Wall Street woes continue to weigh on sentiment- US

Wall Street woes continue to weigh on sentiment- US

By R SIVANITHY

IF there was a single theme to this week’s trading, it would have been ’sell the bounces and only selectively buy the dips’.
This comes from the fact that every bounce was quickly met with waves of selling pressure, even when Wall Street rose the night before.

The source of all the negativity was actually Wall Street, where bounces are now viewed with a great deal of scepticism and where investors find a unique development in place - virtually all analysts and brokers are in agreement that the immediate outlook for stocks is not positive.

Over the course of the first two weeks of 2008, brokers such as Morgan Stanley, Merrill Lynch, Citigroup and Goldman Sachs have released cautionary reports on the market, all revolving around the likelihood of the US economy slipping into a recession and the strong probability that this has not yet been discounted by Wall Street.

Estimates for the quantity by which US stocks might fall before prices reflect the slowdown range from 10-15 per cent, so given that the major indices are only 3-4 per cent lower now, it appears as if there’s some way to go yet.

Also, yesterday’s news that Merrill Lynch’s writedowns might total US$15 billion so far led to a steep drop in the US futures market and reversed a 40-point rise for the Straits Times Index (STI) into a net loss of 23.73 to 3,287.34. The index lost ground for the second consecutive week, dropping 150 points or 4.4 per cent. The index is now down 5.6 per cent for the year so far.

However, it’s not all bad. Even though a US slowdown may already be in place - at least according to Merrill Lynch - no one realistically expects it to be too long-lasting and a second-half recovery is quite probable. AMP Capital summed it up by saying in its weekly round-up that ‘following a run of bad news on the US economy over the last few weeks, fears of a US recession are increasing’, adding: ‘We think it’s now a 50/50 call.

‘Comments by Federal Reserve chairman Ben Bernanke suggest that the Fed is becoming more concerned about the downturn in growth than the risk of inflation, suggesting more easing ahead. His comment that the Fed stands ready to take ’substantive additional action as needed’ suggests that the Fed will cut by 50 (basis) points later this month.’

Blue chips which have been badly hit include the Singapore Exchange, which lost $1.68 or 13.1 per cent during the week to $11.10, DBS which dropped 64 cents or 3.1 per cent to $19.84 and UOB, which lost 92 cents or 4.7 per cent to $18.74.

In the second line, standout falls include recent initial public offer (IPO) KTL Global, which was 80 cents on Wednesday but ended at 54.5 cents yesterday, a whopping loss of 32 per cent in three days. It had been offered at 28 cents.

China chemical firm Jiutian was another that suffered a large drop, dropping 15.5 cents or 34 per cent to 29.5 cents over the week despite DBS-Vickers’ mid-week ‘buy’ call with a 76 cents target price.

The week was also notable for the relaunch of a slimmer STI on Thursday with 30 components as opposed to the previous 47. New entrants Yangzijiang, Yanlord and SIA Engineering all benefited from having index status but among the stocks that were dropped from the index, Venture Corp, stood out with a fall of $1.52 or 12 per cent to a 52-week low of $10.80 between Monday and Friday.

Source : Business Times  - 12 Jan 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

http://www.hotvictory.com

Second A380 jet joins Singapore SIA fleet

Second A380 jet joins Singapore SIA fleet

By NISHA RAMCHANDANI

SINGAPORE Airlines’ second Airbus A380, which was handed over to the company in Toulouse, France, yesterday, will join the first one on the Singapore-Sydney route.
This will allow some rotation of aircraft on the Sydney route, SIA said.

The second aircraft is expected to arrive in Singapore around 9 am today. It seats 471 passengers in three different classes like the first A380, which took to the skies in October last year.

In a release, SIA also said that the addition of the second double-decker jet would create opportunities for crew training.

The airline’s third A380, which will join the stable late next month, is to be used for a daily service between Singapore and London Heathrow.

SIA said it has firm orders for another 17 A380s, for a total of 19 aircraft.

On Thursday evening, the first A380 slipped off the tarmac onto a grass verge at Changi Airport, Terminal 3. No one was injured. The incident happened after a tow truck pulling the plane forward to a take-off position disconnected from it because of a fault with the truck’s hydraulics. The plane has since been lifted out of the grass verge and given the green light to resume its flight yesterday.

Source : Business Times  - 12 Jan 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

http://www.hotvictory.com

More Fed interest rate cuts to come - WASHINGTON

More Fed interest rate cuts to come - WASHINGTON

Bernanke promises ’substantive’ action to avoid US recession

(WASHINGTON) Federal Reserve chairman Ben Bernanke borrowed a page from Alan Greenspan’s crisis playbook when he promised emphatically to cut interest rates further if the weak United States economy needs the help.

‘We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.’

- Mr Bernanke

The response from Wall Street on Thursday showed that the ex-Princeton economics professor is improving but still has a few things to learn before he can match Mr Greenspan’s magic in wowing financial markets.

Still, the effort rated at least a ‘B+’ while earlier attempts by Mr Bernanke to handle the first major crisis in his two-year tenure have gotten far lower grades.

The Dow Jones industrial average reacted to the last Fed rate cut on Dec 11 by plunging 294.26 points - not exactly the response Mr Bernanke was seeking to instill confidence that he iscapable of combatting America’s worst credit crunch since the savings and loan crisis of the 1980s and early 1990s.

The problem has been that Mr Bernanke and his Fed colleagues have appeared to be providing rate relief in a grudging fashion, disappointing investors who wanted a full-throated pledge that the Fed was prepared to do whatever was needed to keep the US from falling into a recession.

In a Thursday speech, Mr Bernanke was more forceful. ‘We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.’
That’s more like it, investors said, pushing the Dow average up by 117.78 points. It was welcome relief for a market that has been plunging in the New Year as investors have had to digest much bad news, indicating that the country was moving dangerously close to a recession.

The most ominous signal on that score came last week when the government reported that unemployment in December shot up to 5 per cent from 4.7 percent in November. That was the biggest one-month gain since Oct 2001 during a time of huge layoffs in the travel industry after the Sept 11 terrorist attacks.

The worry is that a two-year slump in housing, which shows no signs of easing, has now started to spread to other sectors of the economy, especially the financial services industry, with various industry leaders declaring multibillion-dollar losses because of bad bets on securities backed by subprime mortgages where defaults are soaring. No one understood the Fed’s confidence-building role better than Mr Greenspan, who was confronted with his first market crisis, the 1987 stock market crash, only weeks after taking over as chairman.

Mr Greenspan rode out a number of other threats to the economy from S&L and banking troubles to the 1997/98 Asian currency crisis with only two mild recessions during his 18-1/2 years at the Fed.

That span included America’s longest period of interrupted growth, a decade of prosperity from 1991 until 2001.

There have been grumbles that Mr Bernanke has been too much the academic, deferring to other members of the Fed, when what was needed was more of the approach of the two previous Fed chairmen - Mr Greenspan and Mr Paul Volcker - who both relished the roles of crisis managers. They would make decisions and then, by force of their personalities, get others to go along.

Mr Bernanke has stressed a more collegial approach, including going last to give his opinions at Fed rate-setting meetings where Mr Greenspan, hoping to influence discussions, had always gone first.

But in his speech, there were hints of a more forceful approach by Mr Bernanke, whose comments were viewed by analysts as a solid signal that the Fed is prepared to cut rates by a bolder half-point when Fed officials next meet on Jan 29-30 and to keep cutting rates as long as needed until the economy begins to gain traction. — AP

Source : Business Times - 12 Jan 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

http://www.hotvictory.com

Merrill in hunt for more capital as losses set to hit US$15b - New York

Merrill in hunt for more capital as losses set to hit US$15b - New York

It’s wooing investors in US, Asia, Mid-East to shore up finances
(NEW YORK) Merrill Lynch is expected to suffer US$15 billion in losses stemming from soured mortgage investments, almost double its original estimate, prompting the firm to raise additional capital from an outside investor.
The largest US brokerage firm is expected to disclose the huge writedown when it reports earnings next week, according to people who have been briefed on its plans. The loss far exceeds the US$12 billion hit that many Wall Street analysts had forecast.

To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about US$4 billion in the coming days, these people said.

The developments underscore the rising toll that the mortgage crisis is taking on many once-proud Wall Street banks. In recent months, Merrill and several other firms have grabbed financial lifelines from wealthy foreign governments. Further investments by so-called sovereign wealth funds could prompt scrutiny by Congress.

The latest moves at Merrill come as John A Thain, who became the company’s chairman and chief executive in December, struggles to bolster the firm’s capital, burnish its reputation and avoid the toxic internal battles that have hurt the firm in the past.

Mr Thain, who won plaudits as head of the New York Stock Exchange, has wasted little time. After he took over in December, Merrill promptly sold a US$5.6 billion stake to Singapore’s Temasek Holdings, and Davis Selected Advisers, a money management firm based in Tucson, Arizona.

During a meeting in December in London, Mr Thain told anxious employees that Merrill expected further losses after an US$8.4 billion writedown in the third quarter. He also said that the firm would require additional capital. He said that the fourth quarter would be a ‘very bad quarter’, those attending recalled.

Mr Thain has made clear that Merrill would not sell its 49 per cent stake in BlackRock, the global money management firm. But he has said that the firm is considering selling non-core assets like its stake in Bloomberg, the financial news and information company.

In a research report, Brad Hintz, a securities analyst at Sanford C Bernstein & Co, said that that stake was worth about US$4 billion.

Mr Thain also said at the London meeting that Merrill’s management style needed to change. Recalling his days as a co-president of Goldman Sachs, Mr Thain said that he wanted employees to build consensus.

Among other things, that means Merrill will now pay fewer bonuses based on individual performance and instead focus on the performance of a team. Many employees received bonuses this week that included a greater portion of stock than in the past.

Merrill is hardly alone in seeking capital from overseas. US financial institutions have raised more than US$29 billion from foreign governments and their related investment entities, according to market research firm Dealogic. — NYT
Source : Straits Times  - 12 Jan 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

http://www.hotvictory.com

S$6,000 worth of excavator parts stolen from construction site - Singapore

More Higher take-home pay for some civil servants due to error in CPF deduction system

Singapore SIA’s A380 plane lifted off grass verge at Changi Airport’s T3

LTA says demand for taxis should be allowed to stabilise - Singapore

S’pore Airlines receives second A380 aircraft

Silver Industry Exhibition to showcase multi-billion dollar market-Singapore