NEW YORK (Reuters) - The Dow and S&P 500 slipped on Tuesday as financial shares sank and on disappointing housing data, but the Nasdaq rose as investors snapped up technology shares ahead of results from Hewlett Packard (HPQ.N).
After a choppy session, financial shares fell as the U.S. Senate passed a bill to curb sudden credit card interest rate increases and hidden fees, a move that analysts said would hurt the profits of major credit card issuers.
"Anyway you look at it, it's less favorable for banks," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco. "It's going to be more restrictive on interest rate raises," he said.
Shares of American Express (AXP.N) fell 5.1 percent to $24.79, while Capital One Financial (COF.N)fell 4.5 percent to $24.90. Shares in JPMorgan Chase & Co (JPM.N) were off 3.9 percent to $36.81.
The Nasdaq was cushioned from the worst of the losses, with big-tech stocks such as Apple Inc (AAPL.O), up 0.6 percent to $127.45, leading gains as investors snapped up shares in the technology sector ahead of results from Hewlett Packard.
The Dow Jones industrial average .DJI fell 29.23 points, or 0.34 percent, at 8,474.85. The Standard & Poor's 500 Index .SPX lost 1.58 points, or 0.17 percent, at 908.13. The Nasdaq Composite Index .IXIC added 2.18 points, or 0.13 percent, at 1,734.54. more...
Rabu, 20 Mei 2009
Associated Press TARP repayments from big banks may start in June
WASHINGTON (AP) -- The Federal Reserve said Tuesday that approval for big banks seeking to repay bailout money could start in early June.
A Fed official said several of the country's 19 largest banks that participated in the recent stress tests are interested in repaying the money they received from the government's $700 billion bailout fund.
The official said the Fed, which supervises the largest banks, had requested additional information from the banks needed to support the repayment requests. This official, who spoke on condition of anonymity because the applications are still being reviewed, said the earliest that announcements could be made would be the week of June 8.
Under the rules governing the operation of the bailout fund, banks that receive assistance can make repayments as long as they prove to their primary regulator that repaying the capital injections will not jeopardize their safety and soundness. The banks also must show that they can replace the funds by raising capital without guarantees from the Federal Deposit Insurance Corp.
The Fed's decision would go to the Treasury Department for final approval to return the money. Treasury supervises the bailout fund.
The official did not name any of the institutions that have made requests to repay their rescue funds. However, other people familiar with the situation said that Goldman Sachs Group Inc. and Morgan Stanley have formally asked the Fed for permission to repay a combined $20 billion in federal bailout money.
The 10 banks that were found to need more capital after the stress tests, including Citigroup Inc. and Bank of America Corp., have until June 8 to develop such a plan and have it approved by regulators.
A major issue that needs to be resolved along with the repayments is paying the government for warrants it received as part of the initial loans to banks in the form preferred stock purchases. Those warrants gave the government the option to buy stock at a set price over a period of 10 years.
But now that banks want to return the bailout funds, the government and the banks will have to settle the issue of how much the stock warrants are worth. more...
A Fed official said several of the country's 19 largest banks that participated in the recent stress tests are interested in repaying the money they received from the government's $700 billion bailout fund.
The official said the Fed, which supervises the largest banks, had requested additional information from the banks needed to support the repayment requests. This official, who spoke on condition of anonymity because the applications are still being reviewed, said the earliest that announcements could be made would be the week of June 8.
Under the rules governing the operation of the bailout fund, banks that receive assistance can make repayments as long as they prove to their primary regulator that repaying the capital injections will not jeopardize their safety and soundness. The banks also must show that they can replace the funds by raising capital without guarantees from the Federal Deposit Insurance Corp.
The Fed's decision would go to the Treasury Department for final approval to return the money. Treasury supervises the bailout fund.
The official did not name any of the institutions that have made requests to repay their rescue funds. However, other people familiar with the situation said that Goldman Sachs Group Inc. and Morgan Stanley have formally asked the Fed for permission to repay a combined $20 billion in federal bailout money.
The 10 banks that were found to need more capital after the stress tests, including Citigroup Inc. and Bank of America Corp., have until June 8 to develop such a plan and have it approved by regulators.
A major issue that needs to be resolved along with the repayments is paying the government for warrants it received as part of the initial loans to banks in the form preferred stock purchases. Those warrants gave the government the option to buy stock at a set price over a period of 10 years.
But now that banks want to return the bailout funds, the government and the banks will have to settle the issue of how much the stock warrants are worth. more...
Bloomberg U.S. Economy: April Housing Starts Drop on Apartments
May 19 (Bloomberg) -- Builders broke ground on the fewest homes on record in April as a plunge in condominiums and apartment buildings overwhelmed the second straight gain in starts on single-family dwellings.
Housing starts unexpectedly slid 13 percent to an annual rate of 458,000, led by a 46 percent tumble in multifamily starts, which tend to be more volatile, Commerce Department figures showed in Washington. Building permits, a sign of future construction, fell 3.3 percent to a record low of 494,000.
While the homebuilding slump has brought the supply of new properties below the rate households are being created, surging unemployment will temper the likely rebound, analysts said. The plunge in apartments and condominiums also reinforces concern about the impact of the credit crunch on commercial real estate.
“This continues to support the story that new construction probably bottoms by early summer,” said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. “We’re getting closer but that doesn’t mean we’re looking for a strong rebound” he said, adding that “obviously, financing remains difficult for builders and buyers alike.”
Home Depot Inc. and Lowe’s Cos. this week both posted first-quarter earnings that exceeded analysts’ estimates, underscoring signs of a turn in the industry. Confidence among U.S. homebuilders in May rose to the highest level since September, a National Association of Home Builders/Wells Fargo survey showed yesterday. more...
Housing starts unexpectedly slid 13 percent to an annual rate of 458,000, led by a 46 percent tumble in multifamily starts, which tend to be more volatile, Commerce Department figures showed in Washington. Building permits, a sign of future construction, fell 3.3 percent to a record low of 494,000.
While the homebuilding slump has brought the supply of new properties below the rate households are being created, surging unemployment will temper the likely rebound, analysts said. The plunge in apartments and condominiums also reinforces concern about the impact of the credit crunch on commercial real estate.
“This continues to support the story that new construction probably bottoms by early summer,” said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. “We’re getting closer but that doesn’t mean we’re looking for a strong rebound” he said, adding that “obviously, financing remains difficult for builders and buyers alike.”
Home Depot Inc. and Lowe’s Cos. this week both posted first-quarter earnings that exceeded analysts’ estimates, underscoring signs of a turn in the industry. Confidence among U.S. homebuilders in May rose to the highest level since September, a National Association of Home Builders/Wells Fargo survey showed yesterday. more...
Business Times Analyst changes view, now expects palm oil price surge
Tokyo [Tuesday - May 19, 2009]Palm oil prices are likely to surpass RM3,000 per tonne as the world faces a shortage of vegetable oils, says Dorab Mistry, a leading palm oil analyst.
Mistry admitted that he was wrong to have been pessimistic about the palm oil price outlook in Kuala Lumpur a couple of months ago.
At that time, he had forecast prices falling to a low of RM1,500 per tonne in the second half of the year, believing that the global recession would eat into consumer demand.
"Dramatic changes have taken place. I was wrong. Food demand has gone up despite the global economic slowdown. It is now apparent there is tightness in supply of vegetable oils throughout the world, including palm oil," Mistry told Japanese edible oil consumers here at the Malaysia-Japan Palm Oil Trade Fair and Seminar yesterday.
"Soya crop plantings in Argentina and the US have come out lower than expected. Canadian rapeseed harvest is significantly less than previously and this has put Japan in head-on competition with China."
Mistry's views concurred with those of IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng, who had said last week that palm oil prices could heat up further and that traders could expect an explosive market.
Lee had said that prices were likely to soar past RM3,000 per tonne should Malaysia suffer a prolonged drought brought on by the El Nino weather phenomenon.
According to the Malaysian Palm Oil Board, the 4.5 million hectares of oil palm trees in the country produced only 5.08 million tonnes of crude palm oil in the first four months of the year. The output was 4 per cent less than a year ago.
The government data also showed that palm oil stocks had almost halved to 1.29 million tonnes at end-April from a record 2.27 million tonnes in November last year.
Like Lee, Mistry did not discount explosive prices in the palm futures market.
Bloomberg Soybeans Rise to Seven-Month High, Corn Gains on Demand Outlook
May 19 (Bloomberg) -- Soybeans rose to a seven-month high and corn gained for the second straight day on speculation that the economy is recovering, boosting demand for the crops.
Crude oil rose to the highest in six months in New York and the MSCI World Index of equities climbed 1.5 percent as investors become more optimistic that the first global recession since World War II is ending. The dollar fell the most against a basket of six major currencies since May 8 as rising confidence in the U.S. banking industry sapped greenback demand.
“Crude strength, dollar softness, and strength in the equity markets carried soybean prices to new highs, while firming corn,” Dale Durchholz, a senior market analyst for AgriVisor LLC, said by e-mail. “As economic confidence grows, there’s movement of investment money back into commodities as a hedge against inflation.”
Soybean futures for July delivery rose 15.5 cents, or 1.4 percent, to $11.62 a bushel on the Chicago Board of Trade. Earlier, the price touched $11.695, the highest for a most- active contract since Sept. 26.
Corn futures for July delivery gained 4.25 cents, or 1 percent, to $4.2575 a bushel in Chicago, after advancing 1 percent yesterday. The most-active contract reached a seven- month high of $4.34 a bushel on May 13 and is up 4.6 percent this year.
Investments Increase
Improving economic confidence is increasing investment in commodities, said Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago.
Hedge-fund managers and other large speculators increased their net-long positions in corn futures and options traded in Chicago by 70 percent to 137,273 contracts in the week ended May 12 from a week earlier, the highest in nine months, data from the Commodity Futures Trading Commission show.
Speculators increased net-long futures and options positions in Chicago soybeans by 6.6 percent to 112,138 contracts, the highest since July, according to CFTC data.
“Money continues to flow into commodities,” Sernatinger said.
Crude oil rose to the highest in six months in New York and the MSCI World Index of equities climbed 1.5 percent as investors become more optimistic that the first global recession since World War II is ending. The dollar fell the most against a basket of six major currencies since May 8 as rising confidence in the U.S. banking industry sapped greenback demand.
“Crude strength, dollar softness, and strength in the equity markets carried soybean prices to new highs, while firming corn,” Dale Durchholz, a senior market analyst for AgriVisor LLC, said by e-mail. “As economic confidence grows, there’s movement of investment money back into commodities as a hedge against inflation.”
Soybean futures for July delivery rose 15.5 cents, or 1.4 percent, to $11.62 a bushel on the Chicago Board of Trade. Earlier, the price touched $11.695, the highest for a most- active contract since Sept. 26.
Corn futures for July delivery gained 4.25 cents, or 1 percent, to $4.2575 a bushel in Chicago, after advancing 1 percent yesterday. The most-active contract reached a seven- month high of $4.34 a bushel on May 13 and is up 4.6 percent this year.
Investments Increase
Improving economic confidence is increasing investment in commodities, said Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago.
Hedge-fund managers and other large speculators increased their net-long positions in corn futures and options traded in Chicago by 70 percent to 137,273 contracts in the week ended May 12 from a week earlier, the highest in nine months, data from the Commodity Futures Trading Commission show.
Speculators increased net-long futures and options positions in Chicago soybeans by 6.6 percent to 112,138 contracts, the highest since July, according to CFTC data.
“Money continues to flow into commodities,” Sernatinger said.
Bloomberg Oil Rises to Six-Month High on Equity Gain, Refinery Fire
May 19 (Bloomberg) -- Crude oil climbed to a six-month high and gasoline surged after equities rebounded and a fire broke out at a Flint Hills Resources LLC refinery, curbing production.
Oil and stocks rose a second day as gains in utilities and commodity producers helped the market overcome an early slide spurred by an unexpected drop in housing starts to a record low. The catalytic cracker caught fire at Flint Hills’ Corpus Christi, Texas, refinery, according to preliminary reports from the state’s environmental agency.
“The market was in negative territory until equities turned,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Gasoline has a bigger move, probably because of the fire at the Flint Hills refinery. This comes on top of problems at Valero and Sunoco.”
Crude oil for June delivery rose 62 cents, or 1.1 percent, to $59.65 a barrel at 2:50 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 10. Prices are up 34 percent this year.
The June crude contract expired today. The more-actively traded July contract climbed 51 cents, or 0.9 percent, to end the session at $60.10 a barrel.
The Flint Hills refinery has a capacity of 300,000 barrels of oil a day, according to data compiled by Bloomberg. A catalytic cracker is used to make higher-value products such as gasoline and diesel.
Preliminary Reports
“We have very preliminary reports that the cat cracker is what was on fire,” said Andrea Morrow, a spokeswoman for the Texas Commission for Environmental Quality. “We sent a team out there but haven’t heard anything further.” more...
Oil and stocks rose a second day as gains in utilities and commodity producers helped the market overcome an early slide spurred by an unexpected drop in housing starts to a record low. The catalytic cracker caught fire at Flint Hills’ Corpus Christi, Texas, refinery, according to preliminary reports from the state’s environmental agency.
“The market was in negative territory until equities turned,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Gasoline has a bigger move, probably because of the fire at the Flint Hills refinery. This comes on top of problems at Valero and Sunoco.”
Crude oil for June delivery rose 62 cents, or 1.1 percent, to $59.65 a barrel at 2:50 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 10. Prices are up 34 percent this year.
The June crude contract expired today. The more-actively traded July contract climbed 51 cents, or 0.9 percent, to end the session at $60.10 a barrel.
The Flint Hills refinery has a capacity of 300,000 barrels of oil a day, according to data compiled by Bloomberg. A catalytic cracker is used to make higher-value products such as gasoline and diesel.
Preliminary Reports
“We have very preliminary reports that the cat cracker is what was on fire,” said Andrea Morrow, a spokeswoman for the Texas Commission for Environmental Quality. “We sent a team out there but haven’t heard anything further.” more...
PalmoilHQ - Crude palm oil futures rebound from 2-week low
JAKARTA: Malaysian palm futures rose 2.3 per cent yesterday to end a three-day losing streak, pulling back from a two-week low, ahead of export figures expected today, traders said.
The benchmark August contract rose RM60 to RM2,630 per tonne, after losing 8.2 per cent in previous three days. Overall volume was 17,599 lots of 25 tonnes each.
Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will unveil May 1-20 Malaysian palm oil export data on May 20.
“People were talking about exports of 814,000 tonnes. It is a good number although I would say it is not very bullish,” said a trader at a Kuala Lumpur-based commodities brokerage.
The world’s number 2 palm producer shipped 747,575-754,129 tonnes of palm oil products during the first 20 days of April, cargo surveyors have estimated.
Healthy demand from top vegetable oil buyers China and India at a time of low stocks and weak output could push Malaysian palm oil futures pass a key psychological level of RM3,000 soon, a top industry analyst said on Monday.
US soyoil for July contract was up 0.8 per cent in Asian trade and the most active September soyoil contract on Dalian’s Commodity Exchange rose 2.7 per cent.
The benchmark August contract rose RM60 to RM2,630 per tonne, after losing 8.2 per cent in previous three days. Overall volume was 17,599 lots of 25 tonnes each.
Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will unveil May 1-20 Malaysian palm oil export data on May 20.
“People were talking about exports of 814,000 tonnes. It is a good number although I would say it is not very bullish,” said a trader at a Kuala Lumpur-based commodities brokerage.
The world’s number 2 palm producer shipped 747,575-754,129 tonnes of palm oil products during the first 20 days of April, cargo surveyors have estimated.
Healthy demand from top vegetable oil buyers China and India at a time of low stocks and weak output could push Malaysian palm oil futures pass a key psychological level of RM3,000 soon, a top industry analyst said on Monday.
US soyoil for July contract was up 0.8 per cent in Asian trade and the most active September soyoil contract on Dalian’s Commodity Exchange rose 2.7 per cent.
Indopremier ITMG – BUY ( Tp – Rp18.495)
Valuation
With WACC of 12.4%, our current estimates in the DCF calculations resulted in the share price of ITMG to be valued at Rp18.495 per share, still gives potential upside of 8.5% from yesterday’s closing price of Rp17.050. From earnings multiple valuation , at Rp17.050, the share is trading at 6.82 X FY09 earnings, which is below the market rating of 10 X FY09 earnings. We view upsides exist in our DCF-based valuation calculation. In addition , ITMG share price characteristic is that it has a high volatility,daily standard deviation of return of 5.8% in 2008 (vs. the JCI of 2.5%), and this provides trading opportunity to investors.
Recommendation
ITMG is a listed coal producer with a good fundamental, strong balance sheet and cash position, and also with sufficient management transparency. We retain our BUY recommendation.
With WACC of 12.4%, our current estimates in the DCF calculations resulted in the share price of ITMG to be valued at Rp18.495 per share, still gives potential upside of 8.5% from yesterday’s closing price of Rp17.050. From earnings multiple valuation , at Rp17.050, the share is trading at 6.82 X FY09 earnings, which is below the market rating of 10 X FY09 earnings. We view upsides exist in our DCF-based valuation calculation. In addition , ITMG share price characteristic is that it has a high volatility,daily standard deviation of return of 5.8% in 2008 (vs. the JCI of 2.5%), and this provides trading opportunity to investors.
Recommendation
ITMG is a listed coal producer with a good fundamental, strong balance sheet and cash position, and also with sufficient management transparency. We retain our BUY recommendation.
Indopremier BBRI - BUY (TP Rp 6.600)
Bank pelat merah yang di tahun sebelumnya membagikan dividen sebesar 50% dari laba bersih, kali ini diijinkan oleh pemegang saham untuk menurunkan porsi dividen karena untuk menjaga rasio kecukupan modal. Pada 1Q09, rasio CAR BBRI bertengger pada 14,9%. Dengan target ekspansi kredit 18% hingga 20% pada tahun ini, BBRI berusaha menjaga rasio CAR agar tidak meluncur turun.
Perubahan dividen policy ini mempengaruhi imbal balik ekuitas (RoE) pada proyeksi kami untuk tahun 2009 dan 2010. Dampak penurunan dividend payout ratio terlihat pada tingkat RoE yang turun 130bps pada 2010. Namun demikian, menanggapi penurunan dividend payout ratio (DPR), kami tetap mempertahankan rekomendasi BUY untuk BBRI. Penurunan DPR ini memberikan keleluasaan bagi BBRI untuk mengejar pertumbuhan kredit di tahun ini, menurut pandangan kami. Dengan metode dividend discount model, kami mempergunakan tingkat pertumbuhan 13,4% dan cost of equity sebesar 18,2%, untuk mendapatkan harga wajar BBRI pada Rp 6.600,-. Saat ini BBRI diperdagangkan sebanyak 2,4x PBV10
Perubahan dividen policy ini mempengaruhi imbal balik ekuitas (RoE) pada proyeksi kami untuk tahun 2009 dan 2010. Dampak penurunan dividend payout ratio terlihat pada tingkat RoE yang turun 130bps pada 2010. Namun demikian, menanggapi penurunan dividend payout ratio (DPR), kami tetap mempertahankan rekomendasi BUY untuk BBRI. Penurunan DPR ini memberikan keleluasaan bagi BBRI untuk mengejar pertumbuhan kredit di tahun ini, menurut pandangan kami. Dengan metode dividend discount model, kami mempergunakan tingkat pertumbuhan 13,4% dan cost of equity sebesar 18,2%, untuk mendapatkan harga wajar BBRI pada Rp 6.600,-. Saat ini BBRI diperdagangkan sebanyak 2,4x PBV10
Morgan Stanley - Indonesia banks: Another Leg Up ... Raising Target Prices
Investment conclusion:
We continue to recommend investors stay Overweight on Bank Mandiri and Bank Rakyat Indonesia (BRI) with higher target prices. We anticipate further expansion in multiples, driven by an improving macro, lower interest rates and upside earnings surprise. We see another leg up in valuations.
1Q09 insights:
Banks under our current coverage beat our expectations in core profit, and met or exceeded our estimates at the net profit level. Key drivers are volume growth, margin expansion and productivity gains. Asset quality deterioration is manageable – it is being more than offset by improvements in core operating profits.
Above consensus:
On our current forecasts, we are already materially above the Street’s estimates at
Mandiri (18% above) and BRI to a lesser extent. Yet we continue to see upside risks potentially from: higher volume growth, greater productivity, lower credit costs.
Higher target prices:
Given upside EPS risks and declining interest rates, we reduce our cost of equity (COE) assumptions across the banks by 100bp and apply probability-weights to our bull, base and bear case scenarios. We apply 18% COE for Mandiri and BRI, and 17% COE for BCA (for a widely-perceived higher quality franchise). Our new TPs imply 21% upside at Mandiri, 17% upside at BRI and 2% downside at BCA.
Maintain OW on Mandiri and BRI:
Higher upside, upwardly-biased earnings risk (on our and consensus forecasts) reinforce our preference for these two banks. We remain Equal-weight on BCA. Mandiri is our preferred choice for lower valuations and EPS upside.
Regional perspective:
Not only are these banks among the most profitable, best capitalized and possessing the most excess provision reserves, they also have the highest threshold for credit costs. On a P/Core Profit versus Core Profit/Loans matrix, these banks offer outstanding value regionally.
We continue to recommend investors stay Overweight on Bank Mandiri and Bank Rakyat Indonesia (BRI) with higher target prices. We anticipate further expansion in multiples, driven by an improving macro, lower interest rates and upside earnings surprise. We see another leg up in valuations.
1Q09 insights:
Banks under our current coverage beat our expectations in core profit, and met or exceeded our estimates at the net profit level. Key drivers are volume growth, margin expansion and productivity gains. Asset quality deterioration is manageable – it is being more than offset by improvements in core operating profits.
Above consensus:
On our current forecasts, we are already materially above the Street’s estimates at
Mandiri (18% above) and BRI to a lesser extent. Yet we continue to see upside risks potentially from: higher volume growth, greater productivity, lower credit costs.
Higher target prices:
Given upside EPS risks and declining interest rates, we reduce our cost of equity (COE) assumptions across the banks by 100bp and apply probability-weights to our bull, base and bear case scenarios. We apply 18% COE for Mandiri and BRI, and 17% COE for BCA (for a widely-perceived higher quality franchise). Our new TPs imply 21% upside at Mandiri, 17% upside at BRI and 2% downside at BCA.
Maintain OW on Mandiri and BRI:
Higher upside, upwardly-biased earnings risk (on our and consensus forecasts) reinforce our preference for these two banks. We remain Equal-weight on BCA. Mandiri is our preferred choice for lower valuations and EPS upside.
Regional perspective:
Not only are these banks among the most profitable, best capitalized and possessing the most excess provision reserves, they also have the highest threshold for credit costs. On a P/Core Profit versus Core Profit/Loans matrix, these banks offer outstanding value regionally.
HSBC - Macro - The long-term costs of today's fiscal excess
HSBC - And when the money runs out? The long-term costs of today’s fiscal excess
Fiscal austerity will place a huge constraint on any future recovery
The UK and the US have the biggest problems
Fiscal frailties threaten currency crises, price instability and default
Policymakers may have prevented another Great Depression but their work is not yet over. The fiscal arithmetic now looks awful. During the boom years, the US and UK governments in particular chose not to put money aside for a rainy day. Now, the numbers simply don’t add up.
At the very least, governments need to pursue a multi-year period of fiscal austerity. Even that, though, may not be good enough to stabilise the fiscal outlook. Credit booms tend to leave countries with permanent activity losses, undermining a government’s ability to raise revenues to support public services. And, even if productive potential were to be untouched by the crisis, governments still face problems. The number of higher rate tax payers will shrink in response to a diminishing financial sector. Ageing populations will place tremendous pressure on some governments to raise healthcare and pension outlays.
What, then, can governments do? Austerity is politically unpopular and difficult to sustain for more than a handful of years. Other options to reduce the fiscal burden, though, create their own difficulties. For the US and the UK, printing money is an attractive wheeze because, with so much spare capacity, the benefits should be felt via higher output rather than elevated inflation. Foreign purchasers of Treasuries and gilts, though, would take a hit via falls in the dollar and sterling, raising the risk of major currency crises. Meanwhile, for those countries without access to their own printing press (most obviously those in the eurozone), default risk might eventually rise. More generally, in the absence of credible austerity measures, quantitative easing is going to be around for a very long time: any exit which led to higher bond yields would seriously upset both the fiscal arithmetic and the sustainability of any economic recovery
Fiscal austerity will place a huge constraint on any future recovery
The UK and the US have the biggest problems
Fiscal frailties threaten currency crises, price instability and default
Policymakers may have prevented another Great Depression but their work is not yet over. The fiscal arithmetic now looks awful. During the boom years, the US and UK governments in particular chose not to put money aside for a rainy day. Now, the numbers simply don’t add up.
At the very least, governments need to pursue a multi-year period of fiscal austerity. Even that, though, may not be good enough to stabilise the fiscal outlook. Credit booms tend to leave countries with permanent activity losses, undermining a government’s ability to raise revenues to support public services. And, even if productive potential were to be untouched by the crisis, governments still face problems. The number of higher rate tax payers will shrink in response to a diminishing financial sector. Ageing populations will place tremendous pressure on some governments to raise healthcare and pension outlays.
What, then, can governments do? Austerity is politically unpopular and difficult to sustain for more than a handful of years. Other options to reduce the fiscal burden, though, create their own difficulties. For the US and the UK, printing money is an attractive wheeze because, with so much spare capacity, the benefits should be felt via higher output rather than elevated inflation. Foreign purchasers of Treasuries and gilts, though, would take a hit via falls in the dollar and sterling, raising the risk of major currency crises. Meanwhile, for those countries without access to their own printing press (most obviously those in the eurozone), default risk might eventually rise. More generally, in the absence of credible austerity measures, quantitative easing is going to be around for a very long time: any exit which led to higher bond yields would seriously upset both the fiscal arithmetic and the sustainability of any economic recovery
CLSA CPO upgrades
Our regional CPO analyst Wilianto has just raised his CPO price assumption from US$500/ton to US$700/ton. Edible oil supply remains tight while demand remains firm. His upgrade in our CPO price assumption has pushed up our earnings forecast by 30-138% in 2010. This reflects operating leverage as plantation production costs are relatively fixed. Maintain OWT for the sector.
His large cap pick are Malaysian KL Kepong (KLK MK), Sime Darby (SIME MK, upgraded from OPF to BUY). But if you don’t mind smaller caps that are trading at deep discount to the large cap: Bakrie Plantation (UNSP IJ), and Sampoerna Agro (SGRO IJ).
London Sumatra (LSIP IJ) is trading at 50% discount to Astra Agro (AALI IJ) in term of EV/ha. We believe that this discount is excessive. LSIP’s problems are fixable. The estate suffered from less than ideal maintenance during the Asian crisis. But the problems are being addressed. LSIP will have new CPO mill in East Kalimantan (this area will account for no less than 30% of LSIP’s planted area in few year time) that will improve their margins. LSIP also controls an awesome seed garden and the quality of their trees is amongst the best.
Key points from the report:
We have upgraded our CPO price assumption from US$500/ton to US$700/ton.
This lead to 30%-138% earnings upgrade in 2010 as plantations are leveraged to CPO price movement. We are now 30% above consensus.
Supply of edible oils remain tight
All eyes on US soybean planting. Planting progress only 14% vs. 25% average. Late planting will increase risk of lower yield.
Inventory of soybean and palm oil are at multi years low.
Demand remains firm as India and China continue to up consumption. China is now the largest consumer of CPO and India increasingly relies on CPO as well.
His large cap pick are Malaysian KL Kepong (KLK MK), Sime Darby (SIME MK, upgraded from OPF to BUY). But if you don’t mind smaller caps that are trading at deep discount to the large cap: Bakrie Plantation (UNSP IJ), and Sampoerna Agro (SGRO IJ).
London Sumatra (LSIP IJ) is trading at 50% discount to Astra Agro (AALI IJ) in term of EV/ha. We believe that this discount is excessive. LSIP’s problems are fixable. The estate suffered from less than ideal maintenance during the Asian crisis. But the problems are being addressed. LSIP will have new CPO mill in East Kalimantan (this area will account for no less than 30% of LSIP’s planted area in few year time) that will improve their margins. LSIP also controls an awesome seed garden and the quality of their trees is amongst the best.
Key points from the report:
We have upgraded our CPO price assumption from US$500/ton to US$700/ton.
This lead to 30%-138% earnings upgrade in 2010 as plantations are leveraged to CPO price movement. We are now 30% above consensus.
Supply of edible oils remain tight
All eyes on US soybean planting. Planting progress only 14% vs. 25% average. Late planting will increase risk of lower yield.
Inventory of soybean and palm oil are at multi years low.
Demand remains firm as India and China continue to up consumption. China is now the largest consumer of CPO and India increasingly relies on CPO as well.
CIMB Surya Citra Media Result note - Maintaining margins
(SCMA IJ / SCMA.JK, NEUTRAL - Maintained, Rp500 - Tgt. Rp480, Media)
SCM's 1Q09 results were in line with consensus and our expectations. EBITDA margins were maintained at 23% despite rising competition among free-to-air TV stations. The company implemented a profit-sharing scheme with some of its programme suppliers, to manage risks. SCM continues to focus on local soap operas during prime time, sustaining its rating among the top three. We maintain our forecasts and target price of Rp480, based on DCF valuation (WACC 16.5%). Maintain Neutral, in line with our sector rating. The media sector is one of the most vulnerable to lower GDP growth, we believe.
SCM's 1Q09 results were in line with consensus and our expectations. EBITDA margins were maintained at 23% despite rising competition among free-to-air TV stations. The company implemented a profit-sharing scheme with some of its programme suppliers, to manage risks. SCM continues to focus on local soap operas during prime time, sustaining its rating among the top three. We maintain our forecasts and target price of Rp480, based on DCF valuation (WACC 16.5%). Maintain Neutral, in line with our sector rating. The media sector is one of the most vulnerable to lower GDP growth, we believe.
Citigroup global commodities strategy - Thermal Coal
Thermal Coal
Short-Term Risk Building — International seaborne thermal coal prices have been stable over the last two months (Figure 1). However we see downside risks mounting in the short term.
Chinese Imports — We believe robust Chinese imports of thermal coal (Q1 imports up 20% yoy) over the last 6 months could abate in H209. Chinese domestic coal prices are at artificially high levels (above seaborne prices) as negotiations between large IPPs and coal companies drag on, resulting in higher imports. Domestic Chinese coal supply could improve in H209 with resumption of closed production and the ramp-up of new capacity (NDRC estimates a capacity increase of 215mt in 2009). Chinese demand is still subdued with risks building of an over supplied domestic market, falling prices and weaker imports.
Chinese Exports — Q1 Chinese coal exports declined 27% yoy on last year. Export quotas for 2009 have been issued for 26Mt. Assuming these cover the first half, this implies thermal coal exports of 45Mt (vs. annualised YTD of exports ~30mt). Given the slowdown in power consumption growth thermal coal export licenses have potential to increase, a further risk to seaborne coal prices. We retain our forecasts of rollover at $US70/t for JFY10.
Short-Term Risk Building — International seaborne thermal coal prices have been stable over the last two months (Figure 1). However we see downside risks mounting in the short term.
Chinese Imports — We believe robust Chinese imports of thermal coal (Q1 imports up 20% yoy) over the last 6 months could abate in H209. Chinese domestic coal prices are at artificially high levels (above seaborne prices) as negotiations between large IPPs and coal companies drag on, resulting in higher imports. Domestic Chinese coal supply could improve in H209 with resumption of closed production and the ramp-up of new capacity (NDRC estimates a capacity increase of 215mt in 2009). Chinese demand is still subdued with risks building of an over supplied domestic market, falling prices and weaker imports.
Chinese Exports — Q1 Chinese coal exports declined 27% yoy on last year. Export quotas for 2009 have been issued for 26Mt. Assuming these cover the first half, this implies thermal coal exports of 45Mt (vs. annualised YTD of exports ~30mt). Given the slowdown in power consumption growth thermal coal export licenses have potential to increase, a further risk to seaborne coal prices. We retain our forecasts of rollover at $US70/t for JFY10.
Selasa, 19 Mei 2009
Associated Press Stocks jump on renewed optimism on housing, banks
NEW YORK (AP) -- Reassuring news about housing and banking on Monday convinced investors to return to the stock market.
The Dow Jones industrial average shot up 235 points, making up three-quarters of last week's losses. All the major indexes rose about 3 percent.
A better-than-expected profit report from Lowe's Cos., an uptick in homebuilder sentiment and positive comments from analysts about U.S. banks revived investors' confidence in an economic rebound. Stocks fell sharply last week on worries that a recovery might be further off than hoped, interrupting a rally that has left the Standard & Poor's 500 index up 34.5 percent since March 9.
Steep drops in home values have been at the heart of the economy's troubles, slicing into consumers' wealth and saddling banks with huge losses. Analysts believe that stability in the housing and banking industries are imperative for the economy to rebound.
"There's a realization that things are going to get better," said James Cox, managing partner at Harris Financial Group. "That's the main theme of the market over the last couple of weeks."
Despite Monday's bounce, however, the market is expected to remain volatile as investors look for signs that the economy is actually recovering -- not just slowing its descent.
At the start of the market's upswing in March, signs of stabilization were enough to encourage investors to buy stocks. Linda Duessel, equity market strategist at Federated Investors, said the rally has been driven by "less bad" information.
"Probably, we'll get bored with that as the months progress," Duessel said. "We'll need something better to move the market."
The Dow rose 235.44, or 2.9 percent, to 8,504.08. That was the biggest point gain since a 246-point jump on April 9.
The S&P 500 index rose 26.83, or 3 percent, to 909.71, putting it back into positive territory for the year. The Nasdaq composite index rose 52.22, or 3.1 percent, to 1,732.36.
Government bond prices fell, pushing the yield on the 10-year Treasury note -- a widely used benchmark for home mortgages and other loans -- up to 3.24 percent from 3.14 percent late Friday. more...
The Dow Jones industrial average shot up 235 points, making up three-quarters of last week's losses. All the major indexes rose about 3 percent.
A better-than-expected profit report from Lowe's Cos., an uptick in homebuilder sentiment and positive comments from analysts about U.S. banks revived investors' confidence in an economic rebound. Stocks fell sharply last week on worries that a recovery might be further off than hoped, interrupting a rally that has left the Standard & Poor's 500 index up 34.5 percent since March 9.
Steep drops in home values have been at the heart of the economy's troubles, slicing into consumers' wealth and saddling banks with huge losses. Analysts believe that stability in the housing and banking industries are imperative for the economy to rebound.
"There's a realization that things are going to get better," said James Cox, managing partner at Harris Financial Group. "That's the main theme of the market over the last couple of weeks."
Despite Monday's bounce, however, the market is expected to remain volatile as investors look for signs that the economy is actually recovering -- not just slowing its descent.
At the start of the market's upswing in March, signs of stabilization were enough to encourage investors to buy stocks. Linda Duessel, equity market strategist at Federated Investors, said the rally has been driven by "less bad" information.
"Probably, we'll get bored with that as the months progress," Duessel said. "We'll need something better to move the market."
The Dow rose 235.44, or 2.9 percent, to 8,504.08. That was the biggest point gain since a 246-point jump on April 9.
The S&P 500 index rose 26.83, or 3 percent, to 909.71, putting it back into positive territory for the year. The Nasdaq composite index rose 52.22, or 3.1 percent, to 1,732.36.
Government bond prices fell, pushing the yield on the 10-year Treasury note -- a widely used benchmark for home mortgages and other loans -- up to 3.24 percent from 3.14 percent late Friday. more...
Reuters HeidelbergCement may sell Indocement stake
* May sell up to 14 pct in Indocement
* May sell more and cede control - one source
* Proceeds to help reduce debt
SINGAPORE/FRANKFURT, May 15 (Reuters) - German cement maker HeidelbergCement (HEIG.DE) may sell up to a 14 percent stake in Indonesian unit PT Indocement Tunggal Prakarsa (INTP.JK), worth around $270 million, to help pay down debt, sources familiar with the deal said.
HeidelbergCement, which owns 65 percent of Indocement, is laden with debt from the takeover of British rival Hanson, but might still want to retain 51 percent of Indonesia's second biggest cement maker, said the sources, who declined to be identified because no deal was yet public.
A source who has been advising potential buyers said HeidelbergCement would only sell a maximum of a 14 percent stake in Indocement, which would be worth around $270 million based on its current market capitalisation.
"I think they will try to hold on to the Indonesian assets as it offers higher growth potential compared to Australia," another source said.
HeidelbergCement is trying to persuade its lenders to move the maturity date of its bank debt of about 9 billion euros ($12.3 billion) to 2011, a person familiar with the negotiations told Reuters earlier this month. [ID:nL6431455]
Both HeidelbergCement and Indocement declined to comment.
However, another source with knowledge of the matter said the sale would not be limited to a 14 percent stake, suggesting HeidelbergCement could cede control of the company, though no final decision had yet been taken.
Indocement has annual capacity of 17.1 million tonnes in Indonesia, and posted 2008 net profit of 1.75 trillion rupiah ($168 million) on turnover of 9.78 trillion rupiah.
Indonesia, the world's fourth most populous nation, used 38 million tonnes of cement last year, up 11.5 percent on 2007.
Indocement used to be owned by local conglomerate Salim Group prior to the Asian financial crisis in the late 1990s, but the group gave up control to repay its debt. Salim still owns about 13 percent of Indocement.
On Thursday, HeidelbergCement secured a 2-month 600 million euro bridge loan, giving it time to overhaul its finances, and said it sold its Australian asphalt operation to Fulton Hogan for an undisclosed amount as it offloads businesses outside its core cement, concrete and gravel interests.
The Australian Financial Review newspaper has reported the cement maker was looking to sell its entire Australian business. [ID:nnSYD468584] ($1=.7338 Euro) ($1=10,420 Rupiah) (Reporting by Harry Suhartono in SINGAPORE, Philipp Halstrick in FRANKFURT, and Tyagita Silka from JAKARTA) (Editing by Neil Chatterjee & Ian Geoghegan)
* May sell more and cede control - one source
* Proceeds to help reduce debt
SINGAPORE/FRANKFURT, May 15 (Reuters) - German cement maker HeidelbergCement (HEIG.DE) may sell up to a 14 percent stake in Indonesian unit PT Indocement Tunggal Prakarsa (INTP.JK), worth around $270 million, to help pay down debt, sources familiar with the deal said.
HeidelbergCement, which owns 65 percent of Indocement, is laden with debt from the takeover of British rival Hanson, but might still want to retain 51 percent of Indonesia's second biggest cement maker, said the sources, who declined to be identified because no deal was yet public.
A source who has been advising potential buyers said HeidelbergCement would only sell a maximum of a 14 percent stake in Indocement, which would be worth around $270 million based on its current market capitalisation.
"I think they will try to hold on to the Indonesian assets as it offers higher growth potential compared to Australia," another source said.
HeidelbergCement is trying to persuade its lenders to move the maturity date of its bank debt of about 9 billion euros ($12.3 billion) to 2011, a person familiar with the negotiations told Reuters earlier this month. [ID:nL6431455]
Both HeidelbergCement and Indocement declined to comment.
However, another source with knowledge of the matter said the sale would not be limited to a 14 percent stake, suggesting HeidelbergCement could cede control of the company, though no final decision had yet been taken.
Indocement has annual capacity of 17.1 million tonnes in Indonesia, and posted 2008 net profit of 1.75 trillion rupiah ($168 million) on turnover of 9.78 trillion rupiah.
Indonesia, the world's fourth most populous nation, used 38 million tonnes of cement last year, up 11.5 percent on 2007.
Indocement used to be owned by local conglomerate Salim Group prior to the Asian financial crisis in the late 1990s, but the group gave up control to repay its debt. Salim still owns about 13 percent of Indocement.
On Thursday, HeidelbergCement secured a 2-month 600 million euro bridge loan, giving it time to overhaul its finances, and said it sold its Australian asphalt operation to Fulton Hogan for an undisclosed amount as it offloads businesses outside its core cement, concrete and gravel interests.
The Australian Financial Review newspaper has reported the cement maker was looking to sell its entire Australian business. [ID:nnSYD468584] ($1=.7338 Euro) ($1=10,420 Rupiah) (Reporting by Harry Suhartono in SINGAPORE, Philipp Halstrick in FRANKFURT, and Tyagita Silka from JAKARTA) (Editing by Neil Chatterjee & Ian Geoghegan)
Bloomberg Commodity Mutual Funds Draw Most Money Since March
May 18 (Bloomberg) -- Inflows into commodity mutual funds were $352.6 million in the week ended May 13, the largest in seven weeks, researcher EPFR Global said.
Raw-materials funds have attracted $4.8 billion this year, lifting total assets under management to $31.7 billion, Brad Durham, managing director for research at the Cambridge, Massachusetts-based fund-tracking firm, said in a May 15 e-mail. Last week’s inflows were the biggest since the week ended March 25, he said.
Commodities as measured by the Reuters/Jefferies CRB Index had gained 4.9 percent this year as of May 13, rebounding from the biggest slump in five decades in 2008. Natural resources from nickel to crude oil climbed in May’s first two weeks on optimism about a revival in the world economy and its effect on demand.
“Flows are being driven by the recovery in commodity prices,” Durham said in the e-mail. “Faint improvement in economic data recently is fueling hope of global economic recovery and demand for commodities.”
The Bloomberg Professional Global Confidence Index climbed to 38.72 in May from 21.2 in April, the biggest increase since the survey began in November 2007.
Investors put $150.5 million into energy mutual funds in the week ended May 13, the most in eight weeks, according to EPFR. Energy funds have drawn $1.2 billion this year, increasing total assets to $19.5 billion.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
Raw-materials funds have attracted $4.8 billion this year, lifting total assets under management to $31.7 billion, Brad Durham, managing director for research at the Cambridge, Massachusetts-based fund-tracking firm, said in a May 15 e-mail. Last week’s inflows were the biggest since the week ended March 25, he said.
Commodities as measured by the Reuters/Jefferies CRB Index had gained 4.9 percent this year as of May 13, rebounding from the biggest slump in five decades in 2008. Natural resources from nickel to crude oil climbed in May’s first two weeks on optimism about a revival in the world economy and its effect on demand.
“Flows are being driven by the recovery in commodity prices,” Durham said in the e-mail. “Faint improvement in economic data recently is fueling hope of global economic recovery and demand for commodities.”
The Bloomberg Professional Global Confidence Index climbed to 38.72 in May from 21.2 in April, the biggest increase since the survey began in November 2007.
Investors put $150.5 million into energy mutual funds in the week ended May 13, the most in eight weeks, according to EPFR. Energy funds have drawn $1.2 billion this year, increasing total assets to $19.5 billion.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
Bloomberg Oil Rises to Six-Month High on Nigeria Threats, Refinery Fire
May 18 (Bloomberg) -- Crude oil rose to the highest close in six months after Nigerian militants threatened to block waterways used for energy exports and an explosion and fire at a Sunoco Inc. refinery affected operations. The Movement for the Emancipation of the Niger Delta said that ships moving through the southern part of the country would be traveling at their own risk. Sunoco, the largest refiner in the Northeast, said the incident at the Marcus Hook plant, on the border of Pennsylvania and Delaware, took place yesterday.
“The situation in Nigeria is becoming increasingly unsettled,” said John Kilduff, senior vice president of energy at MF Global in New York. “The problems at the Sunoco refinery, which is a major supplier of gasoline to New York Harbor, are also giving the market a boost.”
Crude oil for June delivery rose $2.69, or 4.8 percent, to $59.03 a barrel at 2:43 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 11. Futures are up 32 percent this year.
The June crude contract expires tomorrow. The more-actively traded July contract increased $2.59, or 4.5 percent, to end the session $59.59 a barrel.
Gasoline for June delivery gained 7.75 cents, or 4.6 percent, to $1.7581 a gallon in New York, the highest settlement since Oct. 15.
Energy futures also climbed after U.S. equities increased on better-than-forecast earnings by Lowe’s Cos. and analysts recommended Bank of America Corp. The Standard & Poor’s 500 Index rose 2.5 percent to 905.18. The Dow Jones Industrial Average increased 2.5 percent to 8,471.98
Nigerian Fighting
Fighting in Nigeria has escalated since May 13 when militants said they responded to an army offensive by attacking military positions and hijacking a tanker.
MEND claimed responsibility yesterday for rupturing two pipelines supplying oil and natural gas from a Chevron Corp. facility to domestic refineries and power stations. The rebel group has threatened to blockade waterways in the southern region used for oil and gas exports.
Nigeria produces low-sulfur, or sweet, oil, prized by U.S. refiners because of the proportion of high-value gasoline and diesel it yields. more...
Reuters Wall Street gains as Lowe's lifts mood
NEW YORK (Reuters) - Stocks rallied on Monday as better-than-expected results from the No. 2 U.S. home improvement retailer, Lowe's Cos Inc, helped spark broad-based buying on hopes the recession is easing and consumer spending is stabilizing.Investors' optimism extended to sectors closely aligned with economic growth, including homebuilders, banks, energy companies and retailers. Positive broker comments on Bank of America Corp, up nearly 10 percent at $11.73, boosted financial shares, while rising oil prices improved the outlook for energy names.
Shares of Lowe's rose 8.1 percent to $19.94 after the company raised its full-year forecast due to signs that the housing market's decline may be ebbing. Lowe's Chief Executive Robert Niblock said consumer confidence has improved in recent weeks, and housing turnover is showing "signs of a bottom."
That optimism helped lift shares of Lowe's top rival Home Depot Inc, which added 6.6 percent to $26.02 a day before the Dow component is set to deliver its own quarterly scorecard.
"Lowe's numbers come at a time when the market is looking to rebound," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut. "It does show that consumer spending in general has been a bit stronger than many had anticipated."
The Dow Jones industrial average gained 235.44 points, or 2.85 percent, to 8,504.08. The Standard & Poor's 500 Index rose 26.83 points, or 3.04 percent, to 909.71. The Nasdaq Composite Index advanced 52.22 points, or 3.11 percent, to 1,732.36.
The S&P 500 recently climbed from a 12-year closing low on March 9, rising 37.4 percent through the close on May 8. But after the benchmark index gave up some ground last week amid concerns about the economy and a flurry of secondary stock offerings, the S&P 500 was up 34.5 percent from that low at Monday's close.
The S&P also moved back above 900, which some investors see as a key psychological level. The S&P closed above 900 in early May for the first time since the start of the year, but fell back into the 800s last week. more...
Business Times Mistry expects palm futures to top RM3,000
Malayasian palm oil futures could soon surpass a key psychological level of RM3,000 as Asian buyers hunger for more of the vegetable oil at a time of low stocks and weak output, a top industry analyst said today.Dorab Mistry, head of vegetable oil purchasing at Indian conglomerate Godrej International, said orders from the world’s top two buyers of vegetable oils — China and India — were set to jump as the world economy recovers.
Palm oil supplies are dwindling in top producers Indonesia and Malaysia due to weak output arising from lack of fertiliser use when prices fell dramatically last year, coupled with volatile weather and yield stress after months of good harvests.
In addition, the top two soy exporters, the United States and Brazil are experiencing low stocks after a supply shortfall in third largest soy producer Argentina, which may result in a powerful bull market emerging for vegetable oils, said Mistry, who is based in London.
“The situation in soya is more bullish than in palm and soft oils will soon take price leadership,” he said in a speech to be delivered at a regional palm oil conference in Tokyo.
“However, price-conscious markets like India will chase palm and therefore I expect Bursa Malaysia crude palm oil futures to exceed RM3,000 (per tonne) very quickly,” he said.
Traders consider this figure a key resistance level after prices exceeded it last year before falling back to just over RM1,000, from which they have since struggled to recover.
Benchmark Malaysian prices on Friday were just 12.7 per cent below RM3,000 level. Malaysian refined palm olein FOB traded at US$830 per tonne for June compared to European soyoil at US$886 in Rotterdam last week, Reuters data showed.
China will buy more vegetable oil in the second half than the first as its 4 trillion yuan stimulus package has revived some consumption and current total shipments are 24 per cent behind imports of 8.1 million tonnes last year, Mistry said.
But India will now drive palm and soyoil demand rather than China after the government scrapped import taxes for edible oils, starting with palm oil, last year. Mistry said purchases would hit 8.5 million tonnes for the oil year ending October 2009.
“India’s low per capita consumption was artificially suppressed by high import duties and now that the heavy burden has been lifted, it has come into its own,” Mistry said, pegging demand at 1.4 kilos per person. India has 1.1 billion people.
Surging Asian demand will chase low palm stocks in Malaysia, which are expected to stay below 1.4 million tonnes until mid-August as output will recover that month when the low yield cycle draws to an end and more fertiliser is used, Mistry said.
“Replenishment of stocks will be very gradual and will commence only in mid-July. I expect Malaysian palm oil stocks to peak in November at 1.7 to 1.8 million tonnes at best,” he said. - Reuters
Goldman Sachs - Base metals caught between a strong China and a still-weak ROW
We maintain our near-term bearish bias expressed in our April 22, 2009 publication, as we believe that the impact of the China-led rally has largely played out. In the medium- to longer-term, however, we remain constructive on the base metal sector consistent with an expectation of a strong economic recovery in China from 2Q09, and the beginning of a global economic recovery in 2H09. Therefore, we view any near-term pullback as a medium-term buying opportunity. Furthermore, we consider copper and zinc as most leveraged to the demand recovery given current higher production capacity.Between a China pull and still a drag from the rest of the world
The strong pull from China combined with better leading economic indicators in several large economies has led to a broad rally in base metals prices in recent months. However, coincidental indicators outside of China are still deteriorating - albeit at a slower rate - and metals fundamentals are still fragile. Realizing the tug-of-war between a strong China today and a still-weak rest of world, the market has been trading range bound this month.
Recent China imports have largely gone to restocking
The China-led rally was mostly driven by government buying for strategic and industry support purposes, industry re-stocking in anticipation of a stimulus-led recovery, and pre-stocking for a typical high demand season in 2Q, while the impact from real demand pickup has just begun to emerge in March.
China needs some help from the rest of the world
The direction of metals prices from here depends on three factors:
The magnitude of supply response as prices and demand recover;
Further evidence of global economic improvement; and
The persistence of the China pull that jump started the improvement in the commodities fundamentals.
In our view, China has and will continue to contribute to the fundamental turnaround in commodities, but that China can’t do this alone.
Credit Suisse - RAMAYANA (RALS): In line 1Q09, but outlook improves- Upgrade to Outperform
· RALS reported 1Q09 net income of Rp43 bn, up 2.9%YoY and down 51% QoQ, accounting for 12% of our estimates and 11% of consensus' for FY09. We believe that RALS' 1Q09 earnings are in line with our esimates. RALS's 1Q09 same-store sales growth remained soft, but March 2009 showed early signs of recovery.
· We increase our 2009-11E earnings by 6.2-7%, reflecting more positive outlook for RALS ahead. RALS is currently trading at the lower end of its historical trading range and at the second-lowest 2009E P/E among all Indonesian consumer counters under our coverage. We upgrade RALS from Neutral to OUTPERFORM on higher earnings expectations and undemanding valuations. We increase our target price from Rp510 to Rp600, based on 11x 2009E P/E, in line with market-implied 2009E P/E for the Indonesian market.
· We increase our 2009-11E earnings by 6.2-7%, reflecting more positive outlook for RALS ahead. RALS is currently trading at the lower end of its historical trading range and at the second-lowest 2009E P/E among all Indonesian consumer counters under our coverage. We upgrade RALS from Neutral to OUTPERFORM on higher earnings expectations and undemanding valuations. We increase our target price from Rp510 to Rp600, based on 11x 2009E P/E, in line with market-implied 2009E P/E for the Indonesian market.
Macquarie Indonesia cement: April volume up 7% MoM
Domestic cement volume increased by 7% MoM to 2.85m tonnes in April. The 7% increase was the strongest MoM increase since the 16% increase in May 2008. Volume was down 7% YoY, but the rate of decline improved compared with March's 11% YoY decline. Volume for 4M09 has declined by 6% YoY. We remain comfortable with our forecast of a 2% decline for 2009, as we had expected a weak first half due to a high base effect in 1H08, when growth was extremely strong at 21% YoY.
Java experienced a 10% MoM increase in April. Sales in Java accounted for 55% of the domestic market. The primary beneficiaries from a strong recovery in Java will be Indocement (70% sales in Java) and Holcim Indonesia (82% in Java). Sales ex Java increased by 3% MoM, however, Sumatra (23% of total) and Sulawesi (7% of total) declined by 6% and 11%, respectively.
No signs of price war . Cement prices were flat MoM and up 19% YoY, as producers focus on profitability and are refraining from a price war. By maintaining prices at the current level, we estimate that the average selling price will increase by 10% YoY in 2009. In our view, the main risk to pricing is not a price war but the investigation by the anti-monopoly body KPPU into alleged cartel practices in the cement industry.
We are overweight the Indonesian cement sector (top pick: Indocement), which is trading at around a 20% discount to replacement cost. We expect a strong 10% volume rebound in 2010, as we expect economic growth to accelerate. In addition, our regional economist, Rajeev Malik, mentions in his 15 May 2009 note, Indonesia – Standing tall, that he sees slight upside risk to his GDP growth forecast of 3.5% following 1Q09 GDP growth of 4.4%.
Java experienced a 10% MoM increase in April. Sales in Java accounted for 55% of the domestic market. The primary beneficiaries from a strong recovery in Java will be Indocement (70% sales in Java) and Holcim Indonesia (82% in Java). Sales ex Java increased by 3% MoM, however, Sumatra (23% of total) and Sulawesi (7% of total) declined by 6% and 11%, respectively.
No signs of price war . Cement prices were flat MoM and up 19% YoY, as producers focus on profitability and are refraining from a price war. By maintaining prices at the current level, we estimate that the average selling price will increase by 10% YoY in 2009. In our view, the main risk to pricing is not a price war but the investigation by the anti-monopoly body KPPU into alleged cartel practices in the cement industry.
We are overweight the Indonesian cement sector (top pick: Indocement), which is trading at around a 20% discount to replacement cost. We expect a strong 10% volume rebound in 2010, as we expect economic growth to accelerate. In addition, our regional economist, Rajeev Malik, mentions in his 15 May 2009 note, Indonesia – Standing tall, that he sees slight upside risk to his GDP growth forecast of 3.5% following 1Q09 GDP growth of 4.4%.
Macquarie Indonesia economics: Standing Tall
Indonesia's GDP increased 4.4% YoY in 1Q09, in line with consensus expectations (Bloomberg: 4.3%, range: 0.9% to 5.2%; Macq: 4.0%). Real GDP growth decelerated to 4.4% YoY in 1Q09, the slowest pace in five years, and lower than the growth of 5.2% in 4Q08. The economy had grown 6.1% in full-year 2008, with growth averaging 6.4% in the first three quarters.
On the expenditure side, private consumption unexpectedly picked up to grow 5.8% YoY following a moderation to 4.8% in 4Q08. Investment growth, however, weakened further, to 3.5% YoY in 1Q09 from 9.1% in the closing quarter of 2008. The decline in imports (-24.1% YoY) was unsurprisingly greater than the drop in exports (-19.1%).
On the production side, the farm sector's outcome remained resilient at 4.8% (4Q08: 4.7%), but manufacturing sector's output was hit by the slump in exports and softening domestic demand.
Outlook
Our positive outlook for Indonesian macro remains unchanged from that detailed in Relatively smooth sailing for now, 29 April 2009. Our GDP growth forecast for Indonesia was last revised in October 2008 following the outbreak of the post-Lehman global financial distress in the prior month, and Indonesia was expected to be the least affected Asean economy, partly owing to the resilience of domestic demand and lower interest rates.
We maintain our full-year 2009 GDP growth forecast of 3.5%, though there could be a slight upside risk for 2H09. Note that the Indonesian economy has been relatively less hit by the global financial crisis, hinting that the 2H09 sequential normalisation will be weaker than that in the more meaningfully hit Asean economies such as Singapore and Thailand.
Still, the latest consensus expectation for 2009 GDP growth is at a low 3.1%, and will likely have to be raised.
On the expenditure side, private consumption unexpectedly picked up to grow 5.8% YoY following a moderation to 4.8% in 4Q08. Investment growth, however, weakened further, to 3.5% YoY in 1Q09 from 9.1% in the closing quarter of 2008. The decline in imports (-24.1% YoY) was unsurprisingly greater than the drop in exports (-19.1%).
On the production side, the farm sector's outcome remained resilient at 4.8% (4Q08: 4.7%), but manufacturing sector's output was hit by the slump in exports and softening domestic demand.
Outlook
Our positive outlook for Indonesian macro remains unchanged from that detailed in Relatively smooth sailing for now, 29 April 2009. Our GDP growth forecast for Indonesia was last revised in October 2008 following the outbreak of the post-Lehman global financial distress in the prior month, and Indonesia was expected to be the least affected Asean economy, partly owing to the resilience of domestic demand and lower interest rates.
We maintain our full-year 2009 GDP growth forecast of 3.5%, though there could be a slight upside risk for 2H09. Note that the Indonesian economy has been relatively less hit by the global financial crisis, hinting that the 2H09 sequential normalisation will be weaker than that in the more meaningfully hit Asean economies such as Singapore and Thailand.
Still, the latest consensus expectation for 2009 GDP growth is at a low 3.1%, and will likely have to be raised.
Bloomberg JPMorgan Upgrades Russia, Indonesia; Downgrades China
JPMorgan Upgrades Russia, Indonesia; Downgrades China (Update1)
2009-05-18 02:15:03.542 GMT
By Chen Shiyin
May 18 (Bloomberg) -- Russian and Indonesian stocks were upgraded at JPMorgan Chase & Co. as a recovery in the global economy and investors’ risk appetites drives further gains in emerging market equities. The brokerage downgraded China.
Russia was raised to “neutral” while Indonesia was upgraded to “overweight” within JPMorgan’s global emerging- market portfolio, analysts led by Adrian Mowat said. They cut China to “neutral” after its gains this year and lowered South Africa and Malaysia to “underweight.”
The MSCI Emerging Markets Index slipped 0.8 percent to 702.24 today, after a 24 percent rally this year. Developing countries make up all 10 of the best-performing markets this year, with Peru, Russia and China leading gains. “These asset allocation changes are in the context of a MSCI Emerging Market 900 index target,” the strategists said. “We expect all emerging markets to generate positive returns.”
Mowat, JPMorgan’s Hong Kong-based chief Asia and emerging-market strategist, and his team said last month the MSCI index for developing countries will rise to 900. That would be the highest level since Sept. 8, a week before New York-based Lehman Brothers Holdings Inc.’s bankruptcy froze global credit markets and sparked an exodus from emerging-market assets.
Russia, Indonesia
Russian stocks, previously rated “underweight” at JPMorgan, are benefiting from the government’s growth policies, a contracting risk premium and the increasing likelihood of earnings upgrades by analysts, the brokerage said in the note.
The RTS Index has jumped 48 percent this year, the second-best performer among the 92 global stock indexes tracked by Bloomberg. The ruble-denominated Micex Index has surged 62 percent in 2009.
Indonesia’s Jakarta Composite Index has climbed 29 percent during the same period. The market was upgraded from “neutral” because of the improving commodities and currency outlook, JPMorgan wrote.
Gross domestic product expanded 4.4 percent in the three months to March 31 from a year earlier as local spending accelerated, the statistics bureau said on May 15. That’s the fastest pace in Southeast Asia.
Still, JPMorgan has turned less optimistic about on China, lowering its rating on the market from “overweight.” The MSCI China Index has gained 21 percent and this month touched the highest level since September, just before Lehman’s bankruptcy.
The Shanghai Composite Index, which tracks mainland-listed shares, has gained 45 percent, the world’s third-largest advance.
Reallocating Capital
“As China discounts its economic recovery, we are reallocating capital to other North Asian economies that are later in the recovery phase,” the JPMorgan analysts wrote.
The brokerage is also downgrading stocks in South Africa and Malaysia from a previous recommendation of “neutral,” citing the “low beta” in the two markets.
JPMorgan is joined by Templeton Asset Management Ltd.’s Mark Mobius and HSBC Private Bank in predicting a rebound in emerging market shares.
“I would buy all emerging markets going forward,” Arjuna Mahendran, Singapore-based chief investment strategist for Asia at HSBC Private Bank, which oversees $494 billion in assets, said in a Bloomberg Television interview today. “The world has
turned on its head and the emerging markets are looking decidedly more sound than the developed markets.”
For Related News and Information:
Top stocks stories: TOPD
Most-read emerging market news: MNI EM
World equity index rankings: WEIS
Emerging market monitors: EMMV
--With assistance from Bernard Lo in Hong Kong and Momoe Ikeda-
Chelminska in Tokyo. Editors: Linus Chua, Reinie Booysen
2009-05-18 02:15:03.542 GMT
By Chen Shiyin
May 18 (Bloomberg) -- Russian and Indonesian stocks were upgraded at JPMorgan Chase & Co. as a recovery in the global economy and investors’ risk appetites drives further gains in emerging market equities. The brokerage downgraded China.
Russia was raised to “neutral” while Indonesia was upgraded to “overweight” within JPMorgan’s global emerging- market portfolio, analysts led by Adrian Mowat said. They cut China to “neutral” after its gains this year and lowered South Africa and Malaysia to “underweight.”
The MSCI Emerging Markets Index slipped 0.8 percent to 702.24 today, after a 24 percent rally this year. Developing countries make up all 10 of the best-performing markets this year, with Peru, Russia and China leading gains. “These asset allocation changes are in the context of a MSCI Emerging Market 900 index target,” the strategists said. “We expect all emerging markets to generate positive returns.”
Mowat, JPMorgan’s Hong Kong-based chief Asia and emerging-market strategist, and his team said last month the MSCI index for developing countries will rise to 900. That would be the highest level since Sept. 8, a week before New York-based Lehman Brothers Holdings Inc.’s bankruptcy froze global credit markets and sparked an exodus from emerging-market assets.
Russia, Indonesia
Russian stocks, previously rated “underweight” at JPMorgan, are benefiting from the government’s growth policies, a contracting risk premium and the increasing likelihood of earnings upgrades by analysts, the brokerage said in the note.
The RTS Index has jumped 48 percent this year, the second-best performer among the 92 global stock indexes tracked by Bloomberg. The ruble-denominated Micex Index has surged 62 percent in 2009.
Indonesia’s Jakarta Composite Index has climbed 29 percent during the same period. The market was upgraded from “neutral” because of the improving commodities and currency outlook, JPMorgan wrote.
Gross domestic product expanded 4.4 percent in the three months to March 31 from a year earlier as local spending accelerated, the statistics bureau said on May 15. That’s the fastest pace in Southeast Asia.
Still, JPMorgan has turned less optimistic about on China, lowering its rating on the market from “overweight.” The MSCI China Index has gained 21 percent and this month touched the highest level since September, just before Lehman’s bankruptcy.
The Shanghai Composite Index, which tracks mainland-listed shares, has gained 45 percent, the world’s third-largest advance.
Reallocating Capital
“As China discounts its economic recovery, we are reallocating capital to other North Asian economies that are later in the recovery phase,” the JPMorgan analysts wrote.
The brokerage is also downgrading stocks in South Africa and Malaysia from a previous recommendation of “neutral,” citing the “low beta” in the two markets.
JPMorgan is joined by Templeton Asset Management Ltd.’s Mark Mobius and HSBC Private Bank in predicting a rebound in emerging market shares.
“I would buy all emerging markets going forward,” Arjuna Mahendran, Singapore-based chief investment strategist for Asia at HSBC Private Bank, which oversees $494 billion in assets, said in a Bloomberg Television interview today. “The world has
turned on its head and the emerging markets are looking decidedly more sound than the developed markets.”
For Related News and Information:
Top stocks stories: TOPD
Most-read emerging market news: MNI EM
World equity index rankings: WEIS
Emerging market monitors: EMMV
--With assistance from Bernard Lo in Hong Kong and Momoe Ikeda-
Chelminska in Tokyo. Editors: Linus Chua, Reinie Booysen
CIMB Economic Update 1Q09 GDP: Slower but still positive
Indonesia's real GDP growth slowed to 4.4% yoy in 1Q09 (+5.2% in 4Q08), underpinned by resilient domestic demand amid sluggish exports. This came in a tad higher than our forecast (4.2%) as well as market consensus (4.3%). Easing commodity prices, lower fuel prices as well as lower interest rates helped to lift private consumption while fiscal pump-priming boosted the growth of public consumption. Domestic demand remains the prime mover. We maintain our GDP growth estimates of 3.5% for this year and 5.0% for 2010.
CIMB Jasa Marga Company update - Awaiting catalysts
(JSMR IJ / JSMR.JK, UNDERPERFORM - Downgraded, Rp1,330 - Tgt. Rp1,100, Transport Infrastructure)
The completion of missing links and interconnections for JORR would be a catalyst for JSMR, in our view. However, this is unlikely to happen in the near term as land acquisition progress has been slow. Another potential catalyst is better regulations and assistance to toll-road operators. Unfortunately, with other planned transportation projects under the regional government (e.g. Jakarta Monorail and Jakarta MRT), the regional government may have less incentive to accelerate progress. Downgrade to UNDERPERFORM from Outperform with an unchanged DCF-based target price of Rp1,100 on the lack of visible catalysts.
The completion of missing links and interconnections for JORR would be a catalyst for JSMR, in our view. However, this is unlikely to happen in the near term as land acquisition progress has been slow. Another potential catalyst is better regulations and assistance to toll-road operators. Unfortunately, with other planned transportation projects under the regional government (e.g. Jakarta Monorail and Jakarta MRT), the regional government may have less incentive to accelerate progress. Downgrade to UNDERPERFORM from Outperform with an unchanged DCF-based target price of Rp1,100 on the lack of visible catalysts.
Senin, 18 Mei 2009
Goldman Sachs - Base metals caught between a strong China and a still-weak ROW
We maintain our near-term bearish bias expressed in our April 22, 2009 publication, as we believe that the impact of the China-led rally has largely played out. In the medium- to longer-term, however, we remain constructive on the base metal sector consistent with an expectation of a strong economic recovery in China from 2Q09, and the beginning of a global economic recovery in 2H09. Therefore, we view any near-term pullback as a medium-term buying opportunity. Furthermore, we consider copper and zinc as most leveraged to the demand recovery given current higher production capacity.
Between a China pull and still a drag from the rest of the world
The strong pull from China combined with better leading economic indicators in several large economies has led to a broad rally in base metals prices in recent months. However, coincidental indicators outside of China are still deteriorating - albeit at a slower rate - and metals fundamentals are still fragile. Realizing the tug-of-war between a strong China today and a still-weak rest of world, the market has been trading range bound this month.
Recent China imports have largely gone to restocking
The China-led rally was mostly driven by government buying for strategic and industry support purposes, industry re-stocking in anticipation of a stimulus-led recovery, and pre-stocking for a typical high demand season in 2Q, while the impact from real demand pickup has just begun to emerge in March.
China needs some help from the rest of the world
The direction of metals prices from here depends on three factors:
1.The magnitude of supply response as prices and demand recover;
2.Further evidence of global economic improvement; and
3.The persistence of the China pull that jump started the improvement in
the commodities fundamentals.
In our view, China has and will continue to contribute to the fundamental turnaround in commodities, but that China can’t do this alone.
Between a China pull and still a drag from the rest of the world
The strong pull from China combined with better leading economic indicators in several large economies has led to a broad rally in base metals prices in recent months. However, coincidental indicators outside of China are still deteriorating - albeit at a slower rate - and metals fundamentals are still fragile. Realizing the tug-of-war between a strong China today and a still-weak rest of world, the market has been trading range bound this month.
Recent China imports have largely gone to restocking
The China-led rally was mostly driven by government buying for strategic and industry support purposes, industry re-stocking in anticipation of a stimulus-led recovery, and pre-stocking for a typical high demand season in 2Q, while the impact from real demand pickup has just begun to emerge in March.
China needs some help from the rest of the world
The direction of metals prices from here depends on three factors:
1.The magnitude of supply response as prices and demand recover;
2.Further evidence of global economic improvement; and
3.The persistence of the China pull that jump started the improvement in
the commodities fundamentals.
In our view, China has and will continue to contribute to the fundamental turnaround in commodities, but that China can’t do this alone.
Citigroup Asia ex Japan equity strategy
What’s In The Price, What’s Not and Where To Next?
Markets have achieved in 10 weeks what normally takes 24 months — Post each recovery since 1975, it has taken 2 years for P/BV to hit 1.7x. Not this time, 10 weeks is all it took. 1.7x P/BV usually gives an 11-12% ROE, which is due to arrive end-2010 according to IBES. If it does, this will have been the 2nd shortest and 2nd shallowest earnings recession in Asia ex since 1975. We hope IBES is right!
Taiwan, Thailand and HK. Banks, tech and telecoms. All offer value — Taiwan, banks and technology remain consensus Underweights, but we continue to be contrarian Overweights. Korea is the other consensus Underweight. Telecoms, consumers and materials are all well held, and the latter two are now trading above mean valuations.
Liquidity aplenty, most funds still underperforming — The pain trade in March was up with investors being too defensive. As of last week, between 30-40% of funds are beating the market, and the bears want to see more outperformance before reversing course. Consensus expectation for a 5-10% correction will unlikely happen. If a correction happens, we expect it will be 20-30% with an increasingly unfavorable risk reward.
Markets have achieved in 10 weeks what normally takes 24 months — Post each recovery since 1975, it has taken 2 years for P/BV to hit 1.7x. Not this time, 10 weeks is all it took. 1.7x P/BV usually gives an 11-12% ROE, which is due to arrive end-2010 according to IBES. If it does, this will have been the 2nd shortest and 2nd shallowest earnings recession in Asia ex since 1975. We hope IBES is right!
Taiwan, Thailand and HK. Banks, tech and telecoms. All offer value — Taiwan, banks and technology remain consensus Underweights, but we continue to be contrarian Overweights. Korea is the other consensus Underweight. Telecoms, consumers and materials are all well held, and the latter two are now trading above mean valuations.
Liquidity aplenty, most funds still underperforming — The pain trade in March was up with investors being too defensive. As of last week, between 30-40% of funds are beating the market, and the bears want to see more outperformance before reversing course. Consensus expectation for a 5-10% correction will unlikely happen. If a correction happens, we expect it will be 20-30% with an increasingly unfavorable risk reward.
Associated Press Stock rally stalls as investors await new catalyst
NEW YORK (AP) -- The stock market has run out of reasons to rally, at least for now. After a two-month surge that saw the Dow Jones industrials average soar 31 percent and the Standard & Poor's 500 index shoot up 37 percent, investors gave up some of those gains last week. As the new week begins, there doesn't seem to be any catalysts that could restart the rally.
The market barreled higher as investors realized that worst-case scenarios in the banking industry weren't going to happen. Indications that the recession was slowing also gave investors reason to buy at a pace not seen in decades.
Now though, with dire forecasts no longer priced into stocks, investors will have to hunt for signs that any economic recovery is beginning to take hold and that earnings are returning to more normal levels. Those signs are likely to come in the form of retail sales and consumer confidence reports as well as quarterly earnings announcements, but few are expected this week.
"My sense is we'll be sideways going into (this) week," said Timothy Speiss, chairman of the Personal Wealth Advisors division at New York-based Eisner LLP. "It's like watching grass grow right now."
Dan Genter, chief executive and chief investment officer of Los Angeles-based RNC Genter Capital Management said the rally helped stocks get back to trading at a fair value, or a price that's based more on the fundamentals of a company's performance than fears of an economic collapse.
"In the near term, it's really hard to break out of that 850 to 950 trading range," Genter said, referring to the S&P 500. The index closed last week down 5.2 percent.
Analysts say the market is also not likely to return to the 12-year lows it hit in early March because investors are more confident now. more...
The market barreled higher as investors realized that worst-case scenarios in the banking industry weren't going to happen. Indications that the recession was slowing also gave investors reason to buy at a pace not seen in decades.
Now though, with dire forecasts no longer priced into stocks, investors will have to hunt for signs that any economic recovery is beginning to take hold and that earnings are returning to more normal levels. Those signs are likely to come in the form of retail sales and consumer confidence reports as well as quarterly earnings announcements, but few are expected this week.
"My sense is we'll be sideways going into (this) week," said Timothy Speiss, chairman of the Personal Wealth Advisors division at New York-based Eisner LLP. "It's like watching grass grow right now."
Dan Genter, chief executive and chief investment officer of Los Angeles-based RNC Genter Capital Management said the rally helped stocks get back to trading at a fair value, or a price that's based more on the fundamentals of a company's performance than fears of an economic collapse.
"In the near term, it's really hard to break out of that 850 to 950 trading range," Genter said, referring to the S&P 500. The index closed last week down 5.2 percent.
Analysts say the market is also not likely to return to the 12-year lows it hit in early March because investors are more confident now. more...
GlobalCoal Newcastle Coal Index
Weekly NEWC Coal Index
17-Apr-09 63.12
24-Apr-09 63.11
01-May-09 62.26
08-May-09 63.70
15-May-09 63.33
Monthly NEWC Coal Index
Jan-2009 82.69
Feb-2009 75.03
Mar-2009 61.37
Apr-2009 62.55
17-Apr-09 63.12
24-Apr-09 63.11
01-May-09 62.26
08-May-09 63.70
15-May-09 63.33
Monthly NEWC Coal Index
Jan-2009 82.69
Feb-2009 75.03
Mar-2009 61.37
Apr-2009 62.55
Business Times Palm futures likely to move higher
Crude palm oil futures prices on Bursa Malaysia Derivatives is likely to be higher next week, boosted by strong export data, dealers said.On Friday, cargo surveyor Intertek Testing Services said exports of Malaysian palm oil products from May 1-15 increased by 1.7 per cent to 624,052 tonnes from the 613,677 tonnes shipped between April 1 and April 15.
Another cargo surveyor, Societe Generale de Surveillance, said exports from May 1-15 rose 8 per cent to 629,364 tonnes from the 582,823 tonnes shipped between April 1 and April 15.
A dealer said the current hot and dry weather might affect palm oil production.
He said the dry spell could also affect production of CPO in the long run and this in turn will further push up prices.
During the week, the market was traded steadier as most investors took cue from the movements on the Chicago Board of Trade (CBOT) soyoil and Dalian Exchange.
On a week-to-week basis, May 2009 was higher by RM19 at RM2,849 per tonne from RM2,830 per tonne last Friday, June 2009 eased RM19 to RM2,731 per tonne from RM2,750 per tonne, July 2009 slipped RM20 to RM2,665 per tonne from RM2,685 per tonne and August 2009 declined RM13 to RM2,612 per tonne from RM2,625 per tonne.
Total turnover declined to 87,044 lots from 121,219 lots last week while open interests also decreased to 75,553 contracts from 77,732 contracts previously. -- Bernama
Business Times Higher Malaysia palm exports for May 1-15
Exports of Malaysian palm oil products for May 1-15 rose 1.7 per cent to 624,052 tonnes from 613,677 tonnes shipped between April 1 and 15, cargo surveyor Intertek Testing Services said today.
Meanwhile, another cargo surveyor Societe Generale de Surveillance reported that exports rose 8 per cent to 629,364 tonnes. - Reuters - Reuters
Meanwhile, another cargo surveyor Societe Generale de Surveillance reported that exports rose 8 per cent to 629,364 tonnes. - Reuters - Reuters
Bloomberg U.S. Gasoline Price Rises to $2.3010 a Gallon
May 17 (Bloomberg) -- The average price of regular gasoline at U.S. filling stations rose to $2.3010 a gallon as refiners cut production and inventories fell to the lowest since December.
Regular gasoline climbed 24.61 cents in the three weeks ended May 15, according to a survey of 5,000 filling stations nationwide by Trilby Lundberg, an independent gasoline analyst. That’s an average 8.2 cents more a week, the biggest increase on that basis in a year.
“Between our two survey dates this year, crude oil prices increased nearly $5 a barrel,” Lundberg said today in an interview. Gasoline consumption “always jumps significantly in the spring and plateaus out in the three months of June, July and August. Even in a poor demand year, this adds greatly to seasonal demand.”
Also boosting prices are seasonal government rules about gasoline formulations, she said. This year, they include requirements to blend in more ethanol and are therefore affected by rising ethanol prices, she said.
Stockpiles fell 4.2 million barrels during the week ended May 8 to 208.3 million, the lowest since Dec. 26 and 0.9 percent below a year earlier, the Energy Department reported May 13. Refineries operated at 83.7 percent of capacity, down 1.6 percentage points from the prior week.
AAA, the nation’s biggest motoring club, said today that regular gasoline at the pump averaged $2.308 a gallon, down 44 percent from the record $4.11 in July.
Gasoline for June delivery fell 4.31 cents, or 2.5 percent, to $1.6806 a gallon on the New York Mercantile Exchange on May 15. The futures surged 67 percent this year, the most of any commodity, after refiners including Valero Energy Corp. and Total SA shut plants in response to the slowing economy.
Summer Driving
Daily demand for gasoline in the U.S. was 8.91 million barrels a day in the week ended May 8, down 12,000 barrels from the prior week and the lowest since the period ended Feb. 13. Consumption over the past four weeks was down 1.2 percent from a year earlier.
U.S. refiners typically ramp up gasoline output in April and May to prepare for the higher-demand summer driving season in North America.
Crude oil for June delivery on the Nymex dropped $2.28, or 3.9 percent, to settle at $56.34 a barrel on May 15. Oil accounted for about 55 percent of gasoline’s pump price in March, according to the U.S. Energy Department.
The highest average price for self-serve regular gasoline in the U.S. was $2.63 a gallon in Chicago, Lundberg said. The lowest was in Phoenix at $1.99 a gallon. On New York’s Long Island, the price was $2.44 a gallon and in Los Angeles, the largest U.S. gasoline market, it was $2.47.
To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net
Regular gasoline climbed 24.61 cents in the three weeks ended May 15, according to a survey of 5,000 filling stations nationwide by Trilby Lundberg, an independent gasoline analyst. That’s an average 8.2 cents more a week, the biggest increase on that basis in a year.
“Between our two survey dates this year, crude oil prices increased nearly $5 a barrel,” Lundberg said today in an interview. Gasoline consumption “always jumps significantly in the spring and plateaus out in the three months of June, July and August. Even in a poor demand year, this adds greatly to seasonal demand.”
Also boosting prices are seasonal government rules about gasoline formulations, she said. This year, they include requirements to blend in more ethanol and are therefore affected by rising ethanol prices, she said.
Stockpiles fell 4.2 million barrels during the week ended May 8 to 208.3 million, the lowest since Dec. 26 and 0.9 percent below a year earlier, the Energy Department reported May 13. Refineries operated at 83.7 percent of capacity, down 1.6 percentage points from the prior week.
AAA, the nation’s biggest motoring club, said today that regular gasoline at the pump averaged $2.308 a gallon, down 44 percent from the record $4.11 in July.
Gasoline for June delivery fell 4.31 cents, or 2.5 percent, to $1.6806 a gallon on the New York Mercantile Exchange on May 15. The futures surged 67 percent this year, the most of any commodity, after refiners including Valero Energy Corp. and Total SA shut plants in response to the slowing economy.
Summer Driving
Daily demand for gasoline in the U.S. was 8.91 million barrels a day in the week ended May 8, down 12,000 barrels from the prior week and the lowest since the period ended Feb. 13. Consumption over the past four weeks was down 1.2 percent from a year earlier.
U.S. refiners typically ramp up gasoline output in April and May to prepare for the higher-demand summer driving season in North America.
Crude oil for June delivery on the Nymex dropped $2.28, or 3.9 percent, to settle at $56.34 a barrel on May 15. Oil accounted for about 55 percent of gasoline’s pump price in March, according to the U.S. Energy Department.
The highest average price for self-serve regular gasoline in the U.S. was $2.63 a gallon in Chicago, Lundberg said. The lowest was in Phoenix at $1.99 a gallon. On New York’s Long Island, the price was $2.44 a gallon and in Los Angeles, the largest U.S. gasoline market, it was $2.47.
To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net
Crude palm oil futures fall as investors trim positions
CRUDE palm oil futures contracts on Bursa Malaysia Derivatives closed mostly lower yesterday as investors trimmed their positions amid strong export data and firmer Chicago Board Of Trade (CBOT) soyaoil, dealers said.
They said the market, which was traded higher in the afternoon, closed lower on profit-taking.
“In the afternoon, investors took the cue from the higher CBOT soyaoil trade on tight stocks but profit-taking set in on concerns over the global economic development,” a dealer said.
Information5739
According to cargo surveyor, Intertek Testing Services, exports of Malaysian palm oil products for May 1-15 increased by 1.7 per cent to 624,052 tonnes from 613,677 tonnes shipped between Apr 1-15.
Cargo surveyor Societe Generale de Surveillance said exports of Malaysian palm oil products for May 1-15 rose 8 per cent to 629,364 tonnes from 582,823 tonnes shipped between Apr 1-15.
May 2009 contract increased by RM49 to end at RM2,849 per tonne, June 2009 dropped RM31 to RM2,731, July 2009 fell RM19 to RM2,665 and August 2009 eased RM43 to RM2,612.
Volume decreased to 14,855 lots from 17,659 lots Thursday. Open interests, however, increased to 75,553 contracts from 75,467 contracts previously. On the physical market, May South dropped to RM2,800 per tonne from RM2,860 Thursday.
They said the market, which was traded higher in the afternoon, closed lower on profit-taking.
“In the afternoon, investors took the cue from the higher CBOT soyaoil trade on tight stocks but profit-taking set in on concerns over the global economic development,” a dealer said.
Information5739
According to cargo surveyor, Intertek Testing Services, exports of Malaysian palm oil products for May 1-15 increased by 1.7 per cent to 624,052 tonnes from 613,677 tonnes shipped between Apr 1-15.
Cargo surveyor Societe Generale de Surveillance said exports of Malaysian palm oil products for May 1-15 rose 8 per cent to 629,364 tonnes from 582,823 tonnes shipped between Apr 1-15.
May 2009 contract increased by RM49 to end at RM2,849 per tonne, June 2009 dropped RM31 to RM2,731, July 2009 fell RM19 to RM2,665 and August 2009 eased RM43 to RM2,612.
Volume decreased to 14,855 lots from 17,659 lots Thursday. Open interests, however, increased to 75,553 contracts from 75,467 contracts previously. On the physical market, May South dropped to RM2,800 per tonne from RM2,860 Thursday.
Indonesia’s Astra Agro Lestari secures USD $150m loan
Publicly traded agribusiness company PT Astra Agro Lestari said it will secure a loan of US$150 million in July to finance business expansion.
The subsidiary of Astra International, plans to build crude palm oil processing factories in East Kalimantan, a company director Santosa said.
The company will build two factories respectively with a processing capacity of 30 tons and 45 tons of fresh fruit bunches per hour, Santosa said.
In addition the company will finish the construction of a CPO factory now being built in Jambi this year, he said.
Astra Agro hopes to start harvest from 57,000 hectares of oil palm plantations in the next three to four years, the newspaper Investor Daily said.
In the first quarter of this year the company reported Rp1.4 trillion (US$135.8 million) in net income, down 38 per cent from the same period last year with net profit shrinking 74 per cent to Rp217.7 billion on weak demand since the last quarter of 2008.
The subsidiary of Astra International, plans to build crude palm oil processing factories in East Kalimantan, a company director Santosa said.
The company will build two factories respectively with a processing capacity of 30 tons and 45 tons of fresh fruit bunches per hour, Santosa said.
In addition the company will finish the construction of a CPO factory now being built in Jambi this year, he said.
Astra Agro hopes to start harvest from 57,000 hectares of oil palm plantations in the next three to four years, the newspaper Investor Daily said.
In the first quarter of this year the company reported Rp1.4 trillion (US$135.8 million) in net income, down 38 per cent from the same period last year with net profit shrinking 74 per cent to Rp217.7 billion on weak demand since the last quarter of 2008.
Danareksa BMRI Tersandung Kredit Bermasalah yang Meningkat
Kami men-downgrade BMRI dengan rating SELL, TP Rp2.000 (27% downside), PBV FY09-10E 1,3-1,2x dan PER FY09-10E 8,2-6,7x.Downgrade ini disebabkan:
■ Kredit bermasalah yang meningkat sebagai alasan utama – walaupun NPL terlihat membaik menjadi 5,3% di 2008, namun itu dikarenakan adanya write offs
■ NIM masih di posisi marjinal 5,5% - meskipun asset adalah yang terbesar di industri
■ Neraca lebih sensitif terhadap suku bunga - 30% marketable securities + obligasi dan 47% kredit – bukan indikasi yang bagus di saat tren suku bunga yang menurun saat ini
Pertumbuhan pinjaman masih menunjukkan rate yang tinggi, namun bank menghadapi kondisi NPL yang memburuk.
Uji stress
Sekalipun dalam kondisi terburuk, Mandiri tidak mempunyai masalah dalam memenuhi kriteria kecukupan modal (CAR) dari BI.
CLSA Consumer, GGRM recovery in sight
Not many look at Indonesia consumer sector seriously anymore. The sector was the darling of the market in the 90’s with more than 20% weighting the index. The weighting has now dropped to less than 10%. This is despite consumer spending accounts for 60% of Indo GDP, driven by 235mn consumers, with average per capita income of US$2,100/year.
Indonesian retailers have been enormous competition, not just from multinationals but also from those who lost the jobs and set up neighborhood shops. Unilever (UNVR IJ) and Sampoerna (HMSP IJ) have been doing very well but more of an exception than norm. Other companies with superior performance, such as the consumer company Wings Group, are still privately held.
So it is refreshing that Nick Cashmore has spent some time writing about the consumer sector. The immediate outlook for consumer demand still looks challenging. Companies still have to struggle with rising unemployment, weak purchasing power, and a general slowdown in growth.
But the chart below suggests that there are pockets of strengths. Four companies registered positive QoQ revenue growth in 1Q09: UNVR, INDF (we only look at the consumer business), and 2 cigarette companies: HMSP and GGRM (yes, yes we are talking about the beaten down and overlooked Gudang Garam, the cigarette company)
In his GGRM report today, Nick highlighted the dramatic earnings recovery at GGRM. If this is sustainable, the stock offers incredible value for investors. Assuming 1Q09 performance is sustainable, GGRM is trading at 5.2x 09 PE. Our ex consumer analyst Wilianto commented that he never heard GGRM trades at such a low multiple.
Key points from the report:
Once an investor favourite, GGRM has struggled for much of the past decade, losing market share and profitability to competition.
Regulatory changes favor large producers, leveling the playing field. Plus, the govt is also clamping down illegal cigarette producers (we estimate illegal + small producers account for about 35% of the national cigarette market share).
Great turnaround story. Early days, but there is a dramatic margin recovery at GGRM.
Revenue, gross, operating, and net profit grew 10%, 58%, 94% and 132% YoY respectively for 1Q09.
Valuation: assuming 1Q09 margins are sustainable, the stock trades on 5.2x current year PE, with a 20% ROE and 1x PB.
Upside: provided these returns are sustainable, we believe 10x PE would be closer to fair value.
Indonesian retailers have been enormous competition, not just from multinationals but also from those who lost the jobs and set up neighborhood shops. Unilever (UNVR IJ) and Sampoerna (HMSP IJ) have been doing very well but more of an exception than norm. Other companies with superior performance, such as the consumer company Wings Group, are still privately held.
So it is refreshing that Nick Cashmore has spent some time writing about the consumer sector. The immediate outlook for consumer demand still looks challenging. Companies still have to struggle with rising unemployment, weak purchasing power, and a general slowdown in growth.
But the chart below suggests that there are pockets of strengths. Four companies registered positive QoQ revenue growth in 1Q09: UNVR, INDF (we only look at the consumer business), and 2 cigarette companies: HMSP and GGRM (yes, yes we are talking about the beaten down and overlooked Gudang Garam, the cigarette company)
In his GGRM report today, Nick highlighted the dramatic earnings recovery at GGRM. If this is sustainable, the stock offers incredible value for investors. Assuming 1Q09 performance is sustainable, GGRM is trading at 5.2x 09 PE. Our ex consumer analyst Wilianto commented that he never heard GGRM trades at such a low multiple.
Key points from the report:
Once an investor favourite, GGRM has struggled for much of the past decade, losing market share and profitability to competition.
Regulatory changes favor large producers, leveling the playing field. Plus, the govt is also clamping down illegal cigarette producers (we estimate illegal + small producers account for about 35% of the national cigarette market share).
Great turnaround story. Early days, but there is a dramatic margin recovery at GGRM.
Revenue, gross, operating, and net profit grew 10%, 58%, 94% and 132% YoY respectively for 1Q09.
Valuation: assuming 1Q09 margins are sustainable, the stock trades on 5.2x current year PE, with a 20% ROE and 1x PB.
Upside: provided these returns are sustainable, we believe 10x PE would be closer to fair value.
Barclays - Accounting change disguises worsening deficit
Economics: A government accounting change leads us to revise our FY09 deficit lower. However, revenue trends are worsening, and we now look for a notably larger FY10 deficit.
Treasuries: The Fed has bought $100bn of Treasury securities under the asset purchase program. We discuss the higher-than-expected rate of purchase, switch toward longer-term securities, and increased appetite for cheap issues on the curve.
Inflation-linked markets: The new and just off-the-run 5y TIPS are still at a significant premium on the curve, and we find these overvalued in light of increased breakevens and market risk appetites.
Swaps: Supply-demand dynamics in short-term markets argue for continued compression of the LOIS basis, and the market-implied path seems a little gradual. Along with reducing the scarcity premium for Treasuries, this argues for continued compression of 2y spreads.
Agencies: Fannie Mae and Freddie Mac posted large 1Q09 losses, due primarily to credit loss provisions on the guarantee books; we expect this pattern to continue. Raised debt limits should provide the GSEs flexibility to term out debt, although portfolio growth will likely be muted.
Futures: We expect the FV and TU rolls to cheapen, while TY should richen for a combination of fair value and technical reasons. We also expect rolls to occur quicker and faster, with the bulk of open interest moving in three days in most contracts.
Money markets: Activity in the specials market has dried to a trickle. Now that specific, in-demand Treasury securities can trade at sub-zero rates, will the specials market recover?
Treasuries: The Fed has bought $100bn of Treasury securities under the asset purchase program. We discuss the higher-than-expected rate of purchase, switch toward longer-term securities, and increased appetite for cheap issues on the curve.
Inflation-linked markets: The new and just off-the-run 5y TIPS are still at a significant premium on the curve, and we find these overvalued in light of increased breakevens and market risk appetites.
Swaps: Supply-demand dynamics in short-term markets argue for continued compression of the LOIS basis, and the market-implied path seems a little gradual. Along with reducing the scarcity premium for Treasuries, this argues for continued compression of 2y spreads.
Agencies: Fannie Mae and Freddie Mac posted large 1Q09 losses, due primarily to credit loss provisions on the guarantee books; we expect this pattern to continue. Raised debt limits should provide the GSEs flexibility to term out debt, although portfolio growth will likely be muted.
Futures: We expect the FV and TU rolls to cheapen, while TY should richen for a combination of fair value and technical reasons. We also expect rolls to occur quicker and faster, with the bulk of open interest moving in three days in most contracts.
Money markets: Activity in the specials market has dried to a trickle. Now that specific, in-demand Treasury securities can trade at sub-zero rates, will the specials market recover?
HSBC - Equities - Momentum and liquidity aren’t enough
We hear two objections to our view that the market rally is petering out: momentum and liquidity
But in the past these haven’t necessarily kept markets rising
We also adjust our market calls for the new view: we cut Taiwan to neutral and raise HK and Malaysia to overweight
In last week’s AI we reversed the bullish stance we have taken on Asian equities since March and argued the stock market rally was close to petering out. Not only are valuations getting stretched, but the better news on the economy and earnings is largely in the price (and, if anything, has shown signs of worsening again in the past few days).
When discussing this view with clients, we found few who agreed. Many argue that a new bull market has begun. This is a sharp turnaround from the first half of April when fund managers remained very cautious. We frequently heard two bull arguments. First, momentum indicators – for example, the golden cross between the 20 and 200 day moving average that appeared on May 5– point to the rally continuing. Second, with interest rates ultra-low and the US undertaking quantitative easing, liquidity globally is very strong. In Asia, for example average M1 growth, which has historically had a good correlation with equities, has picked up from 3% to 10% since the end of last year. In this piece, we examine these arguments and conclude that, while they have some merit, historically these factors have not necessarily guaranteed a rising stock market.
We also review recommended country weightings in the light of our new view. The view suggests we should think less about cyclical factors and worry a little about valuation. Accordingly, we lower Taiwan to neutral and Indonesia to underweight, and raise Hong Kong and Malaysia to overweight. We remain overweight on India and Singapore.
But in the past these haven’t necessarily kept markets rising
We also adjust our market calls for the new view: we cut Taiwan to neutral and raise HK and Malaysia to overweight
In last week’s AI we reversed the bullish stance we have taken on Asian equities since March and argued the stock market rally was close to petering out. Not only are valuations getting stretched, but the better news on the economy and earnings is largely in the price (and, if anything, has shown signs of worsening again in the past few days).
When discussing this view with clients, we found few who agreed. Many argue that a new bull market has begun. This is a sharp turnaround from the first half of April when fund managers remained very cautious. We frequently heard two bull arguments. First, momentum indicators – for example, the golden cross between the 20 and 200 day moving average that appeared on May 5– point to the rally continuing. Second, with interest rates ultra-low and the US undertaking quantitative easing, liquidity globally is very strong. In Asia, for example average M1 growth, which has historically had a good correlation with equities, has picked up from 3% to 10% since the end of last year. In this piece, we examine these arguments and conclude that, while they have some merit, historically these factors have not necessarily guaranteed a rising stock market.
We also review recommended country weightings in the light of our new view. The view suggests we should think less about cyclical factors and worry a little about valuation. Accordingly, we lower Taiwan to neutral and Indonesia to underweight, and raise Hong Kong and Malaysia to overweight. We remain overweight on India and Singapore.
Credit Suisse - Indonesia Cement sector
We assume coverage of the Indonesian cement sector with OUTPERFORM ratings on Semen Gresik and Indocement and NEUTRAL rating on Holcim Indonesia. Indonesian cement stocks command higher return and earnings growth, although the stocks trade at a 15% discount to the average global P/E and EV/EBITDA multiples
The short-term data points tend to put pressure on share prices, although we believe it could provide a buying opportunity. We expect a recovery in cement consumption in May-June 2009 and lower energy costs start to affect earnings from 3Q09E onwards. We expect cement companies to be able to maintain their profitability as energy costs are likely to decline.
Among the Indonesian cement stocks, Indocement is our top pick. This is because, it is the most innovative and efficient cement company and its management has a good track record of weathering difficult economic conditions. The stock is trading at a 25% discount to Semen Gresik on EV/tonne (t) basis for 2009E.
The short-term data points tend to put pressure on share prices, although we believe it could provide a buying opportunity. We expect a recovery in cement consumption in May-June 2009 and lower energy costs start to affect earnings from 3Q09E onwards. We expect cement companies to be able to maintain their profitability as energy costs are likely to decline.
Among the Indonesian cement stocks, Indocement is our top pick. This is because, it is the most innovative and efficient cement company and its management has a good track record of weathering difficult economic conditions. The stock is trading at a 25% discount to Semen Gresik on EV/tonne (t) basis for 2009E.