Archive for October, 2008

Hong Kong stock index soars almost 13 percent (AP)

Thursday, October 30th, 2008 | Finance News

HONG KONG – Hong Kong's key stock index soared nearly 13 percent Thursday, gaining for a third straight session to lead a region-wide rally amid fresh efforts in the U.S and Asia to ease the credit crisis and revive the global economy.

The blue-chip Hang Seng Index rose 1,627.78 points, or 12.8 percent, to 14,329.8.

Investors cheered the U.S. Federal Reserve's overnight move to slash its key interest rate by half a percentage point, a cut that was matched by Hong Kong's de facto central bank, analysts said. The Fed also temporarily opened credit lines to more countries, including Singapore and South Korea.

Also lifting sentiment were promises from China's premier that the central government would make "all-out efforts" to help the territory weather deteriorating global economic conditions. China lowered its interest rates by just over a quarter point on Wednesday.

After five days of declines that saw Hong Kong's benchmark index fall 27 percent, the market seemed primed for an explosive move higher, analysts said.

"This is panic buying after panic selling," said Linus Yip, a strategist at First Shanghai Securities.

Resource firms were among the day's best performers, thanks to firmer commodity prices. China Shenhua climbed 20 percent to HK$13.4 and Aluminum Corp. of China gained more than 22 percent to HK$2.89.

Chinese offshore oil and gas producer CNOOC Ltd. surged 22 percent to HK$6.13. Shippers benefited from stronger commodities, with China Cosco Holdings, the country's biggest shipping conglomerate, vaulting 41 percent to HK$4.1.

In financials, HSBC Holdings added 10.7 percent to HK$95.4. Goods and textile company Li & Fung, up almost 20 percent to HK$17.5, was one of several export-linked stocks to post huge gains.

The interest rate cuts appeared to help loosen lending. Hong Kong's interbank offered rate, also known as Hibor, for three-month loans slid to 3.39 percent from 3.54 percent.


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Japan, Germany to spend billions to ease recession (Reuters)

Thursday, October 30th, 2008 | Finance News

LONDON (Reuters) –
Japan and Germany said on Thursday they would plow billions of dollars into their economies, hoping to provide a cushion against a deep recession and complement a series of expected interest rates cuts.

Japan, the world's second biggest economy, unveiled a 5 trillion yen ($51 billion) package of spending measures to support its economy and Germany planned a range of steps worth up to 25 billion euros ($32 billion) to boost business.

"A harsh storm seen only once in 100 years is raging," Japanese Prime Minister Taro Aso told a news conference. "Under such circumstances, I am certain that what is most important is to remove uncertainties from the lives of people.

A leading member of Germany's ruling Social Democrats (SPD) told a newspaper that the government planned to introduce a range of steps to bolster the economy next week.

"All together we are talking about a volume of perhaps 20 billion euros to 25 billion euros," Peter Struck, parliamentary floor leader of the SPD, which shares power with Chancellor Angela Merkel's conservatives, told the Berliner Zeitung.

The package will include support for car makers and building renovation as well as tax breaks enabling companies to write off a share of their investments, German newspapers reported.


Governments are desperate to put measures in place to protect their economies against recession, which euro zone statistics suggested had hit much of Europe.

Economic sentiment in the 15-nation currency bloc plunged to its lowest level since 1993 in October, official data showed.

"These are very bad. It's a clear signal the euro area is in recession," said Christoph Weil at Commerzbank.

U.S. data later on Thursday is expected to show the world's biggest economy shrank in the July-to-September quarter.

Poor corporate earnings and forecasts for 2009 supported the view that the downturn would be long-lasting.

Britain's WPP Group, the world's second-largest advertising firm, said 2009 would be very tough after reporting third-quarter figures in line with expectations.

In Asia, South Korea's Hynix Semiconductor, the world's No. 2 memory chip maker, reported its worst quarterly net loss in nearly 8 years, saying the future looks grim.

And two of the largest U.S. auto parts makers, BorgWarner Inc and Tenneco Inc, said the economic crisis would mean more job cuts and plant closings.

The International Monetary Fund said it was more worried by the slowdown than market volatility, adding it would propose a new regulatory strategy at next month's meeting of the Group of 20 nations.

"The IMF's role as the coordinator of global regulation must be reaffirmed," IMF chief Dominique Strauss-Kahn told French daily Le Monde.

He said the Fund's resources were insufficient to meet requirements over the medium term. Countries have lined up to gain funds from the lender, with Turkey the latest to say it was continuing talks at a technical level on a possible precautionary stand-by agreement.


Across the world, countries are using any means to make sure businesses do not fail.

Russia's state bank said it expected to pump around 5 billion rubles ($183.2 million) into the stock market, sending shares higher.

The government disbursed around $3 billion to billionaire Mikhail Fridman's Alfa Group and state oil major Rosneft to help finance their foreign debts, government and industry sources said.

On Wednesday, Russia's richest man, Oleg Deripaska, became the first beneficiary of the rescue plan, when his flagship company secured a $4.5 billion loan needed to keep its stake in metals producer, Norilsk Nickel.

Germany's finance minister, Peer Steinbrueck, said he believed wage increases were both justifiable and right in the current economic climate.

Four more of the world's top central banks are forecast to have reduced interest rates by the end of next week.

Japan was expected, on Friday, to follow the United States and China and cut rates, with the European Central Bank, Britain and Australia doing the same next week.

Hungary, Taiwan, Hong Kong, Norway and a number of Gulf states have already done so.

The United States cut interest rates to 1 percent on Wednesday to try to kickstart its economy.

The rate cuts and a U.S. move to offer funds to Brazil, Mexico, South Korea and Singapore via four new currency swap lines worth $30 billion spurred Asian markets.

Japan's benchmark Nikkei average index closed up 10 percent, a third straight day of gains. European shares gained 2 percent.

(Reporting by Reuters bureaus worldwide; Editing by Mike Peacock)


Shell profit surges 71 percent (Reuters)

Thursday, October 30th, 2008 | Finance News

LONDON (Reuters) –
Royal Dutch Shell Plc (RDSa.L) beat all forecasts with third-quarter current cost of supply (CCS) net profit up 71 percent at $10.9 billion, as high oil prices and asset sales outweighed a 7 percent drop in oil and gas production.

The world's second-largest non-government controlled oil company by market value said on Thursday it was well placed to continue paying dividends and investing, even at lower energy prices.

"A good performance, all divisions have performed well. The big driver seems to be the downstream. It was much better than expected," said Alexandre Weinberg, analyst at Petercam.

However, Shell shares fell as investors focused on the weaker-than-expected production figures.

London-listed "A" shares traded down 2 percent at 1,671 pence at 0857 GMT, compared with a 1.3 percent drop in the DJ Stoxx European oil and gas sector index (.SXEP).

"With production declines remaining a concern at Shell, at a time when BP's operational performance is finally turning, we suggest that there is not enough in these numbers to reverse recent performance (share weakness)," Citigroup said in a research note.

Shell benefited from a 54 percent rise in crude in the third quarter compared with the same period last year.

However, prices have dropped to around $70/barrel from a record above $147/bbl in July, raising fears oil companies may not be able to continue raising their generous dividends.

Shell said production of oil and gas fell to 2.93 million barrels of oil equivalent per day in the quarter, due to hurricane outages in the Gulf of Mexico, a dearth of new field startups and the impact of production sharing contracts under which it receives less oil from projects when prices rise.

While the upstream oil and gas production unit is always the main profits driver, Citigroup said the smaller downstream division, which refines crude and markets fuel to users, was the "standout" performer in the quarter.

Profits in the division rose 40 percent thanks to higher refining margins in Europe, strong sales of jet fuel and diesel to commercial customers.

Earnings from retailing fuel to motorists fell, a spokesman said, as the company suffered lower sales and found it hard to pass on high fuel prices to customers.

The Anglo-Dutch company said on Wednesday that Chief Financial Officer Peter Voser would succeed Jeroen van der Veer as Chief Executive in July next year.

"His strong track record and conservative financial management should be an asset in this period of greater economic uncertainty," Weinberg said.

Shell said the CCS result, which strips out unrealized gains or losses related to changes in the value of fuel inventories, included a gain of $2.06 billion due to one-off items, mainly the sale of a German gas network, and non-cash gains of $800 million.

Excluding these items, the CCS net profit was $8.04 billion, ahead of an average forecast of $7.195 billion from a Reuters poll of six analysts.

(Editing by David Cowell)