Sensex Drops 2%, Rupee At Peak

123jump.com Staff
12 Oct, 2007
New York City

Sensex in Mumbai, India trading fell 2% after rising sharply in the last three days. Of the 30 stocks 26 declined in the Sensex index. The Finance Minister Chidambaram said that current value of rupee in the international market is trading outside the comfort zone. He also suggested that the economy is capable of 9% annual growth. Reliance Industries plans to invest up to $9 billion in Jamnagar refinery and plans to invest $4 billion in domestic oil exploration.

[R]12:30AM New York, 10:00PM Mumbai – Sensex ended a three day winning streak. Suzuki and Tata in different joint venture deals with Italian firms.[/R]

The BSE 30-share Sensex ended down 2% or 395 to 18.419. The CNX Nifty edged lower at 1.8% or 96.6 to 5,428.3. The BSE reported a turnover of 9,320 crore rupees and NSE reported turnover of 22,767.20 crore rupees.

Of the 30 shares of the Sensex, 4 gained and the remaining declined. Of the BSE stocks, 1,022 advanced, 1,692 declined, while 377 remained unchanged.

Maruti Suzuki Indian Ltd and its parent company Suzuki Motor Corporation have entered into a joint venture agreement with an Italian company Magneti Marelli, an arm of Fiat to establish a manufacturing hub for electronic control units in India.

Under the agreement, Magneti Marelli will contribute 51% share capital of the initial investment of 750 million rupees. Suzuki and its Indian arm will contribute 30% and 19% respectively. Maruti is manufacturing diesel engines with Italian technology, which they had bought from the Fiat Group, but were importing control units from Magneti Marelli.
Maruti Suzuki India closed weaker at 2% to 1, 096.8 rupees.

Fiat and Tata Motors on Friday entered into a joint venture to produce cars, engines and transmissions. In equal ownership in the venture the company will manufacture passenger cars, engines and transmissions for Indian and overseas markets at Ranjangaon, Maharashtra. The overall investment in the facility would exceed $650 million. The venture will focus on making engines, transmissions, and small cars with less than 1.4 liter engine capacity.

Tata Motors edged lower 3.4% to 802 rupees.

The Finance Minister P Chidambaram said at a presentation that global economic downturn is not likely to derail economic growth in India. He projected growth rate of between 8.5% and 9% for the current fiscal year. He expressed his concern that the rupee is at a nine-year high and he said the rupee ‘is not in a comfort zone.” He also said that he favored fewer economic zones with incentives that have sufficient infrastructure than a large number of small zones spread across the country. He worried that they will be difficult to monitor.

Reliance Industries Chairman Mukesh Ambani said that the expansion at Jamnagar refinery in Gujarat is would be completed ahead of schedule and at half the international cost for a refinery of a similar size. He said that the company plans to invest between $8 and $9 billion in the next three years to increase the capacity 1.2 million barrels per day in 2008.

Recently discovered gas blocks in Krishna Godavari basins are likely to commission production in the second half of next year with a production of 80 million cubic meters. This will double India’s gas production and reduce imports.

Reliance plans to invest $4 billion in the next few years to grow its domestic energy and oil exploration business and looking to expand the exploration business in Egypt and Russia.

Reliance in the past has grown through organic growth is now pursuing partnership and acquisition for future growth.

Reliance Industries with market capitalization of $97 billion is the largest exporter from India with total exports of $15.40 billion.

Mukesh Ambani and his family stake of $50 billion in the company ranks him as the richest man in India and likely contender for the richest man in the world. Reliance Industries was down 2.4% to 2,566.90 rupees. Ahead of the Annual General Meeting stock had run up.

Of the Sensex index, Reliance Energy rose 2.4% to 1,636.3 rupees and led the stocks in the index. ONGC gained 2.4% to 1,091.6 rupees, Mahindra & Mahindra climbed 1.79% to 828.5 rupees, and Hindalco Industries surged 1.73% to 178.9 rupees.

Of the index stocks L&T led the decliners with a loss of 3.61% to 3.360.6 rupees followed by declines in BHEL of 3.3% to 2,341.40 rupees, in Suzlon Energy of 4.5% to 1,698 rupees, in DLF of 5.8% to 865.7 rupees.

ICICI Bank declined 3.4% to 1,053 rupees, State Bank of India was down 4.2% to 1,862.3 rupees, and HDFC Bank lost 1.8% to 1,430.9 rupees.

ICICI bank said it has lowered loan rates by 0.5% across a range of loan maturities. For the loans with maturities of 390 days, 590 days, and 890 days the rates are lowered to 9% from 9.5% and on floating rate home loans rates are lowered by 0.5% to 11%.

Earlier State Bank of India lowered rates on home and auto loans. Home loans with maturity less than five years were lowered by 0.5%, by 1% for maturities between 5 and 15 years, and by 0.75% for 20 years.

[R]11:00AM New York – Stocks in New York traded higher on retail sales and inflation data.[/R]

Stocks in early trading rose after earnings from General Electric, retail sales, and a inflation report.

The Labor Department reported that September producer price index rose 1.1% and core PPI excluding food and energy gained 0.2%.

The Commerce Department reported September retail sales increased 0.6% after an increase of 0.3% in August.

General Electric ((GE)) reported third quarter earnings rose 14% on revenue rise of 12% to $42.53 billion. GE reported net earnings per share of 54 cents compared to 50 cents a year ago or $5.5 billion compared to $5.1 billion.

The company realized a $1.8 billion after-tax benefit from the sale of its Plastics business and recorded it in discontinued operations. At the same time, the company took a $1.4 billion charge in discontinued operations for its planned sale of the Japanese personal loan and WMC mortgage businesses. In addition, the company recorded $0.6 billion of after-tax industrial restructuring and other charges in continuing operations, $0.1 billion higher than previously announced.

Centex Corporation ((CTX)) in the preliminary results for the second quarter reported that net sales declined 13%. The company noted in the press release that it plans to take a charge of nearly $1 billion.

For the fiscal second quarter, Centex closed 7,350 units, a decrease of 14 percent from one year ago. Net sales (orders) for the period were 5,953 units, a decrease of 13 percent from last year's second quarter. Also at quarter-end, backlog was 9,633 units, a decrease of 38 percent compared to one year ago.

For the quarter, the Company expects to record an impairment of approximately $850 million for neighborhood and land inventory, and an impairment and option write-off of approximately $40 million for the Company's share of land holdings in joint ventures. The Company also expects to write off option deposits and pre-acquisition costs of approximately $40 million and to record an impairment to goodwill of approximately $65 million.

Centex also anticipates its wholly-owned financial services subsidiary to report a provision of approximately $60 million for increased losses related to mortgage market and credit exposures.

Centex generated positive cash flow from operations during the quarter ended Sept. 30, 2007. The Company projects consolidated cash flow of approximately $500 million for fiscal 2008, down from previous estimates of $750 million, reflecting the impact of worsening conditions in the housing market.

Electronic Arts ((EA)) purchased for $860 million VG Holdings controlled by Elevation partners. The game developer is known for its action and adventure themed video games titles.

Cold Water Creek ((CWTR)) fell 26% in the early hours of trading after it reported that it is likely to report a loss between 11 cents and 13 cents on revenue between $260 million and $265 million. Analysts surveyed by 123jump.com were looking for a profit of at least 11 cents on revenue of $289 million.

[R]10:00AM New York – Oracle offer $6.6 billion in cash for BEA Systems.[/R]

Oracle Corp ((ORCL)) offered $17 per share to software system developer BEA Systems Inc ((BEA)). The BEA stock has come under pressure in the last six months of trading as it has fallen as low as $10.50. The stock rebounded today at the opening to $18 on the news.

Oracle Corporation today confirmed that it delivered a letter to the Board of Directors of BEA Systems, Inc. on October 9 in which Oracle proposes to acquire BEA for $17.00 per share in cash. The $17.00 per share offer is a 25% premium over yesterday's closing price of $13.62.

The letter indicates that Oracle is prepared to proceed immediately to a process that leads to a definitive agreement. 'We have made a serious proposal including a substantial premium for BEA,' said Oracle President Charles Phillips. 'We believe our all cash offer provides the best value for BEA's shareholders and the best home for BEA's employees and customers. This proposal is the culmination of repeated conversations with BEA's management over the last several years.

BEA has faced stagnant earnings in the last three years and battled for market share with IBM. The stock in the last two years has declined from its high $17 to as low as $10.50.

At the opening three popular averages were trading higher. Dow Jones Industrial Average gained 21 to 14,034, Nasdaq increased 11 to 2,783, and S&P 500 increased 2 to 1,556.


[R]6:00AM New York, 7:00PM – Weak consumer confidence and rising prices in Japan are likely to affect retail sales.[/R]

In Tokyo trading Nikkei 225 slipped 0.73% or 127.81 to 17,331.17. Of the Nikkei 225 stocks 17 rose, 145 fell and 9 were unchanged. Hitachi Zosen led gainers for the second day rising 4.37% on firming freight charges.

Economic and Social Research Institute at the Cabinet Office of Japan said today that Consumer Confidence Index of households was nearly flat, rising marginally to 44.1 in September from 44 in August. According to the monthly survey, overall livelihood index was at 42.2 in September from 41.9 a month earlier. However, income growth component of the index remained stagnant at 42.4, while the willingness to buy durable goods component was measured at 45.5 from 44.7 in August. This survey of households with two or more people indicated stagnant wages are dampening spirits while costs of food and other consumables are rising.

Economists believe the survey, which covers 6,720 households measuring consumer perceptions, price expectations and state of households, shows the effects of shrinking disposable incomes, high taxes and the government loss of pension records in May.

Bank of Japan said today in its monthly report on corporate goods price index or producer price index, the domestic goods price index rose 1.7% after rising 2% in August. The export price index slid 0.7%, while the import price index was at 2.1% year on year. Even though the core consumer price index which excludes food and energy prices is declining, consumers are facing higher prices of food the coming weeks. Several food makers have increased or have announced to increase food prices.

The weakening dollar and increasing commodity prices is expected to trim Japan’s slowing wholesale inflation. However, Minister of Economy and Fiscal Policy Hiroko Ota said today the government will continue to monitor the effect of rising commodity prices on households and small companies. Confectionery and noodle prices are expected to rise by an average 8% in December.

Private credit research agency Tokyo Shoko Research announced today that debts left by bankrupt companies rose for the first time in 17 years, soaring 17.8% in the six months between April and September to 2.98 trillion yen.

Fast Retailing said its profit for the fiscal year 2007 ending in August fell to 31.7 billion yen or declined 21.4% from a year ago. Net sales rose 17% to 525.2 billion yen, while operating income and net income plummeted 7.7% to 64.9 billion yen and 21.4% to 31.7 billion yen respectively. Promotional expenses and personnel costs resulted in the decline in profits. The UNIQLO unit, which contributes 81% of consolidated sales, realised increased revenue from increased store numbers and existing store sales. However, Hong Kong and South Korean operations posted a profit reducing the total loss in the unit.

The company press release added that the revenue at UNIQLO CO., LTD., domestic UNIQLO operation that constitutes roughly 81% of total consolidated sales, rose 7.9% in the year to August 2007. However, operating income slipped 7.1% year on year to 64.0 billion yen. A 1.4% increase in existing store sales, and an additional 27 direct-run UNIQLO stores contributed to the rise in overall net sales. The total number of direct-run UNIQLO stores stood at 730 at end August 2007, or 748 stores including franchises. However, gross margin to net sales fell 2 points year on year in the six months to February 2007 as the warm winter forced us to offload more winter stock at discounted prices.

The company announced 130 yen per share dividend.

The company estimated net sales for the year 2008 of 570 billion yen, up 8.5% and increase of 12.1% in operating income to 72.8 billion yen.

Sony Ericsson Mobile Telecommunications Limited’s net income fell from 298 million euros in the third quarter last year to 267 million euros this year. The company, a joint venture between Sony Corporation and Sweden’s Ericsson, earnings were affected as it sold more of low margin models.

According its press release units shipped in the quarter reached approximately 26 million, a 31% increase compared to the same period last year. Sales for the quarter were Euro 3,108 million, representing a year-on-year increase of 7%. Income before taxes for the quarter was Euro 384 million, representing a year-on-year decrease of 11%, which reflects the exceptional third quarter the company experienced in 2006. Net income for the quarter was Euro 267 million. In line with Sony Ericsson expectations, the increase in low- and mid-tier priced phones in the product portfolio in the third quarter resulted in a decline in Average Selling Price (ASP) to Euro 120.

Sony Ericsson forecasts that the 2007 global handset market will be above 1.1 billion units. The company gained around 1% of market share compared with the same period last year and finished the third quarter at over 9%.

Sony Corp closed down 4.33%.

Crude oil prices also rose for the third day, gaining 2.2% to 83.08 per barrel. Inpex rose 3.20%, Mitsubishi Corp soared 2.45% and Nippon Oil gained 0.64%.

Of the index shares shipbuilder Hitachi Zosen led gainers climbing 4.37%, followed by rises of 3.20% in Inpex Holdings, 3.03% in Jtekt Corp, 2.90% in Yokogawa and 2.82% in Clarion Company Limited.

Nikon Corp led declining stocks in the index shedding 8% after an analyst at Goldman Sachs in Japan recommended investors to sell, followed by losses in Fast Retailing of 5.99%, in Taiyo Yuden Company of 5.80%, in Pioneer Corp and Sony Corp of 4.33%.

Technology shares also fell as well after brokerages forecasted that prices of chip and screen-making equipment would fall. Nikon Corp fell 8% to 340 yen and Dainippon declined 8.6% to 692 yen and Tokyo Electron tumbled 1.22%.

Financial stocks also slumped after the European Central Bank said that interest rates may have to be increased thereby tightening the credit market. Mitsubishi UFJ slid 0.68% and Mizuho Financial Group plunged 3.70%.