Mundra SEZ IPO Shines

123jump.com Staff
27 Nov, 2007
New York City

Sensex index in Mumbai trading fell in the afternoon on the weakness in the global markets. U.S. credit market jitters have destabilized world markets. The ongoing U.S. housing market correction has sent the stocks of banks in the U.S., Europe, and Japan lower. The Governor of Reserve Bank of India cautioned that Indian financial markets may be affected even if banks in India have little or no exposure to the U.S. sub-prime lending.

[R]11:00AM New York, 9:30PM Mumbai - Sensex fell on renewed worries over the fallout from the US sub-prime mortgage crisis.[/R]

The Sensitive index of 30 stocks rebounded in the afternoon trade at finally ended lower at 0.6% or 119.81 to 19127.73. The broader index S&P CNX Nifty declined 0.6% to 5698.15. Weak sentiment in the U.S. market played a key role in Mumbai trading as international investors traded in the shadow of global market volatility.

Of the stocks traded on the Bombay Stock Exchange, 1,478 stocks fell, 1,299 advanced, and 66 remained unchanged. Of the 30 stocks in the Sensex index, 18 stocks advanced and 12 remained unchanged.

Daily turnover on BSE crossed 5,795 crore rupees and on the NSE stood at 16,400 crore rupees.

Of the Sensex shares, Bharti Airtel led the decliners with a loss of 3.3% to 917 rupees followed by losses in ICICI Bank and Reliance Energy of 2% to 1,132 rupees and 1,755 rupees respectively.

Among the stocks in the Sensex index BHEL and Bajaj Auto led the gainers with a rise of 2.5% each to 2,673 and 2,653 rupees, respectively.

Mundra Port and Special Economic Zone priced its initial offering at 440 rupees. The stock opened at 770 rupees a 75% premium and traded as high as 1,150 rupees and closed at 962 rupees with a gain of 119%.

The Governor of the Reserve Bank of India said that India cannot be immune to global developments in the credit market jitters despite the insignificant exposure of the local bank to the current U.S. sub-prime lending crisis.

RBI governor Yaga Reddy, however said the central bank was prepared to deal with the crisis if the health of the financial system is in danger. Reddy was addressing delegates who attended the annual banking conference in Mumbai on Tuesday. Reddy said that the credit markets will take time to resolve the current crisis.

On Monday, Reddy met European Central Bank President Jean-Claude Trichet.

Ashok Leyland surged 16.65% to 47.65 rupees, Hindustan Motors soared 10.53% to 41.45 rupees and MRF jumped 9% to 7,366.55 rupees.

DLF gained 0.7% to 897.95 rupees, Unitech surged 1.1% to 364.6 rupees Indiabulls Real Estate gained 2.9% to 641 rupees. Reliance Industries fell 1.42% to 2,842.

TCS rose 1.2% to 996.8 rupees, Wipro surged 1.1% to 457.75 rupees, Satyam Computers advanced 0.2% to 427.35 rupees but Infosys Technologies fell 0.03% to 1,575.8 rupees.

Jindal Saw Limited shed 3.3% to 788.25 rupees, Hindalco Industries declined 1.5% to 191.35 rupees and Steel Authority of India retreated 0.6% to 263.65 rupees. Sterlite Industries gained 1.3% to 908.15 rupees and Hindustan Zinc jumped 6.6% to 737.15 rupees.

Tata Steel fell 0.2% to 847.6 rupees on the news that the company may take up a 35% stake in its newly formed Mozambique joint venture for a consideration of Australian $100 million. News report suggests that the stake will help Tata Steel get exclusive rights for coal mining and provide feedstock for its plants in India and Europe.

Tata Power fell 3.7% to 1,135.8 rupees, Torrent Power slid 3.1% to 174.1 rupees, Power Grid Corporation of India slumped 2.3% to 148.5 rupees, and NTPC slid 1.5% to 234.95 rupees.

Bhushan Steel fell 13.2% to 1,368.2 rupees on reports that Securities & Exchange Board of India will look into the sudden surge in its stock of 46% from 1,086 rupees to 1,576 rupees on Monday.

Newly listed Mundra Port and Special Economic Zone clocked highest turnover of 1,458.51 crore rupees on BSE. Essar Oil, Reliance Petroleum, Jindal Steel & Power and Deccan Aviation were the other companies on the most active stock list.


[R]10:00AM New York – U.S. stocks rallied at the opening on investment in Citigroup.[/R]

U.S. stocks opened higher after a week of volatile trading and sharp loss in yesterday’s trading. The Citigroup 4.9% stake sell to Abu Dhabi Investment Authority sparked a rally in the banking and brokerage stocks.

Dow Jones jumped 102 to 12,849, Nasdaq increased 29 to 2,570, and S&P 500 added 11 to 1,418.

European markets at mid-day trading fell across the region led by a sharp loss in Norway of 1.9%. UK and Germany fell 1.2%, Spain, Italy, and France declined 0.7%. Switzerland bucked the trend and gained 0.5%.

Barclays said that it expects fiscal 2007 earnings to meet the consensus estimates of analysts despite widespread losses in the credit market.

Resource stocks in the morning trading in Europe were weak. Vedanta Resources fell 3% and Antofagasta declined 2% after gold sold-off from the earlier peak.

Banks in the region closed higher on the news that Abu Dhabi will invest $7.5 billion in a convertible security issued by Citigroup that will yield 11% annually for the next three years. The news sent the Royal Bank of Scotland higher by 1.3% and Deutsche Bank by 1.4%.

Asian Markets fell across the board but managed to rebound and trim most of the losses. Taiwan led the region with a decline of 1.8% followed by losses in Hong Kong of 1.5%, in Singapore of 1.3%, in Thailand of 1.2%, and in Indonesia of 0.8%. Japan after declining 2.2% closed up 0.6% and South Korea added 0.25%.

Hong Kong lost as much as 3% and recovered to close with a loss of 1.5%. Banks led the decliners in the local trading on the news that HSBC will move most of the sub-prime exposed structured investment vehicle on to its balance sheet. Investors worried that the implication of this move may deteriorate its balance sheet and the bank may have to seek more capital to maintain its capital ratio requirements.

Bank of China dropped 5% after sovereign fund of Singapore, Temasek, confirmed that it has sold stocks in the bank worth $575 million. HSBC lost 2% and Bank of East Asia declined 1.6%.

Korean shipbuilders rallied as oil price in the region remain firmed and dollar traded near the recent lows again the euro and yen. Financial regulators in South Korea said that they may launch corruption inquiry into Samsung Group of companies. On the news Samsung Electronic fell 4% and Samsung Securities declined 3%.


[R]7:00AM New York – Citigroup seeks funding from the Abu Dhabi at a steep interest rate just two weeks after raising $4 billion at 180 basis points more than Treasury yield.[/R]

Citigroup in a statement said that it has agreed to sell equity linked units to Abu Dhabi Investment Authority and raise $7.5 billion. The largest U.S. bank by market capitalization has gone through a turmoil linked to housing market correction and leveraged loans issued to a leverage buyout boom.

The current investment from ADIA will pay 11% interest rate and will allow it to purchase Citigroup 236 million stocks between March 15, 2010 and Sept 15, 2011 at a price between $31.81 and $37.24 a share.

The emergency funding sought by the bank comes only less than two weeks after the bank raised $4 billion through a ten year bond offering at a rate of 6.125%. The investment from ADIA, though welcome by the bank comes at a steep price and may dilute the shareholders.

ADIA will have no management role and will not have say in the board composition. ADIA investment will follow a similar investment made by Prince Alwaleed bin Talal, a nephew of Saudi King Abdullah in 1991 when the bank suffered heavy losses in Latin America.

Citigroup stock in the pre-market trading rose as much as 6% on the news. However, the larger question remains on the health of the banking system and ongoing correction in the housing market. If the housing market deteriorates further it is almost certain that banks and brokerage houses in the U.S. and Europe will suffer more losses. In the last six months financial services organizations have declared losses totaling $55 billion. Estimates of additional losses for the fourth quarter are expected between $20 and $25 billion.

After declaring a string of recent losses related to sub-prime lending, the Citigroup tier-1 capital adequacy ratio has fallen to 7.3%, below the international standard of 7.5% for the well capitalized banks, but still above 6% required the banking regulators in the U.S. The latest blow to its capital comes after rating agencies downgraded several hundred securities issues only three years ago in the mortgage securities market.



[R]6:00AM New York, 7:00PM Tokyo- Abu Dhabi investment in Citigroup leads Tokyo rebound. Corporate Service Price Index firms 1.4% in October.[/R]

Japan’s stock index rebounded from a 2.2% slump in the morning session on news that Abu Dhabi Investment Authority plans to buy a $7.5 billion stake in troubled bank Citigroup Incorporated.

In Tokyo trading Nikkei 225 rose 0.58% or 87.64 to 15,222.85, while the broader Topix Index gained 11.75 to 1,478.78.

In the first section of the Tokyo Stock Exchange 8.7 billion shares worth 1.0 trillion yen traded and 364.3 million shares valued at 6.5 billion yen changed hands.

Of the Nikkei 225 stocks 144 gained, 72 declined, and 9 were unchanged.

Sanyo Electric Co led the gainers with a rise of 8.47% after the company reported first half net income increase to 16 billion yen from a 6.2 billion yen loss in the previous year.

Exporters also gained as yen declined against the dollar. Canon firmed 0.54%, Toyota Motor Corporation gained 1.84% and Sony Corporation spiked 4.55%.

Citigroup agreed to sell $7.5 billion of equity to Abu Dhabi Investment Authority, adding that the units will convert into common shares. Abu Dhabi also agreed not to own more than 4.9% equity and will not have rights to nominate a board member and nominate management of the company. The equity unit will earn 11% interest rate and will have a conversion feature to purchase equity in the bank between $31.83 and $37.24 a share. The high rate of rate that the bank is willing to pay shows the plight of Citigroup and its need of capital.

Separately, Goldman, Sachs analyst said that HSBC might have to add $12 billion more in bad debts at its sub-prime lender Household International Incorporated.

Bank of Japan reported in its monthly Corporate Service Price Index today that the index edged higher to 1.4% in October from 1.3% in September. The domestic Corporate Goods Price Index also gained 2.4% in October for the year compared to 1.7% in September.

Statistics for the indexes for major groups and subgroups showed that the finance and insurance industries index slipped 0.6% from 97.0 to 97.4 from a year ago and gained 0.4% in September from 0.1% in October. Retail estate services also rose 1.1% from 91.2 to 91.3 a year ago and slipped 0.1% in October compared to 0.3% in September.

Transportation services index gained 7.1% for the year and 2.1% for the month, while communications and broadcasting services were unchanged at 83.8 in October. Furthermore, advertising services slumped 1.3% in October from 8% in September and leasing and rental services gained 0.2% for the months from a 0.2% retreat in the previous month of September.

Separately, Bank of Japan Governor Toshihiko Fukui said today in a press conference in Tokyo the sub-prime woes would have a negative impact on banks, adding that the central bank needs to consider long-term risks in determining interest rate policy.

The Ministry of Economy Trade and Industry said today loans guaranteed for small and midsized companies in construction industry had been expanded by 400 million yen for secured loans and 160 million yen for unsecured loans. The temporary relief program will start today and will run until the end of March next year. Housing starts dropped 37.1% in the third quarter, while investment in housing dropped 7.8%.

Japan’s Economy and Fiscal Policy Minister Hiroko Ota said today that the country’s deflation pressures plaguing the economy are waning even though global competition is preventing companies from raising prices of both goods and services.

Finance Minister Fukushiro Nukaga also announced today at a press conference in Tokyo that tax revenue for the fiscal year ending March from the initial forecast of 53.5 trillion yen. The revenue target might be revised downwards for the first time in five years.

The yen however gained to 107.99 from 108.01 against the dollar at the close of trading.

Of the Nikkei 225 index shares, Sanyo Electric Company led the advancers with a rise of 8.47%, followed by increases of 6.86% in Nippon Suisan, in Kajima Corp of 6.80%, in Mitsubishi UFJ Nicos 6.45%, and in Shimizu Corp of 4.55%.

Sanyo Electric rose after the company’s first half net income rose to 16 billion yen from a 6.2 billion yen loss a year ago. The company left its full year net income forecast unchanged at 20 billion yen on projected sales of 2.23 trillion yen. However, operating profit is forecasted to rise to 50 billion yen from 45 billion yen at the end of the year.

Mitsui Chemicals led the decliners in the index with a fall of 4.58%, followed by declines of 4.19% in Sumco Corporation, 4.08% in Mitsui Engineering & Shipbuilding, 4.04 in Mitsubishi Materials, and 3.67% in Sumitomo Corp.

IHI Corporation said today it is planning to sell its property to Dai–ichi Mutual Life Insurance Company, gaining up to 77 billion yen this business year. The gain is also included in earnings forecast made in September. An operating loss of 17 billion yen is expected for the year. IHI Corp closed up 4.50%.

Bloomberg reported today Seiko Epson President Seiji Hanaoka said the company would reorganize its factory operations as sales of screens are shrinking.

[R]5:00AM New York - Target Corporation third quarter earnings fell 4.5% on disappointing sales on high-margin merchandise.[/R]

Target Corporation ((TGT)) third quarter revenue increased 9.3% to $14.83 billion from $13.57 billion in the year ago quarter.

Same-store sales increased 3.7% with higher contribution from new stores and credit card operations.

Revenue from credit card operations gained 19% to $493 million from $414 million in the corresponding period in 2006.

The discount retailer said net earnings in the third quarter slipped 4.5% to $483 million from $506 million a year earlier. Earnings per share fell 5.1% to 56 cents per share from 59 cents per share last year. Analysts surveyed by Thomson Financial had forecast earnings of 62 cents per share on revenue of $14.83 billion.

Target stock dropped 4.1% or $2.21 to $51.69 after the earnings release on the short fall.

For the quarter, earnings before interest and income taxes rose marginally to $958 million from $957 million.

Chief executive and chairman, Bob Ulrich said the below forecasts earnings were the result of disappointing sales on high-margin products such as clothing and home furnishings.

Credit card operations chipped in with $157 million to EBIT, up 17.1% from prior year. The increase was driven by strong revenue growth, offset by higher bad debt expense.

Average receivables in the third quarter increased 19.6% from a year ago, partially driven by a product change from proprietary Target Cards to higher-limit Target Visa cards for a group of higher credit-quality Target Card customers.

Net interest expense increased $28 million compared with the third quarter in 2006 primarily due to higher average debt balances, including the debt to fund growth in accounts receivable.

In the nine months ending on November 3rd, Target Corp reported net revenue increase of 9.3% to $43.49 billion from $38.60 billion last year. Earnings gained 9.1% to $1.82 billion or $2.11 per share from $ 1.66 billion or $1.92 per share posted in the same period a year ago.

Target said it might not sell its credit card operations, which it expects to contribute $600 million to full-year earnings. Target has been reviewing its strategic operations with the credit card division.
Chief financial officer, Doug Scovanner said, """"at this point in the review, it is clear that if a transaction occurs, it would involve sharing a meaningful portion of our future pre-tax credit card contribution with a new partner.

""""As a result, we are continuing to evaluate whether the benefits of a potential transaction outweigh its expected dilutive impact on earnings per share. Regardless of the outcome, we remain committed to maintaining our core financial services operation.""""

In the quarter, Target said its board had authorized a new $10 billion share repurchase scheme, replacing the previous authorization, representing nearly 20% of total outstanding share repurchase. Debt will partially be used to fund the program.

The company acquired 3 million shares for $172 million in the quarter bringing the total for the nine months to $1.2 billion spent on 19.7 million ordinary shares. Since the share-repurchase program started in 2004, Target Corp has acquired 90.7 million shares for $4.6 billion.

Target Corp said on a conference call that fourth quarter same-store sales growth is estimated to rise between 3% and 5%. Net earnings are expected to rise ahead of the third quarter and earnings per share are not expected to rise faster than last year''s 22% growth.

Target stock ((TGT)) has traded lower in the last two weeks and recently dropped as low as $51.25 before the earnings release. In the last 52-weeks, the stock has touched a high of $70.75, and a low of $50.25.

At the end of the third quarter, Target Corporation operated 1,591 Target stores in 47 states.