled, and early signs of a global recession are becoming evident.''

Coordinated Action

The Chinese central bank reduced its key one-year lending rate to 6.66 percent from 6.93 percent on Oct. 29.

China cut borrowing costs for the first time in six years on Sept. 15, the day U.S. investment bank Lehman Brothers Holdings Inc. filed for bankruptcy. It followed up with another reduction on Oct. 8 as the Fed and five other central banks made emergency coordinated reductions to counter the financial crisis.

The Bank of Japan reduced its key overnight lending rate by 20 basis points to 0.3 percent on Oct. 31 after the Fed last week lowered its target rate for overnight loans to 1 percent, matching a half-century low. South Korea, Taiwan and Hong Kong also trimmed their benchmark rates last week.

Officials are signaling more cuts are likely and the European Central Bank and Bank of England both set policy on Nov. 6. Australia's central bank may also cut rates on Nov. 4, after lowering them by 1 percentage point to 6 percent last month, the biggest reduction since 1992.

``A global dislocation in economic activity is forcing policy makers to take more remedial action,'' said Mark Cliffe, global head of financial markets research at ING Groep NV in London. ``More policy easing is likely.''

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

schedule

2008-11-03T02:24:00.001+08:00

SCHEDULE

Sunday, 2 November 2008
all times GMT
(last release in parentheses)

2145 NZ Q3 labour cost private sector (0.8% q/q)
2145 NZ Q3 average hourly earnings (2.0% q/q)
2230 Australia October performance of manufacturing index (47.2)
2330 Australia October TD Securities inflation (0.4% m/m)
2330 Australia October TD Securities inflation (4.5% y/y)

Monday, 3 November 2008
all times GMT
(last release in parentheses)
N/A UK October Halifax house prices (-12%)
0030 Australia September retail sales (0.3% m/m)
0030 Australia September retail sales, ex-inflation (-0.6% q/q)
0030 Australia Q3 house price index (-0.3% q/q)
0030 Australia Q3 house price index (8.2% y/y)
0030 Australia October ANZ job advertisements (-1.4% m/m)
0830 CH October PMI, manufacturing (47.8)
0845 Israel Richmond Fed President Lacker speaks
0845 Italy October PMI, manufacturing
0850 France October PMI, manufacturing
0855 Germany October PMI, manufacturing
0900 Eurozone October PMI, manufacturing
0930 UK October PMI, manufacturing (41)
1045 Eurozone European Commission economic growth forecasts
1500 US October ISM, manufacturing (43.5)
1500 US October ISM, prices paid (53.5)
1500 US September construction spending (0.0% m/m)

Tuesday, 4 November 2008
all times GMT
(last release in parentheses)

N/A Japan October machine tool orders
0130 Japan September labour cash earnings (-0.3% y/y)
0330 Australia Reserve Bank of Australia interest rate decision
0645 CH October consumer price index (0.1% m/m)
0645 CH October consumer price index (2.9% y/y)
0930 UK October PMI, construction
1000 Eurozone September producer price index (-0.5% m/m)
1000 Eurozone September producer price index (8.5% y/y)
1500 US September factory orders (-4.0%)
2230 Australia October performance of service index (44.9)
2350 Japan October monetary base (0.9% y/y)

Wednesday, 5 November 2008
all times GMT
(last release in parentheses)

0001 UK October Nationwide consumer confidence (50)
0030 Australia September trade balance (A$ 1.364 billion)
0030 Australia September building approvals (-3.7% m/m)
0030 Australia September building approvals (-8.6% y/y)
0845 Italy October PMI, services (49.4)
0850 France October PMI, services
0855 Germany October PMI, services
0900 Eurozone October PMI, services
0930 UK October PMI, services (46)
0930 UK September industrial production (-0.6% m/m)
0930 UK September industrial production (-2.3% y/y)
0930 UK September manufacturing production (-0.4% m/m)
0930 UK September manufacturing production (-1.9% y/y)
1000 Eurozone September retail sales (0.3% m/m)
1000 Eurozone September retail sales (-1.8% y/y)
1030 UK October BRC shop price index
1200 US MBA mortgage applications
1230 US October Challenger job cuts (32.6% y/y)
1315 US October ADP employment change (-8,000)
1500 US October ISM, non-manufacturing (50.2)
2145 NZ Q3 unemployment rate (3.9%)
2145 NZ Q3 employment change (1.2% q/q)
2145
NZ Q3 employment change (0.7% y/y)
2350 Japan October Bank of Japan Policy Board meeting minutes

Thursday, 6 November 2008
all times GMT
(last release in parentheses)

0001 UK October NIESR GDP (-0.2%)
0030 Australia October unemployment rate (4.3%)
0030 Australia October employment change (2,200)
0500 Japan
September leading index
0500 Japan September coincident index
1100 Germany September factory orders (3.6% m/m)
1100 Germany September factory orders (-7.6% y/y)
1200 UK Bank of England MPC interest rate decision
1245 Eurozone European Central Bank interest rate decision
1330 US Q3 non-farm productivity (4.3%)
1330 US Q3 unit labour costs (-0.5%)1330 US Weekly initial jobless claims
1330 US Continuing jobless claims
1330 Canada September building permits (-13.5% m/m)
1500 Canada October Ivey PMI (61)
2230 Australia October performance of construction index (31.8)
2350 Japan Foreign purchases of Japanese equities and bonds
2350 Japan Japanese purchases of foreign equities and bonds

Friday, 7 November 2008
all times GMT
(last release in parentheses)

N/A Germany October wholesale price index (-0.6% m/m)
N/A Germany October wholesale price index (5.8% y/y)
0030 US Federal Reserve Governor Warsh speaks
0645 CH October unemployment rate (2.4%)
0700 Germany September trade balance (€10.6 billion)
0700 Germany September current account (€7.3 billion)
1100 Germany September industrial production (3.4% m/m)
1100
Germany September industrial production (1.7% y/y)
1200 Canada October employment, net change (106,900)
1200 Canada October unemployment rate (6.1%)
1330 US October non-farm payrolls, change (-159,000)
1330 US October average hourly earnings (0.2% m/m)
1330 US October average hourly earnings (3.4% y/y)
1500 US September pending home sales (7.4% m/m)
1500 US September wholesale inventories (0.8%)
2000 US September consumer credit (-US$ 7.9 billion)

Payrolls Probably Fell, Factories Shrank: U.S. Economy Preview

2008-11-03T02:17:00.001+08:00

Nov. 2 (Bloomberg) -- U.S. employers probably eliminated jobs in October for a 10th consecutive month, while manufacturing contracted at the fastest pace since the 2001 recession, economists said before reports this week.

Payrolls shrank by 200,000 workers, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's report on Nov. 7. The unemployment rate may jump to its highest level in more than five years.

``It should be another lousy report,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``This'll be another nail in the consumer's coffin.''

The loss of almost one million jobs, falling property values, slumping stocks and frozen credit may cause consumers and businesses to keep retrenching. The state of the economy gave Democrat Barack Obama a lift over Republican rival John McCain as Americans, who will elect a new president in two days, perceived the Democrat from Illinois had a better grasp of the issue.

The projected drop in payrolls would be the biggest in five years and follow a decline of 159,000 in September. Factories probably cut 62,000 workers from payrolls, according to the survey median.

The jobless rate last month probably rose to 6.3 percent from 6.1 percent in September, the survey also showed.

``Unemployment is likely to rise sharply over the next several months as repercussions from the credit crisis ripple through the economy,'' said Russell Price, senior economist at H&R Block Financial Advisors in Detroit. ``The economy is the most important issue on the minds of voters.''

Economy, Election

The report will be released three days after Americans choose between Obama and McCain. The faltering economy and imploding financial markets helped push Obama ahead of McCain of Arizona in polling in key battleground states in recent weeks.

On the question of which candidate they trust most on the economy, voters in Florida picked Obama over McCain by a 9-point margin, and in Ohio, the Democrat led by 12 points, according to a Bloomberg/Los Angeles Times poll issued last week.

Manufacturing, which accounts for about 12 percent of the economy, probably shrank for a seventh time in nine months, the Institute for Supply Management's factory index may show tomorrow. The gauge probably fell to 41.5, the lowest level since October 2001, from 43.5 the prior month, according to economists polled. A reading less than 50 signals contraction.

``Downside risks to growth remain,'' the Federal Reserve said last week as it lowered its key rate by a half point to 1 percent. ``Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports.''

Automakers

Automobile and car-parts makers are leading the downturn in manufacturing. ArvinMeritor Inc., a Troy, Michigan-based maker of auto and commercial-truck parts, said last week it's cutting 1,250 jobs.

``Swift and decisive actions are necessary in response to today's global economic conditions,'' Chief Executive Officer Charles ``Chip'' McClure said in a statement.

Service industries, which range from homebuilders to mortgage lenders, retailers and restaurants, and account for almost 90 percent of the economy, also probably contracted in October, economists forecast another report from the Institute for Supply Management will show on Nov. 5.

The group's non-manufacturing index fell to 47.2 last month from 50.2 in September, according to the median of economists' forecasts in a Bloomberg survey.

The economy shrank at a 0.3 percent pace in the third quarter, with consumer spending dropping by 3.1 percent, the biggest decline since 1980, the Commerce Department reported last week. Business investment in equipment and software fell at a 5.5 percent rate. Economists surveyed by Bloomberg forecast the economy will contract at a 0.8 percent rate in the fourth quarter.

Bloomberg Survey

=================================================================
Release Period Prior Median
Indicator Date Value Forecast
=================================================================
ISM Manu Index 11/3 Oct. 43.5 41.5
ISM Prices Index 11/3 Oct. 53.5 48.0
Construct Spending MOM% 11/3 Sept. 0.0% -0.8%
Factory Orders MOM% 11/4 Jan. -4.0% -1.0%
ISM NonManu Index 11/5 Oct. 50.2 47.2
Initial Claims ,000's 11/6 Oct. 25 479 477
Cont. Claims ,000's 11/6 Oct. 18 3715 3745
Productivity QOQ% 11/6 2Q 4.3% 0.9%
Labor Costs QOQ% 11/6 2Q P -0.5% 2.8%
Nonfarm Payrolls ,000's 11/7 Oct. -159 -200
Unemploy Rate % 11/7 Oct. 6.1% 6.3%
Manu Payrolls ,000's 11/7 Oct. -51 -62
Hourly Earnings MOM% 11/7 Oct. 0.2% 0.2%
Hourly Earnings YOY% 11/7 Oct. 3.4% 3.5%
Avg Weekly Hours 11/7 Oct. 33.6 33.6
Pending Homes MOM% 11/7 Sept. 7.4% -3.7%
Whlsale Inv. MOM% 11/7 Sept. 0.8% 0.3%
Cons. Credit $ Blns 11/7 Sept. -7.9 -0.4
=================================================================
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Jabre Cuts Back, Lays Off Nine, as Convertibles Market Declines

2008-11-01T03:18:00.000+08:00

Oct. 31 (Bloomberg) -- Philippe Jabre's Jabre Capital Partners SA laid off nine employees in Geneva and shut its Singapore office amid a collapse in convertible bonds, two people with knowledge of the situation said.

The hedge fund firm is offering the six employees in Singapore jobs if they relocate, said the people, who declined to be identified because the company is closely held. Jabre left GLG Partners Inc. during a Financial Services Authority probe and raised almost $3 billion to start his own firm last year, hiring as many as 65 people, for Europe's largest hedge fund start-up of 2007.

Jabre, 48, who specializes in convertible arbitrage, is among dozens of hedge funds that have suffered as banks cut the amount of leverage they make available and short-selling limits crimps the strategy. Convertible bonds have lost almost half their value since May, according to an index compiled by UBS AG.

``Whoever is in convertible bonds is not having a good time,'' said Jacob Schmidt, founder of Schmidt Research Partners Ltd., a London-based hedge fund advisory firm. ``The convertible bond market has gotten hammered. Over the last few months nobody wants to hold convertibles.''

Hedge funds may cut as many as 10,000 jobs this year as they struggle with their biggest losses in two decades, Michael Karp, head of New York-based executive search firm Options Group, said earlier this month. Hedge funds have lost an average of 17 percent this year as the subprime-mortgage meltdown ignited a global financial crisis, according to data compiled by Chicago- based Hedge Fund Research Inc. Jabre declined to comment.

Jabre's Jabcap Global Convertibles Fund Ltd. dropped 15 percent this month through Oct. 21, and is down 17 percent for the year-to-date, according to data compiled by Bloomberg. The fund had been up 6.3 percent through May. Jabcap Multi-Strategy Ltd., the largest of the firm's funds, fell 10 percent in September, its worst month, for a year-to-date decline of 19 percent.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Oil Is Poised for Worst Month Ever on Concern Demand to Decline

2008-10-31T10:25:00.000+08:00

Oct. 31 (Bloomberg) -- Crude oil fell in New York and is poised for its biggest monthly drop since trading began in 1983 on concern that the decline in the U.S. economy will curb fuel demand in the world's largest energy user.

Oil retreated, taking this month's decline to 36 percent, after the U.S. Commerce Department said yesterday that gross domestic product contracted in the third quarter at the biggest annual pace since 2001. U.S. fuel demand in August fell 8.9 percent from a year earlier, the Energy Department said yesterday.

``Sentiment is very fragile at the moment and heavily influenced by concerns about recessions in the major developing economies,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia. ``The story hasn't changed much, people are very concerned about demand being weak.''

Crude oil for December delivery fell as much as $1.51, or 2.3 percent, to $64.45 a barrel. It was at $64.69 a barrel at 9:54 a.m. Singapore time on the New York Mercantile Exchange. Oil's monthly decline may pass February 1986 as the worst month ever, when it dropped 30 percent to $13.26 a barrel.

Prices, which have tumbled 56 percent from a record $147.27 on July 11, are down 32 percent from a year ago. Futures dropped $1.54, or 2.3 percent, yesterday to settle at $65.96 a barrel.

Oil climbed more than $4 a barrel on Oct. 29, the biggest gain in a month, after the U.S. and China, the two biggest energy consumers, cut interest rates to spur economic growth. Prices also rose because the dollar fell the most against the currencies of six major U.S. trading partners since 1998.

Monthly Demand

Monthly data for U.S. August fuel consumption, measured in terms of products supplied by refiners, dropped to 17.4 million barrels a day, the Petroleum Supply Month said. That was down from 19.1 million barrels in August 2007.

U.S. fuel demand during the past four weeks averaged 18.9 million barrels a day, down 7.8 percent from a year ago, an Energy Department report showed Oct. 29. UBS AG cut its oil- price forecast for next year by 43 percent to $60 a barrel from $105 because the global economic slowdown may reduce demand.

OPEC member countries seem to have ignored an agreement reached at a meeting in September to more closely adhere to its production quotas at the time.

The Organization of Petroleum Exporting Countries increased oil supplies 0.5 percent this month because of higher exports from Iraq, according to provisional data from Geneva-based consultants PetroLogistics Ltd.

The group supplied 31.85 million barrels of oil a day in October, up 150,000 barrels a day from September, PetroLogistics founder Conrad Gerber said in a telephone interview yesterday. Higher Iraqi output countered declines from Saudi Arabia, Kuwait and the United Arab Emirates.

OPEC Cut

OPEC agreed on Oct. 24 to reduce their production targets by 1.5 million barrels a day in an attempt to bolster falling oil prices. The OPEC basket price, a weighted average of 11 crude grades produced by the group, was at $58.13 a barrel on Oct. 29, down from a peak of $140.73 a barrel on July 3.

OPEC may curb only 850,000 barrels a day of oil supply by January, PFC Energy said in a report yesterday. PFC expects Saudi Arabia to cut 600,000 barrels a day, the Washington-based oil consultant said. OPEC reduced its target by 1.5 million barrels a day after an emergency meeting Oct. 24.

Brent crude oil for December settlement fell as much as $1.34, or 2.1 percent, to $62.37 a barrel on London's ICE Futures Europe exchange. It was at $62.41 a barrel at 9:36 a.m. Singapore time.

The contract yesterday declined $1.76, or 2.7 percent, to settle at $63.71 a barrel. Futures earlier touched $68.35, the highest since Oct. 22.
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Exxon, Shell Profits Rise After Oil Climbs to Record

2008-10-31T02:37:00.001+08:00

Oct. 30 (Bloomberg) -- Exxon Mobil Corp. and Royal Dutch Shell Plc, the world's biggest oil companies, posted gains in third-quarter earnings after crude's surge to a record made up for slumping output. Both fell in stock trading as oil dropped and the U.S. reported its biggest economic decline since 2001.

Exxon Mobil netted $14.8 billion, up 58 percent from a year earlier, according to a statement today by the Irving, Texas- based company. Profit excluding one-time costs and gains was the highest ever for a U.S. corporation. Shell, based in the Hague, said its net income rose 22 percent to $8.45 billion. Both companies exceeded analyst earnings estimates.

Oil futures in New York averaged more than $118 a barrel, up 57 percent from a year earlier. After reaching a high-water mark above $147 a barrel in July, oil tumbled $80 as growth in fuel demand slowed to the lowest rate in 15 years. U.S. gross domestic product contracted at a 0.3 percent pace in the third quarter, the Commerce Department said today, ushering in a recession in the largest oil-consuming nation.

``I think we're going to see obviously the peak here, and then the fourth quarter will be significantly lower unless things turn around fast,'' said Matti Teittinen, an analyst with IHS Herold in Boston.

Exxon Mobil fell $1.80, or 2.4 percent, to $72.85 at 12:35 p.m. in New York Stock Exchange composite trading, sliding along with oil futures. The stock has dropped 22 percent this year, heading for its worst decline since 1981. Shell's Class A shares in London fell 70 pence, or 4.1 percent, to 1,635 pence.

Exceeding Estimates

Exxon Mobil's per-share profit excluding such items as a gain on a pipeline sale was $2.59, 18 cents higher than the average of 13 analyst estimates compiled by Bloomberg. Shell's profit excluding such items as gains from inventories was $8.04 billion, 9.1 percent higher than the average of 7 analyst estimates compiled by Bloomberg.

``The oil majors are coming all above expectations, which means they have resilient qualities,'' said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. ``They show the benefit of being an integrated company, and they have the flexibility to weather the storm.''

Hurricanes Ike and Gustav, which struck the U.S. Gulf Coast last month, may have contributed to the positive surprises by leading to wider profit margins on refined fuels, said Philip Weiss, an analyst at Argus Research in New York.

``The hurricanes knocked out some operations and that really benefited the spreads for anyone who still had production up and running,'' Weiss said.

Refining Gains

Exxon Mobil's refineries earned $3 billion in the quarter, a 51 percent increase from a year earlier. Shell's profit from refining jumped 40 percent to $2.3 billion as diesel prices in Europe rose 17 percent to a record.

Profits from oil and gas sales surged even as production slid. Exxon Mobil's output fell 8.2 percent, the most since at least 1997, to the equivalent of 3.6 million barrels of oil a day, the lowest since Exxon Corp. bought Mobil Corp. in 1999.

Shell's production fell 6.6 percent and dropped to below 3 million barrels of oil equivalent a day for the first time in more than a decade.

London-based BP Plc said earlier this week that its net income rose 83 percent to $8.05 billion, exceeding analyst estimates. Chevron Corp., Exxon's biggest U.S. rival, is scheduled to report earnings tomorrow.

ConocoPhillips, Marathon

Houston-based ConocoPhillips, the third-largest U.S. oil company, said last week that its profit jumped 41 percent to $5.19 billion.

Marathon Oil Corp., the No. 4 U.S. oil company, said today that its third-quarter profit doubled, partly on a gain in the value of contracts that lock in crude prices paid by its refineries. Marathon said its board approved two deepwater projects in the Gulf of Mexico that will cost $1.6 billion.

Shell said it's delaying a decision on its Athabasca oil- sands project in Alberta because of rising costs.

Exxon Mobil will maintain annual capital budgets of about $25 billion through 2012, regardless of changes in oil prices, Chief Executive Officer Rex Tillerson told reporters Oct. 20 at an industry meeting in Scottsdale, Arizona.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SIA cuts capacity to Asian cities from falling demand

2008-10-30T09:03:00.000+08:00

Faced with falling passenger numbers, Singapore Airlines (SIA) has embarked on an
aggressive capacity reduction programme which will see cuts in some routes and total pullouts
from others. The airline said that the changes, which are being implemented progressively
throughout the five-month-long Northern Winter schedule beginning Oct 26, will 'better match
capacity with demand'. Services to Penang and Ho Chi Minh will be gradually reduced to 18
and 17 weekly flights respectively, while one service to Seoul will be initially reduced, then
scrapped completely from Feb 2 to March 28 next year, when the winter season ends. But SIA
will continue to operate 17 weekly services to and from the Korean capital during winter.
Osaka will be served once a day from Nov 2 by SQ618 (Singapore-Osaka) and SQ617
(Osaka-Singapore). Flights SQ622 (Singapore-Osaka) and SQ621 (Osaka-Singapore) will be
suspended. Frequencies to Bangalore and Chennai will also be reduced. Meanwhile, the
relatively recent service to Amritsar will be dumped from February next year, with passengers
booked on flights to the northern Indian city being transferred to SIA's New Delhi service. Also,
from February, SIA will link its Cape Town flights to Johannesburg. The Cape Town extension
will operate three flights weekly, while the daily service to Johannesburg will be maintained.
But while cutting intra-Asian flights, SIA has increased services to the Middle East. The
frequency of flights to Istanbul, via Dubai, has been raised to six flights per week from four. SIA
will also be introducing flights to Riyadh. All this comes just two weeks after SIA reported that
it had been hit by its first fall in passenger numbers in three years. The airline's passenger
numbers in raw terms dipped 1.6 per cent to 1.51 million last month from a year ago.
Meanwhile, with capacity (measured in available seat kilometres) rising 6.8 per cent during the
month, the passenger load factor declined 4.1 percentage points to 76.9 per cent last month.
The airline is now watching its US routes closely, including its new all-business class, non-stop
flights to Los Angeles and Newark. The only service which remains largely unscathed is its
'kangaroo-route' from Europe, through Singapore, to Australia. But the demand decline is not
unique to SIA. For the first time since the Sars outbreak in 2003, global airline passenger
traffic shrank last month, falling 2.9 per cent as the slump in demand outstripped capacity cuts.
Asia-Pacific carriers posted a 6.8 per cent drop in demand - the second-biggest after African
carriers. International load factors fell 4.4 percentage points to 74.8 per cent last month, from
79.2 per cent in August, no thanks to the widening economic impact of the global credit crunch.
Instead of celebrating a nearly 50 per cent fall in fuel price, the global aviation industry now
finds itself battling a sharp drop in travel demand caused by the global financial meltdown.
According to the International Air Transport Association, at least 30 airlines have gone belly-up
in the first nine months of this year, and another 20 are on its watchlist. SIA's stock tumbled 50
cents to $10.30 yesterday - its lowest level in almost a decade.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Asian Stocks Gain for 3rd Day on Rate Cuts, Commodities Rally

2008-10-30T08:56:00.001+08:00

Oct. 30 (Bloomberg) -- Asian stocks rose after China, Taiwan and the U.S. cut interest rates to alleviate a credit freeze and boost growth, spurring a rally in commodity prices.

Posco gained 8.5 percent and Hyundai Heavy Industries Co. jumped 11 percent in Seoul after the U.S. Federal Reserve included emerging markets for the first time in a liquidity-swap agreement. BHP Billiton Ltd. advanced after oil jumped and copper posted its biggest gain in two years. Toyota Motor Corp. added 4 percent as a weaker yen boosted its earnings outlook.

The MSCI Asia Pacific Index added 1.9 percent to 82.23 as of 9:22 a.m. in Tokyo. Today's advance pared the Asian measure's monthly loss to 23 percent. The gauge is still on course to complete the worst month since its creation in December 1987.

Japan's Nikkei 225 Stock Average climbed 3.3 percent to 8,478.81. South Korea's Kospi index gained as much as 7.4 percent, while a surge in index futures triggered a halt in program trading.

U.S. stocks declined yesterday, with the Standard & Poor's 500 Index erasing a 3.1 percent advance in the final 12 minutes on concern lower interest rates won't stem a recession. Futures on the U.S. benchmark index rose 0.7 percent.

Central banks across the globe are trying to curb an economic slowdown as the financial crisis weighs on consumer sentiment and business spending. The Fed and the People's Bank of China yesterday cut benchmark interest rates to stimulate demand, while Taiwan's central bank today lowered its benchmark rate.

Liquidity, Stimulus

The Fed said yesterday it agreed to provide $30 billion to the central banks of South Korea, Singapore, Brazil and Mexico, ``four large systemically important economies,'' in a statement. The arrangements aim ``to mitigate the spread of difficulties in obtaining U.S. dollar funding.''

Japan's Prime Minister Taro Aso will announce economic stimulus measures worth 5 trillion yen ($51 billion) today, the Yomiuri newspaper said. The package will include 2 trillion yen in assistance for households, according to the report.

Copper futures for December delivery surged 12 percent in New York yesterday, the steepest jump in two years, while crude oil for December delivery climbed 7.6 percent to $67.50 a barrel
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Fed May Cut Rate to 1%, Signal Steps to Save Economy

2008-10-30T00:59:00.001+08:00

Oct. 29 (Bloomberg) -- The Federal Reserve may lower its benchmark interest rate to 1 percent today and signal further reductions to levels unseen since Dwight Eisenhower was president.

Tumbling commodities prices and weaker consumer spending are slowing inflation, which officials described as a ``significant concern'' at their last scheduled meeting in September. Tomorrow, the Commerce Department will probably report that the economy shrank at a 0.5 percent annual rate in the third quarter, the most since the 2001 recession, economists predict.

The Fed ``will be very aggressive,'' said Mark Gertler, a New York University economist and research co-author with Fed Chairman Ben S. Bernanke. ``Inflation risks are off the table'' and ``the issue now is how bad the recession will be.''

He predicted the benchmark rate will be cut by half a point today, matching the median forecast of economists surveyed by Bloomberg News. Bernanke and his team could push borrowing costs to zero by June if the credit crunch intensifies, Gertler said.

The Fed has already cut the benchmark rate from 5.25 percent in the past 13 months and created six lending programs channeling more than $1 trillion into the financial system. Banks are still reluctant to lend to each other and the Standard & Poor's 500 Index is down almost 36 percent this year, even after yesterday's surge.

The FOMC is scheduled to announce its decision on rates at about 2:15 p.m. in Washington.

`Inadequate Growth'

``The predominant concern will be inadequate growth,'' said former Fed Governor Lyle Gramley, now a Washington-based senior economic adviser for Stanford Group Co., a wealth-management firm. ``If the economy shows additional signs of a deepening recession, I think the Fed will decide that the floor is not 1 percent.''

Gramley predicts that policy makers will again cut the main rate by 0.5 percentage point at their next scheduled meeting in December, pushing it toward levels last seen in 1958. ``Zero is a possibility,'' he said.

U.S. stocks swung between gains and losses before the Fed decision. The Standard & Poor's 500 Index fell 0.6 percent at 10:47 a.m. in New York. Borrowing costs eased, with the London interbank offered rate, or Libor, for three-month dollar loans dropping 5 basis points to 3.42 percent.

More evidence of weakness came today as orders for U.S. durable goods excluding transportation equipment fell in September, the government reported. The 1.1 percent drop in bookings of goods meant to last several years was less than forecast and followed a revised 4.1 percent decrease in August that was larger than previously reported.

`Weakening Demand'

European Central Bank President Jean-Claude Trichet said Oct. 27 he may reduce interest rates next week, citing ebbing inflation and ``weakening demand.'' The ECB, Fed and four other central banks trimmed rates by a half point on Oct. 8 in an unprecedented coordinated move.

After the emergency cut, the Fed signaled it may ease again, citing ``weakening of economic activity and a reduction in inflationary pressures.''

Most of the FOMC's statement today will focus on the financial crisis, including tightening credit conditions, said Robert Eisenbeis, a former Atlanta Fed economist.

The statement will also note falling energy prices and express ``less concern, as a result, about inflation,'' said Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors Inc. in Vineland, New Jersey. Beginning today the central bank will probably cut in 0.50 percentage-point increments, stopping at 0.25 percent, he said.

Fed policy makers face increasing evidence the economy is already in a recession. Consumer confidence plunged this month, with the Conference Board's confidence index hitting its lowest level since records began in 1967.

Longest Slump

Payrolls fell last month by 159,000 for the biggest reduction in five years, according to Labor Department figures released on Oct. 3. Retail sales fell 1.2 percent in September, extending their decline to a third consecutive month for the longest slump in at least 16 years.

``Sharply increasing unemployment'' and other data indicate ``the probability has gone up substantially'' that the U.S. economy will begin to shrink, St. Louis Fed President James Bullard said Oct. 14.

The Fed cut the main rate to 1 percent in June 2003, leaving it unchanged for a year in response to concerns about deflation. Bullard and Dallas Fed President Richard Fisher have said the low rate stoked inflationary pressures.

Rising prices have faded as a concern in recent months. Americans expect inflation of 2.8 percent over the next five years, the slowest pace in a year, according to the Reuters/University of Michigan preliminary index of consumer sentiment on Oct. 17.

Global Recession

Crude oil fell to a 17-month low on Oct. 27 amid heightened concern that a global recession will erode consumption. The price of oil has tumbled 56 percent since reaching a record $147.27 on July 11.

With inflation abating, the FOMC may vote with no dissents. Fisher supported the last rate reduction after dissenting as recently as Aug. 5 out of concern about rising prices.

``With the deterioration in economic conditions and the recent associated falloff in energy and many other commodity prices, I anticipate further dissipation of inflationary pressures,'' Atlanta Fed President Dennis Lockhart said Oct. 20.

Cutting rates too far may hurt the money market mutual fund industry by making it difficult for the funds to attract deposits profitably, said Vincent Reinhart, the Fed's chief monetary- policy strategist from 2001 until September 2007.

``As the policy rate goes closer toward zero, rates get compressed and those business models are called into question,'' he said. If that concern is dispelled, the main rate ``could go to 1 percent'' while policy makers say risks are ``tilted toward economic weakness,'' indicating they may further pare rates.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

KS Energy liftboat sinks on way to fulfil North Sea contract

2008-10-29T19:17:00.001+08:00

Lost at sea: a Singapore- owned jack-up liftboat which was contracted to support installation
and maintenance of wind power projects in the North Sea. KS Energy Services yesterday
reported that Titan-1 - which was on a US$43.9 million charter to Siemens Wind Power -
capsized and sank in the Atlantic this week as it was being transported there. Titan-1 - a 50:50
joint venture of KS and Ezra Holdings - was to have executed an 817-day contract for Siemens
for installation, servicing and maintenance of wind turbines, offshore Denmark and the UK. KS,
however, assured that Titan-1, which is said to cost around US$40-50 million to build, is fully
insured by the company's insurance group. It does not expect the accident to have any
material impact on its FY 2008 results. It is meanwhile discussing with Siemens substituting an
identical sister-ship, KS Titan-2, for the charter.
KS had taken delivery of Titan-1 in March-April this year, and of Titan-2 - a separate 50:50
venture of KS and Sinwa - in June-July. A KS spokeswoman told BT that Titan-2 is not under
charter at the moment and will be immediately available to Siemens, although KS has now to
be extra careful regarding its transportation to the North Sea. KS said that this week's accident
happened during the night of Oct 26-27, when the heavylift vessel M/V Ancora aboard which
Titan-1 was loaded, encountered engine problems in the middle of the Atlantic. It was enroute
from Pascagoula in the US to Liverpool. 'As a consequence of the vessel's rolling and tilting
motion, the Titan-1 shifted to portside, capsized and was lost at sea.' 'KS, through its whollyowned
subsidiary Atlantic Oilfield Services, is currently in discussions with Siemens to
substitute the Titan-1 with identical sister-ship Titan-2 for the execution of the contract,' the
spokeswoman said. Titan-2, also in Pascaguola, can reach Siemens in a couple of weeks.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Asian Stocks Drop on Growth Concerns, Commodities; NEC Declines

2008-10-22T13:26:00.000+08:00

By Patrick Rial and Satoshi Kawano

Oct. 22 (Bloomberg) -- Asian stocks slumped, snapping a two- day rally, as weaker earnings at companies including NEC Electronics Corp. and Singapore Petroleum Co. heightened concern the global economy is headed for a recession.

NEC Electronics plunged the most on record after reversing its profit forecast to a loss, causing parent NEC Corp. to drop 9.4 percent. Mitsubishi UFJ Financial Group Inc., Japan's largest listed bank, slumped 6.1 percent after a newspaper reported earnings probably dropped by half. Posco retreated 3 percent after announcing steel production cuts. Singapore Petroleum plunged after third-quarter profit tumbled 99 percent.

``Whether you are talking about the U.S. or over here, there is no escaping the drop-off we're going to have in profits,'' said Jun Morita, a fund manager at Chiba Bank Ltd. in Tokyo, which has $3.1 billion in tradable securities. ``The market is taking any bad news on earnings as a signal to sell.''

The MSCI Asia Pacific Index declined 2.5 percent to 90.39 as of 11:32 a.m. in Tokyo. The gauge rallied 6.2 percent in the past two days as money market rates dropped around the globe, boosting confidence the financial crisis is abating.

The index has plunged 43 percent this year, set for its worst annual performance since it was created in 1987, as credit market turmoil caused losses and writedowns of more than $660 billion at financial institutions and slowed global growth.

World's Cheapest

The slump has brought shares on the index to 1.2 times book value, making Asian equities cheaper than those in the U.S. and Europe. The S&P traded at 1.8 times book value, while stocks in Europe's Dow Jones Stoxx 600 Index are valued at 1.4 times.

Japan's Nikkei 225 Stock Average declined 2.9 percent to 9,041.07, led by Konica Minolta Holdings Inc., after the yen surged to a four-year high against the euro. Losses by South Korea's Kospi index were limited as Samsung Electronics Co. climbed after scrapping its bid for SanDisk Corp. Equity benchmark indexes throughout the region dropped.

Standard & Poor's 500 Index futures rose 0.5 percent in trading today after Apple Inc. posted a 26 percent gain in profit, beating estimates. U.S. stocks slid yesterday as companies from Texas Instruments Inc. to Freeport-McMoRan Copper & Gold Inc. reported profit and revenue that missed analysts' estimates. The S&P 500 Index lost 3.1 percent.

NEC Electronics, Japan's third-biggest chipmaker, tumbled 19 percent to 1,227 yen, the steepest fall since the stock was listed in July 2003.

Semiconductor Declines

The company yesterday said it will probably have a net loss of 8 billion yen ($79.8 million) this year because demand for semiconductors slumped, reversing an earlier forecast to break even. NEC, which owns 70 percent of the company, declined 9.4 percent to 337 yen.

Powerchip Semiconductor Corp., Taiwan's largest memory-chip maker, lost 3.4 percent to NT$4.61 after reporting a third- quarter loss that was more than double analysts' estimates after prices fell because of oversupply.

Samsung, the world's biggest computer-memory maker, rebounded from a loss to climb 0.4 percent to 521,000 won after saying it scrapped plans to buy SanDisk, citing ongoing turmoil in financial markets and the declining value of the target.

Toshiba Corp., which partners with SanDisk in flash memory production, jumped as much as 3.2 percent to 382 yen on relief the company won't be squeezed out of the market.

Bank Profits

Mitsubishi UFJ fell 6.1 percent to 797 yen. The bank's first-half profit may fall about 50 percent because of higher costs to dispose of bad loans and writedowns on its shareholdings, the Nikkei newspaper said today.

Closest rivals Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. may post earnings that are lower than their estimates, the newspaper said. Mizuho lost 4.7 percent and Sumitomo Mitsui sank 5.7 percent.

``We've only just started to see the impact of the growth slowdown on the real economy,'' said Angus Gluskie, who helps oversee A$450 million at White Funds Management in Sydney. ``The companies that have been reporting now haven't been materially impacted by the slowdown yet.''

Posco, the largest steelmaker in South Korea, tumbled 3 percent to 311,500 won. Nippon Steel Corp., the world's second- biggest producer, lost 5 percent to 323 yen. BlueScope Steel Ltd., Australia's largest steelmaker, slid 5.7 percent to A$4.47.

Posco said today it will slash output of stainless steel by about a third this quarter, reining in production to cope with a slowdown in demand. Shoji Muneoka, chairman of the Japan Iron & Steel Federation and president of Nippon Steel, said yesterday Japanese producers may lower output this quarter on slower demand.

Profit Plunge

Singapore Petroleum, the only refiner traded on the Singapore exchange, tumbled 14 percent to S$2.58, set for its biggest loss in a decade. Third-quarter profit plunged 99 percent from a year earlier as falling crude prices caused the company to write down the value of its inventory.

BHP Billiton Ltd., the world's biggest mining company, declined 4.7 percent to A$27.92 after the London Metal Exchange Index fell 3.3 percent to the lowest level since November 2005.

First-quarter iron ore output rose 15 percent, crude-oil and condensates output surged 43 percent, while production from Escondida -- the world's largest copper mine -- slumped 32 percent in the September quarter, BHP said today.

Sumitomo Metal Mining Co., Japan's biggest nickel maker, tumbled 7.2 percent to 798 yen after Credit Suisse Group cut its rating on the shares to ``neutral'' from ``outperform,'' citing lower forecasts for metals prices.

Stronger Yen

Konica Minolta, the world's second-largest maker of film used in liquid-crystal displays, tumbled 10 percent to 772 yen. The company sees an 850 million yen drop in operating profit for every 1 yen gain against the euro, according to KBC Securities. Olympus Corp., which generates more than a quarter of its sales in Europe, slumped 5.6 percent to 2,275 yen.

The yen strengthened to as much as 130.07 per euro today, the highest since June 2004. The stronger yen reduces the value of sales generated overseas.

Mazda Motor Corp., 33 percent owned by Ford Motor Co., dropped 7.4 percent to 263 yen on speculation Ford may unload its stake in the company to raise cash. Mazda also counts Europe as its second-largest market.

Hyundai Motor Co., South Korea's biggest, lost 3.4 percent to 56,400 won. Isuzu Motors Ltd., Japan's third-biggest maker of commercial vehicles, tumbled 8.1 percent to 193 yen.

Citic Tumbles

Citic Pacific Ltd. fell for a second day, declining 11 percent to HK$5.80, after falling 55 percent yesterday on the news that the unit of China's biggest state-owned investment company may lose as much as $2 billion on currency bets.

Hong Kong lawmakers urged regulators to investigate Citic Pacific's delay in disclosing its currency-hedging loss, the South China Morning Post said.

National Australia Bank Ltd., the nation's largest by assets, rose 3.7 percent to A$25.57. Australia & New Zealand Banking Group Ltd., the third biggest, gained 1.8 percent to A$19.19.

Australian funding costs fell for a third consecutive day as banks' deposits at the central bank dropped and the Reserve Bank of Australia pumped A$2.46 billion ($1.67 billion) into the financial system today.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

U.S. Stocks Gain, Led by Energy Shares on Halliburton Earnings

2008-10-21T05:50:00.000+08:00

By Elizabeth Stanton

Oct. 20 (Bloomberg) -- U.S. stocks rose, adding to the Dow Jones Industrial Average's best weekly gain in five years, after Halliburton Co.'s profit topped estimates and Federal Reserve Chairman Ben S. Bernanke endorsed an economic stimulus package.

Halliburton, the world's second-largest oilfield-services provider, jumped 14 percent, while Exxon Mobil Corp. added 10 percent. NRG Energy Inc. surged 29 percent, the most since emerging from bankruptcy in 2003, on Exelon Corp.'s offer to buy the power producer for $6.2 billion. Energy companies, the industry with the highest estimated earnings growth this year, led the 30 percent drop in the Standard & Poor's 500 Index from Aug. 31 to Oct. 10. The group rallied 11 percent today.

``You've got significant rebound capability on these stocks,'' Wayne Wilbanks, chief investment officer at Wilbanks Smith & Thomas, said of energy shares. ``They took the brunt of the forced hedge-fund selling. There's no other way to explain Halliburton going from $33 to $16 in three weeks.'' Norfolk, Virginia-based Wilbanks manages $1.2 billion.

The S&P 500 rallied 44.85, or 4.8 percent, to 985.40. The Dow surged 413.21, or 4.7 percent, to 9,265.43, with all 30 of its companies increasing. The Nasdaq Composite Index rose 58.74, or 3.4 percent, to 1,770.03. More than five stocks advanced for each that fell on the New York Stock Exchange.

Bernanke, LEI

The Dow average added to last week's 4.8 percent advance, its best since 2003. All 10 industry groups in the S&P 500 rallied at least 2.8 percent today as a retreat in money market rates also boosted stocks. About 1.2 billion shares changed hands on the NYSE, 17 percent less than the three-month daily average.

Benchmark indexes extended gains this morning after the Conference Board's index of leading economic indicators unexpectedly rose in September and Bernanke said lawmakers should consider new measures to improve access to credit for consumers, homebuyers and businesses.

U.S. stocks climbed last week on the government's plan to inject $250 billion into financial companies. The Dow is still down more than 30 percent this year and the S&P 500 is off almost 33 percent as credit losses and asset writedowns stemming from the collapse of the subprime mortgage market top $660 billion at financial firms worldwide.

Europe's Dow Jones Stoxx 600 Index added 3.6 percent, while the MSCI Asia Pacific Index rose 3.8 percent after ING Groep NV received a 10 billion-euro ($13.4 billion) lifeline from the Dutch government and South Korea guaranteed $100 billion of lenders' foreign-currency debts.

Halliburton Earnings

Halliburton jumped $2.54 to $20.80. Excluding an acquisition charge and $693 million in costs related to redemption of convertible bonds, per-share profit was 76 cents, 2 cents higher than the average of 24 analyst estimates compiled by Bloomberg.

``Whenever somebody reports numbers that exceed expectations, that's a positive not only for the individual stock but the broader market,'' said Dean Gulis, who helps manage about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``In a case like Halliburton, it carries over to its sector. You have a good number of attractively valued opportunities out there.''

Exxon gained $6.95 to $74.99. Crude oil for November delivery climbed 3.3 percent to $74.25 a barrel in New York on speculation OPEC will cut production to halt a 50 percent slide in prices from July's record.

Fadel Gheit, an analyst at Oppenheimer & Co., upgraded Exxon, ConocoPhillips and Chevron Corp., to ``outperform'' from ``market perform'' on the prospect of higher earnings and mergers that boost stock valuations.

Hedge-Fund Stocks

Goldman Sachs Group Inc.'s Hedge Fund VIP Basket, a gauge of 49 stocks with the highest ownership among hedge funds, climbed 6.1 percent today, with almost half the gains coming in the final hour of trading. More than a third of the stocks in the index are energy companies.

Investors pulled a record $43 billion from hedge funds in September, and U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings.

NRG Energy soared $5.67 to $25 after Exelon offered to buy the second-biggest electricity generator in Texas. Exelon, the biggest U.S. operator of nuclear power plans, rose 0.2 percent to $54.59 for the smallest gain among the 31 utilities in the S&P 500.

Utilities Rally

Exelon followed Warren Buffett in bidding for cheapened power assets after the credit freeze dragged down stock prices. Buffett's MidAmerican Energy Holdings Co. agreed Sept. 18 to buy Constellation Energy Group Inc. for $4.7 billion, less than half the company's market value a week earlier.

AES Corp., a power producer with operations in more than two dozen countries, led S&P 500 utilities to an 8.1 percent gain. AES climbed 21 percent to $9.89 for the biggest gain in the S&P 500.

Financial companies in the S&P 500 rose 2.8 percent as a group, the smallest gain among its 10 main industries.

Bank of America Corp., Goldman Sachs Group Inc. and JPMorgan Chase & Co. advanced after a decrease in money market rates signaled central bank efforts to revive bank lending are succeeding. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell by 36 basis points to 4.06 percent today, according to the British Bankers' Association, the biggest drop in nine months.

KeyCorp and National City Corp. led declines in regional banks. Both were scheduled to release third-quarter results before the market opens tomorrow.

Libor Still `Elevated'

Three-month Libor is ``still very elevated,'' said Walter Todd, a money manager at Greenwood Capital Inc. in Greenwood, South Carolina, which oversees $1 billion. ``The cost of credit to companies and individuals is permanently reset higher. We are not going back to the cheap credit days of a year ago.''

Developers Diversified Realty Corp. and General Growth Properties, real-estate companies, fell the most in the S&P 500. GGP, a mall owner, may sell up to $2 billion in preferred shares to shore up capital, the Wall Street Journal reported. The CEO of Developers Diversified, which manages shopping centers, today pledged to reduce its debt load.

Earnings Watch

At least 139 S&P 500 companies will report third-quarter earnings this week, including Apple Inc., Caterpillar Inc. and McDonald's Corp. Wall Street analysts forecast an 11 percent drop in third-quarter earnings in a Bloomberg survey. Energy companies are forecast to show profit growth of 45 percent in the third quarter and 14 percent in the fourth quarter.

American Express Co., the biggest U.S. credit-card company by purchases, rose in trading after the official close of U.S. exchanges after third-quarter profit topped analysts' estimates. Still, profit fell for the fourth straight quarter as more consumers defaulted on loans.

Texas Instruments Inc. slumped in after-hours trading after reporting a 27 percent drop in third-quarter profit and issuing a fourth-quarter forecast that fell short of analyst estimates.

The S&P 500 trades at about 11.9 times estimated earnings over the coming 12 months, compared with a price-to-earnings multiple of 16.6 at the end of last year.

``You don't know if it's cheap,'' said Ralph Shive, chief investment officer at 1st Source Corp. Investment Advisors in South Bend, Indiana, which manages $3 billion. ``It could be, but it's hard to get much confidence about corporate earnings.''

For Related News:

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Dollar Falls on Concern Credit Crisis Will Hurt Economic Growth

2008-10-17T11:03:00.001+08:00

Oct. 17 (Bloomberg) -- The dollar fell against the euro, headed for its first weekly decline this month, before U.S. reports that will probably show a deepening housing slowdown eroded consumer confidence.

The U.S. currency also fell against the British pound and the Swiss franc on prospects the credit crisis will hurt growth in the world's largest economy, prompting traders to add to bets on a Federal Reserve interest-rate reduction.

``The reports may reinforce worries that the U.S. is in a recession and concerns linger over its financial markets,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``The dollar is still a sell.''

The dollar dropped to $1.3501 per euro at 9:35 a.m. in Tokyo from $1.3456 late in New York yesterday and from $1.3408 on Oct. 10. It traded at 101.60 yen from 101.57 yen yesterday and 100.67 a week ago. Against the euro, the yen was at 137.14 from 136.73.

The U.S. currency weakened to 1.1334 versus the Swiss franc from 1.1379 and declined to $1.7348 against the British pound from $1.7304.

The dollar headed for weekly losses against 9 of the 16 most-active currencies as U.S. housing starts declined to an annual rate of 870,000 homes in September, the fewest since January 1991, from 895,000 in August, according to a Bloomberg News survey of economists. The Commerce Department will issue the report at 8:30 a.m. in Washington.

Investors `Worried'

The Reuters/University of Michigan preliminary index of consumer sentiment, due at 10 a.m., likely decreased to 65.0 in October from 70.3 in September, a separate survey showed.

Futures traded on the Chicago Board of Trade show a 46 percent chance the Fed will lower its 1.5 percent target rate for overnight bank loans by a half-percentage point to 1 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a week ago. The odds of a quarter-point cut are 54 percent.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Singapore S shares agri stocks-report by DMG

2008-10-15T12:57:00.003+08:00

Lee Shaun Tzen (62323894, shaun-tzen.lee@dmgaps.com.sg)

Global food prices have recently come off since July 2008. Corn prices reached the highest on
27 July 2008 at US$7.15 per bushel. However, since the week of 6 October 2008 corn prices
have crashed below US$4.00 per bushel. Prices for rice have also dropped from US$20.32 per
bushel in September 2008 to US$16.74 per bushel as of last week. Soya bean prices have
fallen US$15.69 per bushel in September 2008 to US$7.95 per bushel on 10 Oct 2008.

Given the softening food commodity prices, we have lowered our earnings forecasts for China
Farm Equipment (CFE) and China Milk on anticipation of lower sales volume. However we have
maintained our earnings for China XLX Fertiliser.

Share prices for CFE, China Milk, China XLX and other S-chips have fallen tremendously, partly
due to the global credit concerns. The P/E ratio for the FSTC index has plunged from a high of
18.4x in January 2008 to 4.3x as of 10 October 2008. The estimate FY09 P/E of the index is
4.0x. We are therefore lowering our P/E valuations for the three agriculture stocks.

Maintain BUY for CFE. We have lowered our price target of S$0.56 to S$0.36 based on 6x
FY08 P/E which is a premium to the FSTC P/E estimate of 4.0x. We believe that demand for
farm equipment will remain relatively strong.
Maintain BUY for China Milk. We have lowered our price target of S$1.00 to S$0.975 based
on 6.5x FY09 P/E. We have given China Milk a premium to the FSTC P/E because we believe
that the company’s core business in producing pedigree bull semen is still a growth area. The
company is currently trading at 3.1x FY09 P/E and 2.8x FY10 P/E which is considerably lower
compared to the FSTC P/E of 4.0x.
Maintain BUY for China XLX. China XLX is currently trading at 3.7x FY08 P/E. We maintain
our earnings forecast for China XLX. However, we have lowered our price target of S$0.99 to
S$0.70 which is pegged to 8.5x FY08 P/E. We have given China XLX a premium because we
believe that the Chinese government will raise the current price cap of RMB1,725/tonne of urea
based fertiliser.
The table below provides a clearer picture of CFE’s, China Milk’s, and China XLX’s debt
situation. China Farm Equipment is in a net cash position, China Milk is in a strong net cash
position, and China XLX is the only company with net gearing of 13% which is relatively low.
The 13% is due to its gearing for the 3rd plant which will cost about RMB930m and will be
operational by 3Q09.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Paulson Lacks Leverage to Compel Banks to Put New Cash to Work

2008-10-15T12:52:00.000+08:00

By Robert Schmidt and Rebecca Christie

Oct. 15 (Bloomberg) -- Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.

The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.

``The truth of the matter is, they can't put a gun to their head and say you have to lend this money,'' said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.

Treasury officials acknowledge they can't force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government's investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.

``It's in their economic interest,'' said David Nason, the Treasury's assistant secretary for financial institutions, in an interview with Bloomberg Television. ``When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it's incumbent upon them to go out and continue to lend.''

Powerful Incentive

Tim Ryan, head of the Securities Industry and Financial Markets Association and a former bank regulator, said the sheer scale of the capital infusion banks are receiving is in itself a powerful incentive to put the funds to work in the economy.

``The bully pulpit doesn't really work with banks, but capital does,'' said Ryan, who directed the U.S. Office of Thrift Supervision in 1990-1992.

The government is providing banks with ``quite a war chest that they were not expecting,'' Ryan said. ``They need to put it to work. The only way you put it to work is to lend.''

The Bush administration's rescue, part of a $700 billion bailout passed by Congress this month, is raising questions about what role the federal government will play as it becomes a leading investor in the financial sector. Already, companies that accept the taxpayer money are required to submit to restrictions on their top executives' pay.

Government Involvement

``Obviously there is a danger'' of increased government involvement in banks' corporate affairs, said Martin Baily, a senior fellow at the Brookings Institution in Washington and former chairman of the Council of Economic Advisers under President Bill Clinton.

Still, Baily said that the equity purchases are set up to minimize government intervention.

Treasury has ``been telling these institutions what to do in the last couple months, so they've exercised a good bit of control,'' Baily added. ``I think they'd like to get out of that business.''

The Bush administration is counting on agencies that already regulate the banks, such as the Federal Reserve, to keep an eye on daily operations. Those agencies can encourage firms to keep credit flowing to businesses and households.

``The regulators can do a lot to give the signals to the bank,'' said finance professor Len Rushfield of Pepperdine University in Los Angeles.

Pressure Has Limits

Even so, subtle government pressure on banks may not make much difference. Unlike with the recent federal takeovers of Fannie Mae, Freddie Mac and insurer American International Group Inc., the U.S. won't take a major share of the banks they invest in. Also, the Treasury has said it won't seek voting rights when it buys stakes.

The Treasury said it would dedicate $250 billion to boost bank capital through preferred stock purchases. Bank regulators estimated yesterday that ``thousands'' of financial companies would participate, although the program will begin with the nine big banks.

``What you'll see most large institutions saying is, `We will certainly listen to the government but our decisions are what's in the best interest of our shareholders,''' said John Coffee, a securities law professor at Columbia University.

Financial companies that accept government investments also are counting on Paulson's pro-market philosophy to keep the government out of their boardrooms. The secretary, announcing the capital injections yesterday, said that he regretted having to make such a move.

Alternative `Unacceptable'

``Government owning a stake in any private U.S. company is objectionable to most Americans -- me included,'' he said. ``Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable.''

Bank executives know that the Treasury and members of Congress are going to monitor the situation, said Scott Talbott, chief lobbyist for the Financial Services Roundtable.

``Policy makers will watch closely to insure that the money is used for credit,'' he said.

The one unknown that makes Wall Street nervous, several industry executives said, is what the next Treasury secretary will do. The U.S. presidential election is less than a month away.

``You'd probably want to have Hank Paulson, more than a lot of other people'' overseeing the bailout, said Edward Fleischman, a Republican Securities and Exchange Commissioner from 1986 to 1992, and now a senior counsel at the Linklaters law firm in New York. ``But you're not going to have any choice who takes his job.''

For Related News:

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net. Rebecca Christie in Washington at Rchristie4@bloomberg.net.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

More bad news to be expected

2008-10-14T09:33:00.002+08:00

US Treasury Secretary Hank Paulson expects that "the current strained situation" in the markets " will take more time to play out, and more bad news will come to light.
He has become the main man to watch for US market rescue in recent months.

If one may recalls, a few months back, the world focus was on Frank Bernanke, FED chairman. He is now in the backseat as he has no more bullet to use. The US government is making history and headlines in its efforts to rescue the dire economic situation or at least show the US citizens their efforts in doing so before the presidential elections in Nov.

The question to ask is how much more ammo does the US government have. You cannot give a dying man a miracle jab and he jumps to life. if he does recover, It will be very gradual. Look at the past depressions, it has always been a gradual bottoming out towards the end followed by a gradual rise. Such sharp rally movements yesterday and today are not sustainable. I see as an opportunity to further short the market or get rid of the stock you are holding.

At least Paulson is right in more bad news to be expected.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Banks: Provisions hiked to factor in rising NPLs

2008-10-14T09:05:00.000+08:00

Slower Singapore economic growth. Given the 0.5% Singapore GDP YoY contraction for 3Q08 (as per the flash numbers released by the Singapore
Ministry of Trade & Industry), expectations are for further economic weakness
going ahead. The Singapore government has also lowered its 2008 GDP
forecast to 3%.
We have lowered our earnings forecasts for the banks:
• 2008 loan expansion forecast in the low teens is expected to be followed by
low single-digit in 2009.
• Fee & commission income is seen to weak as capital market activities slow
down and sales of wealth management products soften.
• Loan loss provisions is seen to increase more significantly in 2009 as some
asset quality deterioration take place.
Further risk of earnings deterioration could arise from provisions coming
even higher than our revised levels. Our sensitivity analysis shows that an
increase of provisions amounting to 10 bps of average interest earning assets
could lead to a further 7.4% fall in DBS 2009 net profit, 5.6% for OCBC and
5.7% for UOB. The higher sensitivity for DBS makes it relatively less attractive
when compared against its two peers.
Our banks’ price targets have also been cut. We now value the banks by
applying a premium over the 2003 low P/B levels. The recent concerns on the
global credit situation has made the market much more focused on the
economic slowdown going ahead into 2009. Hence, the Singapore banks are
more likely to trade at P/B levels closer to the 2003 levels.
Amongst the banks, we continue to favour OCBC. OCBC has been less
aggressive in loan expansion over the past 3.5 years (Dec 04 till Jun 08) than
DBS, and this should lead to a lower rise in NPL ratio going ahead. In addition,
it has a strong capital position, given its recent raising of Tier 1 capital over the
past 3-4 months. OCBC remains a BUY with a target price of S$7.80, based on
1.5x of 2009 book.
We also recommend BUY on UOB (target price of S$18.40, pegged to 1.5x of
2009 book). UOB has also been more conservative in lending over the past few
years, and this should help to protect its balance sheet strength going ahead. In
addition, UOB has historically kept its expense-income ratio relatively low and
this will help to support earnings in such periods of economic weakness. Lastly,
the S$1.32b of capital raised in Sep 08 has strengthened its balance sheet
robustness.

Stock Recommendations
DBS Group Holdings
S$14.86 NEUTRAL (TP: S$15.50)

OCBC
S$6.42 BUY (TP: S$7.80)

UOB
S$15.70 BUY (TP: S$18.40)

analysis by DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Jardine C & C: falling CPO prices hurting agri-business(report by DMG)

2008-10-14T08:52:00.000+08:00

CPO prices slide. The price of crude palm oil (CPO) declined substantially over the past few
months. CPO prices are likely to remain under pressure as the lower oil price has weakened the
position of palm oil as a biofuel. Demand for palm oil is also expected to be lower.
Agribusiness supported by strong ASP for CPO in 1H08. While the declining CPO prices are
likely to affect JC&C’s agribusiness going forward, we believe the impact for FY08 would be
partially offset by the strong CPO prices we saw in 1H08. JC&C’s subsidiary, Astra’s ASP for
CPO was over IDR8,000 per kg during the first six months of the year. Hence, we are expecting
a slight increase YoY in CPO ASP for FY08, compared with FY07. The agribusiness accounted
for 33% of JC&C’s operating profit in FY07.
We continue to like JC&C for its diversified businesses, although the current economic environment is weak. With the slowdown in the global economy, we have lowered our ascribed
PE valuations for the Group’s businesses. We are maintaining our earnings estimate of
US$398.8m for FY08, as we had already factored in the declining CPO price. Based on our
SOTP valuation, we arrive at a lower target price of S$12.28, down from S$19.40 previously. At
the current price of S$9.97, our revised target price presents an upside of 23.2%. Assuming that
JC&C maintains its dividend payout ratio, the potential dividend yield would be an attractive
4.4%. Although the share price is rather volatile lately, we maintain BUY.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Indofood Agri Resources: Lonsum’s scientific breakthrough – DMG report

2008-10-08T13:07:00.000+08:00

Patenting the F1 production process. PT PP London Sumatra Indonesia Tbk’s (Lonsum)subsidiary, Sumatra Bioscience (SB), announced yesterday that it has developed a process,reportedly the world’s first, to produce F1 oil palm hybrid seeds, reinforcing our belief in thestrength of their research facility. The European Patent Office has verified SB’s approach to F1oil palm hybrids as the first of its kind and hence, potentially allowing SB to be the first commercial producer of F1 oil palm hybrids.

Yield estimated to triple, boosting competitiveness over rival oils. Based on historic yieldsfrom other F1 hybrid crops in USA, such as corn, oil palm’s conventional yield is estimated tomore than triple, reaching 18.5 tonnes/ha. For illustration, corn’s annual yield in the USAincreased six folds since the 1930s, after using F1 hybrid seeds. Palm oil is currently thecheapest and most productive of all oil crops. The potential increment in yield would boost palmoil’s competitiveness vis-à-vis its rival vegetable oils.

Freeing up precious land. With the ability to generate higher yields, the hybrid seeds will resultin less land required for crop cultivation. This would help alleviate the escalating global foodshortage crisis – the World Bank estimates global demand for food is forecasted to double by2030, with the world’s population expected to grow by an additional three billion by 2050.

More environmentally sustainable. With the rapid growth in palm oil consumption, there havebeen many environmentalists/ organizations lobbying for sustainable palm oil production. Thereis concern that this growth in production has occurred at the expense of irreplaceable tropicalforests in Indonesia and Malaysia. With the reduction in land required for palm oil cultivationmentioned above, this concern can be partly assuaged.

No near term impact on earnings. SB expects to commence commercial production of F1 oilpalm hybrids by 2018. In line with its commercialization plans, SB will invest US$5m in FY09 toexpand its existing R&D facilities.Sensitivity analysis and valuation.

Current CPO spot prices are around RM1,800-1,900/tonne.At this price range, our sensitivity analysis indicates that Indofood Agri’s (IFAR) target pricewould be S$1.48. We are currently using a CPO price assumption of RM2,600/tonne for FY09,obtaining a target price of S$2.65. With IFAR trading at 2.8x FY09 earnings we maintain ourBUY rating.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Asian Stocks Fall, Extending Global Rout, on Recession Concern

2008-10-07T08:34:00.000+08:00

Oct. 7 (Bloomberg) -- Asian stocks slumped for a fourth day, extending a global rout, as electronics makers and commodity producers slumped on concern the seizure in credit markets will deepen a global recession.
Sharp Corp. was poised to fall after cutting its annual earnings forecast as the Nikkei 225 Stock Average sank below 10,000 for the first time since December 2003. BHP Billiton Ltd., the world's largest mining company, lost 2 percent after metals tumbled. National Australia Bank Ltd. dropped 2.7 percent as Bank of America Corp. halved its dividend after a drop in profit.
``The fear that most major economies are going into recession hasn't abated,'' said Jason Teh, who helps manage the equivalent of $5.7 billion at Investors Mutual Ltd. in Sydney.
The MSCI Asia Pacific Index fell 3.2 percent to 97.25 as of 9:26 a.m. in Tokyo, a fourth-straight decline. All 10 industry groups on the index dropped, with financial companies and raw- materials producers contributing the most to the retreat.
Japan's Nikkei 225 tumbled 5.1 percent to 9,938.98. Mitsui Mining & Smelter Co., the co-owner of Japan's biggest copper smelter, dropped 6.6 percent to 197 yen, after slashing a planned dividend and forecasting a second year of profit declines.
Australia's S&P/ASX 200 Index slipped 2.6 percent. South Korea's Kospi Index slid 2.7 percent.
The Dow Jones Industrial Average closed below 10,000 for the first time since October 2004, falling as much as 800 points at its lowest level. The Standard & Poor's Index retreated 3.9 percent to 1,056.89, extending the worst weekly slump since 2001. S&P futures were little changed today.
A measure of six metals traded on the London Metal Exchange slumped 5.8 percent, the steepest decline since Aug. 16, 2007. Zinc fell 2.9 percent, copper 7.5 percent and nickel 5.6 percent.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg; Shani Raja in Sydney at sraja4@bloomberg.net.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Global Stocks, U.S. Index Futures Fall as Credit Crisis Widens

2008-10-06T16:14:00.001+08:00

Oct. 6 (Bloomberg) -- Stocks tumbled in Europe and Asia and U.S. index futures dropped as deteriorating credit markets forced new bailouts of Hypo Real Estate Holding AG and Fortis, while governments pledged to protect depositors. The euro slumped to a 13-month low, while Treasuries advanced.

UBS AG dropped 8.6 percent in Zurich and Japan's Mitsubishi UFJ Financial Group Inc. sank by a record 9.9 percent after Germany agreed on a $68 billion plan for Hypo and BNP Paribas SA said it will take control of Fortis in Belgium and Luxembourg. Hypo Real Estate plummeted 54 percent. BHP Billiton Ltd. lost 10 percent after copper and gold prices sank amid concern a $700 billion U.S. bank bailout won't prevent a slowdown in global economic growth.

``It's like a fire,'' said Emmanuel Soupre, a fund manager at Neuflize OBC Asset Management in Paris, which oversees the equivalent of $33 billion. ``It's easier to extinguish five minutes after the start. Now we're about an hour into it. We have to act quickly to assure the continuity of the financial system to avoid an irreversible contamination of the entire economy.''

The MSCI World Index lost 2 percent to 1,116.1 at 8:05 a.m. in London as all 10 industry groups decreased. National markets in China, Germany, France, Japan, South Korea and the U.K. fell more than 4 percent.

Europe's Dow Jones Stoxx 600 Index sank 3.9 percent with all but six stocks declining. The MSCI Asia Pacific Index lost 3.6 percent. Futures on the Standard & Poor's 500 Index slipped 1.9 percent.

`Intervention Needed'

``It will probably be a rough week for global investors as they realize the credit crisis has a long way to play out,'' said Frederic Dickson, who helps oversee $25 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ``U.S. action was an absolutely essential first step, and global intervention is needed.''

National benchmark indexes sank in all 14 western European markets that were open. France's CAC 40 slumped 4.6 percent, and the U.K.'s FTSE 100 decreased 4.6 percent. Germany's DAX fell 4.5 percent.

In Asia, Japan's Topix index lost 5 percent, and South Korea's Kospi lost 4.4 percent. China's CSI 300 Index fell 4.8 percent, as trading resumed after a one-week holiday.

The MSCI Emerging Markets Index dropped 5.3 percent, bringing this year's retreat to 44 percent. Russia's RTS Index slipped 7.6 percent, and Turkey's ISE National 100 Index sank 6.2 percent.

Treasuries rose for a fourth day, sending two-year notes to their longest winning streak in six weeks. The euro fell to a 13-month low against the dollar and dropped to its weakest versus the yen in more than two years.

Credit Losses

The MSCI World lost 30 percent this year as bailouts of financial companies accelerated and bank credit losses and writedowns approached $600 billion. The index for 23 developed countries is valued at 13.6 times the earnings of its companies, the lowest since at least 1995, according to data compiled by Bloomberg. Europe's Stoxx 600 trades at 11 times earnings, near the lowest since at least 2002, while the S&P 500 is valued at 20.9 times earnings.

UBS lost 8.6 percent to 21.92 francs. The bank's earnings power may be ``challenged for some time,'' and UBS may write down $3.1 billion in the third quarter, Oppenheimer & Co. analyst Meredith Whitney wrote in a note to clients. She cut her third-quarter earnings-per-share estimate to 13 cents from 43 cents.

Mitsubishi UFJ, Japan's largest bank, fell 9.8 percent to 801 yen. Mizuho Financial Group Inc. dropped 8.7 percent to 398,000 yen.

Bailouts

BNP Paribas dropped 5.2 percent to 67.665 euros. France's biggest bank agreed to take control of Fortis in Belgium and Luxembourg for 14.5 billion euros ($19.8 billion) after an earlier government rescue failed to ensure the company's stability.

Hypo Real Estate plunged 4.05 euros to 3.46. The German government and the country's banks and insurers agreed on a 50 billion-euro rescue package for commercial property lender after an earlier bailout faltered.

U.K. Chancellor of the Exchequer Alistair Darling said Britain is ``ready to do whatever it takes'' to help its banks. French President Nicolas Sarkozy, who convened an Oct. 4 meeting with leaders of Europe's four biggest economies, called for a global summit ``as soon as possible'' to implement ``a real and complete reform of the international financial system.''

Protecting Depositors

Germany will guarantee the savings of private account holders, Chancellor Angela Merkel said, in a bid to prevent a rush of withdrawals. Denmark said commercial lenders will provide as much as 35 billion kroner ($6.4 billion) over the next two years to a fund to insure depositors against losses.

The S&P 500 fell 9.4 percent last week, the most since the September 2001 terrorist attacks, as U.S. President George W. Bush signed the rescue package into law to stem a crisis that has claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc.

The legislation enables the government to purchase non- performing assets from institutions and suspend an accounting rule requiring businesses to report losses if asset values fall.

The euro earlier reached $1.3610, the lowest since Sept. 5, 2007. It fell to 141.97 yen, the weakest since May 18, 2006, as investors cut holdings of higher-yielding currencies funded in the Japanese currency.

Falling Dominoes

``The euro zone is the second domino of the globe to be falling over after the U.S.,'' said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland.

Asian money-market rates stayed at the highest in more than nine months. Hong Kong's three-month interbank offered rate rose to 3.85 percent. The Tokyo interbank offered rate for such loans was unchanged at a nine-month high of 0.868 percent.

BHP Billiton, the world's largest mining company, sank 9.9 percent to 1,069 pence. Rio Tinto Group, the third-biggest, slipped 12 percent to 3,006 pence.

Royal Dutch Shell Plc, Europe's biggest oil company, dropped 4.9 percent to 1,548 pence.

Bullion for immediate delivery was down 0.8 percent at $829.35 an ounce. Copper declined 3.5 percent to $5,800 a metric ton on the London Metal Exchange today. Crude oil fell for a fourth day in New York, dropping as much as 2.4 percent to $91.60 a barrel. Power station coal prices at Australia's Newcastle port dropped 6.1 percent last week, a seventh decline.

Commodities Drop

Datong Coal Industry Co., China's second-largest producer of the fuel by capacity, slumped by the 10 percent daily limit to 15.29 yuan in Shanghai. PT Bumi Resources, Indonesia's biggest power-station coal producer, tumbled 15 percent to 2,725 rupiah, extending a six-day, 19 percent slide.

The value of the 19 commodities in the Reuters-Jefferies CRB Index fell $280.6 billion, or 43 percent, from its July 3 peak, a loss larger than their total worth two years ago, data compiled by Bloomberg show.

UBS AG's Hong Kong-based economist Duncan Wooldridge reduced his growth forecast in Asia excluding Japan next year to 6.1 percent from 6.9 percent, saying the region will face ``recession-like conditions.''

Treasuries rose for a fourth day, sending two-year notes to their longest winning streak in six weeks. Two-year note yields fell 5 basis points to 1.53 percent as UBS AG, the largest Swiss bank, said the Federal Reserve will halve its benchmark interest rate to 1 percent by March 31 to combat a recession.

``It's time to start buying,'' said Hiroyuki Bando, chief manager for fixed income, equities and currencies in Tokyo at Mitsubishi UFJ Trust & Banking Corp. ``The economy will become weaker. Interest rates will go lower

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

U.S. Stocks Rally on Speculation Bank Rescue Plan Will Pass

2008-09-30T23:48:00.000+08:00

Sept. 30 (Bloomberg) -- U.S. stocks rose as growing expectations that lawmakers will salvage a $700 billion bank- rescue package helped the Standard & Poor's 500 Index recover more than a third of yesterday's 8.8 percent plunge.

JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. jumped more than 9 percent as President George W. Bush urged the passage of bailout legislation and congressional leaders vowed to resume work on the bill after its defeat spurred the S&P 500's biggest decline in two decades. Hess Corp. and Schlumberger Ltd. rose more than 5.3 percent as speculation about the plan's revival helped oil rebound from a $10-a-barrel drop.

``The market appears hopeful something will happen,'' said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees about $300 billion. ``There's the thought Congress will come back to this bailout proposal. That's the expectation. The market debacle yesterday seems to have gotten people's attention in Washington.''

The S&P 500 rose 32.78 points, or 3 percent, to 1,139.17 at 11:03 a.m. in New York. The Dow Jones Industrial Average gained 233.76, or 2.3 percent, to 10,599.21 after falling a record 777.68 points yesterday. The Nasdaq Composite Index added 2.8 percent to 2,038.42. European stocks rose, while Asian shares declined. Government bonds in the U.S. and Europe fell. The dollar climbed the most against the euro since the shared currency's 1999 introduction.

`Black Monday'

The gains helped the S&P 500 pare losses in its worst September since 1937. More than $1 trillion in market value was erased yesterday in the worst day for stocks since the ``Black Monday'' crash of 1987 after the House of Representatives voted down the plan designed to rid financial institutions of bad loans.

The S&P 500 has declined 11 percent in September and the Dow average has lost 8.1 percent. The Nasdaq is down 14 percent. The S&P 500 has retreated 11 percent since the end of June for its fourth-straight quarterly decline, the longest stretch since 2001. The Dow has slipped 6.6 percent and the Nasdaq is down 11 percent.

The MSCI World Index of 23 developed nations has dropped 13 percent this month as almost $600 billion of credit losses and writedowns at financial institutions worldwide prompted banks to hoard cash, forced Lehman Brothers Holdings Inc. into bankruptcy and spurred government seizures of American International Group Inc. and the U.K.'s Bradford & Bingley Plc.

Financial companies in the S&P 500 this month traded at 1.1 times their book value, the lowest valuation since Bloomberg began tracking the data in 1995. Commercial banks in the gauge trade at 0.8 times book value, also a 13-year low.

JPMorgan, Goldman

JPMorgan, the biggest U.S. bank by deposits, climbed 10 percent to $45.22. Citigroup rose 11 percent to $19.79. Bank of America surged 9.8 percent to $33.20. Goldman Sachs Group Inc. increased 4.2 percent to $125.79 and Morgan Stanley gained 5.2 percent to $22.09.

Bush said yesterday's defeat of the plan ``is not the end of the legislative process'' and failure by Congress to act would cause ``painful and lasting'' damage to the economy.

Christopher Dodd, chairman of the Senate Banking Committee, said senators may deal with the bill as early as tomorrow. Democratic presidential candidate Barack Obama called for calm after the House vote, saying the plan ``will get done.'' Republican nominee John McCain urged lawmakers to ``go back to the drawing board'' and come up with legislation that will pass.

The S&P 500 Regional Banks Index of 12 stocks climbed 13 percent after plunging 24 percent yesterday, its biggest tumble since the gauge was created in 2003.

Regionals Rebound

Sovereign Bancorp, which plummeted 72 percent yesterday, recovered 71 percent to $3.99. National City Corp., Ohio's largest bank, climbed 38 percent after losing 63 percent yesterday.

Speculation the plan will be revived overshadowed the biggest-ever jump in the cost of borrowing dollars overnight. The British Bankers' Association said the London interbank offered rate, or Libor, rose 4.31 percentage points to 6.88 percent, an all-time high.

Hess, the fifth-biggest U.S. oil company, added 6.8 percent to $81.26 and Schlumberger climbed 5.3 percent to $77.67. Crude for November delivery rose $1.50, or 1.6 percent, to $97.87 a barrel after falling the most in seven years yesterday.

Officials from Microsoft Corp. to Office Depot Inc. and Schering-Plough Corp. said the government's failure to bail out the U.S. banking industry put the entire economy at risk unless a deal comes soon. They called on lawmakers to put aside partisan differences and work to restore credit supplies and confidence to the financial markets.

Microsoft, Schering-Plough

Microsoft, the world's biggest software maker, added 3.3 percent to $25.83. Schering-Plough, the Kenilworth, New Jersey- based drugmaker, rose 1.3 percent to $17.74. Office Depot, the second-largest office-supplies company, gained 1.8 percent to $5.78.

Dr Pepper Snapple Group Inc. advanced 6.7 percent to $25.91. The drinks maker spun off by Cadbury Plc this year was picked to replace Wm. Wrigley Jr. Co. in the S&P 500.

Transportation stocks are signaling U.S. shares may be poised for more losses, according to Dow Theory, which holds that the 30-stock industrial average takes cues from the Dow Jones Transportation Average. The gauge of companies such as FedEx Corp. and Ryder Systems Inc. slid to the lowest since March 17 yesterday, suggesting the industrials' plunge won't mark its bottom, some investors said.

Europe's Dow Jones Stoxx 600 Index added 0.6 percent today as Dexia SA, the world's biggest lender to local governments, surged 12 percent on a 6.4 billion-euro ($9.2 billion) state- backed rescue.

Anglo Irish Bank Corp. Plc climbed 35 percent after Ireland's government said it will guarantee bank deposits and debts for two years, seeking to restore confidence in the country's financial industry.
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Lehman bros files for bankruptcy

2008-09-15T20:42:00.000+08:00

Sept. 15 (Bloomberg) -- Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.

The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, dwarfs WorldCom Inc.'s insolvency in 2002 and Drexel Burnham Lambert's failure in 1990.

Lehman was forced into bankruptcy after Barclays Plc and Bank of America Corp. abandoned takeover talks yesterday and the company lost 94 percent of its market value this year. Chief Executive Officer Richard Fuld, who turned the New York-based firm into the biggest underwriter of mortgage-backed securities at the top of the U.S. real estate market, joins his counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn't survive this year's credit crunch.

``There is likely to be a domino effect as other firms and individuals who relied on Lehman for financing feel the effects of its meltdown,'' said Charles ``Chuck'' Tatelbaum, a bankruptcy lawyer with Lauderdale, Florida-based Adorno & Yoss and former editor of the American Bankruptcy Institute Journal. ``The whole thing is frankly frightening for the U.S. economy.''

Shares, Bonds

Lehman shares dropped 81 percent in Frankfurt trading to 75 cents from their $3.65 close in New York on Friday. UBS AG, HBOS Plc, and Axa SA led a decline of more than 3 percent for European stock markets on speculation a forced sale of Lehman's assets could lead to further writedowns at other banks.

Benchmark gauges of corporate credit risk rose by a record in Europe, and traded at an all-time high in North America as investment banks sought to minimize losses from Lehman's collapse. U.S. two-year Treasuries climbed, pushing yields below 2 percent for the first time since April, as investors sought the relative safety of government debt.

Lehman bondholders may get about 60 cents on the dollar if the investment bank is forced into liquidation, analysts at CreditSights Inc. said. The filing is by Lehman's holding company and won't include any of its subsidiaries. Lehman owes its 10 largest unsecured creditors more than $157 billion, including debts to bondholders totaling $155 billion.

Aozora Bank, Mizuho

The largest single creditor listed in today's filing is Tokyo-based Aozora Bank Ltd., owed $463 million for a bank loan. Other top creditors include Mizuho Corporate Bank Ltd., owed $382 million, and a Citigroup Inc. unit based in Hong Kong owed an estimated $275 million. Lehman listed $639 billion of assets. Citigroup and The Bank of New York Mellon Corp. are among trustees for bondholders who Lehman owed about $155 billion.

Barclays, which emerged as a leading candidate to acquire Lehman, pulled out first yesterday, saying it couldn't obtain guarantees from the government or other Wall Street firms to protect against losses on Lehman's assets. Bank of America withdrew about three hours later, before saying it would acquire Merrill Lynch. Brokers sought yesterday to consolidate trades linked to Lehman to minimize the impact of a bankruptcy filing.

Founded in 1850 by three immigrants from Germany, Lehman has managed to avert previous potential disasters and was among the handful of U.S. financial firms that had endured for more than a century.

`Chain Reaction'

Fuld, the longest-serving CEO on Wall Street, attempted to shore up the firm's finances in the second quarter by raising $14 billion of capital, selling $147 billion of assets, increasing cash holdings and reducing reliance on short-term funding to create a buffer against a bank run.

Instability in the financial and credit markets left Lehman officials struggling to keep the firm afloat, Ian Lowitt, the firm's chief financial officer, said in a court filing in the bankruptcy case. Liquidity problems plagued Lehman earlier this year, he said.

``This loss of liquidity created a chain reaction of adverse economic consequences,'' Lowitt said.

Lehman, which has about 25,000 employees worldwide, last week reported the biggest loss in its history and said it planned to sell a majority stake in its asset-management unit, spin off real-estate holdings and cut the dividend in an effort to shore up capital and regain investor confidence. The efforts failed to stem speculation that the firm's mortgage holdings would lead to more losses.

Talks Fail

``The uncertainty, particularly among the banks through which the company clears securities trades, ultimately made it impossible for the company to continue to operate its business,'' Lowitt said in the filing. The firm had sought about $4 billion for the asset-management unit, he added.

The U.S. Treasury and the Federal Reserve negotiated with Wall Street executives for the past three days in New York, trying to strike an agreement that would prevent the investment bank from failing before markets open today. Treasury Secretary Henry Paulson indicated that he didn't want to use U.S. taxpayer funds to ease a sale of the company.

Fuld, 62, is exploring the sale of its broker-dealer operation and continues to hold talks on the sale of its asset- management unit, including fund manager Neuberger Berman, the company said today in the statement.

The U.S. Securities and Exchange Commission said customer accounts at Lehman are protected and agency staff will remain at the brokerage firm in the coming weeks.

SEC Statement

Securities rules require segregation of Lehman's securities and cash, and accounts are covered by insurance provided by the Securities Investor Protection Corp., the Washington-based agency said last night. SEC employees working inside the broker's office will continue that assignment, the agency said.

``We are committed to using our regulatory and supervisory authorities to reduce the potential for dislocations from recent events, and to maintain the smooth functioning of the financial markets,'' said SEC Chairman Christopher Cox in a statement yesterday.

Brokerage units that fail usually are handled by the SIPC, which appoints a trustee to liquidate the business and protect its customers. Lehman's customer accounts may also be farmed out to other firms that could protect cash and securities, on the model of the failed junk-bond firm Drexel Burnham Lambert, which filed for bankruptcy in 1990.

`A Big Mess'

Lehman's trades in commodities, derivatives and other financial instruments could be unwound by the bank's counterparties, said Andrew Rahl, co-head of bankruptcy in New York at law firm Reed Smith LLP and a specialist in financial companies.

A liquidation of the brokerage unit might be ``a big mess'' if Lehman used customer accounts to raise cash, and sale and repurchase agreements had to be unwound, Rahl said.

The trigger for SIPC to take over the Lehman brokerage would be a freezing of customer accounts, or a Chapter 11 filing that implied the unit was insolvent and its customers might not be able to access their property, the official said.

``First there will be chaos and then an adjustment process as losses distribute themselves through the market,'' said Gilbert Schwartz, a former Federal Reserve attorney and now a partner at Schwartz & Ballen LLP in Washington. ``There won't be any lasting turmoil. Treasury and the Fed have determined that markets have adjusted to the situation since Bear Stearns. If every time a big institution went bust the markets expected the government to step in, no one would ever adapt.''

`Uncharted Territory'

Ladenburg Thalmann & Co. analyst Richard Bove wasn't as sanguine.

``We will be entering uncharted territory,'' he said. ``Forcing liquidation will set off problems in other companies and markets everywhere.''

Rival banks and brokers today held a session for netting derivatives transactions with Lehman to reduce uncertainty in the derivatives market. That move means canceling trades that offset each other, the International Swaps and Derivatives Association said in a statement. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad.

In the U.K., the Financial Services Authority asked banks to disclose their exposure to Lehman, spokeswoman Teresa LaThangue said in a statement today.

Any sale of Lehman's investment management units is subject to court approval and creditor scrutiny under bankruptcy rules, according to Tatelbaum.

``Bankruptcy severs all counterparty contracts, and therein lies the systemic risk,'' said David Kotok, chief investment officer of Vineland, New Jersey-based Cumberland Advisors Inc., which manages $1 billion. ``This would be the first time we've tested how much damage will be done by a bankruptcy.''

Lehman's filing was made by lawyers from New York's Weil Gotshal & Manges LLP led by Harvey Miller.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Yalman Onaran in New York at yonaran@bloomberg.net; Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Oil Falls to Six-Month Low as Refineries Escape Major Damage

2008-09-15T01:47:00.001+08:00

Sept. 14 (Bloomberg) -- Crude oil fell to a six-month low in New York and gasoline tumbled amid signs that refineries along the Gulf of Mexico coast will soon resume operations after escaping major damage from Hurricane Ike.

Almost 20 percent of the U.S.'s oil refining capacity was shut, limiting fuel deliveries and prompting the Department of Energy to release 309,000 barrels from its strategic reserves. New York Mercantile Exchange electronic trading opened early to allow traders to respond to Ike.

``It looks like we've dodged another bullet,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``The refineries in the Houston area seem to have come out of the storm remarkably intact.''

Crude oil for October delivery fell $2.10, or 2.1 percent, to $99.08 a barrel at 1:22 p.m. on the Nymex. Futures touched $98.55, the lowest since Feb. 26. Prices are up 25 percent from a year ago. Gasoline for October delivery fell 12.91 cents, or 4.7 percent, to $2.6405 a gallon in New York.

CME Group Inc., the world's biggest futures exchange, began Nymex electronic trading of energy contracts at 10 a.m. New York time today. Trading normally opens at 7 p.m. Sundays.

Oil in New York has fallen 33 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduce demand for fuels. Sales at U.S. retailers dropped in August for a second straight month and July inventories at American businesses increased the most in four years, Commerce Department reports showed last week.

Trumping Ike

``Growing fears about the economy are trumping any fears about the damage caused by Hurricane Ike,'' said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. ``The broader issue is the weakness of the financial system. Given the Lehman and WaMu watch, cash looks better than any speculative investment.''

Barclays Plc, the U.K.'s third-biggest bank, pulled out of talks to buy Lehman Brothers Holdings Inc. today as the U.S. government raced to find a solution for the faltering investment bank. Washington Mutual Inc. plummeted in New York trading last week on speculation about its financial health.

At least 13 refineries in Texas including plants operated by Exxon Mobil Corp., Valero Energy Corp. and Royal Dutch Shell Plc shut 3.64 million barrels a day of refining capacity as Ike approached Texas.

Lake Charles

Calcasieu Parish, Louisiana, which is home to three refineries, reported ``widespread'' power outages and flooding in Ike's aftermath, Tom Hoefer, the parish's public information officer, said in an interview. Hoefer said the refineries located in Lake Charles likely escaped damage.

The three local refineries, which can process a combined 772,000 barrels a day, are owned by ConocoPhillips, Citgo Petroleum Corp. and Calcasieu Refining Co.

``It looks like the storm surge was greater to the east- northeast so we got a lot of flooding in Lake Charles instead of the Houston area,'' Beutel said. ``The possible damage of the three Lake Charles refineries instead of the 13 in Houston is a trade I would take any day.''

Heating oil dropped 9.41 cents, or 3.2 percent, to $2.845 a gallon. Heating oil touched $2.8325 a gallon, the lowest since March 5. Trades of all the futures contracts will be recorded as part of the Sept. 15 session.

``The crude oil price should be lower because with the refineries down, there is nowhere for it to go,'' Kilduff said. ``The drop in product prices may be short-lived because some of these refineries could be down for weeks.''

Regular gasoline, averaged nationwide, rose 6.2 cents to $3.795 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices reached a record $4.114 a gallon on July 17.

Ike Weakens

The National Hurricane Center released its last advisory on Ike at 10 a.m. Houston time when the remnants of the hurricane were centered 60 miles (72 kilometers) east-northeast of St. Louis. Ike had winds of 110 mph at its landfall in Galveston at 2:10 a.m. yesterday.

The storm idled about 99.7 percent of oil production and 98.5 percent of natural-gas output in the Gulf of Mexico, the U.S. Minerals Management Service said yesterday. Gulf fields produce 1.3 million barrels oil a day, about a quarter of U.S. output, and 7.4 billion cubic feet of gas, 14 percent of the total, government data showed.

Natural gas for October delivery fell 4.4 cents, or 0.6 percent, to $7.322 per million British thermal units in New York.
by Mark Shenk
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OPEC agrees to curb oil overproduction

2008-09-10T22:08:00.000+08:00

VIENNA, Austria (AP) -- OPEC oil ministers agreed Wednesday to trim overall output by more than 500,000 barrels a day in a compromise meant to avoid new turmoil in crude markets while seeking to bolster falling prices.

The news sent oil prices rising. Light, sweet crude for October delivery rose 97 cents to $104.23 a barrel in electronic trading on the New York Mercantile Exchange.

The OPEC announcement reflected the organization's efforts to cover all bases in an oil market that saw prices spike to a record high just short of $150 a barrel in July, only to shed nearly 30% off those peaks in subsequent months.

Oil prices had lost more ground Tuesday ahead of the decision, falling $3.08 to settle at $103.26 on the Nymex, the lowest settlement price since April 1.

A statement issued by the Organization of Petroleum Exporting Countries issued after oil ministers ended their meeting early Wednesday said the organization agreed to produce 28.8 million barrels a day.

OPEC President Chakib Khelil said that quota in effect meant that member countries had agreed to cut back 520,000 barrels a day in production over the established quota.

Saudi Arabia alone accounts for more than that amount of output over its official quota -- all members of the 13-nation OPEC have such formal production limits allotted to them except violence-torn Iraq. But Khelil said that the cutbacks in overproduction would apply proportionally to all OPEC members bound by quotas.

OPEC overall regularly churns out oil above the organization's overall quota, last set in November at 27.3 million barrels a day, and it remained unclear whether group members would abide by the decision to keep to their limits.

Still, the decision could have the psychological effect of steadying eroding prices at or above the $100 mark -- the red line for many OPEC nations concerned about their rapid loss of revenue in recent months.

Meeting quotas
While the new production limit of 28.8 million barrels a day is above that set in November, the statement said it reflected adjustments to include new members Angola and Ecuador and exclude Iraq, as well as Indonesia, which used the Vienna meeting to announce it was suspending its full membership.

Saudi Arabia was widely believed to be leaning toward maintaining the status quo heading into this week's meeting -- a view shared by its Arab Gulf neighbors. Wednesday's compromise, while promising to tighten up global supplies, does not amount to an official cutback by the cartel.

"At the end of the day, all they're saying is: 'we've been cheating for the past year,"' said analyst and trader Stephen Schork, who was monitoring the meeting in Vienna. "I wouldn't say the Saudis backed down. I'd say it was a respectful nod to the other members of the group."

Saudi Arabia and others opposed to a major pullback are concerned that high oil prices will kill demand -- a trend that has already begun in the U.S. and other big oil-consuming nations.

But at the same time, OPEC countries' economies are being buoyed considerably by crude's historically high price and members are not eager for the flow of money to ease.

Some observers said Saudi Arabia and other U.S. allies in the Middle East also do not want OPEC to become more of a target for American consumers fuming over historically high fuel prices in a highly charged presidential election season. The impact of Wednesday's compromise remains to be seen.

The half a million barrels OPEC said it will shave from the market is similar to the amount of additional crude Saudi Arabia unilaterally promised to pour onto the market over the summer when prices were setting new weekly, if not daily, highs.

Stemming the slide
OPEC's statement Wednesday noted that "prices had dropped significantly in recent weeks driven by a weakening world economy ... with its concomitant lower oil demand growth, coupled with higher crude supply, a strengthening of the U.S. dollar and an easing of geopolitical tensions."

And it warned of the possibility of further price erosion, forecasting a possible "shift in market sentiment, causing downside risks to the global oil market outlook."

But analysts said several factors could stem any further slide in prices over the next few months. "There are good reasons ahead for prices to turn toward the upside," said Johannes Benigni, managing director of JBC Energy in Vienna. "Take the next hurricane," he said, alluding to the chances that -- after a few near misses in recent weeks -- further storms could savage oil installations in the Gulf of Mexico.

He also warned against expectations that non-OPEC suppliers could make up for any added demand for crude in the traditionally high-use Western Hemisphere winter season, saying "OPEC will have to step in to fill the gap" if other suppliers come up short.

Others said that OPEC's concerns were well founded. Oil analyst Cornelia Meyer said she expected OPEC to "wait and see what is happening to the global economy and depending on whether China and India are (also) affected, we will see them do a cut" in December.

Oil demand from China's and India's booming economies have helped fuel oil demand and drive up prices.

Ehsan ul-Haq, head of research at JBC Energy, also said it that OPEC "might have to cut production below its set target." He mentioned a further downturn in the U.S. economy and the possibility of a mild winter as possibly depressing the world's appetite for crude by year's end.

Khelil said the request to curb overproduction was effective immediately with a 40-day window for it to take effect. And he suggested bigger cuts may be in the offing if prices continue to slide, telling reporters that OPEC would "swiftly respond to energy developments which may threaten oil (market) stability."

At the next OPEC meeting Dec. 17, in Oran, Algeria, the organization would "reassess the market situation," he added.

Since crude surged to a record $147.27 a barrel on July 11, it has tumbled by over $40, or more than 27%. Still, prices remain close to 14% higher this year than in 2007, and a barrel of benchmark crude still fetches four times what it did five years ago.
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Euro Slides to 11-Month Low Versus Dollar on Recession Risks

2008-09-05T11:47:00.000+08:00

Sept. 5 (Bloomberg) -- The euro slumped to an 11-month low against the dollar on speculation a credit-market slump will push European economies into recession.

The currency headed for its biggest weekly decline versus the yen in more than a year after European Central Bank President Jean-Claude Trichet said the economy is ``weak'' and Luxembourg Finance Minister Jean-Claude Juncker said the euro is ``overvalued.'' The yen jumped to two-year highs against the Australian and New Zealand dollars as declines in stocks and commodities prompted investors to reduce holdings of higher- yielding assets funded in the Japanese currency.

``This is a global recession story,'' said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital, Britain's third-biggest lender. ``We're seeing a reversal of what's been happening over the past two years. Now the dollar and the yen are benefiting as risk appetite is on the decline.''

The euro fell to $1.4269 at 12 p.m. in Tokyo, from $1.4325 yesterday. It earlier touched $1.4214, the weakest since Oct. 24. The euro slid to 150.60 yen, the lowest since Aug. 17, 2007, before trading at 152.52 yen from 153.40 yen. It fell 4.2 percent this week. The yen reached 105.69 per dollar, the highest since July 17, and traded at 106.84. The euro may decline to $1.40 in six months, Umemoto said.

Carry Trades

The Australian dollar dropped 3 percent to 87.65 yen from late Asian trading yesterday. It touched 85.88 yen, the lowest since July 2006. New Zealand's dollar slumped 3.7 percent to 71.39 yen, reaching 69.96, the lowest since July 2006. The UBS Bloomberg Constant Maturity Commodity Index reached a seven- month low and the Standard & Poor's 500 Index tumbled the most in three months.

In carry trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark interest rate compares with 4.25 percent in Europe, 7 percent in Australia and 8 percent in New Zealand. The risk to is that currency moves may erase profits.

Volatility implied by dollar-yen options expiring in one- month rose to 12.59 percent, the highest in a more than a month.

``These currency moves are huge,'' said Toru Tokoyoda, head of foreign exchange sales in Tokyo at Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm. ``Volatility is likely to squeeze higher on further gains in the yen as that would spur demand to hedge against that move.''

One-month volatility may rise to 15 percent provided that the yen rises to 105 per dollar today, he said.

Korean Won

South Korea's won rose 0.2 percent to 1,126.70, reversing an earlier drop of as much as 1.2 percent, on speculation the central bank is buying the currency after it two days ago breached 1,150 for the first time in four years. The nation's foreign-exchange reserves fell by $21 billion in the five months through August to $243 billion as the Bank of Korea bought won to try to halt the currency's slide.

A 10 percent drop in the won in the past month sparked concern South Korea may be headed for a repeat of 1997, when the currency lost half its value versus the dollar and the country turned to the International Monetary Fund for a $57 billion bailout to help companies repay overseas debt. Central bank Governor Lee Seong Tae yesterday told lawmakers there is no need to worry that the country is facing a financial crisis.

The euro dropped for a seventh day against the dollar, its longest decline since October 2006. The ECB yesterday kept its main refinancing rate at a seven-year high of 4.25 percent and Trichet told a press conference growth risks are on the ``downside.''

`Effectively Overvalued'

Europe's currency extended its decline after Luxembourg Juncker told reporters the currency is ``effectively overvalued.'' The euro has dropped more than 10 percent against the dollar from the record high of $1.6038 set on July 15.

``Juncker's comments pushed the euro lower,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``It's a bit of an overshoot. It reflected a market that really wants to buy dollars.''

The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 0.3 percent to 78.822 after yesterday touching 79.077, the highest in almost a year.

U.S. nonfarm payrolls probably shrank by 75,000 last month, following a drop of 51,000 in July, according to the median forecast of 76 economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington.

``The dollar faces downside risks against the yen,'' said Tohru Sasaki, chief strategist in Tokyo at JPMorgan Chase & Co. and a former chief currency trader at the Bank of Japan. ``A worse-than-expected payrolls number would stoke fears about a global recession.''

The dollar may fall to 103.70 yen in the next few days, he said.

`Financial Tsunami'

The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' said Bill Gross, co-chief investment officer of Newport California-based Pacific Investment Management Co., manager of the world's biggest bond fund, on the firm's Web site yesterday.

The ECB lowered its 2008 economic growth forecast yesterday to about 1.4 percent from 1.8 percent and its 2009 prediction to 1.2 percent from 1.5 percent. The central bank raised its inflation forecast for this year to 3.5 percent from 3.4 percent and 2.6 percent from 2.4 percent for 2009.

Sterling fell for a ninth day, reaching a two-year low of $1.7538 after the Bank of England yesterday kept its target lending rate at 5 percent. Policy makers judged the fastest inflation in more than a decade outweighed the risk that the British economy is sinking into a recession.

European Haircut

Banks in the U.K., Spain and Ireland that have relied on the ECB for low-cost funding will have to pay more as it tightens lending rules to prevent abuses.

The ECB will increase the so-called `haircut' on most asset-based securities from Feb. 1 to 12 percent from as little as 2 percent, the central bank said yesterday. That means it will lend just 88 percent of the value of the paper.

``The liquidity situation continues to be severe and this could be one reason for the euro to weaken,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader. ``This also focuses attention on the divergence in banks and economies in the euro region.''

The euro may fall to $1.40 this month after breaking below a cloud on its weekly ichimoku chart used to show support levels, he said.

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Fannie Mae, Freddie Mac Turmoil Pose New Economic `Headwind'

2008-07-13T19:19:00.001+08:00

By Matthew Benjamin and Craig Torres

July 12 (Bloomberg) -- The slides in Fannie Mae and Freddie Mac, the largest providers of U.S. mortgage financing, threaten to deepen the economic slowdown by curbing credit to a housing industry already in its worst recession in 25 years.

The two companies' shares reached the lowest level in more than 17 years yesterday, making it tougher for them to raise capital at a time when they account for about 80 percent of mortgages packaged into bonds. A failure of the companies would likely send home loan rates higher, causing further declines in home sales and prices.

The dangers mean the Bush administration, which yesterday indicated a government takeover isn't needed, must be ready to keep the companies afloat, investors said. Lawmakers aim to take up a housing bill next week to help buttress confidence in Fannie Mae and Freddie Mac.

``There is no way the [=^]federal[^=] government is going to let either of those agencies die,'' said Eric Hovde, chief executive officer of Hovde Capital Advisors LLC, which runs a $1 billion hedge fund. ``You can't take housing, which is the most important asset class in the country, and mortgages, which are the largest debt markets, and destroy them.''

Fannie Mae and Freddie Mac own or guarantee about half the $12 trillion in U.S. home loans outstanding. Even if the government steps in with some type of rescue, mortgage rates may rise as much as half a percentage point as the cost of selling mortgage-backed securities rises, said Keith Gumbinger, vice president of mortgage research firm HSH Associates in Pompton Plains, New Jersey.

`Headwind for the Economy'

``No matter how this turns out, you have to think'' the mortgage market ``is going to be under more strain,'' said Brian Sack, a senior economist at Macroeconomic Advisers LLC in Washington who used to work at the Federal Reserve. ``That is a headwind for the economy, and something the Fed will have to take into account'' in considering when to raise interest rates.

Fed Chairman Ben S. Bernanke will deliver updated quarterly forecasts when he gives his semiannual testimony on the economy to Congress next week. Traders anticipate the central bank will raise rates this year to head off an acceleration in inflation spurred by oil and food costs.

The Fed, which opened lending to investment banks in March in the first extension of credit to nonbanks since the 1930s, is looking at options for Fannie Mae and Freddie Mac along with other agencies.

`Range of Options'

Spokeswoman Michelle Smith said in an interview she was ``not prepared to discuss the range of options and alternatives being considered.'' The Fed hasn't spoken with the two firms about access to direct loans, she said.

Treasury Secretary Henry Paulson said in a statement yesterday that ``our primary focus is supporting Fannie Mae and Freddie Mac in their current form.'' The government-sponsored enterprises have [=^]federal[^=] charters and are shareholder-owned companies.

Shares of the two companies closed lower, with Fannie Mae losing $2.95 to $10.25 and Freddie Mac down $0.25 at $7.75 in New York Stock Exchange composite trading. Washington-based Fannie Mae's market capitalization has fallen to $10.1 billion from $38.9 billion in December, according to Bloomberg data. McLean, Virginia-based Freddie Mac's total has slumped to $5 billion, from $22 billion over the same period.

``The substantially smaller market values could dramatically hinder the companies' ability to raise additional capital,'' CreditSights Inc. analysts Richard Hofmann and Adam Steer wrote in a note to investors Friday.

House Prices Fall

The declining availability of credit pushed down home values in 20 U.S. metropolitan areas during April at a record rate, according to the S&P/Case Schiller home-price index. The index dropped 15.3 percent from a year earlier.

Senate lawmakers yesterday approved a bill including $300 billion to help thousands of Americans keep their homes and tighter regulation of Fannie Mae and Freddie Mac. The House previously approved its own version, and legislators may reach agreement on a final bill to send to President George W. Bush for signature next week, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said yesterday.

Economists already anticipate economic growth will dwindle to a 0.6 percent pace by the final three months of 2008, the weakest pace in six years, according to the median estimate in a monthly Bloomberg News survey. Declines in residential construction have subtracted from gross domestic product for nine straight quarters through March.

Rising Role

As mortgage providers retreated from signing new loans, the housing market has relied on Fannie Mae and Freddie Mac to step up. The two firms accounted for 81 percent of the home loans that were packaged into securities in the first quarter, according to the Office of [=^]Federal[^=] Housing Enterprise Oversight.

``This rapid growth pace'' in firm's portfolios ``will probably need to continue if we want to avoid an even sharper deterioration in overall credit availability than is already occurring,'' said Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York. Deteriorating credit creation is the ``key vulnerability'' for the U.S. economy, he said.

To contact the reporters on this story: Matthew Benjamin at mbenjamin2@bloomberg.net

Last Updated: July 12, 2008 00:01 EDT

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U.S. Stocks Bear Market Deepens With Sixth Straight Weekly Drop

2008-07-13T03:20:00.000+08:00

By Elizabeth Stanton

July 12 (Bloomberg) -- U.S. stocks fell for a sixth week, sending the Standard & Poor's 500 Index into a bear market, as fuel prices climbed to records and investors speculated Fannie Mae and Freddie Mac won't survive the mortgage crisis.

Fannie Mae and Freddie Mac, the government-chartered companies that are the largest source of financing for U.S. home mortgages, tumbled to 17-year lows. They led the S&P 500 to a 20 percent drop from its Oct. 9 record, marking a bear market for the benchmark equity gauge. The Dow Jones Industrial Average entered a bear market a week earlier.

The S&P 500 fell 1.9 percent to 1,239.49, the lowest since July 2006, completing the longest streak of weekly declines since July 2004. The Dow average fell 1.7 percent to 11,100.54 for its fourth weekly drop. The MSCI World Index of 23 developed markets fell 1.1 percent to 1345.47, entering a bear market.

``I would love to be bullish, but I think that's a little premature,'' said Julie Van Cleave, who manages $4 billion as head of large U.S. growth stocks at Deutsche Asset Management in Milwaukee. ``We're going from a period of credit expansion to a period of credit contraction.''

The declines left the S&P 500 and the Dow down 16 percent for the year as earnings season enters its second week. Eight of the 30 companies in the Dow average and 62 S&P 500 companies are scheduled to report results next week, beginning with Intel Corp. and Johnson & Johnson on Tuesday.

Declining Profits

S&P 500 profits are forecast to decrease 13.6 percent from a year ago, led by a 69 percent drop in financial earnings, according to analysts surveyed by Bloomberg. A fourth consecutive quarterly decline would be the longest streak since the last recession in 2001.

The cost of using options as insurance against losses in the S&P 500 rose to a three-month high. The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 11 percent to 27.49.

Financial shares led the S&P 500 lower, falling 6.3 percent to a nine-year low.

Fannie Mae fell 45 percent to $10.25 and Freddie Mac tumbled 27 percent to $7.75. Fannie Mae pared a decline of as much as 49 percent and Freddie Mac rebounded from a 51 percent drop after U.S. Treasury Secretary Henry Paulson signaled that a government takeover of the companies won't be necessary.

Lehman Brothers Holdings Inc., once the biggest underwriter of U.S. mortgage bonds, fell 37 percent to the lowest level since 1999.

Crude oil, little changed on the week, touched a record $147.27 a barrel yesterday. Gasoline futures reached an all-time high of $3.631 a gallon, and pump prices rose to $4.108 a gallon on July 7.

Discretionary Spending

Companies that depend on discretionary spending by consumers fell 4.1 percent to a five-year low, led by Office Depot Inc. The world's second-largest retailer of office supplies tumbled 37 percent to $6.84, its biggest drop in 11 years, after saying its second-quarter report on July 30 will show earnings deteriorated more than it previously forecast.

J.C. Penney Co. fell 16 percent to $30.75, the lowest since February 2004. The department-store chain said June sales at stores open at least a year dropped 2.4 percent.

Retail sales probably rose less in June than in July, a July 15 Commerce Department report is projected to show. Sales probably increased 0.4 percent, according to the median forecast of economists polled by Bloomberg. Excluding automobiles, they probably rose 1 percent.

`Cannot Continue'

Continental Airlines Inc. led airlines to the lowest in the 15-year history of the Amex Airline Index. James May, president of the Air Transport Association, the industry's trade group, said airlines ``cannot continue to survive at $140 oil.'' Continental, the fourth-largest U.S. carrier, fell 20 percent to $7.28, a five-year low.

Intercontinental Exchange Inc., owner of Europe's largest energy market, declined 17 percent to $88.40. Senator Joseph Lieberman yesterday proposed legislation to curb speculation in food and energy futures.

Congress ``is convinced that ICE is helping speculators manipulate the price of oil,'' said Michael Allocco, chief investment officer at Brazos Capital Management LP in Dallas, who sold his remaining shares of the company on July 10. Investors are concerned the exchange ``may bear the brunt of any ill-conceived legislation.''

Mergers or merger prospects boosted shares of target companies including Rohm & Haas Co., Hercules Inc. and Yahoo! Inc., limiting the market's decline.

Takeovers

Rohm & Haas rose 66 percent to $74.70 after the maker of paint ingredients and adhesives agreed to an $18.8 billion takeover by Dow Chemical Co. Hercules Inc. gained 30 percent to $20.95. The maker of papermaking chemicals will be acquired by Ashland Inc. for $3.3 billion.

Yahoo climbed 10 percent to $23.57. Microsoft Corp. said it may revive takeover talks for the second most popular U.S. Web search engine if investors back Carl Icahn's attempt to replace Yahoo's board and chief executive.

The Russell 2000 Index, a benchmark for companies with a median market value 23 times smaller than the S&P 500, rose 1.4 percent to 674.95.

Yields on Treasury securities declined as traders pared bets the Federal Reserve will raise interest rates before October. The 10-year note's yield declined to 3.89 percent from 3.98 percent.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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Bernanke Says Fed May Continue Lending Into Next Year

2008-07-09T00:09:00.000+08:00

July 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, seeking to allay renewed concerns over the health of the nation's financial system, said the central bank may extend its emergency-loan program for investment banks into next year.

``The Federal Reserve is strongly committed'' to financial stability and is ``considering several options, including extending the duration of our facilities for primary dealers beyond year-end,'' Bernanke said in a speech to a conference in Arlington, Virginia.

The Fed chairman's comments, the first time he has indicated how long he'll extend the lending programs, come a day after an index of bank shares reached its lowest level since 1996.

Bernanke also endorsed proposals to set up a federal liquidation process for a failing investment bank. The Treasury should ``take a leading role in any such process'' in consultation with regulators, he said. Such a resolution mechanism may help reduce concern that investors and dealers begin counting on Fed aid in case their bets go wrong.

The Fed started the unprecedented lending programs for investment banks in March under its authority to lend to nonbanks in ``unusual and exigent circumstances.'' Officials said at the time the Primary Dealer Credit Facility, which provides direct loans, would last for ``at least'' six months.

Rate Outlook

Continued lending to investment banks may make it harder for the Fed to raise interest rates this year. Traders estimate 74 percent odds of at least quarter point increase in the 2 percent benchmark rate by year-end.

``There was some speculation that, come September,'' the lending programs ``might be allowed to expire,'' Dominic Konstam, head of interest-rate strategy at Credit Suisse Securities USA LLC in New York, said in a Bloomberg Radio interview. ``A lot of people would have thought that might be a prelude to the Fed beginning a tightening cycle. Now, that is obviously that much more uncertain.''

The Standard & Poor's 500 Banks Index, a measure of 22 firms including Fannie Mae and Freddie Mac, the largest sources of U.S. home financing, fell to 155.48 yesterday, its lowest level since 1996.

The Fed chairman didn't comment on the outlook for the economy or monetary policy in his remarks today to a Federal Deposit Insurance Corp. forum on mortgage lending. Treasury Secretary Henry Paulson and JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon are also scheduled to speak at the event.

The PDCF and the Fed's Term Securities Lending Facility, which auctions as much as $200 billion in Treasuries are both aimed at the 20 primary dealers in U.S. government debt.

Capital `Buffers'

The Fed is working with the Securities and Exchange Commission and securities dealers ``to increase the firms' capital and liquidity buffers,'' Bernanke said.

Securities firms have cut back on their use of the programs in recent weeks. The balance of loans outstanding from the PDCF dropped to zero as of July 2, the first time that's happened since the program began. On March 26, the end of the first full week of operation, the PDCF had a balance of $37 billion.

Bids in the TSLF's weekly auctions, in which dealers swap securities such as mortgage-backed debt for Treasuries from the New York Fed, have declined since the start of the program. In the July 3 operation, firms submitted bids for $26.1 billion out of $50 billion of Treasuries offered.

Financial Strains

One gauge of financial stress watched by the Fed has remained elevated. The difference between the overnight indexed swap rate, a measure of what traders expect for the Fed's benchmark rate, and three-month interbank loans in dollars was 0.78 percentage point yesterday, about the same as the start of May.

``Although short-term funding markets remain strained, they have improved somewhat since March,'' Bernanke said.

Bernanke's comments on the resolution authority are in line with Treasury Secretary Henry Paulson's July 2 statement that ``any commitment of government support should be an extraordinary event that requires the engagement of the executive branch.''

FDIC Chairman Sheila Bair has also said an agency should be given such liquidation authority for investment banks. The FDIC has that power over lenders whose deposits it insures. In the case of commercial banks, the use of taxpayer funds in an emergency requires the approval of two-thirds majorities of the FDIC and Fed boards, and of the Treasury secretary in consultation with the president.

`Worth the Effort'

``Despite the complexities of designing a resolution regime for securities firms, I believe it is worth the effort,'' Bernanke said today. ``In particular, by setting a high bar for such actions, the adverse effects on market discipline could be minimized.''

Bernanke endorsed several ways for the Fed and other U.S. agencies to gain more oversight of investment banks and financial markets. Congress should legislate ``consolidated supervision'' of investment banks and other big securities firms, with the unspecified regulator having authority over capital, liquidity holdings and risk management, he said.

The Fed itself should also get ``explicit oversight authority'' over payment and settlement systems, putting the Fed on par with counterparts from around the world, Bernanke said.

Congress may consider giving the Fed responsibility for ``promoting the overall stability of financial markets,'' Bernanke said. Still, ``it would be particularly important to make clear that any government intervention to avoid the disorderly liquidation of firms on the verge of bankruptcy should use clearly defined tools and processes,'' he said.

The Fed will play a part in setting capital cushions at securities firms under an agreement yesterday with the SEC designed to dispel concern a failing financial company without central bank oversight could threaten the economy.

The Fed and SEC will collaborate in determining ``guidelines or rules concerning the capital, liquidity and funding'' arrangements of investment banks, the accord said. They will also cooperate in designing ``risk management systems and controls'' for securities firms.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

Last Updated: July 8, 2008 10:35 EDT

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

G8: Oil prices pose risk to world economy

2008-07-08T17:04:00.000+08:00

TOYAKO, Japan (CNN) -- Leaders of the Group of Eight nations expressed long-term optimism Tuesday about their economies. They also expressed concern over high commodity prices, including the prices of food and oil.

"Elevated commodity prices ... pose a serious challenge to stable growth worldwide," the leaders said in a statement on the second day of their three-day summit.

"We have strong concerns about the sharp rise in oil prices, which poses risks to the global economy."

The leaders called for an increase in oil production and refining, but also said it was important to "improve energy efficiency as well as pursue energy diversification."

They challenged oil-producing nations to boost production capacity to meet rising global demand.

First Published: July 8, 2008: 4:31 AM EDT

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Stocks Fall in Europe, Asia on Loss Concern; U.S. Futures Drop

2008-07-08T16:55:00.000+08:00

By Sarah Jones

July 8 (Bloomberg) -- Stocks fell in Europe and Asia and U.S. index futures dropped as concern deepened financial firms will need more capital and lower oil weighed on energy producers. The U.K.'s FTSE 100 Index entered a bear market.

UBS AG and Deutsche Bank AG slumped in Europe and Mitsubishi UFJ Financial Group Inc. led a retreat by Asian banks after analysts said the two largest U.S. mortgage-finance companies may have to raise a combined $75 billion. Merrill Lynch & Co. fell in Germany after Wachovia Corp. slashed its earnings forecast for the securities firm. Royal Dutch Shell Plc dropped after oil decreased almost $4 a barrel yesterday.

The MSCI World Index lost 0.9 percent to 1,352.86 at 9:13 a.m. in London, extending its decline from an October record to 19.6 percent. Futures on the Standard & Poor's 500 Index fell 1 percent, indicating the benchmark index may slip into a bear market today. The S&P 500 was down 19.99 percent from an all- time high in October as of yesterday's close.

``Investors are nervous,'' said Chicuong Dang, an analyst at Richelieu Finance in Paris, which has $6.2 billion under management. ``The market is falling on fears of bad news from banks, of new writedowns and need for recapitalization.''

Financial stocks from Citigroup Inc. to HBOS Plc have led declines that erased more than $11 trillion from equity markets worldwide this year as credit-related losses topped $400 billion, forcing banks to raise more than $320 billion in capital and threatening to push the U.S. into recession.

``In a recession, earnings always fall,'' said Joost van Leenders, Amsterdam-based investment specialist for asset allocation at Fortis Investments, which oversees $342 billion. ``There is more to come in earnings and the stock market than is currently foreseen.''

Earnings Kickoff

Profit for Stoxx 600 companies will fall 2 percent this year, according to data compiled by Bloomberg. That's down from 11 percent growth predicted at the start of 2008.

Alcoa Inc., the world's third-largest aluminum company, kicks off the second-quarter reporting season in the U.S. today. Analysts estimate earnings at companies in the S&P 500 dropped 11 percent on average in the quarter, Bloomberg data show.

Europe's Dow Jones Stoxx 600 Index declined 2.5 percent, while the MSCI Asia Pacific Index lost 2 percent. The U.K.'s FTSE 100 dropped 2.3 percent, extending its decline from last year's high to 20 percent, the common definition of a bear market.

Sales of services and manufactured in the U.K. fell in the second quarter, posing ``serious risks'' that the economy will tumble into a recession, the British Chambers of Commerce said.

UBS, Mitsubishi UFJ

UBS, the European bank hardest hit by the subprime contagion, sank 4.1 percent to 19.16 francs. Deutsche Bank, Germany's largest bank, slipped 3.6 percent to 52.62 euros.

Analysts at Lehman Brothers Holdings Inc. said a change in accounting rules may force Fannie Mae and Freddie Mac to raise $46 billion and $29 billion respectively.

Mitsubishi UFJ, Japan's largest bank by market value, declined 3.4 percent to 934 yen.

Kookmin Bank, South Korea's largest, tumbled 8.6 percent to 55,000 won. JPMorgan Chase & Co. cut its recommendation on the stock to ``neutral'' from ``overweight,'' saying Kookmin may not have enough capital to complete its plan to set up a holding company.

Merrill Lynch lost 84 cents to $29.52 in Germany. Wachovia lowered its second-quarter earnings-per-share estimate for the third-largest U.S. securities firm to a loss of $2.16 from a profit of 63 cents and dropped its forecast for 2008 to a loss of $3.11 from a profit of 15 cents.

Analysts forecast $5 billion in writedowns for the quarter concerns and said the sale of stakes in BlackRock Inc. and Bloomberg LP, the parent of Bloomberg News, by Merrill would be ``negative.''

Bank of Ireland

Bank of Ireland Plc tumbled 8.7 percent to 4.62 euros after the Dublin-based lender said slowing economic growth in Ireland and the global shortage of credit are ``adversely impacting'' earnings.

``The slowdown in the overall level of activity and volume growth is most pronounced in our retail businesses in Ireland,'' the bank said.

Separately, the Daily Telegraph reported Bank of Ireland is reducing its commercial lending, telling some U.K. customers it won't be taking new business for the next three months.

Shell, Europe's biggest oil company, slid 2.9 percent to 1,982 pence. BP Plc, the second-largest, retreated 2.5 percent to 558 pence.

Crude for August delivery lost $3.92, or 2.7 percent, to $141.37 yesterday. Oil traded at $142.27 today.

Persimmon Plc lost 4.7 percent to 217.25 pence after the U.K.'s second-biggest homebuilder by market value said first- half sales fell 34 percent and it has cut 1,100 jobs to lower costs amid the worst British housing slump in 30 years.

Great Portland

Great Portland Estates Plc fell 2.1 percent to 316.75 pence after Morgan Stanley rated the company, which develops shops and offices in London's West End, ``underweight'' in new coverage on the possibility that rents in the U.K. capital's center will fall.

Klepierre SA declined 5.8 percent to 29.58 euros after Credit Suisse Group downgraded the European shopping center owner to ``underperform'' from ``neutral.''

Fiat SpA dropped 4.4 percent to 9.87 euros. Italy's biggest manufacturer said it will close four of its six car factories for one week each between September and November because of slumping sales.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Last Updated: July 8, 2008 04:23 EDT

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Deciding to trade

2008-05-02T18:24:00.000+08:00

Most shares traders-to-be have one thing in mind: money or the greed of it. To put it in more sophisticated terms: seeking financial freedom. There is nothing wrong with the motive but it can seriously impair your judgement and cause heavy losses because of it.

Before a newbie puts in his/her first trade, there are some questions that they should seriously ask themselves.

1)Can I take risk?
All shares investments carry risk whether in the long term or short. Even the most experienced or the best equiped trader is not exempted from risk. Unless you have a trading volume of tens of millions or can influence the market with actions of yours, then perhaps you are more free of risk than others. Even if you belong to this category, think 911 and the aftermath effect on the stock market.

2)Do I have a sum of money large enough to trade and ready to lose?
Personally I do not encourage excessive use of leverage(allowing you to trade in amounts more than the amount of money you have) although I do employ them from time to time. It is essential that you have a sizable trading amount so that you reduce the impact of commission charges. Consider this:

standard commission charges in singapore:
brokerage commission: 0.28% , min $25
CDP clearing fee :0.04%
SGX access fees :0.0075%
GST on the total charges: 7%

Suppose you buy 5000 shares of company A at a price of $1,
Contract value= 5000 x $1 =$5000
brokerage fee= $25
clearing fee=$2
access fees=$0.375
GST 7%= $1.92
You need to pay= $5029.29

Thus you can see that the commission is about $30 for a contract size of $5000. Note that if you are trading for profit, you need to sell off your contract eventually,so you have to take into account your commission charges for selling as well.

Therefore suppose you are short-term trader and you are aiming to get a 3% gain on the share price. For the contract size of $5000, your gross profit will be $150. After buy and sell commissions, your net profit will be about $90.

However if your contract size is only $1000, 3% increment will give $30. Commission will be at least $50++ since the minimum broker commission for each buy/sell contract is $25. See the picture?

3)How much limit do I take?
As long as you are not trading in penny stock, it is prudent to use a stop loss of 6-8%. Which means that you are setting a maximum loss target for yourself. This is to provide discipline to your trading so as not to hold a falling stock for too long.

First of all ask yourself how much you can lose?if your maximum tolerable limit is $600, then a rough limit you can take should be about $100000. This does not mean that you should put everything into 1 single contract.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Jardine C & C: entry opportunity

2008-04-29T10:29:00.000+08:00

Jardine C & C share price has tumbled for the last two weeks and bottoming opportunites have arisen. The stochastic indicator is going beyond the 20% mark signifiying oversold. $16.18 has also been a strong resistance line since sept 2007.

In my opinion, good buy in price is between $16.2 and $16.4. For those who prefer to see a trend confirmation before entry, $17.38 is the price to look at based on current prices.

Good time to buy in GLD10US$

2008-04-24T19:00:00.000+08:00

StreetTracks Gold shares fell by almost 2 dollars today to close at $88.84 as the US Dollar strengthen against the EURO, reducing the demand for the precious metal as a hedge against further drop in the US dollar. GLD shows strong short term support below the US$89 mark. If GLD was to further decline in tomorrow trading, it would present great opportunity for buying in, even for the short term

China S shares

2008-04-23T23:49:00.000+08:00

China S shares has increased significantly due to an improved sentiment propped up by the new share sale rule by the chinese government. For the last two days, china s shares has been accounting for most of the volume traded on sgx.

for today:
ChinaNtown up 3.8% to 0.275
ChinaHongXing up 0.8% to 0.655
yangzijiang up 3.6% to 1.02
Li heng up 5.1% to 0.725
china sun up 8.5% to 0.32
sinotechfib up 12.5% to 0.81
Ferrochina up 7.2% to 1.49
ChinaZaino up 5.7% to 0.555
Coscocorp up 2.9% to 3.5
ChinaXLX up 5.3% to 0.895
JES up 4% to 0.39
Chinaoilfield up 2% to 0.505
ChinaAelec up 2.2% to 0.235

some however have lost steam:
Chinaenergy down 0.8% to 0.585
chinaEratat down 6.7% to 0.35
Synear down 3% to 0.645

So should we avoid the s shares and possibly miss out on the rally? For those who are willing to take some risk, i have a few recommendations.

ChinaXLX fertiliser
yesterday reported a net profit surge of 42.2%, in line with expectation. With rising food prices, the china government is spending more on subsides for agricultural products. Demand for urea and compound fertiliser are also expected to grow.

China farm equipment
The chinese government has pledged an additional SGD 5 billion of subsidies to boost govt spending on agriculture . the government emphasis on increasing output on on agricultral products put the company in good stead.

What is a CFD?

2008-04-21T00:51:00.000+08:00

CFD stands for contracts for difference. It is an instrument for traders to take long or short position in a share counter without having the share itself. The price of the CFD mirrors the performance of the stock itself and the profit or loss is determined by the difference between the buy and sell price.

The benefits of CFDs are:
Can be used to sell high and buy low without the penalties of short-selling stock
Unlike options and warrants, it does not expire and therefore does not have time decay
Easy to price because they mirror the exchange traded price of the underlying instrument
Can be a good hedge to a long stock portfolio if the CFDs of the same stocks are short i.e. to achieve market-neutral exposure.
Therefore CFDs can be used in the following manner:
Make money in any market condition. So instead of standing on the sidelines in a falling market, bears can sell high buy low to make money.
Protect the downside for long term investors who hold a long stock portfolio for income or growth reasons.

Why gold is a good investment?

2008-04-18T10:22:00.000+08:00

1)Gold always rises in times of uncertainty. It has historically been the best store of value. Be it war, widespread inflation, depression or the likelihood of the above mentioned,demand for gold will rise
2) The US dollar is the reserve currency and many countries uses the US Dollar to underpin the issue of their own currency. With the fall of the US dollar to new low levels, the EURO and GOLD bullion are much better choices.

3)Gold should do well in extreme bear markets. Silver increased in value more than double from 1932 to 1936 during the Great Depression (the price of gold was fixed by the government). The next long bear market was 1968-1980. Silver rose from around $2 in 1968 to a peak near $50 in 1980

My trading philosophy

2008-04-18T07:49:00.000+08:00

1. trading is like a business. There is no need to trade everyday for the sake of trading. Keep your cost low.
2.History always repeat itself. The key is detecting the trend.
3. Use of both fundamental and technical data improves the probablity of winning
4.Place a stoploss. Nobody is correct all the time. if you make a wrong bet, your losses are limited.