MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Saturday, May 18, 2013
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2:48 PM New home prices in China rose 4.9% from a year ago in April, a faster Y/Y pace than the 3.6% growth witnessed in March. In Beijing and Shanghai, prices rose 10.3% and 8.6% respectively. The data underscore government concerns regarding property inflation and suggest that last month's 13% decline in home sales transaction value was an anomaly tied to developers' rush to supply homes in March ahead of property curbs rather than an indicator that the sector is cooling. On a M/M basis, home prices rose 1% in April. The Chinese Real Estate ETF (TAO) is essentially flat YTD, but up ~43% over 12 months. Comment!
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11:33 AM With Turkish stocks and, by extension, the Turkey ETF (TUR), trading just a shade below all time highs, it's worth looking at the country's fundamentals in the wake of Moody's investment grade blessing (I, II). From WSJ: Debt-to-GDP is just 36% (down 10% in the past three years alone), 2012's budget deficit was a comparatively meager 1.4%, and the country's reliance on foreign currency debt is limited to just 27%. Like the Philippines however, authorities are concerned about the potential for inflows of "hot money": "Investment grade can lead to excessive build up of risk and we may have to look into that," Finance Minister Mehmet Simsek says. 1 Comment
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9:30 AM Nonperforming loans (as a percentage of total loans) are growing in the eurozone periphery by a disconcerting 2.5% per year, JPMorgan says, adding that the problem appears endemic outside the eurozone core as NPLs are 25%, 19%, 13.4%, and 10% in Greece, Ireland, Italy, and Portugal respectively. This raises questions about the impairment capacity of banks and what steps will ultimately be taken to provision against these underperformers. (Also: Spain's banks to reclassify refies, Slovenia NPLs contribute to downgrade, need to be transferred) 2 Comments
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8:40 AM European Economic Commissioner Olli Rehn is tired of being labeled "as an unworthy person who is almost eating children," a rather fantastical characterization he says is improperly applied to anyone pushing the austerity agenda. In reality, Rehn is agnostic when it comes to economic policy and says he finds much to like in Keynes. Now that the crisis has dissipated (at least in terms of periphery yield spreads) Rehn says there is more "room to maneuver" and countries can pursue budget cuts "at a slower pace." Comment!
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Friday, May 17, 2013
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9:35 PM Of the €208.2B in non-performing loans Spanish banks have refinanced (in order to avoid recognizing them as NPLs), nearly half are treated as though they are not distressed, dubiously eliminating the need to take provisions against them, FT says. These banks have until September to reclassify restructured loans under tougher guidelines, a mandate that will likely necessitate fresh provisioning at some institutions. Between them, Santander (SAN), BBVA, and Caixabank (CAIXY.PK) had €76B in refinanced debt on their books at the end of last year. 10 Comments
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6:15 PM Caterpillar's (CAT) deal to cut the purchase price of a Chinese mining equipment maker it bought last year ends an embarrassing episode, but now comes the hard part: penetrating China's huge underground mining market. The dispute overshadowed the real importance of giving CAT the product line and distribution it desperately wants in China, the world's top producer and consumer of coal. Comment!
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5:31 PM Venezuela reportedly will allow its state-owned energy company to form joint ventures with PetroChina (PTR) and Chevron (CVX) to manage $6B in loans designed to reverse declining oil output. Agreements have been reached on terms of a $2B credit from CVX for the Petroboscan venture and a $4B loan from China for Sinovensa. Similar deals may be in the works with Shell (RDS.A) and Repsol. 3 Comments
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4:44 PM It looks like investors will have to wait for any supersized dividend from Gazprom (OGZPY.PK). Citigroup analysts say the Russian gas giant will pay a dividend of 5.99 rubles/ADR, or ~25% of net income according to Russian accounting standards; investors had been hoping the company would pay 25% of net income based on international financial reporting standards. (earlier) 3 Comments
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3:46 PM The yen (FXY -0.9%) legs down to a new multi-year low - the dollar now buying ¥103.24 - continuing a truly remarkable move since late last year. It's an instance where politicians told you they were going to devalue, every trader and strategist around told you they were shorting the yen, and sure enough the yen went down ... hard, and in as straight of a line as markets ever allow. Ah, if it were always that easy. Other ETFs: JYN, YCL, YCN. 4 Comments
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1:31 PM Fitch downgrades Slovenia by one notch to BBB+, outlook Negative (the country is still worthy of an investment grade rating apparently) citing, among other factors, "a significant divergence between official and Fitch estimates of bank recapitalization costs." Recall that NPLs at state-controlled banks sum to nearly 30% of total loans (total NPLs at ~20% of GDP), and many of these will need to be transferred to a state-run "bad bank." (Previously: Moody's takes Slovenia into junk territory) Comment!
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12:53 PM The bull move in the greenback (UUP, UUPT) is just getting started, writes Vince Cignarella, believing the dollar's about to get another boost from safe-haven flows. The catalyst will be a selloff in fixed income taking yields on junk bonds (HYG, JNK) - now at all-time lows - to more realistic levels. The catalyst for the catalyst? It won't be 2007 all over again, he says, but instead maybe the dreaded "tapering" move from the Fed, or perhaps Syria flaming up higher. Comment!
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11:23 AM Impax Laboratories (IPXL -1.2%) says its Generic Division, Global Pharmaceuticals, has begun shipping its generic drug Zomig, which is used for the treatment of migraines in adults, as part of a licensing and distribution agreement with AstraZeneca (AZN). Comment!
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10:27 AM The call option otherwise known as National Bank of Greece (NBG +19.2%) soars again, now closing in on being a 4-bagger in a month. The capital raise plan has been approved - though surely dilutive, it keeps the bank privately-owned - and an upgrade cycle has begun for the country and the banking system. The Greek ETF (GREK +3.1%). Comment!
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10:10 AM China says it will encourage investment in vehicle manufacturing in the western part of the nation to reverse a prior decision on the issue. General Motors (GM +2.5%) and Volkswagen (VLKAY.PK) could benefit from the development due to their aggressive expansion plans in the region. Comment!
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9:56 AM The U.K.'s Serious Fraud Office says it is "urgently reviewing" whether it has the authority to investigate allegations of price fixing in the oil market, after unannounced inspections earlier this week by EU antitrust authorities of BP, Shell (RDS.A, RDS.B) and Statoil (STO). The SFO believes it could be the appropriate body to investigate such allegations. 5 Comments
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9:38 AM Did the Fed tighten while we were getting a cup of coffee? The greenback is soaring against all other currencies, with the dollar bull ETF (UUP) gaining 0.6% - an unusually large move for that vehicle. Strength against the yen (FXY -0.3%) and the aussie (FXA -0.9%) are givens of late, but the greenback is up about 1% vs. both the loonie (FXC) and the swissie (FXF), and about 0.6% vs. the euro (FXE) and cable (FXB). Getting hit are Treasurys (TLT -0.5%), the dollar bear ETF (UDN -0.6%) and of course, gold (GLD -0.7%). 5 Comments
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9:26 AM Thai stocks (THD) rise 0.62%, helped by 7% gains for Shin Corp. (SHNZY.PK) and Minor International (MNILF.OB) which will both be added to the MSCI Emerging Markets (EEM) index. Elsewhere in the region, stocks in Indonesia (IDX) rise 1.32%, continuing to defy analysts' predictions (I, II) of a steep sell-off, and post-midterm election profit-taking continues in the Philippines (EPHE), where stocks fall 0.42%. Comment!
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9:13 AM Big beer companies including Anheuser-Busch InBev (BUD), Molson Coors (TAP), SABMiller (SBMRY.PK), Heineken (HINKY.PK), and Constellation Brands (STZ) support legislation that they say would take away some of the advantages craft brewers have on excise taxes. While separating the big boys like A-B from smaller local players is pretty easy, things get more confusing when trying to label brewers such as Boston Beer (SAM) and Craft Brew Alliance (BREW) with indy roots. What to watch: Though sluggish beer volume in the U.S. is a major concern, the battle over excise taxes could be just as big for bottom lines. Comment!
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8:56 AM Workers in Angola are completing construction of the strongest crane in Africa, with a capacity to lift 2,500 metric tons, to be used at offshore projects for Chevron (CVX), Total (TOT) and SBM Offshore. The second phase of CVX’s $5.6 billion Mafumeira Sul project is expected to produce 110K bbl/day by 2015, and TOT’s Clov project may start pumping crude next year. Comment!
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8:50 AM Russia's economy expanded by 1.6% in Q1 (consensus was for 1.2% growth), marking the fifth straight quarter of decelerating growth. As in Japan, business investment is weakening even as private consumption remains steady. The problem: demand for commodity exports from the world's largest energy exporter is flagging amid a seemingly intractable recession in the eurozone — the currency bloc accounts for ~50% of Russian trade. Russian stocks (RSX), which are the cheapest among 21 EMs according to Bloomberg, are trading 1.8% higher but are still off ~5% YTD. 1 Comment
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