Archive | March, 2014

Leading Chinese banks doubled written-off bad loans in 2013

The largest Chinese banks doubled the level of bad debts and write-offs during the last year, which is a sign of the strengthening of financial tensions in the system, as the economy growth is slowing.

The five largest Chinese banks, which are responsible for more than half of all loans in the country have written-off bad debts of 9.5 billion USD from its balance sheet, according to the financial reports for 2013. The data showed an increase of 127% compared to 2012 and the highest proportion since the banks were saved from bankruptcy, recapitalized and IPO listed in the last decade.

The sharp increase in write-offs is the last signal of turmoil in the Chinese financial system. The bond market saw the first real bankruptcy in March, as two high-profile investment products in the shadow banking were saved from bankruptcy at the last minute, while the small provincial lender experienced a banking panic during last week for short time. The evidence also points to a deeper than expected downturn in the first quarter, pushing China this year to its slowest growth since 1990.

The deterioration of the economy condition has fueled the expectations that Beijing will act soon to support the economy. The Chinese banks built strong defensive walls in the last decade during the impetuous growth, which are currently being tested. Since they made large reserves against possible losses, the banks were able to double their loans write-offs without hurt their profitability or their capital buffers.

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Asian indexes finished the session with mixed results

Asian indexes finished the session with mixed results

Asia Nikkei growthThe leading stock markets in Asia ended the trading on Monday with increases amid the hopes that China may stimulate its economy. However, the first quarter of 2014 was marked by the fear of the market participants.

The Japanese benchmark Nikkei 225 was the worst performing index in the region for the first three months, counting a loss of 9%. In this way it reached its weakest quarter in nearly two years. The presentation of leading Indonesian index Jakarta Composite was absolutely opposite, as it rose with 11.5% over the period. The Philippine’s benchmark PCOMP, even recorded growth of nearly 9%.

Despite of its decline for the quarter the Japanese stocks rose to their highest level in nearly three weeks during the Monday trading session. They grew for the fourth consecutive session. Nikkei 225 rose with 0.90% to 14,827.83 points, supported by the decline of the JPY to a one-week low against the USD. The market capitalization of Sony expanded with 4%, while Nintendo and Honda Motor closed with growths of more than 2%.

The investors also weighed the weak economic data that showed a decline in manufacturing activity in February. Activity in the sector declined by 2.3% on a monthly basis after rising 3.8% in January. The analysts predicted expansion of 0.3%. Measured on an annual basis, the activity still reported growth, expanding by 6.9%.

The Chinese Shanghai Composite fell by 0.41% to 2,033.31 points. The market was scared before the publication for the key production data compiled by HSBC and the Chinese government. Anhui Conch lost 1.2% despite the announcement of an increase in net profit for 2013 with 48.3%. The shares of Dongfeng Motor fell with 1.3%. Here, however, the decline came despite good corporate results, which showed a rise in annual profit by 15.8%.

The Australian S&P ASX 200 ended the quarter at two-week maximum 5 394.80 points, expanding by 0.52% for the day. The local mining companies reported mixed results from after the copper toward its biggest monthly loss since June. BHP Billiton added 1.1%, while Fortescue Metals slid more than 1%. Meanwhile AUD retreated from 4-week high of 0.9261 USD reached on Friday.

The South Korean KOSPI expanded with 0.23% to 1,985.61 points, supported by Hyundai Motor grwoth, which reached 1.2%. The economic data showed that South Korean current account surplus fell in February. Samsung SDI ended the session with a growth of 6.6%, while its affiliate for electronic materials Cheil Industries added 5.7%. The rise came after news that the giant will acquire a smaller company by the swap deal.

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ING will resume paying dividends in 2015

ING announced that will start paying dividends again in 2015, after the Dutch bank is trying to recover from the years of restructuring caused by the financial crisis. The bank seeks payment of 40% of its profits as dividends after paid all the government assistance. This will be the first dividend of ING since 2008, when it was near the collapse.

The bank is on back to complete five-year restructuring plan imposed by the antitrust regulators in European Union, as a condition for the granting of financial rescue aid. ING sold dozens of assets in recent years and is currently preparing its European insurance business for an initial public offering (IPO).

“Now, when we are at the end of the restructuring period and once our program for the sale of assets and repaying the Dutch government are almost finished, we are proud that we can now look to the future”, commented the CEO Ralph Hamers.

The management of ING announced that it aims to increase lending by 4% per year to 2017 to expand its net interest margin with 1.50-1.55 percentage points and reach factor cost/profit of 50-53%. This should lead to a return on equity of 10-13%.

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Gold price hold positions under 1300 USD

The gold price keeps its position below the psychological level of 1,300 USD per ounce, where it retreated at the end of last week. The decline came after the optimistic US economic data reinforced expectations that the Federal Reserve may increase more than projected their interest rates.

At the end of the Friday session the value of gold futures with June delivery fell with 0.04% to 1,294.30 USD per ounce. Thereby the commodity expanded its weekly decline to 3.03%, reporting its second consecutive week of decline in price.

During the Asian trading on Monday, the gold slightly grew its price to 1,295.90 USD per ounce.

On Friday, the US Commerce Department reported that the consumer spending rose with 0.3% in February, exceeding slightly the revised growth of 0.2% in January. A separate report showed that the index of consumer confidence reduced to 80 points in March from 81.6 points a month earlier. A Thursday data showed that the applications for unemployment benefits in USA fell to the lowest level since late November 2013. The economic growth in USA in Q4 2013 was revised upwards again.

The positive data reinforced the hopes that the weakness in economic activity this year was temporary.

Gold was under pressure in the last sessions amid the growing expectations that Fed will raise the interest rates sooner than expected. The President of the US Central bank Janet Yellen said that the institution may start raising interest rates in the next six months if the optimistic plans for the economic development are confirmed.

Meanwhile, silver with May delivery rose with 0.42% on Friday, closing the week at a level of 19.79 USD per ounce.

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Crude oil price rose supported by the US economy data

The price of the WTI crude oil futures continued to retain their positions above 100 USD per barrel since reaching a three-week high on Friday. The in creased demand for oil was driven by the optimistic US data, which highlighted the positive development of the economy after the failures caused by the bad weather conditions at the beginning of the year.

The WTI crude oil futures with May delivery closed the last week session with a daily growth of 0.39% to 101.67 USD per barrel. Through the past week the raw material price rose with 2.14%.

On Friday, the US Commerce Department reported that the consumer spending rose with 0.3% in February, exceeding slightly the revised growth of 0.2% in January. A separate report showed that the index of consumer confidence has decreased to 80 points in March from 81.6 points a month earlier. The market forecasts were for a level of 80.5 points.

Thursday data again showed that the initial applications on unemployment benefits in USA fell to the lowest level since late November 2013. The economic growth in USA in the Q4 2013 was revised upwards again.

The bullish market sentiment rose further after the Chinese government declared its willingness to do more to support the economy. On Friday, the Chinese Prime Minister Li Keqiang said that Beijing will pursue a policy of opposition to economic instability.

The latest data of the US Trade Futures , issued by Commodity Futures Trading Commission (CFTC) showed that the hedge funds reduced the bullish trades on crude oil contracts in the week ended March 25th. The net trades reached 293,403 contracts compared with 302,320 in the previous week.

Meanwhile, the London’s Brent crude oil with May delivery rose to 108.07 USD per barrel on Friday, considering the daily growth of 0.22%. The cost of raw material futures rose with 1.15% for the week.

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Rewe Group reported record revenues

Billa ReweThe second largest German food retailer Rewe Grоup increased its sales revenue during the past fiscal year over 50 billion EUR. The giant in the retail sector has increased its consolidated sales with 2.9% to 50.6 billion EUR, said the CEO Alain Caparros. The business with trade food under the brands Rewe, Penny and Billa encouraged the revenue the supported for the good financial results.

“In particular, the sales of our stores Rewe in Germany are developing for years well above the industry average level”, commented Alain Caparros.

The Group has invested in modernizing of its supermarkets and discount shops, but also expanded its market presence with opening e new stores and sales concepts. So Rewe Grоup already is also available online in 20 cities in Germany and plans to expend this practice worldwide.

Largest contribution to the increase in revenue also have the independent operators of stores (also known as brand stores), which have increased their sales with 6.2% to 11.3 billion EUR. Without them, the sales of the group rose with 2.2% to 42 billion EUR.

The revenues from tourism division DER Touristik and businesses in building materials division Toom are stable in a difficult environment, reported by Rewe Group. The consolidated earnings before interest, taxes, depreciation and amortization rose to 1.26 billion EUR from 1.21 billion EUR an year earlier.

The number of the stores of Rewe Group in Europe rose with 2.2% to 14,888 and the number of employees increased with 0.6% yoy to 329,418.

In 2014 is expected the investment to rise to 1.6 billion EUR from 1.4 billion EUR an year earlier. The modernization will continue and the company will explore new business models, especially in the area of electronic commerce.

Caparros is happy with the start of the current fiscal year. In January and February Rewe Group has grown by over 4% in Germany, Penny reported an increase of over 2%, Toom grew with over 17% and DER Touristik with more than 5%.

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British consumer confidence returned to pre-crisis levels

The consumer confidence in the UK in early March reached 6.5-year high, as it was never been at such levels since the bankruptcy of the mortgage creditor Northern Rock in the Autumn of 2007.

The study of GfK, on behalf of the EU, shows that confidence in March rose to -5 points from the level of -7 points in February. The increase on an annual basis is 22 points, which is the largest for more than 4 years. The results indicate that the consumer spending will remain strong in the coming months and will continue to be the driving force for the economic recovery that began last year.

The improvement may reflect to the sharp decline of inflation rates in UK and the gradual rise in wages, which relieve the pressure over the households in recent months. Another data showed that the retail sales in the country rose in February.

The people are very optimistic compared to a month earlier in terms of their intentions to make major purchases such as furniture and appliances. The improving consumer confidence accompanying the recovery of the UK economy, which was one of the fastest growing economies for the last year. According to authorities, however, until the recovery is highly dependent on consumer spending and may be unsustainable unless business investment and exports also increased.

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Asian markets closed the week with increases

Asian stock markets ended the last weekly session with growths, due to the increased hopes of monetary easing in China. The latest comments of the Chinese Prime Minister Li Keqiang feed the further speculation about a new monetary stimulus of the country. In his speech on Wednesday, he said that the government has prepared a policy, which will get targeted measures to support the economy.

The Japanese benchmark Nikkei 225 closed the session with 2-week high at 14,696.03 points, adding 0.50% during the trade. The investor optimism increased, following the recent economic data from the country. The inflation maintained its level in the last month against the government’s plan to create a virtuous cycle of growth by increasing investment, expanding the profits of the business and increased consumption. Underlying the consumer price index, which excludes fresh fruit and vegetables, rose with 1.3% yoy in February. The annual rate of inflation remained unchanged in December last year, maintaining its highest level since April 2010. The retailers reported solid growth, as Takashimaya, Aeon and Fast Retailing added more than 2% to their market capitalization. The shares of Yahoo Japan fell with 6.3% after the company announced that will buy the mobile operator Softbank eAccess at the amount of 3.2 billion USD.

The Chinese Shanghai Composite dropped with 0.24% to 2,041.71 points, shrinking for the third consecutive session. The investors were looking to the production data, which will be presented next week. In the corporate part of the index, the largest-volume automaker in the country SAIC Motor, expanded with 13% after accounting for 19.5% growth in net profit for 2013. The Industrial and Commercial Bank of China added 2% despite the weakest profit growth in the last 7 years.

The Australian Index S&P ASX 200 rose with 0.31% to 5,366.94 points, supported by the gains in the financial sector. Meanwhile, the AUD hit a new four-month high of 0.9295 against the USD. National Australia Bank and Australia New Zealand Banking reported 0.8% growth rates of their market capitalization. The gold mining companies rebounded, although the price of the yellow metal fell to a six-week low. The shares of Evolution Mining and Newcrest Mining rose with more than 1% during the trade today.

The South Korean benchmark KOSPI ended at its highest level since the beginning of the year, taking into account its strongest weekly performance in the last 7 months. The index added 0.15% to 1,981 points. The increase was supported by one of the largest components of the country - Hyundai Motor, which expanded with 0.8%.

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Wall Street indexes finished the session with slight decreases

The US stocks fell slightly on Thursday after the mixed economic data showed favorable employment data, but lower economic growth in last quarter than expected. The index of 30 leading US companies Dow Jones declined by 0.03% to 16,264 points, the broader S&P 500 fell with 0.2% to 1,849 points, while the technology-oriented Nasdaq fell with 0.5% to 4,151 points.

In the last three months of 2013, the US gross domestic product has grown by 2.6% annually, according to the Commerce Department. The previous assessment of the US Commerce Department was for growth of 2.4%, but the expectations were for growth of 2.7%.

To the Ministry of Labor of USA revealed that the applications for unemployment benefits fell with 10,000 to 311,000 units, which is close to 4-month low. Today’s figures for the labor market suggest that we head to a favorable rebound. The next week we will have more of an interesting report on employment. Maybe he will be the first of a few months, to which no attached external factors.

The US National Association of Realtors reported that real estates for sale fell in February with 10.5% yoy. According to the analysts the Spring season will move the markets upward and will increase the sales.

In the corporate sector, the shares of Citigroup fell with 5.4% after the Federal Reserve rejected capital plan of the financial company. The shares of Exxon Mobil rose with 1.6% after the crude oil prices reached a two-week high. The shares of King Digital Entertainment fell with 2.7%, as yesterday the developer of Candy Crush made ​​his debut with the stock issue price per share of 22.50 USD.

The USD rose against the major currencies, while the yield on 10-year US government bonds fell with 0.01 percentage points to 2.68%. The gold futures fell with 0.6% to 1,295 USD per troy ounce, as the decrease under 1,300 USD is the first since the middle of last month. The US oil futures rose with 1% to 101.28 USD per barrel.

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European stocks ended the session with no clear direction

The stocks in Europe closed mixed the today’s trading session, as the lower commodity prices hit the shares of mining companies and the Federal Reserve had a negative effect on the bank stocks. The pan-European FTSEurofirst 300 index ended unchanged after it fluctuated during the session, as the banking stocks and shares of companies in the basic materials, compensated the increases in other positions.

The British FTSE 100 fell with 0.3% to 6,588 points, the German DAX 30 added 0.03% to 9,451 points, while the French CAC 40 lost 0.1% to 4,379 points.

The European banks were affected by the decision of the Fed, which blocked some programs of US banks for higher dividends and buybacks. The US central bank rejected the plan of Citigroup to buy back 6.4 billion shares, indicating that the bank is not prepared to deal with a potential crisis.

Also from the Federal reserve blocked the plans of the US subsidiaries of HSBC, Royal Bank of Scotland and Banco Santander. After that the HSBC shares fell with 0.5%, while those of Royal Bank of Scotland dropped with 1.5%.

The presentation of the European shares amid the mixed trading in Asia and declines in USA at the beginning of the session. The US data showed that the revision of growth in USA for the last quarter of 2013 (from 2.4% to 2.6%) was less than expected, while the applications for unemployment benefits fell during the last week with 10,000 to 311,000, which is a level close to four-month low.

Meanwhile, the IMF announced that signed an agreement for a rescue loan to Ukraine at worth of 14-18 billion USD in the form of stand-by arrangement.

The data on retail sales in UK exceeded expectations both in food and non-food products, indicating that consumers feel more confident about the economic recovery of the country.

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