Wednesday, March 19, 2008

Stocks Up In Spite Of Rate Cut

by Rohan Parker

Stocks in Asia rose higher last month than any other increase in a month seen this year. This comes on the back of the Federal Reserve cutting interest rates and China Mobile Ltd. bringing in more than they had forecasted. Good news like this helps to alleviate growing concerns over the global market becoming more sluggish and fears of profits diving.

After both Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. announced higher than expected earnings, Macquarie Group Ltd. also saw growth on the market. Yesterday the dollar strengthened against the Yen - the biggest rise in a day in nine years - which has meant that Canon Inc. had a marked increase as nearly a third of all their business comes from the Americas. Straight after Hong Kong lowered the cost of borrowing, Cheung Kong (Holdings) Ltd. made significant gains in the city.

Hiroshi Yoh, an overseer of roughly $1 billion at Tokio Marine Asset Management International in Singapore, suggested that this latest trend may mean that the worst in over for the market. He went on to say that with the current reduction of interest rates, those people who put their money into money-market funds may now be induced to buy equities, though it is still a risk, however not so much as it was recently.

A noticeable jump of 2.6% was seen in the MSCI Asia Pacific Index, which brought it to 136.36 at 7:24pm in Tokyo; this is the largest upward move in the Index since February 14. However, the market is still quite down, 14% for this year, which makes it likely that this quarter will be the worst since September 2001.

A 2.5% rise was seen in Japan’s Nikkei 225 Stock Average, which brought it to 12,260.44. Australia’s S&P/ASX 200 saw it’s largest increase of recent months, up by 4%. Most Asian markets are on the up, with the exception of Indonesia, Sri Lanka and Vietnam.

Interest rates are at 3.25%, after the Federal Reserve took off .75% in a bid to build a more stable economy and promote trust in the financial system. Standard & Poor’s 500 Index had a turn-about of 4.2% yesterday, the largest seen since October 2002.

The worlds largest wireless operator - if counted by users - China Mobile, rose 3% yesterday, to HK$107.60 and also reported that they experienced a 37% increase in profit for the fourth-quarter last year; which has far-outweighed expectations from analysts. China Merchants Bank Co., who are the nation’s largest supplyer of dual-currency credit cards reported an increase of 5.4% to reach HK$22.55, which is the most for the company since February 27th.

The company to make the largest percentage gain on the MSCI Asian Index was Li Ning Co., a Hong Kong based sportswear manufacturer, who hiked up 19% to reach HK$20.90. The company, founded by Olympic gold-medal winning gymnast, experienced a profit growth of nearly 65% last year.

Financial companies are leading the pack in terms of gains, with Australia’s largest investment bank, Macquarie Group advancing 14% to AU$51.25 which is their largest gain since October of 1997. The National Australia Bank Ltd. also saw remarkable gains - the largest in the country in terms of assets - with their largest increase since January 25 of 7.4% to AU$29.80. The largest securities company in Japan, Nomura Holdings Inc., saw an increase of 8.7% which brought them to 1,549 yen and is their highest gain since August 2001

The U.S.’s fourth largest brokerage, Lehman, and their larger competitor Goldman, experienced dramatic increases since announcing their net incomes for the first-quarter. Prior to releasing their earnings report, Lehman had experienced a record drop, raising concerns they may be going the same way Bear Stearns Cos. did and run out of cash. Earlier this month, JPMorgan Chase & Co. made a deal to buy out Bear Sterns in a fire sale as cash shortage concerns had induced customers and lenders to pull US$17 billion from the company, last week.

However the stock markets aren’t back to normal yet; the MSCI Asian Index dropped 6.9% from August 18, which was the day the Federal Reserve announced the first of their eight reductions to discount rates.

According to Allan Yu, who is one of those responsible for the equivalent of approximately $3.4 billion from the Metropolitan Bank & Trust Co. in Manila, there have been far too many false assertions that the final ripples caused by the subprime crisis have been seen to yet give any likewise indication about the markets current activity.

Canon Inc. has risen 6.3% which brings them to 4,570 Yen, and Sony Corp., whose largest market is in the U.S., raised 6.8% which brought them to 4,240 Yen, their highest in the past five months.

Game-console maker, Nintendo Co., depend on the U.S. for approximately 37% of their sales, rose 5% which brings them to 52,100 Yen.

Earlier today, the dollar battled its way back up to 100.45 Yen; It started the day at 97.15.

According to a statement released by Sony earlier this year, a 1 Yen change against the dollar can affect the company’s annual operating profit by 6 billion Yen ($60 million) and for Canon, the same move in Yen brings around 9.9 billion Yen in profit affects.

The penultimate developer in Hong Kong, Cheung Kong, saw an increase of 2.4% to HK$105.60 and the Malaysian builder, Kerry Properties Ltd., rose 7.6% to HK$41.95 after the company announced an increase in profits by 40% for last year based on property sales in China and gains in asset values.

Maintaining a currency peg to the dollar, Hong Kong lowered their base lending rate to 3.75% from 4.5% to match the Federal Reserves move earlier this year to cut 0.75% point off. Speculation is currently that property buying could see an increase due to the lowered lending costs.

The Hong Kong developer, Sino Land Co., announced their first-half profit yesterday, which had tripled from last year, and has since gone up 5.9% to HK$17.36 as the company’s stock rating on the market has been altered by Morgan Stanly from Overweight to Equal weight.

 

 

 

Stories related to: Stocks Up In Spite Of Rate Cut

 

 

Visited 550 times, 2 so far today