Asian Markets Plunge, Sensex Plummets 4%

123jump.com Staff
01 Aug, 2007
New York City

Sensex led the declining markets in Asia with loss of 615 points of 3.96%. Auto, techs, banks, and real estate stocks led the decliners with a loss of between 7% and 10%. Among Sensex stocks, ACC suffered led with a loss of 10%. Bajaj sales in July fell 7% but Maruti sales increased 18%. Bank of India dropped 10%. Mall developers, Orbit and Indiabulls, plunged 10%. Daily turnover reached record for the year. Reliance Industries is in final 10 to drill in Australia.

[R]10:00AM New York, 7:30PM Mumbai – Sensex plunged to its third worst one day loss on near 4% sell-off in Asia.[/R]

Sensex in Mumbai trading plunged 615.22 or 3.96% to 14,935.77 level. Other indexes in the region fell between 4% and 3% during the session. Taiwan, Korea, and India led the decliners in the region. Stock trading in the session jumped to 6,267 crore rupees from 5,298 crore rupees a day ago.

In the broader market 2,147 stocks declined, 533 advanced, 41 were unchanged.

Among Sensex stocks ACC cratered 9.6% to 958 rupees on heavy volume. Reliance Energy lost 7% and Manhindra & Mahindra declined 4.8%.

Tata Motors dropped 4.65% to 666.80 rupees. Bajaj Motors lost 2.8% to 2,295 on the news that July sales dropped 7% from a year ago to 185,890 units. Maruti Suzuki India reported 18% rise in July sales to 52,839

Hindalco Industries lost 6.4% to 159 rupees after the company reported first quarter proft of 602 crore rupees, flat from a year ago and on revenue gain of 9%. The company sold 4,677.9 crore rupees of metal and metal products in the quarter.

Real estate stocks, subject of market speculation saw some air off the market valuations. Indiabulls Real Estate and Orbit Corporation plunged 9%, Unitech declined 7.3%, DLF lost 4%, and Mahindra Gesco fell 5%.

Consumer sector stocks that are supposed to withstand this kind of market declines fell as well. Hindustan Lever dropped 2.5%, Cipla fell 3%, ITC lost 2.2%.

Bank stocks fell a day after the Reserve Bank of India hiked the reserve ratio for bank deposits to 7%. Union Bank fell 9%, Bank of India lost 8%, and Allahabad Bank fell 6.5%.

Everonn Systems prices 4 million (40 lakhs) stocks at 245 rupees. The initial public offering jumped to 560 rupees before closing at 478.50 rupees with a premium of 242%. The offering was oversubscribed by 131 times propelling the stocks in the stratospheric level.

Jai Corp board of directors approved the foreign investor limit to 49% and agreed to split stock.

[R]8:00AM New York, 1:00PM London – European companies report higher earnings but credit worries in the U.S. affect the trading sentiment.[/R]

European markets fell sharply at the mi-day trading across the region. The high yield fund losses at a subsidiary controlled by Macquarie Bank in Australia and profit declines at banks in Japan contributed to worries in the region. Bear Stearns in the U.S. is limiting high yield funds withdrawal on losses. The indexes in the region traded lower at the opening and quickly fell after four hours of trading.

European markets declines were led by 2.2% loss in France and Norway, 1.7% decline in Italy and the Netherlands, Germany, 1.6% decrease in UK, and 1.2% slide in Spain. Switzerland, the lone gainer in the region, jumped 2.1%.

In London trading, Man Group dropped 3.4% on the worries that earnings in the current quarter may decline sharply in the futures and derivative related funds that it manages. Cadbury Schweppes melted 7% after the first half net income fell nearly 80% to 182 million pounds.

British Air agreed that it colluded with Virgin Air in setting higher fuel surcharges for airline tickets. The UK government agency levied $250 million fine and similar fines are expected from the U.S. agency.

The largest mortgage bank in the UK, HBOS said that its profit for the first half rose to 2.11 billion pounds from 1.76 billion pounds a year ago. Despite the five rate hikes the company has delivered higher profit on higher loans. The bank guided that profit rise in the second half will decline if rates keep rising.

Mining stocks in trading fell nearly 4%. BHP Billiton, Xstrata, and Rio Tinto fell more than 4% on the worries that the credit problems in the U.S. will affect demand for metals.

In Frankfurt trading Deutsche Bank fell 2% after reporting second quarter earnings gain of 31%. The bank net income increased to 1.78 billion euros from 1.35 billion euros from a year ago. The earnings per share increased to 3.60 euros from 2.44 euros. BMW reported second quarter earnings decline of 4.3% to 753 million euros on 11% rise in sales to 14.7 billion euros. The stock lost 5% after the news.

BASF second quarter profit jumped 11% to 1.02 billion euros from 920 million euros on 19% increase in revenue to 14.7 billion euros. The earnings per share increased to 2.08 euros from 1.82 euros. The stock fell after the news more than 2% in the general weakness in the market.

Largest retailer Metro AG reported 60% decline in earnings on 9.7% rise in sales to 15.4 billion euros. The earnings fall, without one time gain in the earlier year, would have been lower. Sales in Germany jumped 5.6% and in the rest of Europe advanced 13%. The revenue in Eastern Europe jumped 24% and 29% in Asia and Africa group.


[R]7:00AM New York, 8:00PM Tokyo – Widening net of subprime contagion drag Asian markets sharply lower.[/R]

What first appeared in the U.S. is now quickly spreading to Asia and Europe. The subprime contagion.

Nikkei 225 Index fell 2.2% or 377.91 to 16,870.98 on weakness in financial stocks across the region. Of the 1,686 traded in the first-section, for every rising stock seven stocks fell. All markets in Asia fell and the most of them declined between 3% and 4%.

The yen in trading against international currencies gained on the possible fall out to the carry trade investment mechanisms. The yen dipped below 118 from near 119 to a dollar.

Taiwan, Korea, and India fell nearly 4% and led the region. Hong Kong, Australia, Singapore, Thailand declined 3%, and Philippines lost more than 2%.

Mizuho Group plunged 9% after reporting 49.5% decline in first quarter profit. The net income fell to 116 billion yen on 22% rise to 1.05 trillion in ordinary income. The banking group, one of the largest in the country, led other bank stocks to decline between 4% and 5%. Lower income and dividend from investment in equities and other investments dragged the higher ordinary income from loans and deposits income. The news contributed to the general worries related to subprime lending in the U.S., Europe, and Australia.

Mitsubishi UFJ Group reported first quarter earnings decline of 31% to 151 billion yen on 18% increase in ordinary income to 1.5 trillion yen. Higher net fees and trading commissions were dragged by lower net interest income for the group. After the news the stock fell 4.6% with a general decline in the bank stocks. The bank is able to pass on higher interest rates to its core customer base of small businesses and first time home buyers, which other banks are not able to do this easily. Market analysts hoped that recent hikes in interest rates will still benefit the bank earnings in the rest of the year more than other banks.

Idemistu Kosan, second largest oil refining company in Japan after Nippon Oil, fell 2.8% after reporting 74% decline in first quarter profit. The refiner reported 0.7% drop in the revenue largely on eroding demand for refined products. The company is increasing its exploration in the North Sea area and is spending more to widen its exploration activities. For the current fiscal year the company guided lower operating income by 31 billion yen to 109.0 billion yen according to its revised presentation on the company website.

Asian currencies declined after Macquarie Bank reported losses in funds investing in high yield securities. Macquarie loss in Australia and similar losses in Japan and recent fallout in subprime trading at Bear Stearns added to global jitters that left all averages in the region sharply lower.