Manufacturing Report Lifts UK Stocks

123jump.com Staff
03 Sep, 2007
New York City

Stocks in London closed fractionally higher. UK manufacturers reported strong rise in manufacturing activity at the end of the second quarter. Despite rising currency and steady rise in interest rates domestic orders are greater than export orders. The general tone of the report suggested that UK may be enjoying the best manufacturing environment in the last ten years. HSBC agrees to pay $6.3 billion for 51% stake of Korea Exchange Bank. of the FTSE 100 stocks, 65 closed higher.

[R]1:00PM New York, 7:00PM London - Bank and mining stocks helped London higher at close. Prime Minister Gordon Brown says the current financial market turmoil is temporary. UK Manufacturers report best performance in 10 years. HSBC offers to acquire 51% of Korea Exchange Bank.[/R]

London limped higher helped by mining and financial shares. UK closed up 0.2% carrying forward gains started last Wednesday. Of the 102 FTSE 100 shares, 65 finished up, 30 fell while 7 remained unchanged. Of the index stocks, 21 gained above 1%.

In London trading FTSE 100 finished up 0.19% or 11.9 at 6,315.20 after Prime Minister Brown showed confidence in the domestic financial system. In his first comments since U.S inflicted financial market turmoil, Brown told BBC on Monday: “We can say to people we are doing everything in our power'''' to achieve stability. ``In a modern economy, government''s duty is to ensure transparency.''''

Equities were also helped by news that UK manufacturing industry’s growth has remained robust in the last decade. Manufacturer’s body, EEF reported Monday the balance of firms reporting increases in orders and output in the second quarter both rose 30%, from 23% and 19% in the corresponding period last year. The report also said that the net balance of firms reporting increased domestic orders jumped from + 8% to +17% on the back of a strong UK economy. EEF said all sectors experienced robust activity with all but the two metals sectors showing improved output balances. Transport and mechanical sectors rose for the 10th and 14th straight quarters. EEF, which surveyed 866 companies, expects the growth to continue in 2007 and next year. Domestic orders are larger than export order for the first time since the last quarter of 2002.

Of the FTSE 100 stocks, financial and mining shares gained most. Barclays plc paced gainers advancing 4% followed by ICAP plc that rose 2.7%. Kazakhmys lifted higher 2.4% while Royal & Sun Alliance gained 1.84% and Standard Chartered up 1.7%. Schroders plc rose 1.7 while Northern Rock, 3i Group plc, Royal Bank of Scotland and Man Group all rose below 1%. Mining and energy related stocks gained. Xstrata added 1.7%, Compass Group up 1.62% and British Energy up 1.02%.

Of the index stocks consumer shares fell most. Rentokil Initial led decliners falling 2.1% followed by mining group BHP Billiton plc shedding 2%. B.G Group plc and Diageo plc ended lower 1.6% and 1.13% respectively. Consumer shares, Reckitt Benkise, Associated British Foods, Cadbury Schweppes, and Kingfisher all dragged below 1%.

Financial group, HSBC Holdings plc closed unchanged at 897 pence after reporting Monday it had purchased 51% stake in Korea Exchange Bank for $6.3 billion, higher than market forecasts between $5.2 billion and $5.5 billion. The transaction is still subject to regulatory approval. Under the deal, HSBC will pay 18,400 won per share for 51% stake of U.S. based Lone Star Fund. The price will rise by Won380 per share, or $133 million, if the deal is not completed by January 31 next year, but the whole agreement will expire on April 30 if the sale has not taken place.

Unconfirmed reports suggested that Qatari Investments Authority were prepared to pay one billion pounds to purchase Nasdaq’s 31% stake in the London Stock Exchange. By selling the 797 million shares stake the U.S. exchange hopes to prevent Dubai Exchange from muscling in on its planned 1.9 billion-pound purchase of Nordic exchange OMX. Nasdaq and Borse Dubai are currently embroiled in a take-over for Stockholm-based OMX.

[R]11:00PM New York, 8:30PM Mumbai – Maruti reported 25% rise in auto sales in August while Bajaj Auto sales declined 6% in the month.[/R]

Sensex in Mumbai trading increased 103.45 or 0.7% to 15,422.05. CNX Nifty traded up 10.75 or 0.24% to 4,474.75. Rupee in trading declined to 40.89 against dollar.

Daily turnover on BSE declined to 4,715 crore rupees from 5,070 crore rupees. On the NSE the turnover declined to 10,115 crore rupees from 11,088 crore rupees. Of the 30 stocks in the Sensex 22 gained and 8 declined. NTPC led the rising stocks in the Sensex and ONGC led the decliners in the index.

Dr Reddy’s Laboratories increased 3.8% to 665 rupees on the news that the company has offered a non-binding offer to acquire Bradley Pharmaceuticals. Bradley, listed on the New York Stock Exchange is known for its Doak Dermatologics providing therapies for dermatology and podiatry, Kenwood Therapeutics providing internal medicines for gastroenterology, respiratory and respiratory needs.

Cipla jumped 2.75% to 172 rupees and Ranbaxy increased 1% to 395 rupees.

Maruti – Suzuki rose 1.5% to 881 rupees after reporting August month unit sale increase of 25% to 60,229. Bajaj Auto lost 0.9% to 2,324 rupees after reporting 6% August sales declined to 195,707. Exports increased 7% to 56,452 units. TVS Motors increased 1% to 66 rupees after the company denied the media speculation that it had violated Bajaj Auto patent in spark plug technology.

Reliance Industries fell 0.5% to 1,981 rupees after the news reports that it plans to use its pipe network from Bharuch, Gujarat to Kakinada, Andhra Pradesh to lay fiber optic cable network.

JSW Steel jumped 2% to 655 rupees after the company reported 32% increase in crude steel production from a year ago and 11% from July 2007.

NTPC jumped 6.5% to 184.55 rupees on heavy volume for the third day in a row. Last week the central government expressed interest to divest its 4.75% stake in the company through public offering.

Banking sector was in favor lifted by 2.7% rise in ICICI Bank and 0.5% in HDFC Bank. Jammu & Kashmir Bank jumped 3.2% to 690 rupees after the Reserve Bank permitted the bank to sell up to 47% to foreign investors.

Cairns India increased 0.4% to 150 rupees after the news that the company plans to invest 1,000 crore rupees to expand oil exploration in 15 blocks that it controls in Rajasthan, Gujarat, and U.P.

Apollo Hospitals jumped 1.8% to 492 rupees after the company agreed to sell 60 lakh shares (6 million) to Apax partners in the U.S. at 605 rupees per share.


[R]10:00AM New York, 10:00PM Hong Kong – In cautious Asian markets trading local deal makings dominated news. Singapore plans to invest $900 million in China Eastern Air.[/R]

Asian markets traded with a declining bias on thin volume. Shanghai led the region with a gain of 2% followed by Indonesia with a rise of 0.9% and increases of 0.85% in Thailand, 0.7% in India, and 0.4% in Korea and Australia. Hong Kong and Japan led the decliners with a loss of 0.3% followed by losses of 0.2% in Singapore and 0.02% in Taiwan.

Economy in South Korea expanded at 1.8% in the second quarter according to Bank of Korea. Export driven economy was supported by rising and stable orders from China and other nations in Europe and Asia. The slowdown in the U.S. housing market has not affected Korean economic growth. Exports in the quarter rose 5.2% and private consumption increased 0.8%. Construction fell 1.4% but service sector expanded at 1.3%. Strong gains in the financial markets lifted the insurance and financial service sector by 5.2%. Manufacturing expanded at 3.6% on sharp rise in orders for shipping heavy machineries.

HSBC has agreed to pay $6.3 billion for a 51% stake in Korea Exchange Bank. The sixth largest bank in the Korea with more than 5 million customers and nearly 350 branches was rumored as a takeover target for months. The recent rise in consumer spending and strong financial markets had bid up the bank’s valuation. Citigroup paid $3.4 billion for Koram Bank in 2004. HSBC offer is 24% higher from the closing price of the bank’s stock and plans to keep the bank name and its listing on the Seoul exchange.

Singapore Airlines and sovereign investment funds of Singapore Temasek agreed to pay $918 million for a stake of 24% in China Eastern Air. The Chinese airline had suffered a string of losses for the last two years and was looking for capital infusion. The airlines in the past has struggled with torrid pace of growth and lacked international management capabilities. The capital infusion from Singapore government fund and management expertise from Singapore Air will help the airline to return to profitability by the end of the next year.


[R]7:00AM New York, 8:00PM Tokyo - Japanese shares fell after weak company expenditure data drew out investor confidence. Tax collection in Japan jumped 34% in July. Sony plans to list its subsidiary on Tokyo Stock Exchange in October.[/R]

Japanese stocks edged lower dragged by weak companies’ spending statistics. Tokyo lost 0.3% in mixed trading, shedding off gains of 2.6% reported Friday. Of the 225 Nikkei stocks 129 ended down, 88 gained while 8 remained unchanged. Nearly 2 trillion yen worth of shares changed hands. Of the index shares, 23 gained over 2%.

In Tokyo trading Nikkei 225 shed 0.27% or 44.16 to 16,254.93 after Finance Ministry data showed Monday capital spending by Japanese firms between April and June fell 5% from a year ago. The Ministry said manufacturers spent 12% more on plant and equipment in the last 12 months. Non-manufacturers spent 13.1% less during the review period. In the second quarter the aggregate corporate pre-tax profits rose 12%, those for manufacturers and non-producers increased 17.3% and 8% respectively.

The companies’ data also weakened the yen to 115.97 to one dollar, down from around 115.77 in the morning trade, pushing exporters marginally higher.

Japanese Finance Ministry reported that tax revenue expanded 34% in July to 4.7 trillion yen from a year earlier while income tax revenue jumped 76% to 2.8 trillion yen. Corporate tax revenues fell 38.2% to 120.38 billion yen, while consumption tax revenues lifted up 2.3% to 906.81 billion yen. Last week, Japan proposed raising consumption tax to cover social expenses. The ministry attributed to the rise in revenue to a relatively low base a year ago. The central government then had transferred large chunk of tax collected to local authorities to improve the regional economies.

Of the Nikkei 225 stocks, industrial shares gained. Yokohama Rubber ended up 5.3% followed by Mitsubishi Materials rallying 4.04%. Mitsubishi Rajon Co closed up 3.7% while Furukawa Electrical added 3.6% and Isetan up 3.5%. Technology stocks, financial and electrical shares gained.

Of the index stocks, Resona Holdings led the decliners with a loss of 3.7% followed by declines in Shinsei Bank Ltd of 3.10%, and 2.8% in Sumitomo Trust and Banking Ltd. KAO Corp and Mitsui Chemicals ease 2.74% and 2.7% respectively. Financials, Softbank Corp, Credit Saison Co, Shizuoka Bank, Chiba Bank Ltd and Mizuho Trust & Banking Co dropped over 1% each.

Sony Corp ended up 0.4% after Japanese media reported Monday that the technology group in October is planning to list Sony Financial Holdings Inc, on the Tokyo Stock Exchange''s First Section. The company plans to offer 30% to public shareholders in the estimated around 300 billion yen.


French automaker Renault SA and Nissan Motor Co group said Saturday that they plan to construct an automobile manufacturing plant in Morocco with an annual capacity of 400,000 vehicles. The joint venture plans to invest nearly $1.2 billion.

Morocco''s Prime Minister Driss Jettou and President and chief executive officer of Renault and Nissan, Carlos Ghosn, signed a memorandum of understanding Saturday for the creation of a new industrial complex in the Tangier region of North Morocco, the group said in a press release. Nissan Motor Co closed down 0.2% in Tokyo.