China Surges 1%, NEC, Sony Boost Tokyo

Ivaylo
22 May, 2007
New York City

China finished almost 1% higher Tuesday on yuan appreciation, as regional markets mostly rose, but declines in large-cap stocks pushed Hong Kong lower. Tokyo stocks continued its upward trend as investors bought NEC and Sony as well as banking shares on hopes for solid earnings this fiscal year. All the other major indices advanced with only Australia bucking the trend and declining.

[R]8:30AM Asian markets mostly advance on Tuesday with China leading advancers.[/R]

Asian markets mostly advanced on Tuesday. The Shanghai Composite Index, which tracks both Class A and B shares, ended up 0.9% at 4,110.38. Property stocks advanced on hopes of an increase in the pace of yuan rise after Beijing announced Friday that it was widening the daily trading range of the yuan against the U.S. dollar. A firmer yuan means an increase in the value of yuan-denominated assets, such as property.

The most actively traded property companies were China Vanke, which rose 4.8%, Shanghai New Huangpu Real Estate, which soared 10%, the daily limit, and Beijing North Star, which added 1.8%.

The Nikkei 225 Stock Average in Tokyo ended up 0.7% at 17,680.05. Upbeat earnings guidance released Monday by Sumitomo Mitsui Financial Group lifted banking shares. Shares in the company jumped 5.7% after it said that it hopes its group net profit to rise this fiscal year after posting a 36% decline last fiscal year. Mizuho Financial Group gained 4.4% ahead of its earnings release after the market close Tuesday.

Mitsubishi UFJ Financial Group rose 3%. NEC soared 7.3% after the Japanese electronics company announced Monday that it aims to lift its group net profit to 30 billion yen this fiscal year. Sony continued rising on its solid earnings outlook released last week, finishing up 3% following an 8.8% advance over the past four sessions.

The benchmark Hang Seng Index in HK fell 83.83 points, or 0.4%, to 20,843.92, having struck 21020.42 in the morning. The Hang Seng Index two biggest constituents by market capitalization both fell. HSBC dropped 0.3% and China Mobile slipped 0.7%.

Other indices around the region also gained. South Korean Kospi index added 0.9% at 1,642.88, Singapore Straits Times index climbed 0.7% to 3,539.82. Sydney S&P/ASX 200 bucked the uptrend and finished 0.5% lower at 6,338.8.

[R]7:30AM NY -6:30PM Mumbai Sensex edges higher amid volatile trading.[/R]

The Sensex on BSE finished Tuesday 35.12 points, or 0.24%, higher at 14,453.72.

The market-breadth was negative as the small-cap index ended lower. For 1,116 stocks which advanced, 1,444 declined and only 91 stocks remained unchanged. Of the 30 stocks in the Sensex, 16 advanced, while the rest declined. The turnover on BSE was Rs 5,180 crore, compared to Rs 5,576 crore on Monday. On NSE, the turnover was Rs 11,375.26 crore, much higher than Rs 9,810 crore on Monday.

Economic news

The rupee traded at 40.5850 a dollar in late morning deals on some dollar selling. The rupee advanced in the absence of any dollar demand from oil corporates.

Indian companies are expected to invest Rs 8,974 crore on information technology in fiscal year 2008, which is an increase of 26% when compared with the expenditure of Rs 7,123 crore in fiscal year 2007.

Despite the hardening of interest rates, the majority of the banks reported a considerable improvement in their asset quality on strong economic growth in the country. As a result of better monitoring of the credit portfolios and healthy macro-economic performance, most of the banks have succeeded in reducing their loans repayment defaults.

Trading highlights

Reliance Capital was the most active stock with a turnover of Rs 447 crore followed by Reliance Industries and Reliance Communications.

Advancers

HDFC rallied 4.5% to Rs 1,794. HDFC Bank gained 1.54% to Rs 1,120, ACC was up 1.55% to Rs 885 and Hero Honda rose 0.85% to Rs 686.25. Reliance Communications soared 3.4% to Rs 523.

BHEL rose 1.5% to Rs 2,676, on 1.35 lakh shares. The stock surged ahead of its record date of June 1 2007 for the proposed 1:1 bonus issue. Maruti and Bharti Airtel advanced over 1% each to Rs 830 and Rs 859, respectively.

Index heavy Reliance Industries finished 0.8% higher at Rs 1,775. Reliance has been striking record highs in the past three sessions and has gained over 34% since its close of Rs 1313.50 on April 2 2007.

Decliners

Bajaj Auto led the decliners, down 2.4% to Rs 2,195. Bajaj Auto plunged 16% in the past two trading sessions after the surprise news that Allianz, which is Bajaj’s partner in its two insurance ventures has a call option to buy up to 74% at a nominal price. This was the biggest disappointment in the demerger plan.

Gujarat Ambuja shed 2.3% to Rs 116 and SBI slipped 1.6% to Rs 1,325. IT large-caps, finished lower again as the rupee hit a fresh nine-year high. Infosys lost 0.7% to Rs 1,947, HCL Technologies was off 1.4% to Rs 342.25), and Tata Consultancy Services declined 0.6% to Rs 1,229.

[R]6:30AM European markets trade mixed Tuesday with resource stocks advancing.[/R]

European markets were mixed in mid-day trade on Tuesday. The U.K. FTSE 100 index slipped less than 0.1% to 6,634.00, the German DAX Xetra 30 index added 0.1% at 7,629.28 and the French CAC-40 index traded fractionally lower at 6,089.34.

Advancers

Oil producer Cairn Energy rose 2.8%, while miner Lonmin gained 0.9%. Merrill Lynch said that it remains optimistic about the oil and gas sector in Europe as the sector is cheap and defensive.

Bid talk supported Spanish airline Iberia to add 1% after 10% stake holder British Airways announced it is going to team up with TPG Capital, Vista Capital, Inversiones Ibersuizas and Quercus Equity to investigate making a formal bid for Iberia.

Alliance & Leicester advanced 3.4% after UBS initiated coverage on the mortgage bank with a buy recommendation.

Decliners

GlaxoSmithKline kept falling tracking late weakness on Monday, following reports that increased safety concerns on the Avandia treatment of the company. Shares in the pharmaceutical company lost 3.3% on Tuesday morning after several brokers cut their ratings on the stock.

Marks & Spencer shed 2.6% after the firm announced that it anticipates the retail environment to become more challenging as competition remains intense and interest-rate increases are expected to hurt consumer spending.

Commodities

Oil prices were virtually unchanged Tuesday after surging above $66 a barrel in the previous session on concerns about gasoline supply. Crude oil for June delivery was flat at $66.27 a barrel in electronic trading on the New York Mercantile Exchange.

Gold for immediate delivery fell as much as $1.20, or 0.2%, to $662.05 an ounce. Silver for immediate delivery fell 3 cents, or 0.3%, to $13.03 an ounce.

Currencies

The euro slipped slightly against the dollar on Tuesday but investors expect the common currency to rise if a key report on German investment sentiment reports more gains. The euro bought $1.3464 in morning trading, down nominally from the $1.3467 it bought in New York trading late Monday. The British pound bought $1.9724 in morning trading, up from $1.9702 the night before in New York. The dollar bought 121.44 Japanese yen on Tuesday, down slightly from the 121.46 yen it bought the day before.

[R]5:30AM Corn rallies Monday, gold and oil also advance.[/R]

A bushel of corn for July delivery surged 9.75 cents to close at $3.81 on the Chicago Board of Trade, adding to modest gains last week. Soybean and wheat futures also gained. July soybeans picked up 8 cents higher to settle at $8.0050 a bushel and July wheat rose 8.25 cents to $4.7950 a bushel.

Crude oil for June delivery rallied $1.33 cents to settle at $66.27 a barrel on the Nymex. Overseas, Brent crude for July delivery climbed $1.07 to close at $70.49 on the ICE Futures exchange in London.

Gold for June delivery added $1.80 to end at $663.80 an ounce. July platinum settled down $6.50 at $1,319.70 an ounce, while June palladium settled up $9.05 at $374.30 an ounce. Copper gained 7.6 cents to settle at $3.4030 a pound on the Nymex. Aluminum, zinc and lead settled higher on the London Metal Exchange.