Dear Ladies & Gentlemen,
US stocks have risen almost 50% from their lows in March, a turbo-charged performance that ranks as the best post-war market rebound.
Five months and counting since the lows in March has the S&P up 49%, eclipsing the 43% rally reached 105 trading days after the lows of August 1982.
Investors in other established equity markets have also enjoyed big rallies from their March lows.
Japan's Nikkei 225 index has bounced 50%, London's FTSE 100 climbing 36% and the FTSE Eurofirst 300 as much as 45%.
Emerging market equities have recorded bigger rises with investors banking on stronger growth outside the US and particularly in Asia.
Hong Kong is up 85% from its March low while Brazil has rallied 57%.
The nature of the US economic recovery and the behaviour of the consumer hold the key as to whether the 2009 rally continues.
By June 1983, 10 months after the market bottomed, the S&P was sitting on a gain of 67% and it would keep climbing until the great bull run of that era peaked in August 1987.
Based on data compiled by Mizuho Securities, the S&P's current rise is more than double the average 22% gain seen during the first 105 days of a post-war bull run.
That has left the S&P 500 valued at 18.6 times the profit of its companies - the highest valuation since 2004. The index is now up 11.7% so far this year but remains 35% below its record high in October 2007.
There have been signs of consolidation this week with sentiment taking a hit from poor retail sales data and weak consumer sentiment. Some warn the rally may have run its course for the time being as it is already pricing in a lot of good news.
One troubling aspect of the rally is that, from a historical perspective, equity volatility remains elevated, with the CBOE's Vix volatility index showing a reading of about 25. Before the credit squeeze in the summer of 2007, the Vix rarely rose to more than 20.
There is also concern that the strong run has largely reflected short sellers reversing bearish bets on stocks.
The average stock in the S&P 500 had 4.97% of its float sold short as of the end of July, the lowest level since January 30.
Low summer trading volumes are a cause for concern. Daily share volume on NYSE Euronext has not been above 2bn since June 25 and, in recent weeks, is behind April and May.
As the second-quarter earnings season fades, cost-cutting helped many companies exceed lowered estimates. Almost three-quarters of S&P companies beat estimates but many recorded revenue shortfalls.
That disturbed some analysts but the market appears to be betting that lean and mean companies will prosper when the economy rebounds.
Economists forecast expansion in the third quarter, the economy having fallen in the previous four quarters and enduring its longest decline since 1947 when records began.
The rebound is based on restocking of inventories but, once that is complete, there are concerns about sustainability of growth in 2010 as the consumer remains burdened by high debt, rising job losses and sharply lower housing prices. This week, the Federal Reserve highlighted the expectation of "sluggish income growth" in its latest policy statement.
For the time being, the equity market bets on the strength of the recovery - but technical factors are driving stocks. The money trade right now is the March rally, it's a momentum play and not based on a fundamental change.
For those readers that remember my comments in June whereby I quoted the head of Templeton Investments stating that he felt a 15% correction was looming, well he has increased his views on that now to between 20%-30%.
The stock markets of emerging economies could rally to surpass the highs reached in mid-2008 by some 30% by the end of 2010, but not before a sharp market correction from current levels in the short term, Templeton Asset Management Executive Chairman Mark Mobius said this week.
A correction to regional stock markets, which have appreciated by some 70% since early this year, is "inevitable" and "could happen at any time," the investment guru told Dow Jones Newswires in an interview on the sidelines of a capital market seminar.
He said with companies' earnings remaining weak, the rise in stock prices so far this year has meant that "valuations are now relatively lofty" while price-earnings ratios at 20 to 30 times give jittery investors an incentive to take profit in the still-precarious economic recovery. The level of correction may be between 20% and 30% from the current levels in the near term, he added.
Mobius said a resurgence in capital-raising exercises, like initial public offerings and share placements, as well as a recovery in the bond market could divert funds away from the equity market in the short term. "The market is very sentiment-driven right now," he said.
However, Mobius said the dip could be temporary with emerging markets likely to recover and rise to surpass the previous highs of mid-2008 by some 30% before the end of 2010.
"I am bullish about the prospects (for emerging markets). Next year will be a lot better (than this year). Corporate earnings will improve and coupled with the stimulus packages, there will be a lot more money in the market," he said.
Mobius said the gains will also be fueled by these economies bouncing back, and "a natural development that growth rates will be higher in the emerging markets (compared with developed markets)."
His comments reiterate my views that growth in Emerging Markets after a correction will outpace mainstream markets, but the longer we see this rally continuing, the deeper the correction is going to be.
I have read countless reports this week from supposed 'Experts' (and I use this noun loosely - these are the same people who only get paid when people are investing) and it beggars belief to read of projections for the Dow reaching 12,000 before the end of the year; the Australian ASX shooting through 6,000 and the Dax reaching 7,000 - astonishing projections at best, complete drivel at worst.
Take 2,000 off the Dow Friday and 1,200 off of the FTSE, Australian Composite and both the Cac 40 and the Dax - then you'd be approximately where markets will be at the end of this year - and for the Hang Seng in Hong Kong, you might as well chop off a whole 500 points because that is one market in particular that has risen way too high, way too fast and in turn, is only going one way!
On to the numbers for the week: |
| US Markets
How the US did this week ..... |
 Late buying saw stocks avoid their worst day in a month, although weak data knocked confidence in the recovery and dragged equities to their first weekly loss in five.
Several pieces of data came in below expectations during the last two sessions of the week, which combined to trigger the worst sell-off in more than a month on Friday.
Worries about deflation added to poor consumer confidence and activity, leaving investors seeking safer assets than equities.
Friday's consumer price inflation figures, which showed the biggest year-on-year drop since 1949, saw inflation-sensitive sectors fall, with materials, industrial and energy stocks all doing badly.
They were then joined by consumer discretionary shares after the University of Michigan's consumer confidence index for August showed an unexpected drop.
This followed disappointing retail sales figures on Thursday, which only failed to trigger a sell-off after the market was supported by the promise of growth in the Eurozone.
Stocks actually closed that session at record highs for the year. However, after gaining strongly on Thursday, materials led Friday's selling.
Alcoa, the aluminium company, lost 3.2% to $13.27 while Freeportthe gold and copper miner, fell 3.7% to $63.65.
This saw the S&P close 0.9% down at 1,004.09. It lost 0.6% over the week.
The Dow Jones Industrial Average gave up 0.8% to 9,321.40, a weekly drop of 0.5%, and the Nasdaq Composite index fell 1.2% to 1,985.52, finishing the week 0.7% lower.
The falls in consumer stocks dragged two leading clothing retailers lower, even after they both raised full-year forecasts following their quarterly results.
JC Penney lost ground in spite of making a narrower loss than expected. Its higher profit forecast remains at the lower end of analyst expectations and the stock declined 6.2% to $31.29.
Nordstrom also fell as its new forecast could not counteract slightly lower profit than expected.
The shares gave up 6.4% to $27.87. Andrew Wilkinson, senior market analyst at Interactive Brokers, said: "People have assumed that the recovery will be consumer led. We have known for many months that that won't be the case, but it is only just sinking in."
But Abercrombie & Fitch, which has suffered recently as cheaper competitors have eaten into its share of the teenage fashion market, bounced 3.9% to $34.25. Its quarterly loss did not deter investors, who focused on some encouraging sales trends.
Boeing slid further than the rest of the industrial sector after the company encountered fresh problems with its 787 Dreamliner aircraft.
Boeing said it had stopped work on two parts of the fuselage but denied this would further delay the launch, which is already two years behind schedule. The shares fell 3.8% to $44.87.
Elsewhere, struggling DVD rental chain Blockbuster was one of the day's heaviest fallers after it made a worse loss than expected on weak sales.
The results forced management to cut the full-year forecast and the shares shed 16.3% to 72 cents.
Autodesk the graphic design company, beat analysts' estimates on slightly stronger revenues than expected, which were particularly strong in Asia-Pacific and emerging countries. Its shares rose 4.9% to $25.38. |
| European Markets
What has been happening in Europe this week ..... |
 European stocks fell, snapping four straight weeks of gains for the Dow Jones Stoxx 600 Index, as a drop in US consumer confidence added to speculation the rally in equities has outpaced the prospects for an economic recovery.
The Stoxx 600 retreated 0.7% to 228.77, extending its weekly drop to 0.8%. The measure has climbed 45% since March 9, pushing the gauge's valuation to 39.9 times the profit of its constituent members, the highest ratio since September 2003.
The FTSE Eurofirst 300 index fell 1% over the week to 940.94, but on Thursday hit its highest level since November 5. However, in Germany the Xetra Dax was dragged down by the heavily weighted Volkswagen's sharp decline on Friday. The car manufacturer dropped 21.7% to €190.70 as more details of its costly integration with Porsche were released. In sharp contrast, Porsche shares rose 7.9% on Friday to €48.50. The Dax closed 2.7% lower at 5,309.11.
A measure of telecommunications shares on the Stoxx 600 fell 1.7% after Bank of America Corp. strategists cut their recommendation on European phone stocks to "neutral" from "overweight." The strategists said they favor industries more likely to benefit from the economic recovery, which is "now increasingly confirmed in the hard data."
GERMANY
German stocks declined as Volkswagen AG retreated after the carmaker agreed merger terms with Porsche SE and as a report showed US consumer sentiment unexpectedly declined this month.
Volkswagen AG sank 16% as the company said it will pay 3.3 billion Euros for a 42% stake in Porsche's automotive unit. ThyssenKrupp AG, Germany's biggest steelmaker, added 2.1% after reporting a loss, excluding inventory writedowns and reorganization costs, which was narrower than analysts estimated.
The benchmark DAX Index fell 1.7% to 5,309.11, the first decline in three days. The broader HDAX Index lost 1.4% Friday. German companies that have reported quarterly earnings so far beat projections by an average of 10%, while net income declined 60%, according to Bloomberg data.
The DAX has dropped 2.8% in the past five days after a four-week rally left the measure trading at about 45.3 times the earnings of its companies as of Aug. 7, the most expensive level since December 2003.
Volkswagen tumbled 16% to 190.70 Euros. Europe's largest carmaker will fully integrate the maker of the 911 sports car in 2011 as long as all merger requirements are met, the companies said Thursday in separate statements.
Porsche shares jumped 8.7% to 48.50 Euros. The stock was raised to "buy" from "hold" at Equinet AG, which said "the deal details are clearly a positive surprise for Porsche shareholders."
Porsche said Qatar agreed to buy the majority of options that the sports-car maker holds in Volkswagen as part of a transaction that also includes a 10% stake in Porsche. Qatar Holding LLC agreed to provide 265 million Euros to participate in a 16-bank syndicated loan.
Salzgitter, Germany's second-biggest steelmaker, fell 3.4% to 65.51 Euros as metal prices declined in London. BASF SE, the world's biggest chemical company, slid 3.4% to 34.77 Euros, while K+S AG, Europe's biggest producer of potash used in fertilizers, lost 2% to 36.21 Euros.
Metro AG, Germany's largest retailer, slipped 1.3% to 37.83 Euros. European consumer prices dropped more than initially estimated in July, losing 0.7% from the year- earlier month, the European Union statistics office in Luxembourg said Friday. The decline exceeded the 0.6% estimate published on July 31 and the median forecast of 30 economists surveyed by Bloomberg News.
ThyssenKrupp climbed 2.1% to 23.15 Euros. The loss of 452 million Euros ($645 million) was narrower than the 479 million Euros predicted by Bank of America Corp. and 539 million Euros estimated by Commerzbank AG. The company reported sales of 9.3 billion Euros.
Hannover Re, the country's second-largest reinsurer, gained 3% to 31.50 Euros.
Celesio increased 2.6% to 19.50 Euros, trimming Thursday's decline. Europe's biggest drug wholesaler was raised to "buy" from "accumulate" at Equinet, while Credit Suisse Group AG lifted its recommendation to "neutral" from "underperform."
Colonia Real Estate rose 3.9% to 3.22 Euros, rebounding from Thursday's decline. The German property investor was raised to "overweight" at HSBC Holdings Plc.
Continental dropped 4.5% to 23.31 Euros, paring Thursday's gain. The corporate family rating of Europe's second-biggest car-component maker was cut to B1 from Ba3 at Moody's Investors Service Friday, with a negative outlook.
Escada climbed for the first time in four days, adding 5.7% to 74 cents. The German luxury clothing maker said Christian Gerloff was appointed interim insolvency administrator.
Hochtief jumped 3.7% to 45.96 Euros. Germany's biggest builder confirmed its forecast for the full year of a drop in new orders, sales and order backlog as well as pretax profit and net income at the previous year's level.
TUI increased 1.4% to 5.265 Euros, extending Thursday's 10% gain. HSH Nordbank filed for state guarantees on loans for the shipping line Hapag-Lloyd AG, in which TUI holds a stake.
FRANCE
France's CAC 40 Index declined 29.12, or 0.8%, to 3,495.27 in Paris. The gauge lost 0.7% this week.
The SBF 120 Index dropped 0.7%.
Air France-KLM Group lost 37.7 cents, or 3.6%, to 9.99 Euros, a third decline this week. Citigroup Inc. downgraded Europe's biggest airline to "sell" from "hold."
Archos jumped 1.15 Euros, or 31%, to 4.90 Euros, the steepest increase since October 2002. The maker of portable music and video players said its first-half loss narrowed to 5.1 million Euros ($7.3 million) from 9.9 million Euros a year earlier.
Axa declined 36 cents, or 2.2%, to 15.78 Euros, ending a two-day gain. Financial stocks reversed previous gains in Europe after a report showed confidence among US consumers unexpectedly fell in August for a second month.
CS Communication & Systemes lost 29 cents, or 3%, to 9.25 Euros, paring Thursday's 9.9% increase. The computer-services company that makes air- and traffic- control systems said first-half revenue fell 5.5% to 108.4 million Euros.
France Telecom retreated for a fourth day, losing 31.5 cents, or 1.8%, to 17.36 Euros. Bank of America Corp. downgraded the European telecommunications industry to "neutral" from "overweight."
LVMH Moet Hennessy Louis Vuitton added 2.12 Euros, or 3.3%, to 65.62 Euros, the highest since September. Swatch Group AG, the world's largest watchmaker, surged as much as 12% after first-half profit beat analysts' estimates.
PSA Peugeot Citroen, Europe's second-biggest carmaker, tumbled 78 cents, or 3.7%, to 20.53 Euros. Automobile stocks retreated in Europe, led by Volkswagen AG. Europe's biggest carmaker will pay about 3.3 billion Euros for a 42% stake in Porsche SE's automotive unit as it executes a gradual merger of the two manufacturers.
Renault, France's second-largest automaker, fell 1.74 Euros, or 5.2%, to 31.85 Euros.
Safran increased 12.5 cents, or 1.1%, to 12.01 Euros, taking this week's gain to 12%. Citigroup Inc. upgraded Europe's second-biggest aircraft-engine maker to "hold" from "sell."
BELGIUM
The Bel 20 in Brussels shed 0.23% Friday to close at 2,274.24.
Anheuser-Busch InBev, maker of Stella Artois and Beck's beers, announced second-quarter profits that beat forecasts, but analysts stressed they expect a weaker second half of the year. The company's shares fell 1.8% to €27.17.
Inbev Thursday reported that cost-cutting boosted its earnings in the second quarter, but disappointing sales and a cautious second-half outlook from the company sparked unease among investors.
AB InBev, the world's largest brewer by sales after its $52 billion takeover of leading US brewer Anheuser last year, said cost-cutting across its far-flung beer empire - particularly in the US - boosted earnings 13% in the quarter, offsetting exchange-rate losses and flagging sales in other markets.
But the brewer said it would probably not be able repeat that earnings increase in the second half, mainly because it had strong results in the second half of 2008.
AB InBev's earnings before interest, taxes, depreciation and amortization, or Ebitda, adjusted for one-time items, rose to $3.6 billion from $3.18 billion a year earlier. The figure is closely watched by the markets because it strips out fluctuating tax rates, interest expenses and one-off costs, focusing on the company's operational performance.
Analysts were expecting $3.22 billion in adjusted Ebitda.
Sales were $9.5 billion, a 9.5% decrease from $10.5 billion a year ago, while overall volumes in the quarter fell 1.1%. Both figures were slightly below analysts' expectations.
Shares in Belgian private equity firm RHJ International fell as much as 3.5% as Canadian automotive group Magna and its Russian partner Sberbank near a deal to to buy control of General Motor's European unit Opel, for which RHJI has also bid.
RHJI's Opel has been seen as a strategic move for the small Belgian player to boost its profile in Germany and to bolster existing auto holdings.
THE NETHERLANDS
In Amsterdam the AEX lost 0.69% to finish the week at 288.02.
Dutch insurer Aegon Thursday posted its fourth quarterly loss in a row and said it would sell as much as £1bn in stock to help repay state aid.
Aegon dropped 40c or 6,9% to €5,32 after midday in Amsterdam, reducing the gain this year to 18%. By comparison, the Dow Jones STOXX insurance 600 index, of 37 companies, advanced 6,4% this year.
The second-quarter loss was driven by €393m of asset write- downs, which exceeded the €309m estimate of analysts, as well as a loss of €385m on the sale of its Taiwanese life-insurance unit to Zhongwei.
Aegon followed ING Groep last year in drawing on the €20bn set aside by the state to prop up Dutch financial firms. The insurer sold 750-million nonvoting securities at €4 each to Association Aegon, its largest shareholder, which in turn received funding from the Dutch government.
The insurer, which scrapped its final dividend last year and this year's interim payout, has the option to buy back 250-million shares at between €4 and €4,52 apiece by December.
By buying back the securities, Aegon would avoid having to pay €6 apiece at a later date, and would no longer be required to make future coupon payments of at least 8,5% annually on the repurchased amount.
Shares in the insurer fell as much as 9,4% in Amsterdam trading after it reported a second-quarter net loss of €161m, wider than the €66,9m loss estimate of 10 analysts. The company planned to raise the funds in a share offering which started Thursday.
Aegon, based in The Hague, took €3bn in aid from the Dutch government last year to bolster capital amid the global financial crisis. A final decision on whether to repay a portion of the funds before December would depend on Aegon's capital position, the outlook for the economy, and financial markets not deteriorating materially, the company said.
Dutch financial services group ING Groep Wednesday returned to a profit in the second quarter, but real-estate write- downs and loan-loss provisions kept the result below analyst expectations and it said it expects conditions to remain tough for some time.
ING scrapped its interim dividend and Chief Executive Jan Hommen told a news conference that no decision has been taken yet on the possibility of a full-year payout, although the group did say that it was seeing the first signs of a recovery in financial markets. It also raised its 2009 cost-cutting target by 30% to Eur1.3 billion.
Financially pressured Dutch brokers Van der Moolen Holding shares plunged 72% Tuesday, as trading resumed a day after the once-mighty broking group asked for and was granted court protection from creditors.
Van der Moolen filed for creditor protection Monday, when it said it would soon be unable to meet its financial obligations.
Dutch property group Wereldhave said on Thursday that it was gearing up to make acquisitions, following the launch of a bond issue that rose over the day to 230 million Euros.
"In the coming months or at the start of 2010 we are going to look at buying opportunities," Charles Bloema, Wereldhave's corporate treasurer, said in an interview.
Wereldhave, which manages property in Europe and the United States, said the five-year senior unsecured convertible bonds would carry a coupon of 4.375% with a conversion price of 72.184 Euros, which represents a premium of 15% on Thursday's average trading price. This price was the best end of indicative terms, the company said.
AUSTRIA
Vienna's ATX closed Friday and the week at 2,388.93, down 0.64%.
Raiffeisen International Bank Holding, which is active in Central and Eastern Europe, Thursday said second-quarter net profit tumbled 93%, due mainly to rising risk provisions as loan quality deteriorated in the troubled CEE region.
Risk provisions quadrupled in the quarter, but the lender still repeated that it was confident it will weather the crisis and emerge strengthened from the test.
"The global crisis has hit Central and Eastern Europe very hard, but the markets will recover again. CEE is as attractive as it ever was," Chief Executive Herbert Stepic told reporters.
Raiffeisen International's net profit after minorities for the quarter ended June 30 came to Eur22 million, down from Eur311 million a year earlier, but still came in slightly higher than the Eur14 million average estimate of 17 analysts' forecasts compiled by the bank.
Loan-loss provisions rose to Eur523 million from Eur108 million a year earlier, reflecting a steep rise in non-performing loans in the first half of 2009, mainly in macro-economically troubled Ukraine, Russia and Hungary, the bank said.
Analysts were more cautious about the outlook. Investment bank Citigroup said the second-quarter bottom line missed its estimate and added that uncertainty about Raiffeisen International's asset quality and operating outlook remains.
Citigroup rates the stock at sell, with price target Eur30.
Sporting goods manufacturer Head struck a crucial bond deal on Friday, allowing the group to slash its debt levels and cementing hedge fund Octavian Advisors' position on its board.
Investors supported an exchange which reduces debt levels at the Austrian maker of skis and tennis racquets by almost 40 million Euros ($57.1 million) and which offers them a mixture of new bonds and shares.
SWITZERLAND
The SMI in Zurich finished Friday at 5,985.30, a slight decline of 0.02% for the session.
Swatch Group, the world's largest watchmaker, climbed 16.2% to SFr237 over the week after reporting that first-half profits had beaten forecasts and that it expected demand to increase in the second half.
UBS shares rose 4.7% to SFr17.12 over the week following the Swiss bank's provisional settlement of a long-running tax dispute with the US government. But Credit Suisse gave back gains from earlier in the week to close down 0.1% at SFr53.20.
Dental implant maker Nobel Biocare Holding Wednesday reported a better-than-expected second-quarter net profit on lower restructuring costs and higher cost savings, but said its market remains challenging.
Nobel, the world's largest maker of dental implants by sales, failed to give a quantitative guidance for 2009, but said it sees a stabilization in the market for dental implants, which it saw shrink 10% to 12% in the first half of 2009.
Investors welcomed the news and at 0720 GMT, Nobel shares were up 4.2%.
Nobel Biocare said net profit for the three months to June 30 rose to Eur28.2 million from Eur24.3 million a year earlier, beating analysts' estimates of a drop to Eur21.86 million. The figure includes restructuring costs of Eur5.8 million, while most analysts had penciled in costs of around Eur10 million.
Nestlé shares fell 4.3% at SFr42.20 after the Swiss food group reported a slide in profits and sales in its interim results.
SWEDEN
The OMX 30 in Stockholm closed out Friday at 876.74, down 1.36% for the session.
Scandinavian Airline Group (SAS) on Wednesday said it will cut between 1,000 and 1,500 more jobs to reduce costs after posting another large loss for the second quarter amid falling demand for its services.
The Stockholm-based company, whose net loss more than doubled to 1.05 billion Kronor ($144 million) from 422 million Kronor a year earlier, said the job cuts will be part of a new program to lower costs by 2 billion Swedish Kronor ($274 million).
To implement the savings it will also start negotiations with trade unions to demand a 10-20% reduction of salaries and pensions for flight deck and cabin staff.
SAS said the result for the second quarter was weighed down by falling demand and restructuring costs. Sales for the period fell to 12.2 billion Kronor from 14.4 billion Kronor in the second quarter 2008.
The new savings program adds to a massive overhaul of the company announced in February, which included a 40% staff cut, a reduction of the aircraft fleet, divestments of stakes in some subsidiaries and a new share issue of 6 billion Kronor ($720 million).
At the end of the second quarter, SAS had 18,000 employees.
DENMARK
The Copenhagen 20 ended Friday at 329.63, up 0.71% and one of the few bright spots in Europe Friday.
Danish hearing aid and headset maker GN Store Nord reaffirmed its full-year sales and profit guidance on Friday after cost cuts helped it beat forecasts for second-quarter core earnings.
The head of GN's hearing aid unit, which competes with Swiss-based Sonova, Denmark's William Demant and German conglomerate Siemens, said he saw a persistently tough market but that GN could gain market share. Earnings before interest, tax and amortisation (EBITA) slid to 2 million Danish Crowns ($383,400) in the April-June period from 38 million Crowns last year, beating a mean forecast for a loss of 7 million Crowns in a Reuters survey of eight analysts.
GN Store Nord kept its 2009 full-year outlook for EBITA of around 65 million Crowns and revenue of around 5 billion and said it was focused on creating a leaner company.
Total sales fell to 1.20 billion Crowns in the second quarter from 1.36 billion in the year-ago quarter, missing an average forecast of 1.23 billion.
Danish healthcare products maker Coloplast posted a 2% rise in operating profits for the third quarter, roughly in line with forecasts, and slightly upgraded its guidance for full-year margins.
Earnings before interest and tax (EBIT) rose to 347 million Danish Crowns ($66.54 million) in the third quarter of Coloplast's 2008-09 fiscal year, from 341 million in the same quarter last year, the company said on Friday.
The result for the medical supplies producer missed an average expectation of a rise to 351 million in a Reuters survey of eight analysts, but came within the range of estimates of 313 million to 380 million Crowns.
Coloplast shares closed down 0.9% at 386 Crowns, against a 0.7% rise in the Copenhagen bourse's blue-chip index.
Coloplast, which makes products ranging from continence bags to wound dressings, nudged up its full-year 2008-09 guidance for its operating profit margin in Danish Crown terms to 15 to 16% from an earlier projection of around 15%.
However, it trimmed its full-year 2008-09 forecast for organic revenue growth in Danish Crowns to around 5% from an earlier projection of around 6%.
FINLAND
The OMX in Helsinki finished at 5,949.57, down 0.27%.
Papermakers advanced after Bank of America raised Stora Enso Oyj, Europe's biggest paper producer, and UPM-Kymmene Oyj, the second-largest, to "buy" from "underperform."
Stora Enso rallied 5.4% to 4.68 Euros. UPM jumped 4.2% to 8.21 Euros.
Finnish department store group Stockmann said on Friday it aimed to raise 140.9 million Euros ($201.1 million) in a share placement and rights offering to pay off debt from its 2007 acquisition of Swedish clothing chain Lindex.
"The transaction will allow the company to... reach its strategic objective of an equity ratio of 40%," Stockmann said in a statement.
Stockmann said it had agreed with HTT Holding, a company owned by the Finnish Hartwall family, on a placement of 96 million Euros, or 5,648,830 new shares for 17 Euros each.
It also said it aimed to raise 44.9 million Euros in a rights offering, issuing a maximum of 3,741,787 new shares for 12 Euros per share, a 34% discount of its trading price on Friday.
Stockmann said the subscription period would last from August 31 until September 18.
It said E. Ohman Securities Finland would manage the placement and Nordea Bank Finland would act as bookrunner of the rights offering.
Finnish design group Marimekko posted a 58% annual drop in second-quarter earnings on Thursday, hit by soft demand, and said it would start job talks to save costs.
"The difficult market situation continues and there are not yet any signs of recovery," Marimekko said in a statement.
"We will continue our actions aimed at lowering fixed costs to ensure the company's profitability and steady business development," it added.
Marimekko's April-June operating profit sank to 1.06 million Euros ($1.50 million) from 2.54 million a year ago, with sales down 13.7% year-on-year at 16 million Euros.
Finnish department store group Stockmann said on Friday it aimed to raise 140.9 million Euros ($201.1 million) in a share placement and rights offering to pay off debt from its 2007 acquisition of Swedish clothing chain Lindex.
"The transaction will allow the company to... reach its strategic objective of an equity ratio of 40%," Stockmann said in a statement.
Stockmann said it had agreed with HTT Holding, a company owned by the Finnish Hartwall family, on a placement of 96 million Euros, or 5,648,830 new shares for 17 Euros each.
It also said it aimed to raise 44.9 million Euros in a rights offering, issuing a maximum of 3,741,787 new shares for 12 Euros per share, a 34% discount of its trading price on Friday.
Stockmann said the subscription period would last from August 31 until September 18.
NORWAY
In Oslo the OBX closed out the week at 270.67, declines of 0.53% on the day.
Norway's sovereign wealth fund, Europe's biggest stock owner, said the value of its investments rose a record 12.7% in the second quarter after shares rallied on signs the global economic slump was easing.
The Government Pension Fund - Global climbed by 270 billion Kroner ($45 billion) as measured by a weighted basket of currencies, the central bank said Friday in Oslo. The 2.39 trillion-krone fund gained 19.5% on stocks and 5.1% on bonds.
The fund, which manages Norway's oil and gas revenue, recovered along with worldwide markets after last year's plunge in global equities erased gains since it started investing in 1996. The fund added stocks throughout the rout, which paid off in the quarter as the MSCI World Index rallied 20% and Europe's Dow Jones Stoxx 600 Index increased 17%.
The fund has raised its stake in shares to 60% from a previous limit of 40%, which it says will provide better returns over time. The government pumped 40 billion Kroner into the fund in the second quarter, the lowest since the last quarter in 2004. The return was 2.1 percentage points above the benchmark set by the Finance Ministry. Norway's central bank runs the fund, while the Finance Ministry sets guidelines.
Fixed-income management produced an excess return of 3.7 percentage points, while equity management produced an excess return of 0.7 percentage point.
Norwegian media group Schibsted reported a smaller-than-expected fall in second quarter core earnings and said the weak economic environment would continue to hit its printed classified ads markets.
Earnings before interest, tax and amortisation fell to 218 million Crowns ($36.25 million) in April-June from 365 million a year ago, easily beating the average forecast of 114 million Crowns in a Reuters poll of 10 analysts.
Schibsted said its ad revenues hinged on economic developments, which indicate "a movement towards a certain levelling out" during the rest of 2009, though with large variations between its different markets.
The company said its 1 billion Crown profitability programme for 2009 was on track and had a 250 million Crown effect in the second quarter. The company shed 430 jobs in 2009.
Schibsted said it would continue to make targeted investments in online growth positions and spend 150 million Crowns on organic projects in 2009.
SPAIN
The Ibex in Madrid ended the week at 10,901.90, down 1.31%.
Banco Santander, Spain's largest bank by market value, was flat for the week at €10.16.
Spain's economy shrank by 1% in the second quarter compared with the previous three months, the government reported, indicating the country is still mired in recession and not showing the signs of recovery of fellow EU members France and Germany.
It was the fourth consecutive quarterly contraction of a once-robust economy and was due principally to a continuing decline in consumer demand, offset somewhat by exports, the National Statistics Institute said.
Compared with a year earlier, the economy shrank 4.1% in the second quarter. In less than two years, Spain has gone from being a European model for growth, creating more than one-third of all Euro zone jobs to one with 4.13 million people out of work and Europe's highest unemployment rate at 17.9%.
A boom fueled by housing construction and consumer spending have collapsed over the past two years.
PORTUGAL
The PSI General in Lisbon closed out Friday at 2,603.32, up 0.46%.
Shares in Millennium bcp , Portugal's largest private bank, rose more than 6% on Friday, boosted by improving capital ratios, analysts and traders said.
Shares in the bank were 5.4% higher at 0.8960 Euros, after earlier hitting a high of 0.9040 -- their highest level since November 2008. The Lisbon PSI20 stock index was 1.1% higher and the DJ Stoxx European banks index was up 0.2%.
The bank's shares have lagged the Lisbon market this year, gaining 7.8% against a 23% rise for the broader market.
Millennium's first-half net profit rose 45% to 147.5 million Euros, below expectations, and operating costs fell 5.2% in the period, but margins slumped 20%.
But the bank's Tier 1 capital ratio rose to 8% at the end of June from 6.8% in March and could rise further to 8.8% with a planned bond issue of 400 million Euros this week, the bank has said.
ITALY
Italy's benchmark FTSE MIB Index fell 274.80, or 1.3%, to 21,552.39 in Milan. The gauge gained 0.7% this week.
Banca Popolare di Milano Scrl dropped 9.75 cents, or 2.1%, to 4.67 Euros. Financial stocks declined in Europe after a report showed confidence among US consumers unexpectedly fell in August for a second consecutive month.
Intesa Sanpaolo lost 5.5 cents, or 1.9%, to 2.87 Euros. UniCredit SpA (UCG IM) declined 7 cents, or 2.9%, to 2.38 Euros.
Bulgari added 47.75 cents, or 10%, to 5.26 Euros, the highest in nine months. Swatch Group AG, the world's largest watchmaker, climbed after first-half profit beat analysts' estimates.
Geox SpA rose 7.5 cents, or 1.3%, to 5.84 Euros. Tod's SpA (TOD IM) gained 1.03 Euros, or 2.5%, to 42.3 Euros.
Davide Campari-Milano increased 9.5 cents, or 1.6%, to 5.93 Euros, a second gain this week. The Italian distiller had its price estimate increased to 6.9 Euros from 5.7 Euros at UniCredit Markets & Investment Banking. The brokerage reiterated a "buy" recommendation.
Fiat Sdeclined 21 cents, or 2.5%, to 8.3 Euros. Automobile stocks retreated in Europe, led by Volkswagen AG. Europe's biggest carmaker will pay about 3.3 billion Euros ($4.7 billion) for a 42% stake in Porsche SE's automotive unit as it executes a gradual merger of the two manufacturers.
Gruppo Editoriale L'Espresso rose 6.7 cents, or 4.5%, to 1.55 Euros, a fourth gain this week. UBS AG increased its price estimate on the Italian publisher controlled by financier Carlo De Benedetti to 1.65 Euros from 1.4 Euros. The brokerage kept a "buy" recommendation.
Landi Renzo, the Italian maker of injection systems for alternative fuels, advanced 7.75 cents, or 2.1%, to 3.79 Euros, snapping a two-day decline, after the government raised incentives for new gas-fueled cars.
Lottomatica, the manager of Italy's national lottery, advanced for a third day, adding 53 cents, or 3.6%, to 15.46 Euros. On July 10, De Agostini SpA, Lottomatica's controlling shareholder, sold 1.2 million put options on Lottomatica shares with a strike price of 29.985 Euros expiring in July 2010, according to a regulatory filing Thursday. Mediobanca Securities reiterated an "outperform" recommendation.
Management & Capitali climbed 3.1 cents, or 21%, to 17.6 cents. Main shareholder Carlo De Benedetti bought a 2.2% stake in the investment company through two distinct block-trade transactions on Aug. 10 and Aug. 13, according to a regulatory filing Friday.
Telecom Italia, Italy's biggest phone company, slid 2.1 cents, or 2%, to 1.06 Euros. Bank of America Corp. downgraded the European telecommunications industry to "neutral" from "overweight."
Tenaris, the world's biggest maker of seamless steel tubes for pipelines, lost 22 cents, or 2%, to 10.64 Euros. Crude oil fell in New York, ending a two-day increase.
GREECE
The Athens Composite ended a thinly-traded week at 2,341.42, gains of 0.8% on the day.
Shares of Greek drybulk shipper Star Bulk Carriers Corp. fell after it reported a second-quarter loss.
On Wednesday the company said it lost $3.4 million in the second quarter due to greater expenses and revenue that fell 45% to $32.4 million. Charter rates decreased, and one of its vessels, the Star Ypsilon, was dry-docked for half the quarter. Meanwhile, depreciation costs, voyage expenses and vessel operating costs all rose. |
| The UK Market
Did it follow the Global trend ..... |
 A weak US confidence reading left the FTSE 100 with its first weekly loss in five weeks on Friday, but Sage beat the trend.
The software maker gained 1.9% to 212¾p after Panmure Gordon moved to a "buy" rating in advance of results next week from Intuit, its main rival in the US.
Sage has been working to repair its US sales channel following the collapse of its largest reseller, IMS Group.
If it had succeeded, it should mirror any improvement reported by Intuit in pushing online services and attracting small businesses looking to cut costs, Panmure said.
The FTSE 100 slipped from a 10-month high, losing 0.9%, or 41.49, to 4,713.97. The benchmark - which was offline at 1.15pm for about half an hour - had peaked at 4,790.18 in early trading.
For the week, the index was down 0.4%.
The unexpected decline in US consumer confidence left HSBC among the sharpest fallers on Fridya with the bank losing 2.8% to 650p. Prudential, which also has large US operations, retreated 2.6% to 516p.
British Land was the day's main talking point amid continued takeover speculation. Its shares rose 3.9% to 512½p.
A group of investors looking at real estate in the UK was said to have made inquiries to bankers about whether a bid for British Land would be plausible.
It is thought the talks were informal and came to nothing. Credit Suisse was reported to be involved.
Morgan Stanley, British Land's house broker, was cautious on the speculation.
It said that while takeovers in the sector in the past two decades had averaged 12% below net asset value, the rumoured price tag for British Land would require a premium of 64-92%.
Taking British Land private would also cost the group its Reit tax break, the broker noted.
Nevertheless, the tale underpinned sector peers. Hammerson was up 1.7% to 414¼p, Liberty International rose 1.7% to 487¾p and Land Securities was 0.7% firmer at 631p.
ENRC led the miners lower, losing 5.6% to 807p after chairman David Cooksey stepped down to concentrate on his new role chairing UK Financial Investments, which manages the government's stakes in rescued banks.
The rest of the sector was weak with Xstrata 3.1% lower at 782¾p and Randgold Resources down 2.4% to £35.48.
Kazakhmys eased 0.3% to 897½p even after Goldman Sachs added the Kazakh group to its "conviction buy" list as a play on rising copper prices.
Platinum specialist Johnson Matthey lost 2.5% to £14.11 after UBS cut its rating to "sell" in a note arguing that valuations across the chemicals sector were looking stretched.
Ahead of full-year results next week, Diageo was up 0.8% to 934p on reheated speculation that the drinks group could buy majority partner LVMH out of their Moët Hennessy venture.
Dealers were cautious of the gossip, which some linked to a large foreign-exchange trade at the end of last month. Diageo was keen to take control of Moët Hennessy, but LVMH would not welcome any proposal, they said.
Carillion, the engineering group, edged up 1.4% to 287½p amid rumours of a large deal with BT to provide infrastructure services.
BT, up 0.9% to 134¼p, has long been suspected of investigating ways to slim its heavily regulated Openreach division, which employs about 25,000 engineers.
Taylor Wimpey led the housebuilders higher, taking on 6.7% to 43p after RBS added the stock to its "buy" list.
Sterling Energy was squeezed higher by 18.6% to 3¼p on short covering after it confirmed plans to raise £62.5m with a share issue at 1.3p apiece, writes Bryce Elder.
Michael Kroupeev, the investor said to have played a key role in the sales of Emerald Energy and First Calgary Petroleums, subscribed for stock that will give him a near-30% stake in the group.
African Minerals, the Sierra Leone iron ore miner run by Frank Timis, drifted 3.5% to 333p after it posted a narrowing of interim losses. The stock has jumped more than 50% in two months amid talk that a large miner such as ENRC is interested in taking a stake.
Findel, the mail order group, rebounded 13.2% to 43p after it completed a placing and open offer to raise £80m. Rumours of takeover potential helped spur investor interest.
Takeover chatter also helped Renovo, the biotechnology group developing anti-scarring treatments. It added 8.2% to 29¾p on talk of interest from two parties.
Cinema operator Cineworld slipped 0.3% to 149p on caution ahead of its interim results next week, though some dealers believe the figures could be better than feared.
Media distributor Dawson Holdings, which recently put its consumer unit into administration, jumped 39.3% to 9¾p on a brighter-than-expected trading update.
GoIndustry DoveBid dropped 23.8% to 2p after the auctioneer dismissed takeover rumours and said it was looking at a discounted share issue.
And here is the latest from the UK.
Bereaved families will face higher charges for late payments of inheritance tax from next month, officials have said.
HM Revenue and Customs (HMRC) is increasing the interest rate payable on late inheritance tax bills to 3% while cutting the rate it pays in interest when it returns overpayments.
Campaigners condemned the "desperate" move as an attempt to feed "the Government's addiction to debt, tax and spend" and said it was "unjustifiable" during a recession.
From September, late payments will be charged at 2.5 percentage points above the Bank of England's historic low interest rate of 0.5%.
Meanwhile, the interest HMRC pays on refunds will be pegged at one percentage point below the Bank's rate, but this will not go beneath a floor of 0.5%.
A HMRC spokesman said: "Interest is not a penalty but compensation for tax paid late.
"We are streamlining the rates charged and paid for interest to simplify and make things fairer for customers. This has been subject to extensive consultation over the last 18 months and has been largely welcomed by customer groups and their representatives."
But the Taxpayers' Alliance, said: "I think it's a desperate move and a seriously retrograde step for the Government. It's basically one rule for them and another for everyone else."
The good old UK - always a reminder of why I'm not there! |
| Asia Pacific Regional Markets
Did they set the tone or follow the lead ..... |
 JAPAN
Japanese stocks rose, capping a fifth weekly gain, as commodities companies and machinery makers advanced on higher metal prices and speculation Chinese demand will boost earnings.
Mitsubishi, a trading company that gets more than a third of sales from commodities, added 3.3% after a top- ranked analyst at Goldman Sachs Group Inc. said a recovery in steel production made trading companies more attractive. Komatsu Ltd. the world's No. 2 maker of earthmoving equipment, and Hitachi Construction Machinery Co., a smaller rival, gained more than 5% after analysts said demand is picking up in China.
The Nikkei 225 Stock Average added 80.14, or 0.8%, to close at 10,597.33 in Tokyo. The broader Topix index rose 5.16, or 0.5%, to 973.57. For the week, both benchmark gauges advanced 1.8% for a fifth week of gains, the longest streak since the five weeks ended April 10.
Mitsubishi, whose joint venture with BHP Billiton Ltd. is the world's biggest exporter of coking coal, added 3.3% to 1,994 Yen. Mitsui & Co. rose 2.8% to 1,295 Yen. A $1 change per ton of iron ore alters Mitsui's annual net income by 2 billion Yen ($21 million), the company said last week.
Marubeni Corp. climbed 5.8% to 471 Yen after Yoshida boosted the stock to "buy" from "neutral." A measure of trading companies posted the second-steepest climb among the Topix's 33 industry groups, following machinery manufacturers.
Komatsu jumped 5.3% to 1,716 Yen, a level not seen since Sept. 29. Nomura Holdings Inc., Japan's largest brokerage, said the recovery in demand is spreading from China to Indonesia, Brazil and the Middle East.
Hitachi Construction, which cut its full-year profit target by more than one-fourth last month, soared 8.4% to 1,930 Yen, the steepest gain in the Nikkei. Mitsubishi UFJ Financial Group Inc. lifted its rating on the stock to "outperform" from "market perform," saying the company's forecast doesn't reflect an increase in orders from China and Indonesia.
The Nikkei has climbed 50% from a more than quarter- century low on March 10, as improved economic statistics and corporate earnings fanned optimism the global economy is recovering. The gauge closed at its highest since Oct. 3 Friday, increasing its price-book ratio, or PBR, to 1.41 times, a level not seen since September.
Nikkei futures expiring in September added 0.7% to 10,590 in Osaka and gained 0.6% to 10,595 in Singapore.
SOUTH KOREA
South Korean shares closed higher Friday, led by financial and technology stocks amid improving economic sentiment.
The Korea Composite Stock Price Index, or Kospi, added 26.77 points, or 1.7% to 1591.41, its highest close since July 31, 2008 when it finished at 1594.09.
Foreigners were net buyers of shares worth KRW365.3 billion, but both domestic institutions and local retail investors were net sellers of KRW134.2 billion and KRW189.1 billion of shares, respectively.
Although sentiment is expected to stay positive for a while due to optimism over the economy, the Kospi's rise pace is expected to slow down next week as it nears the psychological resistance of 1600, said analysts.
Shinhan Financial Group rose 5% to KRW41,350 and KB Financial Group advanced 2.7% to KRW54,000.
Bellwether Samsung Electronics jumped 4.1% to KRW731,000 and LG Electronics gained 2.5% to KRW141,500.
Samsung Securities rose 2.5% to KRW78,400 and Daewoo Securities gained 4.4% to KRW23,750.
Korean Air finished 0.4% higher at KRW45,500 after saying it swung to a net profit of KRW78.5 billion for the second quarter from a net loss of KRW288.9 billion a year earlier.
STX Pan Ocean fell 1.2% to KRW12,600, underperforming its peers, after reporting it swung to a net loss of $36 million in the second quarter from a net profit of $173 million a year earlier, and to an operating loss of $65 million from an operating profit of $200 million.
HONG KONG
Hong Kong's Hang Seng tracked losses in Shanghai. It was heavily influenced Friday on concerns over increased supply of shares-as capital raising picks up steam.
The Hang Seng eventually closed marginally up by 0.15% at 20,893.
China Merchant Bank, the country's sixth biggest lender, said it plans to raise as much as $2.6 billion in a rights issue in Hong Kong and Shanghai by the end of the year. Everbright Securities says it will list in Shanghai next week, and is hoping to raise $1.6 billion in its upcoming IPO.
Casino operator Las Vegas Sands appears to have a clear path to a Hong Kong listing. It comes after lenders agreed to amend its $3.3 billion Macau credit facility. The casino operator wants to use the cash to complete the stalled Venetian project in the Chinese gambling enclave. The company also said it's on track to open its next gambling resort in Singapore early next year.
Meanwhile, rival Macau casino firm Melco raised $200 million in equity to pursue development opportunities, further signaling an expected recovery in the top gambling hub.
Li & Fung Ltd. said its first-half net profit rose 13% from a year earlier, driven by cost-cutting measures.
The Hong Kong-based consumer goods exporter, which sources products for US retailers such as Abercrombie & Fitch Co. and Kohl's Corp., said revenue growth in the second half hinges on acquisitions and new outsourcing deals, while earnings growth will depend on cost savings.
Li & Fung said its unaudited net profit rose to 1.4 billion Hong Kong Dollars (US$180.6 million) for the six months ended June 30, from HK$1.24 billion a year earlier. Revenue fell 2.3% to HK$46.29 billion from HK$47.39 billion.
The company said it remains committed to its plan of achieving annual revenue of US$20 billion and a core operating profit of US$1 billion by 2010, though it added the US economic climate remains unclear.
Li & Fung, which acts as a sourcing agent for many major US and European companies that acquire finished consumer goods from factories mainly in China, also said it signed a deal to become the exclusive sourcing agent for US retailer Talbots Inc.
As part of the global apparel sourcing pact, which takes effect next month, Talbots will pay an agency commission to Li & Fung for product purchases made through the Hong Kong company.
CHINA
China's benchmark stock index fell to the lowest in more than six weeks, completing the worst week since February, on concern this year's rally has overvalued the prospects for earnings growth.
Industrial & Commercial Bank of China Ltd., the nation's biggest listed lender, sank 3.2%. PetroChina Co., No. 1 in the world by market value, dropped 2.1%, losing 7.1% in its worst week since December. China Merchants Bank Co. slid 2.4% after saying its board approved a plan to sell 18 billion RMB ($2.6 billion) of shares to boost capital.
The Shanghai Composite Index, tracking the bigger of China's exchanges, slumped 93.59, or 3%, to 3,046.97 at the close, the lowest since July 1. It slid 6.6% this week, the most since the five days ended Feb. 27 and paring this year's rally to 67%, on concern a slump in exports and new loans will damp economic growth.
The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, declined 2.8% to 3,344.46.
The Shanghai index this week entered a correction after its retreat from this year's high on Aug. 4 surpassed 10%. The gauge, which ended the week 12% below the peak, trades at 33 times the reported profit of its companies, compared with a price-to-earnings ratio of 18 times for the MSCI Emerging Markets Index.
PetroChina lost 2.1% to 13.94 RMB. China Minsheng Banking Corp., the nation's first privately owned bank, fell 4.6% to 7.47 RMB, bringing its loss to 7.3% this week.
Merchants Bank, the nation's fifth-biggest lender by market value, retreated 2.4% to 17.26 RMB after saying late Thursday it will sell as many as 3.8 billion shares to owners of existing Shanghai-listed A-shares and Hong Kong-listed H- shares.
Prime Minister Wen Jiabao said Aug. 9 the government will maintain its current macroeconomic policy stance aimed at bolstering domestic spending as the nation continues to experience fallout from the global recession.
Exports fell 23% from a year earlier, the government said on Aug. 11, while urban fixed-asset investment rose a less- than-estimated 32.9% in the first seven months from a year earlier. New loans plunged to 355.9 billion RMB in July, less than a quarter of advances in June, according to the central bank.
Yanzhou Coal Mining Co., the listed unit of China's fourth- biggest coal miner, added 3.7% to 20.72 RMB after announcing a takeover of Australia's Felix Resources Ltd. for about A$3.5 billion ($2.9 billion) to secure supplies.
Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, gave up 3.2% to 4.83 RMB. Bank of China Ltd. fell 3% to 4.16 RMB, while China Construction Bank Ltd. lost 1.2% to 6.01 RMB.
Ping An Insurance Ltd. lost 2.3% to 52.61 RMB, while China Life Insurance Ltd., the country's biggest life issuer, dropped by 1.9% to 28.41 RMB.
Jiangxi Copper Ltd., the country's second-largest metal producer, declined by 2.8% to 41.52 RMB, while Baoshan Iron & Steel Co., the country's biggest steelmaker, shrank 3.2% to 8.08 RMB.
TAIWAN
Taiwan stocks closed up 0.49% on Friday to a two-week closing high, led by gains in netbook pioneer Asustek and other major technology shares due to expectations of stronger sales and earnings.
The main TAIEX share index finished up 34.55 points at 7,069.51, a closing level not seen since July 31. The TAIEX wrapped up the day to post a near 3% gain for the week.
Turnover was moderate at T$124 billion ($3.8 billion), compared with Thursday's T$120 billion.
Asustek rose 3.67%, pushing the computer and peripheral sub-index 1.22% higher. Goldman Sachs said in a report the company would make an operating profit after breaking even in the second quarter as it clears inventory and as demand picks up following the launch of Window 7.
Some major technology shares tracked gains among US tech companies. TSMC, the world's largest contract chip maker, rose 0.51% after positive earnings reports in the United States, a key export market for Taiwan companies.
However, Mediatek, Taiwan's biggest chip designer and supplier, gave up early gains to fall 3.11% after investors locked in recent profits.
Chang said he expects the main index to test as high as 7,300 next week, but investors would likely remain cautious ahead of more first-half earnings reports by the end of August.
Nomura raised ratings on major liquid crystal display (LCD) makers, including AU Optronics and Chi Mei Optoelectronics Corp, following its industry view upgrade.
Shares of AU Optronics rose 0.85%, while its smaller rival Chi Mei Optoelectronics, reversed early gains to lose 0.55%, after Nomura raised them to "neutral" from "reduce".
A local newspaper cited Citigroup as saying a possible drop in panel prices could be delayed to November from its previous forecast of September, due to a shortage after an earthquake disrupted glass production in Japan.
Construction and steel shares rose after a local newspaper said Taiwan's cabinet had decided to set aside a special budget of up to T$200 billion for reconstruction after Typhoon Morakot left a path of destruction as it swept over the island.
The construction sub-index rose 1.63% and the steel sub-index rose 1.61%.
Shares of chip packager Siliconware fell 1.05%. The company said on Thursday it would invest up to T$2 billion ($61 million) in Taiwan Memory Co (TMC).
The government-backed TMC was officially established in late July, with an initial capital of T$500,000. TMC would use Elpida's technology to help rescue the island's struggling DRAM sector, which competes with global giants in South Korea.
Shares of Fubon Financial Holding, parent of Taiwan's No.2 insurer Fubon Life, closed 0.61% lower on news that the firm will participate in a fund-raising plan by China's Xiamen Commercial Bank by the end of the year.
THE PHILIPINES
Stocks ended flat on Friday with the bellwether index weakening after US reported a 0.1-percent decline in retail sales in July.
The 30-company Philippine Stock Exchange index (PSEi) inched down 0.21% or 6.05 points to 2,850.01. Market breadth was negative as losers led gainers at 55 to 46 while 57 issues were unchanged. The broader all shares shed 4.96 points or 0.2737% at 1,806.98.
Four indices - property, holding firms, services and financials- out of six ended in the green, gaining between 0.4335% and 1.3887%.
Two indices ended in the red- mining and oil and industrial, which skidded 2.7165 and 2.5931%, respectively.
Volume continued to be low with 3.398 billion stocks worth P2.687 billion changing hands.
Cornering some 14% of the total market in the local session, Philex Mining Corp., one of the country's largest miners, was the day's top-traded. Philex's shares plunged P0.50 or 4.6512% to P10.25.
Telecommunications giant Philippine Long Distance Telephone Co. jumped P15 or 0.5929% to P2,545.
Manila Electric Co., the Philippines' largest power distributor, retreated P21 or 8.6066% at P223.
The Philippine Stock Exchange was steady at P300.
Retail giant SM Prime Holdings Inc. advanced P0.20 or 2.0833% to P9.80.
SINGAPORE
Singapore shares closed 0.66% higher Friday on gains in selected heavyweight stocks amid growing confidence about the economy, dealers said.
The blue-chip Straits Times Index advanced 17.33 points to 2,631.51. Volume totalled 2.55 billion shares worth 1.75 billion Singapore Dollars.
There were 257 winners, 248 losers while 778 issues were even.
Among the winners were Singapore Airlines which gained four cents to 12.74 Dollars, while Singapore Telecommunications was five cents higher at 3.23 and Neptune Orient Lines rose two cents to 1.71.
For the property sector, CapitaLand put on four cents to 3.70, City developments gained 18 cents to 10.20 and Keppel Land was four cents stronger at 2.74.
Singapore gained 3.2% for the week, the second best regional performer after Vietnam.
MALAYSIA
Malaysian shares closed up 0.2% on Friday, led by gains in plantation and construction stocks, as well as higher crude palm oil prices, dealers said.
The Kuala Lumpur Composite Index gained 2.38 points to 1,188.57.
Declining stocks outnumbered advancers 438 to 315.
Plantation firms were among the gainers - IOI Corp rose 1.9% to RM5.35, KL Kepong gained 2.8% to RM13.98 and Sime Darby gained 1.2% to RM8.42.
INDONESIA
Indonesian stocks slipped on Friday as some investors opted to pull out of the market after the recent strong rally and ahead of the long holiday weekend, an analyst said.
The Jakarta Composite Index lost 9.62 points, or 0.4%, to close at 2,386.86. Some 6.85 billion shares worth Rp 5.26 trillion changed hands. Decliners outnumbered losers 114 to 78, with 61 stocks unchanged.
The JCI finished the week with a 1.6% gain, its fifth c o nsecutive weekly advance.
Investors also sold stocks on Friday to avoid possible negative global developments over the long weekend, he said. The market is closed on Monday for Independence Day.
Among market movers, state-owned miner PT Aneka Tambang lost 75, or 2.75%, to 2,650, while PT Timah fell 25, or 1.1%, to 2,325.
PT Astra International fell 1,150, or 3.7%, to 29,850, and PT Telekomunikasi Indonesia lost 50, or 0.6%, to close at 8,700.
PT Berlian Laju Tanker, the country's biggest shipping firm, fell 2.4% to 810 after reporting that first-half profit fell 91% to $9.6 million on lower sales and higher non-operating costs.
Plantation stocks gained as imports of vegetable oils by India, the world's biggest buyer after China, were projected by a processors' group to climb to a record high as the weakest rain in five years threatened to damage oil-seed crops and worsen a shortage of the commodity.
PT Astra Agro Lestari rose 550, or 2.45%, to 23,000, while PT London Sumatera Plantations gained 150, or 1.9%, to close at 8,000.
THAILAND
The SET closed 0.2% lower Friday.
In Bangkok, the market was weighed down by a 1.1% fall in top mobile phone company Advanced Info Service, which reported a 33% fall in earnings in the second quarter as the economic recession and weak tourism hit revenue.
Property firms rallied, with Asian Property surging 6.5% to 5.7 Baht, its highest since 19 August 2008, after the company gave an upbeat outlook. Land & Houses rose 4.1% and Quality Houses gained 2.7%.
INDIA
A key index of the Indian equities markets ended Friday at a loss of 106 points, with investors booking profits after almost a 500-point surge in the previous session.
The 30-scrip sensitive index ( Sensex) of the Bombay Stock Exchange (BSE), which opened lower at 15,530.386 points, ended at 15,411.63 points, down 106.86 points or 0.69%.
The Nifty of the National Stock Exchange (NSE) also closed in the red, losing 0.54% from its previous closing figure to end at 4,580.05 points.
Broader market indices closed mixed, with the BSE midcap index ending 0.09% down while the the BSE smallcap index closing 0.4% higher.
Of the 13 sectoral indices on the BSE, those for realty, FMCG, IT and auto stocks came under selling pressure. Energy and consumer durables saw some buying activity.
The market breadth was positive, with 1,417 stocks advancing, 1,243 declining and 72 remaining unchanged.
Of the 30 stocks on the Sensex, there were only five gainers: ONGC, up 4.79% at Rs.1,220.20; Reliance Infra, up 1.49% at Rs.1,185.50; Reliance Industries, up 0.54% at Rs.2,034.30; Sterlite, up 0.34% at Rs.662.35, and HDFC Bank, up 0.13% at Rs.1,426.85.
Among the losers were Jaiprakash Associates, down 3.52% at Rs.216.40; Hindustan Unilever, down 2.6% at Rs.256.45; NTPC, down 2.41% at Rs.206.20, and Reliance Communications, down 2.34% at Rs.258.55.
Total turnover stood at Rs.85,916.55 crore, down from the previous trading session. This included Rs.16,397.44 crore from the NSE cash segment, Rs.63,891.72 crore from the NSE futures and options and the balance from the BSE cash segment.
AUSTRALIA
Upbeat comments from the Reserve Bank of Australia, above consensus results from Leighton and gains in offshore equities and commodities helped the Australian share market hit a fresh 10-month high Friday before profit taking trimmed its advance before the weekend.
The benchmark S&P/ASX 200 closed up 25.1 points or 0.6% at 4461.0 after hitting 4509.5, its highest level since October 2008. The index dipped to 4445.4 intraday as profit taking emerged ahead of important US economic data, including industrial production and consumer confidence.
It was the fifth consecutive week the index ended up - the first time in two years. The index rose 3.8% this week. At A$6.8 billion, the value of shares traded was very heavy, particularly for a Friday.
A senior institutional trader said there was a massive inflow of funds relating to an ongoing asset allocation in favor of equities - domestic pension funds and offshore investors were scrambling to buy equities.
He said three brokers had major buy portfolios Friday.
"Maybe when we see an end to this sort of flow, the market could finally take a breather," said the trader, speaking on condition of anonymity.
Many traders until recently had 4500 as their year end target and some now said 5000 was possible before year end (in their wildest dreams say I - I would say they'll be looking more at 3,500 than 5,000 after the long-awaited correction happens).
UBS strategists estimated S&P/ASX 200 fair value at 4700-4800, adding that, on a top-down view, the index could continue rising over the next six months, albeit less dramatically than the past six months.
UBS said that while investors were having to look a long way forward for earnings growth, upgrades to near and medium-term estimates were increasingly likely.
In this regard, while UBS said tactical downside risks to the market appeared to be rising, the balance of evidence pointed to moderate global recovery.
UBS continued to recommend an underweight stance on resources and property trusts and an overweight stance in banks and industrials.
Overnight, the S&P 500 rose 0.7% despite weak retail sales and jobless claims. London Metal Exchange copper rose 3.1%, helped by signs that Europe was coming out of recession.
Locally, RBA Governor Glenn Stevens said this may be one of Australia's shallower downturns, while Leighton reported above consensus full year profit.
Financials responded positively to Stevens' comments and US peer gains. The S&P/ASX 200 Financials Ex-Property Trusts Index closed 1.0% higher.
Banks generated much of the strength, with National Australia Bank up 3.0% at A$27.75 and ANZ up 2.7% to A$20.74 and Westpac up 0.6% to A$24.40. Commonwealth Bank, which goes ex-dividend on Monday, fell 1.1% to A$47.02.
Helping NAB was a Macquarie Equities strategy note recommending investors buy NAB for exposure to an expected economic recovery in the UK
Top rated Macquarie strategist Neale Goldston-Morris and team recommend investors reduce equities exposure to China in favor of the US and UK
He favored NAB for its UK exposure as well as "deep cyclical" US stocks including Billabong, Incitec Pivot, and James Hardie.
Billabong rose 2.9% to A$10.35, Incitec Pivot rose 6.6% to A$3.23 and James Hardie rose 3.6% to A$5.75.
Macquarie advised cutting exposure to "defensive" Singtel and "fairly priced" Orica, while reducing exposure to "expensive" BHP Billiton, Rio Tinto and Woodside Petroleum.
Those stocks faded after early gains, with BHP closing flat at A$38.26, Rio up 2.0% at A$59.99 and Woodside down 1.0% at A$44.15.
Leighton soared 7.3% to A$33.30 after its full-year results beat market forecasts, while elsewhere in the industrials sector, Brambles rose 5.7% to A$6.82.
Telstra climbed 1.1% to A$3.60 and CSL rose 2.6% to A$33.02, suggesting some defensive buying was emerging as the overall market ran into profit taking near 4500.0.
Westfield fell 0.6% to A$12.06 after hitting A$11.85 amid some ongoing fear of a potential capital raising.
NEW ZEALAND
New Zealand shares pushed to a 10-month closing high Friday, as rising investor confidence helped the market complete another strong week that lifted the benchmark index 2.6%.
The NZX-50 Index closed up 0.7%, or 22.4 points, at 3,151.26. The index has rallied 15% in the past four weeks.
Even an earnings report by blue chip Contact Energy, showing its full-year net profit to June 30 had halved to NZ$117.5 million, failed to damp enthusiasm.
Cyclical stocks, particularly those leveraged to the building industry, dominated the leaderboard.
Carpet maker Cavalier Corp. jumped 7.3% to NZ$2.50 and resins manufacturer Nuplex Industry rose 4.8% to NZ$2.40.
Steel & Tube rose 3.2% to NZ$3.20. First NZ Capital upgraded its recommendation to Outperform from Neutral.
Air New Zealand was also upgraded to outperform by Macquarie Equities analysts, who forecast it will report a full-year net profit of NZ$81 million versus the NZ$76 million consensus. Its stock rose 1.6% to NZ$1.25.
Chip maker Rakon Industries rose 3.5% to NZ$1.47 after telling shareholders at the annual meeting that demand had returned to the level of 12 months ago, although the high New Zealand Dollar was hurting and the current year would remain challenging.
Bellwether Telecom Corp. rained on the parade with a 1.8% fall to NZ$2.75 on profit-taking.
AMP NZ Office Trust fell 2.4% to NZ$0.81 after reporting a NZ$192.8 million annual loss following heavy unrealized property writedowns. |
| Global Commodities
'Food for thought' or 'a Grain of truth' ..... |
 Commodity markets staged a correction on Friday, surrendering some gains made earlier in the week as concerns about the outlook for the US consumer replaced relief that France and Germany had shown signs of moving out of recession.
Sugar prices fell after hitting the highest levels for 28 years this week amid concerns about record low stocks and bad weather in India and Brazil, the world's largest sugar producers. ICE October raw sugar, the global benchmark, lost 1.7% at 21.85 cents a Pound but rose 5% over the week.
Duvvuri Subbarao, governor of the Reserve Bank of India, said India's agricultural situation was "disturbing". Poor monsoon rains meant some key growing regions faced drought.
Rabobank cut its forecast for India's 2009/10 sugar output to 14.5m to 15m tonnes, down from forecasts of more than 20m tonnes a few months ago. This would imply no rise from the estimated 15m tonnes that India will produce in 2008/09 and 45% less than the 26.5m tonnes of 2007/08.
Liffe October white sugar lost 4.4% at $551.6 a tonne, up 2.7% this week.
Crude oil prices fell sharply with Nymex September West Texas Intermediate dropping $3.01 to $67.51 a barrel, down 4.9% on the week. ICE September Brent lost $1.07 at $72.41 a barrel, down 2% this week.
WTI traded at a substantial discount to Brent as US demand remains anaemic.
The International Energy Agency, the developed world's energy watchdog, said the US summer driving season seemed "to have fizzled out before getting started".
Among base metals, copper, nickel and zinc hit fresh year-highs during the week but ran into profit taking on Friday. Copper reached $6,465 a tonne before slipping to $6,240, up 1.5% over the week.
Gold ebbed and flowed under the Dollar's influence. Bullion slipped 0.9% to $945.50 a troy ounce and was also down 0.9% this week. Support for gold from jewellery buying and investor inflows into exchange traded funds remained absent. |
| Global Currencies
In for a Penny, in for a Pound ..... |
The Dollar lost ground this week as rising risk appetite prompted investors to abandon the currency in search of higher returns elsewhere.
Investor confidence was buoyed as the Federal Reserve said after its policy meeting that US interest rates would remain at exceptionally low levels for an extended period of time and issued a slight upgrade to its assessment of the US economy.
The central bank said the downturn in US economic activity showed signs of "levelling out".
This reassured investors, allowing equity markets to continue on their upward path and stemming haven demand for the Dollar.
Against the Euro, the Dollar declined 0.6% to $1.4245 on the week as growth in the Eurozone's two largest economies boosted sentiment towards the single currency.
Figures revealed that both Germany and France recorded growth of 0.3% in the second quarter, outstripping forecasts for further contraction.
The Dollar also lost ground against the Yen - an anomaly given that, like the US currency, its perceived haven status has seen it weaken sharply in recent bouts of rising investor confidence.
Part of the Dollar's weakness against the Yen might be explained by bearish sentiment towards the US currency, but that government bond-related currency flows were also playing a role.
Japan is the second-largest holder of US Treasuries behind China and the large mid-August coupon payment and maturity funds may be being hedged or repatriated.
The Dollar dropped 3.2% to Y94.55 against the Yen over the week.
The Dollar also fell against commodity-linked currencies as optimism over the prospects for global growth continued to rise.
Indeed, the focus of market attention shifted away from risk towards the prospect of interest rate rises in some commodity-producing countries.
The Australian Dollar hit an 11-month high of $0.8477 on Friday after Glenn Stevens, governor of the Reserve Bank of Australia, said that the current interest rate of 3% was an "emergency measure" and normal levels would be a good deal higher. The Australian Dollar finished the week 0.5% higher against the Dollar.
The Norwegian central bank surprised the market, saying that activity in the country's economy might slow less sharply than expected and it may be appropriate to increase rates earlier than expected.
The Norwegian Krone advanced 1.1% to NKr6.0560 against the Dollar over the week, while the New Zealand Dollar climbed 2.1% to $0.6827 against its US counterpart.
The Dollar did rise against the Pound as the Bank of England delivered a dovish inflation report. The Bank projected that UK inflation would stand at 1.4%, below its 2% target, if UK interest rates followed the path implied by market expectations.
This heightened speculation that UK interest rates were set to remain at record-low levels for an extended period of time and that quantitative easing could be expanded.
Over the week, the Pound fell 0.8% to $1.6533 against the Dollar, dropped 1.3% to £0.8613 against the Euro and declined 3.9% to Y156.34 against the Yen.
The South African Rand was little moved against the Dollar in the afternoon session on Friday and was said to be in a consolidatory phase having shown volatility earlier this week, according to a local trader.
The Rand was bid at 8.0470 to the Dollar from a previous close of 7.9933. It was bid at 11.4754 to the Euro from a previous 11.4045 and at 13.3535 against Sterling from 13.2400.
And as always, bringing currencies to a close this week here in China with the RMB - the RMB strengthened to 6.8348 to the US Dollar, up from Thursday's close of 6.8421. |
| China
Key news eminating from China this week ..... |
 US firms, such as Blackstone and the private equity arm of Goldman Sachs, are establishing investment companies in China to raise RMB funds from local investors and take stakes in local companies with Chinese partners, according to people familiar with the matter.
The move is another step towards making the Chinese currency more widely available, and a further signal that Beijing is determined to improve the standard of corporate management in China.
The two private equity firms join banks such as Citibank, Bank of East Asia and HSBC in their ability to offer RMB products.
By tying up with Chinese partners, Blackstone and Goldman hope to gain an advantage in securing deals in China. So far, foreign private equity firms have been frustrated by the relative lack of deal flow in a country where economic prospects are so seductive.
In many cases, planned investments have been sabotaged by competing Chinese companies claiming that foreign investment jeopardises China's security.
Blackstone's partner is expected to be the Peoples' Government of Shanghai Pudong New Area, which has stakes in numerous companies that could potentially benefit from the private equity group's operational expertise. Blackstone is expected to announce the new venture, which it hopes will raise 5bn RMB, as soon as Friday in Shanghai. Goldman still has not selected its partner, but has many close relationships in China, for example with ICBC, the country's biggest bank, and with Ping An Insurance.
With the massive increase in domestic liquidity, continued growth of the Chinese economy and policy support from the central government to spur domestic investment, foreign investors are increasingly looking at the attractiveness of the domestic deal flow and the desirability of setting up an onshore investment platform and a RMB fund to facilitate onshore deal-making.
However, it is still not clear, for example, whether such jointly owned ventures will be allowed to invest in sensitive industries in China, such as the media. Nor is it clear whether purely domestic funds would be favoured over these new funds in competitive bidding situations.
Moreover, as long as the Chinese currency is not freely convertible into other currencies, any profits are likely to stay in China.
China has steadily encouraged investors, financiers and companies with which it trades to use RMB. Earlier this week, Citibank China said it had received approval to broaden its access to different types of RMB bonds. China Construction Bank recently said it was exploring ways to offer RMB dominated trade finance credit.
China's efforts to promote the use of the RMB are in part tied to concerns about the Dollar. In recent months, Chinese firms have been encouraged to go abroad to acquire commodity-related firms and acquire physical stocks of commodities as an alternative to investing in Dollar-denominated securities.
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China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.
State-owned Yanzhou Coal Mining Co. Thursday agreed to buy Australia's Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), a day after Sinochem Corp., China's biggest chemicals trader, offered to buy Emerald Energy Plc for 532 million Pounds ($881 million) to gain oil fields in Syria and Colombia.
China National Petroleum Corp.'s plan to buy Repsol YPF SA's Argentine unit may push Chinese purchases of overseas commodity assets to $43 billion this year, a 48% increase on 2008, according to data compiled by Bloomberg.
"The Chinese don't have enough nickel, don't have enough oil, and they don't have enough copper," Jim Rogers, chairman of Rogers Holdings and the author of books including "Investment Biker" and "Adventure Capitalist", said in a telephone interview Thursday. "There's a crisis coming. They are going around the world buying up what they can. They're preparing for a rainy day."
Bids for resources by China, whose $2.1 trillion in currency reserves are the world's largest, have been met with opposition in the US and Australia. Neither concern over its growing influence nor the arrest of four Rio executives in Shanghai have stopped Chinese companies from buying assets abroad as the nation's 4 trillion RMB ($585 billion) economic stimulus spurs demand.
The Reuters/Jefferies CRB Index, which tracks 19 raw materials, dropped 36% last year, the biggest annual decline since at least 1957. The measure has gained 15% this year on signs that the recession may be ending.
Chinese energy companies have spent at least $13 billion on overseas assets since December as they take advantage of lower valuations caused by the slowdown.
Yanzhou, China's fourth-biggest coal miner, is offering A$18 a share for Felix, including a dividend and stock in a spin off of a unit of the Australian company.
The state-owned parents of PetroChina Co., China Petroleum & Chemical Corp. and Cnooc Ltd. are studying investments in companies in Africa, Latin America, the Middle East and Central Asia
China National Petroleum, the parent of PetroChina and the nation's biggest oil company, is considering offering $13 billion to $14.5 billion for a controlling stake in Repsol's unit, three people familiar with the matter said last month.
China Petrochemical Corp., the country's second-biggest oil company, in June agreed to buy Geneva-based Addax Petroleum Corp. for C$8.3 billion ($7.6 billion) in China's biggest overseas takeover to date.
China bought record volumes of oil and iron ore in July, according to customs figures released Aug. 11.
The world's fastest-growing major economy consumes more than a third of the world's aluminum output, a quarter of its copper production, almost a tenth of its oil and accounts for more than half of trading in iron ore. Last year, China bought $211 billion worth of iron ore, refined copper, crude oil and alumina, according to government data.
China's oil consumption doubled in the last decade, rising to 8 million barrels a day last year from 4.2 million barrels in 1998, according to BP Plc's Statistical Review. The world's third-largest economy imported 3.6 million barrels of oil a day last year, meeting about 45% of its needs.
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Shanghai copper stockpiles climbed for a third week by 20% this week to the highest since August 2007, the Shanghai Futures Exchange said in a report on its Web site.
Inventories of the metal, based on a survey of five warehouses monitored by the exchange, jumped 12,673 metric tons to 76,107 tons this week, according to the report Friday.
Stockpiles of aluminum declined 238 tons to 181,368 tons, based on a survey of 11 warehouses in Shanghai, Guangdong, Wuxi and Hangzhou, the exchange said.
Zinc stockpiles expanded 5,840 tons to 115,731 tons, based on a survey of seven warehouses in Shanghai, Guangdong and Hangzhou.
Rubber inventories increased 4,780 tons to 67,558 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said.
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China Life Insurance Co., the world's largest life insurer by market value, may buy a stake in Agricultural Bank of China and sell policies through its branch network as international competitors seek to expand.
"China Life is very interested in the restructuring and initial public offering of Agricultural Bank, and there has been a lot of contact" between the two companies, China Life Vice President Liu Jiade said in an Aug. 7 interview in Beijing. "We are optimistic about the prospect of closer cooperation."
An investment would give the insurance company guaranteed access to Agricultural Bank's more than 24,000 branches across China, helping it defend its market share of more than 40% as rivals such as American International Assurance Co., a unit of American International Group Inc., gain ground. Foreign insurers expect their share of the Chinese market to reach 10% by 2011, according to PricewaterhouseCoopers, from 3.8% in the first half of this year.
China Life's 50% premium growth last year was driven by sales at Agricultural Bank, one of the Beijing-based insurer's three-biggest partners, said Liu. The bank, which has the country's biggest branch network, received $19 billion from the government in October in preparation for an IPO.
Agricultural Bank, the largest lender to China's 800 million farmers, is seeking strategic investors to buy shares before the IPO, bank president Zhang Yun said in May. The Beijing-based bank provides custodian and settlement services to China Life, Liu said. Both China Life and Agricultural Bank can benefit from the investment, Liu said. The bank didn't respond to a request for comment.
"Our current business cooperation won't be undermined in any way," Liu said. "The relationship will strengthen further, and each will get corresponding profit and business support from the cooperation."
Most of the 28 foreign insurers in China surveyed by PricewaterhouseCoopers projected premium growth between 30% and 50% annually. Premium income at China Life fell 5% in the first half. Premium income for the first seven months was 191.1 billion RMB ($28 billion), the company said Thursday, compared with 203 billion RMB for the year-earlier period.
International life insurers including Prudential Plc, the UK's biggest insurer by market value, and Aviva Plc, the UK's second biggest, are constrained by a slow branch approval process, and can only operate as joint ventures with local partners. They are not allowed to own more than 50% of the venture, a restriction China was allowed to keep as part of negotiations to enter the World Trade Organization in 2001.
AIA, founded in Shanghai 90 years ago by Cornelius Vander Starr, the first Westerner to sell insurance to the Chinese, is exempted from the rule because it got an insurance license before the nation's entry into the WTO. China lifted geographic restrictions and allowed foreign life insurers to provide health, group insurance, and pension plans three years later.
China Life adopted "an active financial support policy" to drive growth and keep its market share above 40% last year, Liu said with elaborating.
China Life is "very interested" in the planned IPO of AIA, though it's "too early to tell" if it will make an investment, said Liu, the CFO of publicly traded China Life, without specifying whether he was referring to the listed company or parent China Life Insurance (Group) Co. China Life in February dropped a bid for some of AIA's assets.
Deutsche Bank AG and Morgan Stanley, global coordinators of the sale, sent letters to several Chinese companies including China Life, inviting them to invest, the Hong Kong-based Oriental Daily reported Aug. 3, citing unidentified people.
China Life wants premium income this year to be "reasonably" higher than last year by adding to its 700,000 agents and improving productivity, Liu said. Premiums totaled 172.7 billion RMB in the first half, compared with 295.6 billion RMB for the whole of last year.
China Insurance Regulatory Commission last year began restricting insurers' bank-counter sales, mainly of short-term, single-premium products that are linked to investment returns, after competition drove up commission levels and customers complained about being misled.
China Life increased equity holdings in the first half to boost investment returns as the nation's stock market rallied, Liu said. The company may have lifted equities to about 13% of its portfolio from 8% at the end of last year. |
| Summary
The coming week looks like ..... |
Earnings season continues next week with financial results from DIY chains and big PC makers.
Earnings season may be a little long in the tooth, what with most companies beating analysts' low expectations over the last two weeks. That mood was evident in the major indexes this week as stocks seesawed up and down on mixed results from retailers and conflicting economic data.
Investors don't get a break, though. Earnings season continues next week with a look at how the home improvement and computer industries are doing. Lowe's reports earnings on Monday morning and analysts expect the second-biggest do-it-yourself chain to announce second-quarter profits of 54 cents a share, within the company's own forecast. That would be a drop from last year's 64 cents a share in profit. Slightly lower sales are also forecast.
The computer industry also gives investors its financial results next week, starting off with the world' biggest PC maker, Hewlett-Packard, on Tuesday. Shareholders may be buoyed by last month's upbeat report from industry bellwether IBM, which beat analyst profit expectations and raised its forecast for the year. H-P also makes it a habit to set expectations low enough to beat them consistently.
Number two rival Dell may see an even bigger plunge in performance. Analysts expect the PC giant, which doesn't report until Aug. 27, to announce a profit decrease of 35% and a sales decline of 24%.
Looking at the economy, building permits come out on Tuesday before trading begins. Analysts expect a slight uptick to 576,000 in July from 570,000 in June. Housing starts are expected to make a similarly small increase to 598,000. Inflation watchers may have been sated by Friday's consumer price report showing no increase despite the government's massive stimulus spending. Producer prices should show the same thing Tuesday morning with economists expecting a dip of 0.2%.
Europe's flash PMIs next week will show how much scope there is for the unexpected rise in German and French Q2 GDP to be followed up by a healthy Q3.
Any break in the headline indices above the 50 dividing line between contraction and expansion would give new hope to those looking for the Euro zone economy to do more than stabilize.
Failing that, investors will be left waiting for breakdowns on order books, inventories, and layoffs to get a better sense of potential sources of growth in the coming months.
Talk of QE exit strategies is focusing minds on the problems of calculating the output gap and the hazards for monetary policymakers of using such a compass.
The uncertainty surrounding the output gap in the Euro zone has been flagged by the ECB's Stark, who reckons that the gap is lower than either the IMF or the OECD estimates.
The Euro zone is not the only region in which debate is rumbling over whether the crisis has lowered potential growth rates and banks such as Goldman are crunching the numbers to gauge the relative importance of output gaps/changes in output gaps in determining FX direction.
Next week's EU economic calendar includes the August 17th release of June foreign trade expected at 2.7 million compared to 1.9 billion last month.
On August 18th German ZEW index will be released expected at 41.5 to 39.5 last month. On August 19th German July PPI will be released expected flat compared to -0.1% last month.
On August 21st EU August manufacturing and services PMI's will be released. The manufacturing PMI is expected to approve the 46.6 from 45.7 last month and services PMI is expected to improve to 46 from 45.7 last month.
The Bank of England appears to have set itself apart by indicating a greater concern about undershooting its inflation target than most other major central banks. Its stance has succeeded not only in shifting UK rate expectations but also in changing market views on the relative attractiveness of gilts.
Central bankers at the annual Jackson Hole meeting could give clearer signs on whether this difference in emphasis between central banks has more to do with market perception than reality, as well as how and when QE exit strategies will play out around the world.
Next week's UK economic calendar includes the August 18th release of July CPI expected at 0.2% of% compared to 0.3% last month. On August 19 August CBI orders will be released expected at -57 compared to -59 last month.
The minutes for the BOE August 5/sixth policy meeting will also be released on Wednesday.
On August 20th July M4 will be released along with July net public-sector borrowing and July retail sales. M4 is expected to rise 0.1%% compared to 0.2% last month.
Public sector borrowing is expected to fall to -6.25 billion from 19.98 billion last month. Retail sales are expected to rise 0.2% compared to 1.2% last month.
Next week's Japanese economic calendar includes the August 17th release of preliminary Q2 GDP expected at 1% compared to -3.8% last quarter.
On August 18th revised leading indicators will be released expected at 3.5% compared to 0.9% in the prior report. On August 19th June all industry activity will be released expected at 0.4% compared to 0.7% last month.
Japan Q2 GDP data is expected to show the country following Germany and France out of recession but policy challenges abound for the next government.
Financial markets are increasingly poring over implications of policy declarations by the opposition Democratic Party, which is leading in the polls.
Its stance on fiscal stimulus, FX reserves, and general FX policy have already caught traders' eyes and the details of its platform will grab more and more attention with the approach of the August 30 voting day that could see the ruling LDP ousted from power for only the second time in half a century.
All told Ladies and Gentlemen, September is approaching and given the 'double-header' reasoning that September is historically the worst month of the year for stockmarkets and my own view that a crash is coming, I think we will see more negativity globally next week and it would not surprise me in the least if next week sees the start of the rot setting in. |
As always, I will keep you posted with major developments as/when they occur in the week ahead.
In the meantime, I wish you all a very pleasant weekend.
Market Newsletter Written By
Adrian Page
Managing Director
Financial Page International | |
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