Wednesday, August 12, 2015

China's Tencent posts 25% profit surge in Q2, revenue slows

AUG 12, 20157:33 PM

[HONG KONG] Chinese Internet giant Tencent saw its net profit surge by 25 per cent in the second quarter buoyed by growth in online advertising revenue and its popular messaging service WeChat, the company said Wednesday.

Net profit for the three months to June 30 stood at 7.31 billion yuan (us$1.14 billion), up 25 per cent from 5.84 billion yuan in the same period last year, while revenue rose by 19 per cent from 19.75 billion yuan to 23.43 billion yuan.

Analysts quoted by Bloomberg News had forecast a revenue figure of 24 billion yuan, but earnings were seen as better than expected.

Shares in Tencent closed down 4.19 per cent at HK$134.9 (us$17.39) in Hong Kong on Wednesday while the overall market was down 2.38 per cent.

Tencent's half-yearly earnings measured from January to June grew year-on-year by 15 per cent to 14.20 billion yuan, while revenue growth in the period was 20 per cent.

Based in the Chinese southern export hub of Shenzhen, Tencent operates China's biggest messaging service WeChat, through which a variety of businesses including gaming, advertising and social networking have flourished in recent years.

WeChat has reached 600 million in monthly active users, the company said in a statement to the Hong Kong Stock Exchange, contributing to an 18 per cent growth in social network revenues which stood at 5.46 billion yuan in Q2.

The firm added its online advertising business enjoyed rapid growth, having nearly doubled year-on-year to 4.07 billion yuan, while revenues from online gaming, its biggest segment, rose by 17 per cent to 12.97 billion.

The technology giant recently said it will set up an online platform to allow WeChat users to buy and sell stocks online.

It has also offered to buy eLong, a major Chinese online travel portal, as part of its drive into the traditional economy, according to Bloomberg News.

AFP

S&P praises Chinese yuan devaluation

AUG 13, 201512:21 AM

[NEW YORK] Credit rating agency Standard & Poor's praised China's devaluation of its currency on Wednesday and said the move did not threaten a currency war.

"China's surprise move to allow for more exchange rate flexibility makes good economic sense and is not the start of a currency war or an attempt to jump-start growth," S&P said.

Beijing on Tuesday surprised global financial markets by devaluing its currency the yuan by nearly two percent against the US dollar.

A second cut on Wednesday brought reductions this week in the yuan to 3.5 per cent against the dollar to its lowest level in four years.

The move to allow more flexible trading "could help maintain the flexibilty of the country's monetary policy as cross-border financial flows increase," S&P said.

The shift is part of an effort to comply with conditions set by the International Monetary Fund to qualify the Chinese currency in the IMF's "special drawing rights" basket.

China wants to expand use of the yuan by having it included in the SDR, an international reserve asset that currently comprises four currencies: the dollar, euro, pound and yen.

But the IMF has been pressing China for greater liberalization in the yuan to win membership.

S&P rejected arguments that the devaluation was motivated by a desire to boost Chinese exports.

"The argument that China is trying to spur growth by weakening its currency to spur exports does not strike us as very convincing," said Paul Gruenwald, S&P's chief economist for Asia-Pacific.

"Exports are more a function of foreign demand, with the exchange rate playing a secondary role. There is no reason for that relationship to have changed."

The IMF has praised China's moves this week, with a spokesman calling the shift "a welcome step as it should allow market forces to have a greater role in determining the exchange rate."

AFP

Singapore dollar remains within policy band: MAS

Joyce Hooijoyceh@sph.com.sg@JoyceHooiBT

AUG 12, 20158:13 PM

THE Monetary Authority of Singapore (MAS) said on Wednesday the Singapore dollar remains within its policy band, despite "increased volatility in foreign exchange markets following the recent shift in China's exchange rate policy".

The regulator's statement came on the heels of the Chinese central bank's move to cut the yuan's daily reference rate against the US dollar this week. In the ensuing fallout, regional bourses and currencies tumbled on Wednesday, with the Straits Times Index shedding 2.9 per cent and the Singapore dollar hitting a five-year low against the US dollar.

In its statement, MAS said it "does not focus on any specific bilateral exchange rate", but manages the Singapore dollar "against a trade-weighted basket of currencies within a policy band".

"This framework allows the Singapore dollar to adjust to short-term market fluctuations, while providing an anchor against undue volatility in the foreign exchange market," it added.

The regulator also said the monetary policy stance that it announced in April this year "remains appropriate from the perspective of overall macroeconomic conditions".

"MAS stands ready to curb excessive volatility in the trade-weighted Singapore dollar," it said.

US crude, gasoline stocks dip; refiners ease from record runs

AUG 12, 201510:51 PM

[WASHINGTON] US crude stocks dipped last week as refineries slightly pared record-high output, while gasoline stocks decreased and distillate inventories rose, data from the Energy Information Administration showed on Wednesday.

Crude inventories fell by 1.7 million barrels in the last week, compared with analysts' expectations for an decrease of 1.8 million barrels. Oil prices slightly pared earlier gains following the data, with US crude hovering just above $43 a barrel, near a new six-year low.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 51,000 barrels to 57.1 million barrels, EIA said. Tanks in Cushing can store as much as 71.4 million barrels, according to EIA estimates.

Oil traders are bracing for a rapid build-up in inventories in the coming weeks, likely testing Cushing's storage capacity limits, as refiners shut for spring maintenance; the rise may be swifter than expected due to the unexpected prolonged closure of the biggest crude unit at BP's Whiting refinery this week.

Refinery crude runs fell by 46,000 barrels per day to 17.03 million bpd after reaching the highest run rates on record in previous weeks, EIA data showed. Refinery utilization rates remained unchanged.

Gasoline stocks fell by 1.3 million barrels, compared with analysts' expectations in a Reuters poll for a 647,000 barrels drop.

Distillate stockpiles, which include diesel and heating oil, rose by 3.0 million barrels, versus expectations for a 1.3 million barrels increase, the EIA data showed.

US crude imports rose last week by 393,000 barrels per day.

REUTERS

German FinMin paper says Greek MoU lacks clarity on policy

AUG 12, 201511:56 PM

[BERLIN] Germany's Finance Ministry has criticised a memorandum of understanding (MOU) agreed between Greece and its international lenders as showing "no full clarity on the direction of policies".

In a two-page paper entitled "preliminary check of MoU" that was sent to officials in Brussels on Wednesday, the ministry describes Greek reform plans on debt sustainability and privatisations as "not yet compliant".

Earlier in the day, the MOU was welcomed by Chancellor Angela Merkel's spokesman as a "substantial result" which went in the "right direction". The economy ministry also had a positive view on the Greek reform plans, an official in the ministry said.

REUTERS

Job openings in US decrease from record as hiring picks up

AUG 13, 201512:00 AM

[WASHINGTON] Job openings in the US decreased in June from the highest level on record as hiring picked up.

The number of positions waiting to be filled declined by 108,000 to 5.25 million from a revised 5.36 million in May that was the most since data began in 2000, a report from the Labour Department showed Wednesday. The rate of hiring was the strongest this year.

The data signal employers are filling the vacancies they currently have before posting more, as they also wait for more evidence that the US can weather any weakness that ripples from financial shocks abroad. Federal Reserve policy makers are looking for some additional improvement in the labour market to ensure that the economy can withstand the first increase in the central bank's benchmark interest rate since 2006.

"The labour market in the US remains solid, demand for labour remains solid and labour-market slack continues to diminish," said Jesse Hurwitz, a US economist for Barclays Plc in New York.

"There's less slack left in US labour markets than the Fed thinks." The median forecast in a Bloomberg survey of economists projected 5.35 million openings in June.

The Job Openings and Labour Turnover Survey, or JOLTS, adds context to monthly payrolls data by measuring dynamics such as resignations, help-wanted ads and the pace of hiring. Although it lags the Labour Department's other jobs figures by a month, Fed Chair Janet Yellen follows the report as a measure of labour- market tightness and worker confidence.

The report showed job openings fell at hotels and restaurants, construction companies and factories.

Some 2.75 million people quit their jobs in June, up from the prior month's 2.73 million. The quits rate, which shows the willingness of workers to leave their jobs, held at 1.9 per cent and compares with a 2 per cent reading when the recession started at the end of 2007.

"In Yellen's view, that is a sign of workers' confidence in the labour market," Ryan said. "You wouldn't be quitting your job unless you have better prospects." The number of people hired climbed to 5.18 million, pushing the hiring rate up to 3.7 per cent, the highest since December, from 3.6 per cent. The gauge calculates the number of hires during the month divided by the number who worked or received pay during that period.

Total dismissals, which exclude retirements and those who left their job voluntarily, increased to 1.79 million from 1.66 million in May.

In the 12 months ended June, the economy created a net 2.7 million jobs, representing 60.6 million hires and 57.9 million separations.

There are about 1.6 unemployed people vying for every opening, compared with 1.8 when the 18-month recession began in December 2007, the figures show.

Wednesday's report follows the July employment report from the Labour Department, which showed companies continued to expand headcount last month while keeping a lid on wage growth. Payrolls climbed by 215,000 and the unemployment rate held at a seven-year low of 5.3 per cent, while average hourly earnings climbed a less-than-forecast 2.1 per cent from a year earlier.

That may be enough to indicate "some further improvement" in the labour market that the Fed has said it needs to see before the increase their benchmark interest rate, which has lingered near zero since 2008. Additionally, officials need to be "reasonably confident" that inflation will move back to its 2 per cent goal in the medium term.

BLOOMBERG

Noble Group outlook cut to negative from stable by Moody's

AUG 12, 201510:05 PM

[LONDON] Noble Group Ltd, the commodity trader battling criticism of its accounting, had the outlook for its debt cut to negative from stable by Moody's Corp.

"The company's liquidity profile has weakened compared to levels over the last few years, which negative for the ratings," Moody's said in a statement on Wednesday.

Moody's affirmed Noble's rating at Baa3, the lowest investment grade.

BLOOMBERG

Malaysian experts in Maldives probe possible MH370 link

AUG 12, 20155:30 PM

[COLOMBO] Three Malaysian aviation experts began examining debris on Wednesday found in the Maldives to determine if it could be wreckage from flight MH370, a minister said.

The Maldives joined a regional search for wreckage from the missing Malaysia Airlines flight after islanders spotted unidentified debris washed up along the northern atolls of the Indian Ocean archipelago.

Mohamed Shareef said the three, led by director general of civil aviation Azharuddin Abdul Rahman, met with local authorities and inspected the debris after arriving on the honeymoons islands on Tuesday night.

"They have today officially started investigating the debris found in the Maldives," Mr Shareef, a minister attached to the president's office, told AFP by telephone from the capital island Male.

He said the experts will return to Malaysia later Wednesday before reporting to their Transport Minister Liow Tiong Lai.

The plane was carrying 239 passengers and crew when it disappeared in March 2014 after inexplicably veering off course. It is believed to have gone down in the southern Indian Ocean region.

The search acquired fresh impetus when Malaysia last week said a wing part that washed ashore on the French island of Reunion came from the aircraft.

After that discovery, the Malaysian authorities alerted nearby Madagascar and South Africa to be on the lookout, saying it was possible debris would wash up in those locations.

Mauritius has also joined the search.

Reunion is some 2,000 miles (3,200 kilometres) southwest of the Maldives, and local media said some of the large objects washed up on the islands appeared to be debris from a barge that capsized in February.

AFP

US: Stocks fall on weak Chinese economic data

AUG 12, 20159:47 PM

[NEW YORK] US stocks opened lower on Wednesday, retreating for a second straight day on concerns about China following disappointing data from the world's second-biggest economy.

Five minutes into trade, the Dow Jones Industrial Average stood at 17,212.87, down 189.97 points (1.09 per cent).

The broad-based S&P 500 dropped 19.65 (0.94 per cent) to 2,064.42, while the tech-rich Nasdaq Composite Index fell 52.89 (1.05 per cent) to 4,983.90 Chinese data released Wednesday all came in below expectations. Industrial production rose 6.0 per cent, below the median forecast for a 6.6 per cent rise. Chinese retail sales and fixed asset investment also lagged analyst forecasts.

The Chinese data "compounded the negative investor sentiment" after Tuesday's surprise devaluation of the yuan pressured US stocks, said Patrick O'Hare, analyst at Briefing.com.

AFP

Top wealth fund says half its stock trades now outside exchanges

AUG 12, 20159:51 PM

[OSLO] Up to half of all shares traded by the world's largest sovereign wealth fund are bought and sold outside of stock markets in a bid to cut transaction costs, a fivefold rise since 2010, a senior executive at Norges Bank Investment Management (NBIM) said.

The manager of Norway's $873 billion oil fund is gradually moving away from automated trading in favour of a measured approach that even includes the services of stockbrokers, Chief Investment Officer for Asset Strategies Oyvind Schanke said.

In a recent report, NBIM argued that global stock exchanges are failing to meet the needs of large institutional investors as the race towards ever faster buying and selling is both unnecessary and costly, benefiting only high-frequency traders. "I believe more and more people realise that being part of the speed race is unnecessary ... We're seeking to slow things down," Schanke said in an interview with Reuters at the fund's head office in Oslo.

With more than 9,000 companies in its portfolio, NBIM owns on average 1.3 per cent of all listed shares globally. About 62 per cent of its funds are invested in stocks, while 35 per cent is in bonds and the remaining in real estate.

In 2008 about three quarters of the fund's share trading was done via algorithms, but that number is now down to around 40-42 per cent, Schanke said. "We've cut back on it and are instead actively looking for liquidity," he added. "The cost of trading rose over time and only began to fall when we began to seek out blocks (of shares)."

Mr Schanke estimated that 40-50 per cent of the fund's share purchases are now done in large batches rather than in incremental trades of smaller stakes. As late as 2010, block trading made up only around 10 per cent of the volumes. "We've been worried by a rise in the cost of trading. We believe stock exchanges have been too focused on execution, the high speed and low latency," he added.

NBIM is also a co-founder of Plato Partnership, a trading platform being developed by banks, asset managers and brokers to enable the execution of large trades without alerting high-frequency traders to the intention to buy or sell.

The Plato consortium recently announced it was in talks with the London Stock Exchange Group's Turquoise unit to set up the planned trading site, or dark pool, to allow the anonymous trades. "Depending on the talks going well, this could move quickly. That's what we hope for," Mr Schanke said.

Stock market operators are also experimenting with so-called intra-day auctions of shares, allowing bigger trades than the smaller increments of stocks that are processed during normal trade. "Stock exchang

Oil at US$30 is no problem for some cost-cutting bakken drillers

AUG 12, 201511:46 PM

[HOUSTON] The lowest crude prices since 2009 might still not be enough to end the US energy renaissance.

Some parts of North Dakota's Bakken shale play are profitable at less than US$30 a barrel as companies tap bigger wells and benefit from lower drilling costs, according to a Bloomberg Intelligence analysis. That's less than half the level of some estimates when the oil rout began last year.

The lower bar for profitability is one reason why US oil production has remained near a 40-year high even as crude prices fell more than 50 per cent over the past year to the lowest level since March 2009.

"One of the explanations for why production hasn't fallen off is that the cost has gone down so much," David Hackett, president of Stillwater Associates LLC, an energy consulting firm in Irvine, California, said by phone. "The marginal cost to produce has shrunk pretty dramatically with the drop in prices. The efficient drillers are now able to take advantage."

West Texas Intermediate crude futures fell US$1.88 a barrel to settle at US$43.08 on Tuesday. In North Dakota, where producers have to offer discounts to account for extra transportation costs, the price of Bakken oil dropped to US$30.58 on Tuesday, according to Royal Dutch Shell PLC.

The breakeven price, based on production rates and drilling, completion and other costs, can vary widely within a play based on how prolific the geology is and the efficiency of the drilling company, according to Bloomberg Intelligence energy analysts William Foiles and Andrew Cosgrove.

In McKenzie County, North Dakota, one of the core areas of the Bakken, the median breakeven price is a little more than US$29 a barrel, Mr Foiles said. That's about a third less than in nearby Williams County, and it's less than half the average breakeven price for the Bakken that banks and research firms estimated last fall.

McKenzie County wells have shown the best returns amid the price drop. Drillers had 26 horizontal wells seeking oil in that county last week, the most in the state, according to Baker Hughes Inc.

Bakken oil production in North Dakota has fallen less than 2 per cent from its peak in December, while the number of oil rigs in the state has fallen by 60 per cent. EOG Resources Inc, the largest shale driller, says it can make a 30 per cent after- tax return on US$50 oil in its best plays. Whiting Petroleum Corp, the largest Bakken producer, said it's preparing to be able to grow production at US$40 to US$50 prices.

"A single break-even price doesn't actually exist," Mr Foiles said in a presentation. "Rather, what the model indicates is that at a realized oil price of US$29.42, half of wells will generate returns exceeding 10 per cent. This price is considerably lower than the US$70 breakeven estimated by industry watchers at the start of the oil price slump."

BLOOMBERG

Eurozone finance ministers to meet Friday on Greek bailout deal

AUG 12, 201511:35 PM

[BRUSSELS] Eurozone finance ministers will meet Friday to give their verdict on a third massive bailout deal for Greece, an official said on Wednesday.

"Extraordinary Eurogroup on Friday August 14 at 3pm: Greece," Michel Reijns, the spokesman for Eurogroup President Jeroen Dijsselbloem said on his Twitter account, adding ministers would meet in Brussels.

AFP

Fed's Dudley says yuan adjustment could reflect China's slowdown

AUG 12, 201510:32 PM

[WASHINGTON] Any weakening of the yuan in line with China's slowing growth is understandable, Federal Reserve Bank of New York President William C. Dudley said, withholding judgment on the nation's surprise shift in currency policy.

"Clearly what is happening" is that the Chinese yuan was appreciating along with the US dollar, Mr Dudley said Wednesday in response to a question after delivering a speech in Rochester, New York. If China's economy has proved weaker than its authorities anticipated, "it's probably not inappropriate for the currency to adjust in consequence to that weakness." Still, it's too soon to "draw firm conclusions about what this means," Dudley said.

Financial markets are attuned to what's happening because it "has implications much broader than China, it has implications for the global economy," Mr Dudley said. "I'll be watching very closely what happens there."

The yuan sank for a second day earlier Wednesday, spurring China's central bank to intervene amid the biggest rout since 1994. On Tuesday, the People's Bank of China cut the currency's value by 1.9 per cent in what it called a one-time adjustment, and said the yuan's fixing will become more aligned with supply and demand.

This week's move comes against a backdrop of slowing growth in the world's second-largest economy.

The International Monetary Fund projected in July that China's economy will expand 6.8 per cent this year, down from 7.4 per cent growth in 2014. A spate of weak data in recent days has showed a pullback in Chinese industrial production and a slump in exports.

BLOOMBERG

Wednesday, August 12, 2015