Hedge fund manager Hall says world market 'not awash in oil'

Andy Hall, one of the best-known oil traders who's bullish on prices, said the decline in the oil market isn't a repeat of 1998 or 2008. 

PHOTO: EPA

SEP 4, 20154:35 PM

[NEW YORK] Andy Hall, one of the best-known oil traders who's bullish on prices, said the decline in the oil market isn't a repeat of 1998 or 2008.

The absence of "extreme contango," which occurs when commodities prices close to delivery are cheaper than those to be delivered at later dates, suggests that "the world, whilst moderately oversupplied, is not awash in oil," Mr Hall said in a letter to investors.

Oil prices, which plunged 32 per cent in 1998 and 54 per cent in 2008, are down more than 50 per cent in the past year. Mr Hall, who runs hedge fund firm Astenbeck Capital Management, said US crude output through the remainder of 2015 will decline 6 per cent from the first half's average. He said he expects to see a decline in production forecasts by the International Energy Agency.

There is probably more than 200 million barrels of crude oil storage capacity still available, Hall said in the letter, a copy of which was obtained by Bloomberg.

Officials at Astenbeck, based in Southport, Connecticut, didn't return telephone messages seeking comment.

Brent crude, the benchmark for about half the world's oil, fell 1.1 per cent to US$50.10 a barrel on the London-based ICE Futures Europe exchange by 8:48 a.m. local time.

Mr Hall also said platinum-group metals prices may gain because of supply deficits.

"We think current prices are discounting a worst case scenario," Mr Hall said, referring to concerns over demand from China. "Extreme positioning creates the potential for a rapid recovery in prices."

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Standard Chartered said to plan cutting 250 managing directors

SEP 4, 201511:37 PM

[LONDON] Standard Chartered Plc is considering cutting about a quarter of its senior banking positions as part of a plan by Chief Executive Officer Bill Winters to reverse a two-year profit slide at the emerging markets-focused lender, people with knowledge with the matter said.

The British lender, which makes most of its earnings in Asia, plans to cut as many as 250 of about 1,000 managing directors, two of the people said, asking not to be identified as the information is private. About 50 of those positions will be in the bank's Middle East and North Africa operations, one of the people said.

Mr Winters, 53, a former co-CEO of JPMorgan Chase & Co's investment bank, has been seeking ways to restore investor confidence after replacing Peter Sands in June. The bank said last month that it's on track to cut costs by more than US$400 million this year as part of plans laid out by Sands to save about US$1.8 billion through 2017. It has cut about 4,000 jobs so far this year, about 5 per cent of total headcount, Finance Director Andy Halford said.

Simon Kutner, a spokesman for Standard Chartered in London, declined to comment.

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The shares have dropped about 26 per cent this year, trailing HSBC Holdings Plc, which is down 19 per cent. Under Sands, the bank lost more than a third of its market value over the past two years.

Standard Chartered operates in 71 countries and has some 90,000 employees, according to its website. While its headquarters are in London, the bank makes about 90 per cent of its revenue and profit from Asia, Africa and the Middle East.

The bank may start eliminating jobs as early as this month, while some people will be offered new roles within the company, according to one person.

Mr Winters has said he'll present a strategic update later this year.

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Europe: Stocks retreat at open

European stocks shot higher in opening trading on Thursday, benefitting from a Wall Street rally and volatile Chinese markets being closed for a long weekend. 

PHOTO: REUTERS

SEP 4, 20153:35 PM

[PARIS] European stocks retreated in opening trade on Friday, giving back much of their gains made the previous day, as investors showed caution ahead of a jobs report that could be key in determining whether US interest rates rise later this month.

London's FTSE 100 index dropped 0.91 per cent to 6,137.60 points, the CAC 40 in Paris fell 0.99 per cent to 4,607.91 and in Frankfurt the DAX 30 also reversed 0.99 per cent to 10,216.17.

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UBS cuts Hong Kong stock target 25% as black sky new reality

Hong Kong stocks sank 1.18 per cent by the end of a rollercoaster session Wednesday with traders gripped by ongoing concerns about China's economic crisis that has rattled world markets. 

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SEP 4, 20154:56 PM

[HONG KONG] UBS Group AG lowered its target for Hong Kong's benchmark stock gauge by 25 per cent, saying its worst- case scenario for the city is coming true as the economy weakens and tourism arrivals decline.

The Hang Seng Index will slide to 19,775 as slowing growth in the city and China weigh on corporate earnings, UBS analyst Spencer Leung wrote in a report dated Sept 2. That's a 5.5 per cent drop from the last close and implies a 16 per cent decline for 2015. In December, UBS's target for the end of 2015 was 26,484 and the 19,775 level was the "black sky" of four possible outcomes.

"On the back of slower economic growth in China and more signs that a US rate hike is approaching, we believe the current valuation of Hong Kong equity may not be attractive enough to compensate for potential earnings downside," Leung said in the report. "Our black-sky scenario could be a better portrayal of the challenges in the current environment."

Hong Kong stocks are being buffeted by a global sell-off, China's equity rout and a downturn in tourism that's hurting shop rents and retail sales. The Hang Seng Index last month entered a bear market, and is the developed world's worst- performing stock gauge this quarter.

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The Hong Kong equity measure slid 0.5 per cent at the close as a gauge of Chinese companies listed in the city slumped 1.4 per cent.

While valuations are becoming more attractive, they're still too high given the worsening outlook for earnings, Mr Leung said. Hong Kong company profits will tumble 31 per cent in 2016 from a year earlier under the black-sky scenario, he wrote. He also reduced his estimate for the MSCI Hong Kong Index by 27 per cent to 10,443.

The Hang Seng Index trades at 9.9 times projected 12-month earnings, compared with its five-year average of 10.8. The MSCI Hong Kong is valued at 13.4 times, its lowest level in three years.

Forward earnings-per-share estimates for Hong Kong jewelers fell 27 per cent year-to-date as less Chinese shoppers came to the city, according to Bloomberg Intelligence. Visitor arrivals plunged 8.4 per cent in July from a year earlier, despite efforts to attract tourists by loosening visa restrictions.

Hong Kong also faces the risk of importing higher interest rates from the US because of its currency peg to the dollar. Traders see a 56.5 per cent chance that the Federal Reserve will raise borrowing costs by December, a move that would translate into higher mortgage costs in a city where property companies make up about a quarter of the MSCI Hong Kong measure.

Companies including Cathay Pacific Airways Ltd, Chow Tai Fook Jewellery Group Ltd, Wharf Holdings Ltd and Galaxy Entertainment Group Ltd are the least preferred at UBS, according to the report. Cheung Kong Property Holdings Ltd, Sun Hung Kai Properties Ltd and Swire Pacific Ltd are among the brokerage's top picks.

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