US: Stocks advance ahead of corporate earnings reports

PHOTO: AFP

OCT 13, 20155:57 AM

[WASHINGTON] US stocks rose for a fourth day amid gains in retailers as Amazon.com Inc climbed to a record, and investors awaited further indications on the strength of the world's biggest economy from corporate earnings reports.

Equities moved in a narrow range in light trading, with consumer shares taking the lead as commodity producers, October's best performers, retreated for a second day. The S&P 500 remained at a seven-week high, with energy stocks losing momentum after snapping on Friday their longest rally in six years.

The S&P 500 rose 0.1 per cent to 2,017.46 at 4 pm in New York, with the benchmark holding in an 8 point range amid the calmest day of trading since June. The Dow Jones Industrial Average added 47.37 points, or 0.3 per cent, to 17,131.86. The Nasdaq Composite Index increased 0.2 per cent. About 5.1 billion shares traded hands on US exchanges, 30 per cent below the three-month average amid the Columbus Day holiday.

"As long as earnings are fair or better than the expectations, I think we're going to be OK," said Andrew Brenner, the head of international fixed income for National Alliance Capital Markets. "All of sudden people are saying, well, China's not so bad. Emerging markets are coming back. Oil is coming back. I'm looking for a grind higher."

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Profits at S&P 500 companies are projected to have fallen 7.2 per cent in the third quarter, with energy and materials companies showing the steepest drop, according to analyst forecasts compiled by Bloomberg. Alcoa unofficially kicked off the reporting season on Oct 8, with sales and profit missing estimates. Some 35 S&P 500 companies are scheduled to report results this week, including Johnson & Johnson, Intel Corp. and JPMorgan Chase & Co on Tuesday.

Investors are also listening for further hints on the Federal Reserve's policy intentions. Fed Vice Chairman Stanley Fischer said the US economy may be strong enough to merit an interest-rate increase by the end of 2015, while noting that policy makers are also considering slower job growth and international developments. Mr Fischer spoke at the annual meeting of the International Monetary Fund in Lima on Sunday.

Fed Bank of Atlanta President Dennis Lockhart, speaking Monday to a group of economists in Orlando, Florida, repeated his view that he backs the first rate increase since 2006 by the end of the year. Chicago Fed's Charles Evans today also reiterated his view that a later liftoff may be the best policy as inflation struggles to gain traction.

The S&P 500 surged to its best week in 2015 after Fed meeting minutes last Thursday showed caution over raising interest rates even as the economy improves. That helped push expectations for an increase further into next year. Traders are now pricing in about a 39 per cent chance of a rate liftoff in December, with a 60 per cent probability of a March raise. 

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China stock investor confidence rose sharply in September: government investor protection fund  

China stock investor confidence improved sharply in September, according to a survey conducted by state-owned China Securities Investor Protection Funds (SIPF). 

PHOTO: EPA

OCT 13, 20159:10 AM

[SHANGHAI] China stock investor confidence improved sharply in September, according to a survey conducted by state-owned China Securities Investor Protection Funds (SIPF).

An index tracking investor confidence jumped 24.2 per cent from August to 51.3 in September, showing investors were becoming optimistic, SIPF said on its website.

The survey found that 28.2 per cent of investors expect China's benchmark Shanghai Composite Index to rise over the next three months, while 38.9 per cent of the investors polled expect the index to be flat in the fourth quarter.

That compares with 20 per cent of investors who say the market would fall.

REUTERS

      

Australia's ANZ to expand in China as Asia strategy evolves

Australia and New Zealand Banking Group will expand its customer base in China and lengthen the tenure of loans to its top customers as part of the"evolution" of its Asia strategy, a senior executive said on Tuesday.

PHOTO: REUTERS

OCT 13, 20159:50 AM

[SYDNEY] Australia and New Zealand Banking Group will expand its customer base in China and lengthen the tenure of loans to its top customers as part of the"evolution" of its Asia strategy, a senior executive said on Tuesday.

Australia's No 4 lender kick-started its regional strategy in 2007 under CEO Mike Smith, who announced his retirement this month. Incoming CEO Shayne Elliott, who takes on the reins next year, has said the strategy needs to evolve.

ANZ International and Institutional Banking CEO Andrew Geczy said the "strategy evolution" would include issuing longer-term loans and engaging new borrowers in China that are not "just the very, very top state-owned enterprises and the top multinationals".

The country currently accounts for about 3 per cent of ANZ's total outstanding loans, and of those, 88 per cent are for less than a year, according to public filings.

ANZ has a small retail presence in China but its growth in the world's second-biggest economy depends on lending to top institutions, cash management and trade finance. It will also focus on advisory and market-making activities, Mr Geczy added.

ANZ is among the top four global banks in Asia-Pacific, according to the Greenwich survey. But while it is ranked No 5 for arranging loans in Asia Pacific ex-Japan so far this year, it falls to ninth place when Australia is excluded, according to Thomson Reuters data.

Although the bank has built a reasonably strong position in Asia its strategy has come under fire for its low returns. Cut-throat competition, a lack of local expertise and slim margins have proved to be formidable challenges.

ANZ has also said it will push harder into the lucrative mortgage market at home, where growth is faster and returns attractive.

REUTERS

    
 

US hedge funds' favourite stocks lose more than rivals

OCT 13, 20157:20 AM

[BOSTON] Publicly listed companies that are popular with US hedge funds lost more money than sector rivals when stock markets tumbled in the last few months, new data from research firm Symmetric.io show.

Hedge fund managers, who often promise strong returns in all markets, were caught off guard when stocks sold off on fears of slower growth in China, falling energy prices, and worries about a potential US interest rate hike.

Some funds are nursing double digit declines, their deepest since 2008, according to the data that Symmetric will release to clients on Tuesday. Reuters reviewed the data on Monday.

David Einhorn's Greenlight Capital is off 17 per cent while Larry Robbins' Glenview Capital is down 13 per cent. The Standard & Poor's 500 index is off 2 per cent.

"Companies with the highest concentration of hedge fund ownership are performing 6 per cent worse than the sector they are in," Symmetric Managing Director Sam Abbas said.

Part of the problem could be that stocks fall more as hedge funds look to exit losing positions, creating a sort of vicious cycle, Mr Abbas said.

The stock of Brookdale Senior Living, a favorite among hedge funds, was a major loser.

In May, billionaire investor Larry Robbins touted the senior housing company as one of his best ideas at the Sohn Investment Conference, saying that one of the easiest things is to bet on an aging population.

He owns 11.6 million shares, making him Brookdale's seventh largest investor.

Whether people took Mr Robbins' advice and piled in is unclear, but 43 per cent of Brookdale's outstanding stock is owned by hedge funds including Barry Rosenstein's Jana Partners, Discovery Capital Management and Scopia Capital Management.

Since the presentation, Brookdale's stock has fallen 35 per cent, creating pressure for Glenview whose portfolio is down double digits after a 25 per cent gain in 2014.

Another company which lost hedge fund investors a lot of money this year is renewable energy company SunEdison, Symmetric.io data show.

More than half of its owners are hedge funds like Einhorn's Greenlight, Glenview, and Leon Cooperman's Omega Advisors. And its stock price has tumbled 69 per cent since the end of June when the last hedge fund filings were made.

REUTERS

    
 

Humbled metal traders lick wounds amid slump, ponder next moves

OCT 13, 20157:25 AM

[LONDON] Metals traders often brag that they can make money whether prices rise or fall, but few are crowing these days.

That's because they're being hit by slowing growth in China and worsening credit conditions.

Trading houses including Noble Group Ltd and Trafigura Pte Ltd. have seen a series of high- profile departures and scaled back on warehouse operations. A collapse in premiums for stockpiled aluminum, a vital source of income for many, also cut profits.

The impact has been severe: Glencore Plc reported earnings at its metals trading unit fell 50 per cent in the first half to US$444 million, before interest, taxes and other expenses.

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The lackluster results from trading houses are a key topic of conversation at the London Metal Exchange's annual gathering this week, when some are calling the setback temporary due to the collapse in aluminum premiums.

"It's very choppy water we are in at the moment," said Michael Lion, a consultant at Lion Consulting Asia Ltd who has been in metals almost five decades. "Buyers now, who are under pressure themselves, can be very choosy about what they buy, when they buy and the means in which they buy."

MINING SLUMP

The slowdown comes as the wider mining industry battles with low prices. The top mining official in Chile, the world's biggest producer, said on Monday that copper prices will remain low through next year due to weak growth in China and ample supplies.

The LMEX Index, a measure of six metals contracts traded in London, dropped 16 per cent this year. While the slump was bigger during the 2008 financial crisis, it's lasting longer as China, the world's biggest user, extends its economic slowdown.

Noble recently overhauled its metals business to cut back on copper and zinc and focus on aluminum and alumina.

At least five traders in the US and the UK left the company this month, according to a person familiar with the matter. At Trafigura, Simon Collins, head of metals and minerals, exited earlier this year. Mercuria Energy Group Ltd's Tristan Busch left as head of refined metals and concentrates less than a year after arriving.

LME WEEK

With so much turmoil, figuring out how long the current pain will last is probably the main theme of this year's LME Week, when thousands of people in the industry meet to discuss supply contracts and get a feel for the market.

Ivan Glasenberg, the billionaire boss of Glencore, blamed aluminum - for years a cash-cow for the company - as the main culprit. Other executives say the slump in the industry will be temporary and doesn't foreshadow years of low profits.

Not everyone is hurting. Trafigura's metals business saw gross profit rise 31 per cent to US$509 million in the six months through March, despite what it described as a "difficult market environment."

While falling aluminum premiums, the price consumers pay above the LME contract to secure metal supplies, are beneficial to buyers including beverage-can makers, they're cutting profits for traders. The premium to obtain metal in Rotterdam, with import duty paid, has plunged 74 per cent since December.

Noble Chief Executive Officer Yusuf Alireza has said the drop in premiums was the largest "in recent history, if not ever."

Eoin Dinsmore, a consultant at CRU Group in London, said that metals traders "were happy" to take excess aluminum stocks at the end of last year. "The traders were the willing buyers as premiums were rising, and that left them exposed," he said.

While aluminum created the biggest setback for traders, it wasn't the only one. Nickel premiums were also under pressure as demand slowed from makers of stainless steel. Credit tightness, particularly in China, also hurt the industry as buyers were unable to afford as much metal as traders had initially expected.

On top, a fraud linked to metal stocks in two Chinese ports - Qingdao and Penglai - hit some traders and their financiers. The attractiveness of import financing has also been further undermined this year by the shrinking gap between Chinese and US interest rates, according to CRU.

"For the bulk of the traders, it has been horrible," said Eric Schreiber, an independent investor and former head of commodities at Swiss wealth manager Union Bancaire Privee. "People are very worried."

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