Thursday, July 2, 2015

Oil prices drop on rising US rig count, China stock market probe

JUL 3, 20159:02 AM

[SINGAPORE] Oil prices dropped on Friday on ongoing concerns of oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation that also dragged on other commodities.

Front-month US crude futures were trading at US$56.54 per barrel at 0038 GMT, down 39 US cents from their last settlement.

That means that US crude has fallen below a price range of US$57-62 per barrel that it had been in since early May.

Brent crude futures were down 23 US cents at US$61.84 per barrel, keeping the contract in a downward trend that has been in place since early May and which has seen prices fall almost 10 per cent. "Negative sentiment stemmed from an increased US oil rig count (by 12 to 640), after dropping for six months. US shale producers have brought down the breakeven cost from US$35 to US$20 per barrel," ANZ bank said on Friday.

The rising US rig count adds to near record production by OPEC and Russia.

Traders said that Asia's commodity markets were also impacted by reports that China's regulators had opened an investigation into suspected market manipulation after a slump of more than 20 per cent in Chinese stocks since mid-June On Thursday, Shanghai's benchmark composite index fell below 4,000 points for the first time since April - a key support level that analysts had expected Beijing to defend. They had predicted that more conservative investors would start closing out leveraged positions if the index fell below 4,000.

The weak stock markets also pulled down other commodities.

Iron ore futures into China .IO62-CNI=SI have dropped almost 15 per cent since mid-June and at US$55.80 a tonne are not far above their historic lows of under US$47 from last April, while Chinese steel prices hit at least six-year lows of just over 2,100 yuan this week.

Beyond China's investigation, analysts said that iron ore, like oil, was suffering from oversupply.

REUTERS

China regulator to probe possible stock market manipulation

JUL 3, 20157:41 AM

[SHANGHAI] China's securities market regulator said it would investigate suspected market manipulation after a slump of around 20 per cent in Chinese stocks since mid-June.

The China Securities Regulatory Commission had established a team to probe market manipulation, "especially clues of illegal manipulation across markets", spokesman Zhang Xiaojun said in comments on the CSRC's official Weibo microblog late on Thursday.

Mr Zhang said the regulator would send any cases it finds to the police for further investigation.

REUTERS

Foreign investors dump Philippine shares at record speed

JUL 3, 20157:18 AM

[MANILA] Philippine shares, a favourite among emerging-market investors not too long ago, were under siege in April-to-June, with net foreign selling rising to the highest since the 1998 Asian crisis and exceeding outflows from some major stock markets in the region.

Net foreign selling reached 31.81 billion pesos (S$2.74 billion), according to figures from the Philippine Stock Exchange (PSE), which started compiling the quarterly data in 1998. The net selling in the second quarter was a reversal of net foreign buying of 28.3 billion pesos a year earlier and 48.9 billion pesos in the first quarter. It also outpaced net foreign net selling of US$72.7 million in Indonesia and US$61.4 million in Thailand. Vietnam saw US$8 million in net foreign purchases.

The Philippine stock market was attacked from all sides. First-quarter economic growth came in below forecasts, and disappointing corporate earnings prompted fund managers to take profit. Valuations on Manila's broad index had soared to 20, topping the 10-year average of around 16 and more expensive than Jakarta's 15.96 and Bangkok's 17. Foreign investors also rotated out of Manila stocks and into booming markets in mainland China. "The damage has been done. There was a migration of funds to Japan and China," PSE Chief Operating Officer Roel Refran told Reuters, adding that fund managers were also positioning themselves ahead of expectations that Chinese shares would be included in the Emerging Markets Index of MSCI Inc.

But the PSE expects investors to re-align their portfolios once more and increase their allocation to emerging Asian markets including the Philippines, given the current bear market in China and as markets calm down after Greece. PSE's Refran was also positive about Philippine shares in the run-up to next year's presidential polls, which should boost the service sector and consumer firms.

REUTERS

US: Stocks fall as Greek debt saga drags on

JUL 3, 20157:00 AM

[NEW YORK] Fears of a messy Greek debt default overshadowed generally solid US economic data, pushing Wall Street for a loss in the week that closed out the first half of the year.

The Dow Jones Industrial Average shed 216.57 points (1.21 per cent) to 17,730.11.

The broad-based S&P 500 dropped 24.83 (1.18 per cent) to 2,076.78, while the tech-rich Nasdaq Composite Index lost 71.30 (1.40 per cent) at 5,009.21.

The holiday-shortened week opened in dramatic fashion, as worries about an impending Greek default resulted in a global rout Monday that extended to New York, where the S&P 500 suffered its steepest single-session drop in more than 14 months.

Trade the rest of the week was choppy, depending on the perception of the likelihood of a deal on Greece and the country's missing a 1.5 billion euros (S$2.2 billion) debt payment to the IMF on Tuesday.

Wall Street will be closely watching Sunday's Greek referendum on the creditors' reform plan."Hopefully we don't get a 'no' vote, because that would lead to a lot of volatility in global markets," said Tom Cahill, a portfolio strategist at Ventura Wealth Management.

The fear is that a "no" vote could expand the country's crisis to other vulnerable eurozone economies, such as Portugal, Spain and Italy, Cahill said."Nobody know what the impact may be for global markets, since financial institutions are so interconnected," he said."But that's going a long way and I don't think it would happen." Hugh Johnson of Hugh Johnson Advisors, said a "no" vote could "create a fairly significant downdraft in equity markets in the US and Europe." However, many analysts have also noted that the Greek economy is small and that even a worst-case "Grexit" might not have dire consequences.

This view was strengthened by the fact that last week's declines were not catastrophic."If Greece gets us dead center, it will be short-lived," said Johnson."It's not a game-changer."

Meanwhile, the June US jobs report turned out to be a mixed bag.

While the headline number of 223,000 new jobs came in above the key 200,000 benchmark, average hourly earnings were flat compared with May and the Labor Department cut its estimates for job growth in April and May.

Other new reports included a solid uptick in consumer confidence, a rise in pending home sales and modest growth in manufacturing activity.

June auto sales were also a bright spot.

Total industry sales rose four per cent and hit a seasonally adjusted pace of 17.2 million vehicles, according to Autodata.

That is the fastest pace recorded in June since 2005."We just wrapped up the US auto industry's best six months in a decade, driven by strong demand for pickups and crossovers," said Kurt McNeil, head of sales at General Motors.

Merger and acquisition activity also remained fairly brisk.

The week's deals included the US$28.3 billion purchase of insurer Chubb by Swiss insurer Ace Limited; the US$6.8 billion acquisition of Health Net by rival health insurer Centene; and the decision by US professional services company Towers Watson and insurance broker Willis Group to combine in a deal with an implied equity value of about US$18 billion.

On the opposite side of the equation, food services company Sysco abandoned a planned US$8 billion takeover of US Foods following the opposition of US antitrust regulators.

Also, the Justice Department sued to block the sale of General Electric's appliance business to Sweden's Electrolux, saying the US$3.3 billion deal would harm consumers.

The Justice Department has also launched an antitrust probe on whether US airlines have engaged in "possible unlawful coordination." Analysts expect Greece to remain at the forefront in the coming week.

The calendar includes the US trade balance for May, minutes from the June Federal Reserve meeting and results from aluminum giant Alcoa, leading off the second quarter earnings season.

AF
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Chinese tycoons lose US$34b as China stock market slumps

JUL 3, 20156:54 AM

[HONG KONG] The worst monthly slump in Chinese stocks in two years wiped away more than US$34 billion in combined net worth of the richest people in China and Hong Kong in June.

Of those 45 wealthy people on the Bloomberg Billionaires Index, more than 80 per cent lost money in June as the Shanghai Composite Index tumbled.

"The fortunes of billionaires are closely tied to the rise and fall of stocks," said Zhang Lu, a Shanghai-based analyst at Capital Securities Corp. "When the market is more unstable, like now, their fortunes go down." Zhou Qunfei, chairman of Lens Technology, saw her wealth shrink the most among all Chinese billionaires. Her fortune shrank by US$4.8 billion in June as Shenzhen-listed Lens Technology tumbled 36 per cent. Ms Zhou became the country's richest woman after the maker of mobile-phone glass covers went public in March.

The fortune of Wang Jing, chairman of Beijing Xinwei Telecom Technology Group, dropped from US$9.5 billion at the end of May to US$6.9 billion.

Billionaires who listed their companies outside China saw smaller declines.

Property tycoon Lee Shau Kee lost US$1.5 billion, paring his fortune to US$19.3 billion, after his Hong Kong-listed Henderson Land Development Co. fell 6.7 per cent in June. Hong Kong's benchmark Hang Seng Index fell 4.3 per cent last month.

Richard Liu of US-listed online retailer JD.com and Robin Li of Baidu saw their net worth relatively little changed.

BLOOMBERG

Thursday, July 2, 2015