Regions

[Muthukali]

Fed to Test 19 Banks’ Capital Against Recession Scenario

The Federal Reserve will show how the capital of 19 U.S. banks might fare through a deep recession and a second housing crisis when they unveil stress-test results in three days.

The tests will show results for revenues, capital ratios and profits or losses at each firm over a nine-quarter period, the Fed said in a paper released today in Washington. The results will be released at 4:30 p.m. on March 15. Templates included in the Fed release today showed an array of categories it plans to disclose, from trading and counterparty losses to credit cards and first-lien mortgages.

“Strong capital levels are critical to ensuring that banking organizations have the ability to lend and to continue to meet their financial obligations, even in times of economic difficulty,” the Fed said in a statement. “The supervisory stress scenario is not the Federal Reserve’s forecast for the economy, but was designed to represent an outcome that, while unlikely, may occur if the U.S economy were to experience a deep recession at the same time that economic activity in other major economies contracted significantly.”

The KBW Bank Index of 24 U.S. lenders has advanced 15 percent this year as investors bet a strengthening economy will help firms boost earnings. Concern that the nation’s banks may be damaged by Europe’s debt crisis helped drive down the index 25 percent in 2011, its worst annual performance since the 2008 credit crisis.

Lehman Brothers Collapse
Stress tests date back to 2009, when supervisors tried to determine the extent of losses facing the nation’s largest lenders following the collapse of Lehman Brothers Holdings Inc. (LEH) and the subsequent financial crisis. Gross domestic product contracted at an 8.9 annual rate in the fourth quarter of 2008.

For the current test, the Fed provided the banks with 25 variables, including estimates on gross domestic product, Treasury bill rates and indexes of consumer prices and home prices. The more severe scenario assumes an 8 percent drop in U.S. gross domestic product, an unemployment rate as high as 13 percent and a 21 percent drop in home prices.

Six banking-holding companies with large trading, private equity and derivatives activities were also subjected to tests of these positions from a “global market shock,” the Fed said. The six banks are Citigroup Inc. (C), Bank of America Corp. (BAC), Wells Fargo & Co., Morgan Stanley, Goldman Sachs Group Inc. (GS), and JPMorgan Chase & Co. (JPM)

The Fed said it estimated revenue and losses under the stress scenario based on detailed data provided by the firms and verified by supervisors. The Fed said the tests draw on the expertise “of hundreds of staff,” including supervisors, economists, and market analysts.

 

[Muthukali]

Wells Fargo May Lead Payouts After Fed Test

Wells Fargo & Co. (WFC) and Citigroup Inc. (C) may join banks unleashing more than $9 billion in dividend increases and share buybacks if they get passing grades this week on the Federal Reserve’s annual stress test.

Thirteen of the 19 largest U.S. lenders may say they’ll pay out $3.79 billion in extra dividends this year and buy $5.52 billion of additional shares, according to estimates of six analysts compiled by Bloomberg. That’s 30 percent more than they spent last year. San Francisco-based Wells Fargo probably will offer the biggest difference at a combined $4.16 billion, followed by Citigroup with $2.92 billion.

“This is their opportunity to differentiate themselves from their peers and competitors, and argue for a fresh look from investors,” said Matt McCormick, who helps oversee $5.1 billion at Bahl & Gaynor Inc. in Cincinnati and focuses on dividend-paying stocks. “You’ll see a lot of people saying the banks are out of the woods.”

Investors are pressing lenders to restore dividends and buybacks to levels that prevailed before the financial crisis, when they were all but eliminated under terms of U.S. bailouts. Dividends contributed about two-thirds of the total return for stockholders during the decade before the 2008 crisis, as measured by the KBW Bank Index. (BKX) The 24-company benchmark now yields 1.8 percent, about half the average in 2007.

Wells Fargo
The index rallied 16 percent this year through last week, partly in anticipation that banks will get permission to increase payouts after getting results of the stress tests, which are due March 15. The gauge fell 0.7 percent as of 2:58 p.m. in New York, led by Regions Financial Corp., which dropped 3.1 percent, and SunTrust Banks Inc. (STI), which slid 2.7 percent.

The Fed imposed the stress tests on 31 U.S. firms with at least $50 billion in assets to ensure lenders can withstand another crisis. The most dire scenarios call for unemployment to hit 13 percent and a 20 percent slump in home prices.

There’s still doubt that all the requests will be approved and that investors will get the full amount that analysts are predicting. As of last week, the Fed was pushing back against some banks after concluding they underestimated potential losses on consumer debt in a severe economic slump, according to two people with knowledge of the situation. Examiners are still fine-tuning calculations, which may change, the people said.

Wells Fargo, the most valuable U.S. lender, will offer $1.39 billion in added dividends this year and an additional $2.77 billion through share repurchases, for a combined increase of 84 percent, the estimates show. That would boost the annual payout to 75 cents a share from 48 cents. The buybacks equal about 1.7 percent of the 5.27 billion shares outstanding based on last week’s closing price.

Citigroup Payout
Citigroup, the third-largest U.S. lender by assets, could distribute $744 million in higher dividends based on an increase to 28 cents this year from 3 cents, the estimates show. The New York-based firm may also buy about $2.18 billion in shares, equal to 2.2 percent of the total. The bank didn’t repurchase shares in 2011.

Citigroup will raise its payout, analysts estimate, even though it’s restricted from boosting it as long as the U.S. government holds a remaining $3.03 billion in trust-preferred securities issued as part of emergency funding programs. The restrictions can be waived, according to company filings.

Regulatory Mindset
The amount Citigroup is allowed to pay out will give good insight into regulators’ thinking, KBW Inc. analysts led by David Konrad wrote in a March 11 note. One of the Fed’s goals is to limit capital leaving the banking system, they wrote, citing concern that Europe’s turmoil still could spread to U.S. markets.

“Although we believe Citi is on track to generate excess capital within a two- to three-year time frame, we believe its pro forma Basel III ratio may not be sufficient to begin meaningful capital deployment,” the KBW analysts wrote, referring to new minimum international standards that lenders must meet. “Citi may be able to resubmit a plan for more meaningful share repurchases after further sales of distressed assets.”

Goldman Sachs Group Inc. (GS)’s annual payout may fall 28 percent to $4.9 billion, according to the consensus. The New York-based investment bank may increase the annual dividend to $1.47 a share from the current $1.40, and repurchase $4.17 billion in shares, or about 7 percent of the 495 million shares outstanding. Total dividends and buybacks probably will be down from last year when the company had more shares outstanding.

Consensus of Estimates
Mary Eshet, a Wells Fargo spokeswoman, declined to comment on the projected dividends and buybacks, as did Michael DuVally of Goldman Sachs and Citigroup’s Shannon Bell.

The dividend and buyback estimates were compiled from reports written by analysts at International Strategy & Investment Group Inc., Raymond James Financial Inc., Portales Partners LLC, Morgan Stanley (MS), Barclays Capital, and Oppenheimer & Co. In most cases, the dividend estimates are based on the current dividend rate prevailing in the first quarter, plus three quarters of the higher payout.

Dividends historically have been sought by income-oriented investors, and banks traditionally have been among the highest payers. The yield for the 81-company Standard & Poor’s 500 Financials Index exceeded the broader S&P 500 every year from 1998 through 2007, according to data compiled by Bloomberg.

Yield Shortage
Even with dividends, total return for the S&P Financials was a negative 30 percent over the past decade, compared with a 44 percent gain for the S&P 500. As bank payouts increase, their shares may be sought by a wider swath of buyers, said Jason Goldberg, a senior bank analyst at Barclays Capital in New York.

“There is a search for yield, and to the extent bank dividend yields increase, that makes them attractive to equity- income investors,” Goldberg said in a phone interview last week. “The industry is on much firmer ground.”

The Fed has said it will watch payouts closely. Regulators limited banks to returning 60 percent of their retained earnings to shareholders in 2011, split evenly between dividends and share repurchases. Regulators will pay “particularly close scrutiny” this year to banks asking permission for dividend payouts of more than 30 percent in after-tax profit, the Fed said in instructions it published in November.

The dividend for JPMorgan Chase & Co. (JPM), estimated to pay out the most among the banks, would be 25 percent of 2012 earnings as estimated by 23 analysts in a Bloomberg survey, while Wells Fargo’s would be about 23 percent.

Payout Forecasts
Wells Fargo’s quarterly dividend may increase to 20 cents in the second quarter, according to the Bloomberg Dividend Forecast. Citigroup’s will climb to 5 cents and Goldman Sachs’s will stay at 35 cents. The forecast is compiled using variables that include company guidance, analysts’ predictions and trends. It had a global accuracy rate of 83.7 percent last year, compared with 71.4 percent accuracy by analysts.

Some banks won’t announce any increase. Bank of America Corp. (BAC), struggling from shoddy mortgage loans that have cost about $40 billion, didn’t ask to raise its dividend or buy back stock in its capital request to the Fed, Chief Executive Officer Brian T. Moynihan said during a March 8 investor conference. The Charlotte, North Carolina-based lender, ranked second by assets after JPMorgan, pays a 1-cent quarterly dividend. The total payout will nevertheless rise by about $16 million, or 4 percent, because more shares are outstanding.

Buffer Zone
Regions is focused on repaying the $3.5 billion in U.S. bailout funds it still owes, finance chief David Turner said in January. The amount is the largest outstanding for any public commercial bank under the U.S. Treasury Department’s Troubled Asset Relief Program. Regions, based in Birmingham, Alabama, hasn’t reported an annual profit since 2007.

Regulators are allowing the largest U.S. banks to disburse capital -- the buffer between a bank’s assets and liabilities that helps shield depositors from losses -- as long as it remains above 5 percent of assets under the stressed scenario. U.S. commercial banks with at least $10 billion in assets finished 2011 with a core capital ratio of 8.77 percent, according to the Federal Deposit Insurance Corp. Loan losses fell to $25.4 billion in the fourth quarter, the lowest in 15 quarters, the FDIC said.

In addition to approving or rejecting banks’ capital plans, regulators could release bank-specific estimates of revenue, losses and capital ratios under the adverse scenario. These disclosures, perhaps more than the payout announcements, may be the “most surprising,” Charles Peabody, an analyst at Portales, wrote in a March 1 note.

Gap in Estimates
During the stress tests, the Fed has generally predicted banks would suffer greater losses on credit cards and mortgage- related holdings than what firms estimated in the plans they submitted in January, said the people familiar with the process, who asked not to be identified because the results aren’t public.

Still, investors such as McCormick and Tom Mangan, who helps oversee $3 billion at James Investment Research Inc. in Xenia, Ohio, said they don’t expect the Fed to single out or reject the capital plans of individual banks.

“Regulators can’t kick the legs out of the financial industry at this point,” said Mangan, whose firm holds shares of Capital One Financial Corp. (COF), KeyCorp and PNC Financial Services Group Inc. (PNC) “It’s not their pattern to nail a bank because then you create a run and the stock market drops overall and you get angry voters.”

 

[Muthukali]

Federal Open Market Committee March 13 Statement: Full Text

The following is a reformatted version of the full text of the statement released today by Reserve in Washington:

Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further, the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

 

[Muthukali]

Stocks Gain as Treasuries Fall as Federal Reserve Boosts Economic Outlook

U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since 2007, and Treasuries fell after Federal Reserve policy makers raised their assessment of the economy and retail sales increased.

The Standard & Poor’s 500 Index (SPX) added 0.9 percent to 1,384 at 2:25 p.m. New York time and the Dow climbed 123.06 points to 13,082.77. Yields on 10-year Treasuries advanced a fifth day, reaching 2.09 percent. The dollar strengthened against the euro and yen. Copper futures rallied 1.5 percent, crude oil rose 0.4 percent and gold declined 0.9 percent.

The Fed said the economic outlook has improved as the labor market gathers strength. Policy makers refrained from new action to lower borrowing costs. Earlier gains in equities were spurred by U.S. Commerce Department data showing retail sales jumped 1.1 percent in February following a 0.6 percent increase in January. The ZEW Center for European Economic Research said its gauge of German investor confidence rose to 22.3, more than double the median estimate of 10 forecast in a Bloomberg survey.

Before the Fed’s comments, the Chicago Board Options Exchange Volatility Index, or VIX, fell to an almost five-year low of 13.99. It’s a gauge of how much investors are paying to protect against S&P 500 losses. Following the Fed, the VIX declined 5.4 percent to 14.79.

German bunds fell, pushing 10-year yields up by the most in a month, after the report showing investor confidence in Europe’s largest economy improved sapped demand for the region’s safest securities. The yield on the 10-year bund rose six basis points, or 0.06 percentage point, to 1.82 percent.

Greek bonds issued to investors as part of the nation’s debt swap declined on their first full day of trading. The yield on the 2 percent bonds due in February 2023 rose 57 basis points, to 19.02 percent.

Spanish securities slipped after European finance chiefs meeting yesterday called on the nation to make deeper budget cuts. The yield on the nation’s 10-year bond yield climbed eight basis points to 5.13 percent.

 

[Muthukali]

Fed Says Labor Market Improves; Leaves Policy Unchanged

Federal Reserve policy makers raised their assessment of the economy as the labor market gathers strength and refrained from new actions to lower borrowing costs.

“Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated,” the Federal Open Market Committee said in a statement at the conclusion of a meeting today in Washington. It said “strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook.”

The best six-month streak of job growth since 2006 may not be enough to convince Chairman Ben S. Bernanke and fellow policy makers they can meet their goal of maximum employment without additional easing measures. Bernanke last month told U.S. lawmakers that the job market remains “far from normal” even as it showed signs of improvement.

The Fed left unchanged its statement that economic conditions would probably warrant “exceptionally low” interest rates at least through late 2014. The central bank in December 2008 lowered its target overnight interest rate to a range of zero to 0.25 percent.

Policy makers said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist. The Fed also did not alter its policy of reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities.

Shifting Stance
“The FOMC is clearly shifting its stance away from blanket gloom to something more realistic, but they have a long way to go,” Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said in a note to clients.

The Standard & Poor’s 500 Index climbed 0.8 percent to 1,382.63 at 2:36 p.m. in New York. The yield on the 10-year Treasury note rose to 2.11 percent from 2.03 percent late yesterday.

Inflation “has been subdued in recent months although prices of crude oil and gasoline have increased lately,” the Fed said today. The increase in oil will “push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.”

Oil-Price Gains
Rising oil has pushed the national average cost of gasoline up to $3.81 a gallon, from $3.28 at the start of the year, according to the American Automobile Association.

The Fed said it expects “moderate economic growth” and said the unemployment rate “will decline gradually.” In its last statement in January, it said growth would be “modest” and unemployment “will decline only gradually.”

Richmond Fed President Jeffrey Lacker dissented for the second meeting in a row, saying he doesn’t anticipate that economic conditions are likely to warrant exceptionally low levels of the fed funds rate through late 2014.

The U.S. economy has gained strength as payroll growth boosts consumer demand. Household confidence climbed earlier this month to the highest level in four years, according to the Bloomberg Consumer Comfort Index.

“All of the data we’re seeing suggests the overall economy and customer sentiment are improving,” David Dillon, chairman and chief executive of Kroger Co., the largest U.S. grocery store chain, said in a March 1 earnings call.

Retail Sales
A government report today showed retail sales in the U.S. rose in February by the most in five months. The 1.1 percent advance followed a 0.6 percent increase in January that was larger than previously estimated. Demand improved in 11 of 13 industry categories, including auto dealers and clothing stores.

Consumers are getting a boost as job prospects brighten. Employers added 227,000 workers in February, completing the best six months for payroll growth since 2006.

“There’s real improvement here, and we’re definitely on the recovery path” for employment, said Scott Brown, chief economist at St. Petersburg, Florida-based Raymond James Financial Inc., which oversees $300 billion.

Stock-market gains are contributing to consumer optimism and spending power. The Standard & Poor’s 500 Index rallied 9 percent this year through yesterday after completing its best February since 1998. Before today, the benchmark for U.S. equities rose 25 percent since concern about Europe’s debt crisis pushed the gauge to a one-year low on Oct. 3.

Fed Forecasts
Still, most Fed policy makers in January forecast the economy would grow 2.2 percent to 2.7 percent in 2012 and the unemployment rate would end the year at 8.2 percent to 8.5 percent. By the end of 2014, the FOMC expects a jobless rate of 6.7 percent to 7.6 percent, still above their goal for maximum employment of 5.2 percent to 6 percent.

“The economy from our vantage point is moving sideways,” Dave Denton, chief financial officer of CVS Caremark Corp., the largest U.S. provider of prescription drugs, told analysts today at a Barclays Capital conference in Miami. “I don’t see it moving down at this point in time. But at the same token, I don’t see it moving up in any significant fashion either.”

Policy makers will update their economic forecasts at the April 24-25 FOMC meeting, which will be followed by a press conference with Bernanke.

None of the 49 respondents to a Bloomberg survey of economists from March 9 to March 12 expected the Fed to announce a new round of asset purchases today.

Boosting Economy
Central bankers have already taken unprecedented steps to boost the economy following the longest and deepest recession since the Great Depression.

The Fed first lowered its target interest rate to a range of zero to 0.25 percent in December 2008. At its January meeting, the FOMC said that economic conditions would likely warrant keeping rates “exceptionally low” at least through late 2014, extending a previous date of mid-2013.

The central bank purchased $2.3 trillion of assets in two rounds of large-scale asset purchases, known as quantitative easing. In September, the Fed announced a $400 billion program, dubbed Operation Twist, to lengthen the average maturity of assets on its balance sheet.

In November, the Fed joined with five other central banks to cut the interest rate on swap lines providing dollar liquidity to banks strained by Europe’s financial crisis.

Balance Sheet Grows
These actions propelled the central bank’s balance sheet to a record $2.94 trillion on Feb. 15, more than triple its size before the 2008 bankruptcy of Lehman Brothers Holdings Inc.

The European Central Bank is pausing its own easing campaign after returning its benchmark rate to a record low of 1 percent in December, freeing up collateral rules and lending banks an unprecedented 1.02 trillion euros ($1.34 trillion) for three years.

Steps in Europe have paid off, with investors crediting ECB President Mario Draghi for helping stabilize Europe’s two-year- old debt crisis. Italy’s 10-year bond yields have fallen below 5 percent from more than 7 percent in January, and the Bloomberg Europe Banks and Financial Services Index gained about 14 percent from Dec. 30 through yesterday.

“It’s certainly a much better time now than it was even at the last meeting, and in multiple ways both in the U.S. economy and in foreign markets,” George Mokrzan, director of economics at Huntington Bancshares Inc. in Columbus, Ohio, said before the Fed’s statement.

 

[Muthukali]

Citigroup, SunTrust Banks Capital Plans Fail Fed Stress Tests

Citigroup Inc. (C), the lender that took the most government aid during the financial crisis, will try again to win approval for its capital plan after failing to meet minimum standards in U.S. stress tests.

The Federal Reserve objected yesterday to Citigroup’s plan -- which may have included a request for a higher dividend -- prompting the bank to say it will submit a revised version later this year. SunTrust Banks Inc. (STI), Ally Financial Inc. and MetLife Inc. (MET) also fell short in the Fed’s test of how 19 of the nation’s biggest lenders would fare in a severe economic slump.

“Investors are going to be disappointed,” said Michael Shemi, a director at Christofferson, Robb & Co., a New York- based investment firm with about $1.5 billion under management, referring to Citigroup. “Citi appears to have been too aggressive with their capital plans.”

The results are a blow to Chief Executive Officer Vikram Pandit, who has told investors the New York-based bank is ready to return capital to shareholders after slashing the dividend during the financial crisis. Capital plans submitted for the tests typically involve requests for higher dividends and share buybacks, which the Fed allowed for JPMorgan Chase & Co. and Wells Fargo & Co.

Pandit scrapped Citigroup’s dividend in 2009 as part of the company’s $45 billion bailout, which was later repaid. He reinstated a 1-cent payout last year and has been selling riskier assets to rebuild the bank’s strength. The Fed didn’t object to keeping the current quarterly payout, Citigroup said.

Ally’s Setback
The tests may also set back Ally, the Detroit-based auto and home lender rescued by taxpayers, which had planned an initial public offering to repay its bailout. Ally, run by CEO Michael Carpenter, and SunTrust, led by CEO William H. Rogers, said they will submit revised plans.

The Fed is testing to see how the capital of U.S. banks might hold up through a deep recession and a second housing crisis. The scrutiny focused on variables such as trading and counterparty losses and write-offs on credit cards and first- lien mortgages. Most of the 19 banks passed.

Disclosure of stress-test results in May 2009 boosted confidence in the financial system by giving investors more certainty on the maximum losses firms might sustain, and bank stocks beat the Standard & Poor’s 500 Index in the next 12 months. The KBW Bank Index jumped 4.6 percent yesterday after JPMorgan, the biggest U.S. lender, announced it had passed the test and was raising its dividend 20 percent.

Analytical Gaps
The average estimate of six analysts surveyed by Bloomberg was for Citigroup to increase its payout to 28 cents this year from 3 cents. They projected the bank would buy back about $2.18 billion in shares, or 2.2 percent of the total, after making no repurchases last year.

Shannon Bell, a spokeswoman for Citigroup, declined to comment on what was in the capital plan. Ally said in an e-mailed statement that the Fed’s analysis overstated some risks and didn’t account for some of the auto and home lender’s financial and management resources.

Citigroup’s projected Tier 1 common capital ratio fell to 4.9 percent, below the central bank’s minimum requirement of 5 percent, in a test estimating the effects of a severe economic slump, according to data released by the Fed. Citigroup would surpass the threshold if the bank didn’t pursue a dividend increase or share buyback, according to the Fed’s data.

Orphaned Assets
Citigroup still has more than $200 billion of unwanted assets in the Citi Holdings unit, including more than $100 billion of mortgages, according to a filing.

“We continue to have the same goals that I mentioned before, which is that this will be the year that we’ll start returning capital,” Pandit told analysts on Jan. 17.

Ally has benefited from $17.2 billion of federal aid, which it needed after losses swelled on subprime home mortgages made by its Residential Capital mortgage subsidiary. A statement e-mailed by Gina Proia, a spokeswoman for Ally, said the Fed’s analysis “dramatically overstates potential contingent mortgage risk, especially with respect to newer vintages of loans.”

The tests also didn’t give enough credit for “management’s track record” and commitment to addressing the mortgage risks, and doesn’t “adequately contemplate contingent capital that already exists,” according to the statement.

The U.S. Treasury holds $5.9 billion of preferred shares that must be converted into common equity no later than Dec. 30, 2016, according to the lender’s annual securities filing.

ResCap’s Fate
Ally has considered putting the ResCap unit into bankruptcy, people familiar with the matter have said. Once known as GMAC when it was part of General Motors Co., Ally remains one of the biggest auto lenders and has profited from a recovery in car sales. The U.S. gained a 74 percent stake in the company in return for rescuing Ally in 2008.

“They’ve done a lot less capital-raising than others,” said Kirk Ludtke, an analyst at Stamford, Connecticut-based CRT Capital Group LLC. Ally’s capital plan may include additional contributions to ResCap, he said.

SunTrust’s Tier 1 common capital ratio would fall to 4.8 percent if the Atlanta-based lender carried out capital plans submitted to the Fed, according to the test results. Capital plans can include dividend payouts, stock repurchases and share sales. Ally’s ratio was estimated at 2.5 percent, regardless of any capital actions it proposed, according to Fed data.

SunTrust, ranked eighth in the U.S. by deposits, said it would have met Federal Reserve standards without the plan for capital actions that the lender submitted to the regulator. Distributing dividends and share buybacks tend to weaken performance on the tests by draining capital.

Housing Loans
The lender amassed losses amid a housing slump in the nation’s Southeast. After posting profits of more than $1 billion annually before 2008, the company booked a $1.56 billion loss in 2009 as write-offs surged .

About 27 percent of SunTrust’s residential construction loans and 29 percent of its residential mortgages were concentrated in Florida, which suffered some of the worst mortgage defaults during the financial crisis.

“I don’t think these stress tests are about who needs more capital,” said Michael Rose, an analyst with Raymond James & Associates Inc. “Clearly it’s about who can return capital. So maybe what they asked for might have been a little aggressive.”

Rose, who rates the shares “outperform,” said he’d been expecting SunTrust to double its 5-cent quarterly dividend. “It’s not like they failed by a wide margin,” he said, calling the test’s scenario “onerous” and “probably unrealistic.”

MetLife’s Results
MetLife’s total risk-based capital ratio would be 6 percent, compared with the minimum acceptable level of 8 percent, the Fed said as part of its review of how companies would withstand a “stress scenario.”

The insurer had requested approval for $2 billion in share repurchases and an increase of its annual dividend to $1.10 a share from 74 cents, according to a statement from the New York- based company. MetLife, which is overseen by the Fed because of its banking operations, was prevented by the regulator last year from increasing its dividend.

CEO Steven Kandarian is winding down the banking business and said he expects the firm to have as much as $7 billion of excess capital by the end of this year. Kandarian said he remains “fully committed” to returning funds to shareholders, and that MetLife is on track to stop being a bank holding company by the middle of this year.

“At the end of the day this is an insurance company,” said Edward Shields, an analyst at Sandler O’Neill & Partners LP. MetLife’s inclusion in the Fed test is “like putting a square peg into a round hole.”

Fifth Third Bancorp (FITB), the Cincinnati-based lender, said the Fed objected to increases in its 8-cent quarterly dividend and some common share buybacks. The government didn’t object to its redemption of as much as $1.4 billion in certain trust-preferred securities

 

[Muthukali]

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Fed Says 15 of 19 Banks Have Adequate Capital in Stress Scenario

The Federal Reserve said 15 of the 19 largest U.S. banks could maintain adequate capital levels even in a severe recession that assumes they keep paying dividends and buying back stock.

Today’s results of the central bank’s stress tests show that nearly three years of economic expansion have helped U.S. banks raise profits, rebuild capital, and increase liquidity after the collapse of Lehman Brothers Holdings Inc. in 2008 nearly toppled the financial system.

“On the whole, the major U.S. banking organizations are well on the mend,” said Ernest Patrikis, a partner at White & Case LLP and a former lawyer for the Federal Reserve Bank of New York. “They have sufficient capital to weather a severe storm. One question is whether they will have too much capital.”

JPMorgan Chase & Co. (JPM), in an announcement before the Fed’s release, said it would increase its dividend 20 percent and authorized a $15 billion share repurchase plan after the central bank test. Citigroup Inc., the lender that took the most government aid during the financial crisis, said it will resubmit its capital plan to regulators after failing to meet some minimum standards in the stress tests.

Stocks rose, sending the Dow Jones Industrial Average to the highest level since 2007, after the JPMorgan Chase dividend announcement and as the Fed raised its assessment of the economy.

Treasury Yields
The Standard & Poor’s 500 Index added 1.8 percent to 1,395.95 at 4 p.m. New York time, and the Dow climbed 217.97 points to 13,177.68. Yields on 10-year Treasuries advanced a fifth day, reaching 2.13 percent.

The KBW Bank Index (SPX), which tracks shares of 23 of the largest U.S. banks, including BB&T Corp. and Wells Fargo & Co., rose 4.6 percent. The index is up 21 percent this year on expectations of stronger economic growth and improving profits. Concern that the nation’s banks may be damaged by Europe’s debt crisis helped drive down the index 25 percent in 2011, its worst annual performance since 2008.

SunTrust Banks Inc., Ally Financial Inc. and MetLife Inc. (MET) also fell short by at least one measure under the central bank’s most dire economic scenario. Ally also intends to resubmit its plan, the company said in a statement.

Earlier today, Fed policy makers raised their assessment of the economy as the labor market gathers strength and refrained from new actions to reduce borrowing costs. They repeated that interest rates are likely to stay low at least through late 2014.

FOMC Statement
“The unemployment rate has declined notably in recent months but remains elevated,” the Federal Open Market Committee said in a statement. It also said “strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook.”

The Fed’s stress tests showed that an unemployment rate of 13 percent, a 50 percent drop in stock prices and a 21 percent decline in house prices would produce aggregate losses of $534 billion over nine quarters.

Even with that blow, the 19 banks would see their Tier 1 common capital ratio -- a measure of bank strength against loss -- fall to 6.3 percent in the fourth quarter of 2013 in the hypothetical scenario, above the 5 percent minimum the Fed required. The ratio was 10.1 percent in the third quarter of last year.

Capital Strategy
The Fed started the test and review of banks’ forward- looking capital strategy in November, saying they should have “credible plans” to meet tougher standards required by new regulations and to continue lending even in period of financial stress.

Of the $534 billion in total projected losses, $341 billion comes from loan-portfolio losses, the Fed said. Loans and trading portfolio and counterparty losses account for 85 percent of the total, the Fed said.

Six banking-holding companies with large trading, private equity and derivatives activities were also subjected to tests of these positions from a “global market shock.” The six were Citigroup, Bank of America Corp. (BAC), Wells Fargo, Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and JPMorgan Chase.

The stress tests are now a standard feature of the Fed’s big-bank supervision and oversight of financial risk. The concept was born in late 2008 when Chairman Ben S. Bernanke was trying to discern the maximum losses facing the banking system following the collapse of Lehman Brothers.

Paying Dividends
The Fed’s special focus on the l9 largest institutions’ capital management also reflects a wary attitude toward boards that paid out more than $43 billion in dividends as housing markets started to deteriorate in 2007, according to comments last year by Patrick Parkinson, the former director of the Fed’s Division of Banking Supervision and Regulation.

Citigroup’s proposed capital actions would leave the third- biggest bank with Tier 1 common capital of 4.9 percent, below the 5 percent minimum require by the regulators, according to today’s results. Citigroup, the third-largest U.S. bank, would meet the requirement only if it doesn’t change the amount of capital it returns to shareholders, the test results showed.

A senior Fed official said in a conference call with reporters that the central bank’s models showed higher estimated losses than those submitted by the banks, while declining to specify in what categories.

The results were originally due to be announced on March 15. The official said the results were released early because of a possible inadvertent release of information. The official said JPMorgan Chase’s release was the result of miscommunication between the Fed and the bank, and didn’t cause the Fed’s accelerated release of the results.

 

[Muthukali]

Growth in U.S. to Strengthen as Jobs Lift Consumers: Economy

The world’s largest economy will strengthen through 2012 as employment gains give Americans the means to withstand rising fuel costs, according to economists surveyed by Bloomberg News.

Gross domestic product will climb at a 2.5 percent annual rate in the final three months of the year, up from 2 percent this quarter, according to the median forecast of 71 economists surveyed from March 9 to March 13. For all of 2012, the U.S. may expand 2.2 percent, accelerating from 1.7 percent last year.

More jobs, increasing share prices, improving confidence and stability in housing will bolster the expansion. At the same time, unemployment will be slow to retreat, averaging 7.3 percent in 2014, showing why Federal Reserve policy makers yesterday said interest rates will remain low for at least the next two years.

“Some of the conditions for faster growth are falling into place,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. By the end of the year, “we’ll still be a long way from what would make the Fed more comfortable. They will still be missing their full employment objective.” IHS Global Insight was the second most-accurate forecaster of consumer spending over the two years through February, according to Bloomberg calculations.

Household purchases, which account for about 70 percent of the economy, will advance at a 2.4 percent pace in the final three months of the year, up from 1.9 percent this quarter, the survey showed.

Sales Climb
Retail sales indicate the year was off to a good start. The 1.1 percent advance in February, the biggest in five months, followed a 0.6 percent increase in January that was larger than previously estimated, according to Commerce Department data yesterday. Eleven of 13 categories showed gains last month, including auto dealers and clothing stores. The results also reflected higher gasoline costs, which reached $3.81 on March 13, the highest since May.

Cars last month sold at the fastest pace in four years, led by Chrysler Group LLC and a surprise gain from General Motors Co. (GM) Light-vehicle sales accelerated 6.4 percent from January to a 15 million annual rate, the strongest since February 2008, according to Ward’s Automotive Group.

Luxury retailer Nordstrom Inc., clothing chain Gap Inc. (GPS) and discounter Target Corp. (TGT) last month beat analysts’ estimates.

Hiring gains are driving the spending. Employers boosted payrolls by 227,000 in February after a revised 284,000 gain in January, capping the best six-month streak of job growth since 2006. The unemployment rate held at a three-year low of 8.3 percent following five consecutive declines. Worker pay jumped in the last six months of 2011 by the most in almost five years.

‘Solid Year’
“Household income growth will be a bit stronger as the labor market improves, so the consumption numbers will look better,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York and a former Fed researcher who specialized in consumer spending. “It’ll be a solid year, not a spectacular one.”

Delhaize Group SA, the owner of the U.S. Food Lion supermarkets, this month said the improvement in the labor market is encouraging.

“There are some good forward-looking economic indicators here in the U.S. that would help give all of us some optimism,” Ronald Hodge, chief executive officer of Delhaize’s U.S. business, said on a March 8 conference call with analysts. “Unemployment has started to decrease in every one of our major markets and that is a very, very key sign in our business.”

Gaining Confidence
Gains in hiring and wages are also lifting Americans’ moods. The Bloomberg Consumer Comfort Index, which has advanced in all except two weeks so far this year, rose to an almost four-year high in the period ended March 4.

Investors are also growing more upbeat. The Dow Jones Industrial Average yesterday jumped to the highest level since 2007, and the Nasdaq Composite Index climbed to the highest level since 2000. Yesterday’s 1.8 percent gain in the Standard & Poor’s 500 Index extended the gauge’s advance this year to 11 percent, the best start since 1991.

Households may be more inclined to spend in the second half as gains in wealth eventually drive purchases, Maki said.

“The recent gains in the stock market will start to show through more significantly in consumer spending,” he said. “We’re seeing demand gradually recover.”

The jobless rate will decline to 8.1 percent by year-end, according to the median forecast of economists surveyed. It will average 7.8 percent next year and 7.3 percent in 2014, the survey showed.

The Fed’s projection of the jobless rate over the long run, the level that policy makers believe will keep inflation steady, is 5 percent to 6 percent.

“The unemployment rate has declined notably in recent months but remains elevated,” the central bank said in a statement after policy makers met yesterday in Washington. Economic conditions warrant keeping interest rates “exceptionally low” at least through late 2014 “to support a stronger economic recovery,” they said.

 

[Muthukali]

Treasuries Drop as Dollar Gains; Most U.S. Stocks Decline

Treasuries slid, sending 10-year yields to a four-month high, while the dollar rose and gold tumbled as the Federal Reserve’s improved economic assessment caused investors to reduce bets on more monetary easing. Most U.S. stocks fell a day after the biggest rally of 2012.

The U.S. 10-year yield increased 14 basis points to 2.27 percent and the dollar strengthened versus all 16 major peers. The Standard & Poor’s 500 Index retreated 0.1 percent to 1,394.28 at 4 p.m. in New York after yesterday closing at its highest level since June 2008. The Dow Jones Industrial Average rose for a sixth day, its longest rally in more than a year, ending up 16.42 points at a more-than four-year high of 13,194.1. Gold futures slid to an eight-week low.

The Fed said yesterday that strains in global financial markets have eased and the labor market is gathering strength. The central bank said separately that 15 of the nation’s largest 19 banks may keep adequate capital levels even in a recession. European industrial output rose 0.2 percent in January from the previous month. Chinese Premier Wen Jiabao said relaxing property curbs could cause “chaos” in the market.

“Some worry that with the Fed’s upgrade of the economic environment, they may not do a bond purchase program on the long end,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that are required to bid at the auctions.

The yield on the 30-year U.S. Treasury climbed 14 basis points to 3.41 percent, the highest since October. The government today sold $13 billion auction of 30-year bonds at yield of 3.383 percent, the highest since August. The Fed’s 21 primary dealers that are required to bid at the sale were awarded 56.3 percent of the securities, compared with an average of 52 percent for the past five sales. Two-year yields increased four basis points to 0.39 percent.

Commodities Slip
The S&P GSCI Index of commodities lost 0.8 percent as silver and gold led declines among 21 of 24 raw materials. Copper dropped the most in a week, losing 1.4 percent to $3.848 a pound, on concern demand will ease in China. Gold for April delivery declined 3 percent to $1,642.90 an ounce. Oil for April delivery slid 1.2 percent to settle at $105.43 a barrel in New York after stockpiles at Cushing, Oklahoma, climbed to the highest level in nine months.

More than two stocks retreated for each that rose on U.S. exchanges. MetLife Inc. slid 5.8 percent after a plan for a share buyback was rejected by the Fed. The Dow Jones Transportation Average lost 1.4 percent as railroads CSX Corp. and Norfolk Southern Corp. tumbled at least 2.9 percent. Apple Inc. advanced 3.8 percent to a record $589.58 after Morgan Stanley raised its share-price estimate to $720.

Highest Since 2007
The Dow Jones Industrial Average surged 218 points yesterday and closed at the highest level since 2007, while financial shares in the S&P 500 rallied 3.9 percent as a group, the biggest gain of the year. The Fed said that it expects “moderate economic growth” and predicted the unemployment rate “will decline gradually.”

“Investors globally believe that macro risks have subsided” because of central bank actions, Tony Crescenzi, a strategist at Pacific Investment Management Co., said today in a radio interview on “The Hays Advantage” with Kathleen Hays and Vonnie Quinn. PIMCO manages the world’s biggest bond fund in Newport Beach, California. “The data as it’s accumulated has convinced more and more investors that the U.S. economy is on firmer footing than many previously thought.”

Stress Tests
JPMorgan Chase & Co. and Wells Fargo joined banks raising dividends and authorizing share repurchases after passing the stress tests. The results of the Fed’s tests showed that almost three years of economic expansion have helped U.S. banks raise profits, rebuild capital and increase liquidity after the collapse of Lehman Brothers Holdings Inc. in 2008.

Citigroup Inc., the lender that took the most government aid during the financial crisis, said it will resubmit its capital plan to regulators after failing to meet some minimum standards in the tests. Citigroup has repaid $45 billion in TARP money. Chief Executive Officer Vikram Pandit said in a memo to employees today that the bank still plans a “meaningful” payout to shareholders.

“I was expecting all of the banks to pass, but when you look at the terms, the stress tests were so onerous that a modest miss really isn’t all that discouraging,” said William Fitzpatrick, a Milwaukee-based financial-services analyst at Manulife Asset Management, whose team oversees $800 million.

European Stocks
The Stoxx 600 (SXXP) advanced for a second day as three shares gained for every two that declined. Barclays Plc and Credit Suisse Group AG climbed at least 3.9 percent to lead a rally in bank stocks. EON AG (EOAN), Germany’s largest utility, jumped 6 percent as earnings exceeded analysts’ estimates. Legal & General Group Plc surged 7.2 percent after the fourth-biggest U.K. insurer by market value boosted its dividend as full-year profit rose.

The dollar advanced 0.4 percent to $1.3026 against the euro and strengthened 1 percent versus the yen. The Dollar Index, a gauge of the currency against six major peers, increased 0.5 percent to the strongest level since January.

The pound strengthened versus 14 of 16 major peers and the yield on the 10-year gilt jumped 17 basis points to 2.34 percent.

Britain is proposing to revive “perpetual gilts,” first used in the wake of the 1720 South Sea Bubble crisis, to allow the government to borrow for as long as possible at record-low rates, according to two people familiar with budget discussions. Chancellor of the Exchequer George Osborne will use his March 21 budget to announce a consultation on introducing bonds of up to 100 years and reviving debt with no fixed maturity.

The two-year Italian yield slipped four basis points to 1.997 percent as the government sold 6 billion euros ($7.8 billion) of bonds today, with borrowing costs on its three-year debt falling to the lowest since October 2010.
Emerging Markets

The MSCI Emerging Markets Index (MXEF) was little changed. Benchmark indexes in Turkey, Poland, Hungary and South Korea gained at least 1 percent, offsetting declines in China and Brazil. Russia’s Micex Index added 0.8 percent.

China’s Shanghai Composite Index (SHCOMP) sank 2.6 percent, the biggest drop since Nov. 30. A gauge tracking Chinese property stocks in Shanghai slid 3.7 percent. Anhui Conch Cement Co. (600585), the nation’s biggest maker of the building material, fell 3.3 percent, and Poly Real Estate Group Co. (600048), China’s second-largest developer by market value, slumped 3 percent.

 

[Muthukali]

Jobless Claims in U.S. Decrease, Matching Four-Year Low

Claims for jobless benefits dropped last week to match a four-year low, and U.S. consumer confidence rose to the highest since 2008, signaling an improving labor market may boost household spending.

Applications for unemployment insurance payments fell by 14,000 to 351,000 in the period ended March 10, Labor Department figures showed today. The Bloomberg Consumer Comfort Index rose to minus 33.7 from minus 36.7 in the week ended March 11.

“There’s a steady, sustained improvement in the labor market,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, who was ranked the most-accurate forecaster of personal spending over the two years through February, according to data compiled by Bloomberg. “As more people have jobs, confidence is picking up. This is consistent with pretty solid gains in consumer spending.”

Prospects for stronger household demand, along with investment in new equipment, helped sustain manufacturing in the New York and Philadelphia regions this month, reports from the Federal Reserve showed today. At the same time, wholesale prices climbed in February by the most in five months, a reminder that higher gasoline costs pose a risk to corporate and consumer spending.

U.S. stocks advanced on the data, sending the Standard & Poor’s 500 Index above 1,400 for the first time in almost four years. The index rose 0.6 percent to 1,402.60 at the 4 p.m. close of trading in New York. The yield on the 10-year Treasury note was little changed at 2.28 percent.

The median estimate in a Bloomberg News survey of 52 economists called for 357,000 jobless claims. The Labor Department revised the prior week’s applications to 365,000 from the initially reported 362,000.

Firings Slow
Companies have slowed the pace of firings and are expanding their workforces as sales rise and the threat of financial contagion from a European default diminishes. Job growth in February capped the best six months since 2006, and the unemployment rate stayed at 8.3 percent, a three-year low.

“The economy seems to have regained its footing and is now on the way up,” said Edmund Phelps, director of the Center on Capitalism and Society at Columbia University in New York and a Nobel Prize-winning economist. “It’s a good sign that companies are confident enough to be beginning to get their stock of employees back up to more normal levels.”

Rising Wages
TopJob Staffing, Inc. in Roswell, Georgia, which provides part-time bartenders and banquet employees for company events, this month added a full-time corporate staff manager. It was the first full-time manager added in seven years, President Scott Harb said.

“Our big corporate accounts and country clubs are calling us more frequently,” said Harb, 47. “When companies cut back, hospitality is the first thing to go. It came back in 2010 and was sustained in 2011.”

Brighter job prospects and rising wages are giving consumers the means to spend more. Purchases at stores and malls advanced 1.1 percent in February, the most in five months, after a 0.6 percent rise in January that was larger than previously estimated.

“We’re seeing some improvement in the environment” for the American consumer, Stuart Burgdoerfer, chief financial officer at Limited Brands Inc., said today at a conference in Boston. Columbus, Ohio-based Limited Brands operates the Victoria’s Secret lingerie chain and Bath & Body Works stores.

Clothing stores and auto dealers were among those showing improving demand last month. Cars and light trucks sold last month at the fastest pace in four years, according to Ward’s Automotive Group.

Buying Climate
The confidence report’s measure of the buying climate reached the highest level since November 2007, and a gauge of the state of the economy had its best showing since September 2008.

Lauren Barnard, 24, switched jobs last month after she was recruited by a San Francisco-based public relations company that specializes in technology. Barnard said she got a higher salary and is now considering buying a new car.

“I feel more comfortable spending money, going out to eat and getting drinks, and I think it’s the same for my friends,” said Barnard, a client executive. “I don’t have a fear that I’m going to lose my job anytime soon. I feel really comfortable. One of my friends even just bought a house, which is pretty cool.”

Stock Gains
Stock gains are also lifting consumer spirits as household wealth grows. The S&P 500 Index has climbed almost 12 percent this year.

Full-time workers and people living in the South were among the groups that registered their highest levels of confidence in four years. The comfort gauge for political independents, a key swing group during this year’s election, improved to minus 29.9, the best reading since 2007, the year before voters last went to the polls to pick a new president.

Manufacturers remain at the forefront of the nearly three- year economic expansion.

The Federal Reserve Bank of New York’s general economic index increased to 20.2 this month, the highest since June 2010, from 19.5 in February. Readings greater than zero signal growth in New York, northern New Jersey and southern Connecticut.

A similar index from the Philadelphia Fed showed manufacturing in eastern Pennsylvania, southern New Jersey and Delaware expanded at the fastest pace in 11 months as factory employment picked up.

Fuel Costs
Rising fuel costs threaten to curb corporate profits and consumer spending. The average price of regular gasoline at the pump climbed to a 10-month high of $3.82 a gallon yesterday.

Today’s Labor Department report showed the producer-price index rose 0.4 percent in February following a 0.1 percent increase the prior month.

Stepped-up hiring prompted Fed policy makers this week to raise their assessment of the economy, while repeating that interest rates are likely to stay low at least through late 2014.

 

[Muthukali]

Consumer Sentiment in U.S. Drops on Gasoline Prices: Economy

Confidence among U.S. consumers unexpectedly dropped in March as this year’s 17 percent jump in gasoline prices threatens to squeeze household budgets.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 74.3, the lowest this year, from 75.3 the prior month. The gauge was projected to rise to 76, according to the median forecast of 70 economists surveyed by Bloomberg News. A government report today showed that consumer prices rose in February by the most in 10 months, with gasoline accounting for 80 percent of the increase.

he sentiment gauge contrasts with the Bloomberg Consumer Comfort Index, which climbed last week to the highest level since 2008. Reports this week showed claims for unemployment benefits declined, matching a four-year low, and retail sales rose in February by the most in five months, indicating households are weathering the increase in fuel costs.

“The rise in gasoline prices appears to be a worry but not a game-changer yet,” said Michael Gapen, a senior U.S. economist at Barclays Capital Inc. in New York, who predicted the sentiment index would drop to 74. “Households are saying ‘yes, gasoline takes a bit out of my pocket, but other energy costs are lower, and the labor market looks better so incomes will rise.’”

The Standard & Poor’s 500 Index rose 0.1 percent to 1,404.17 at the 4 p.m. close of trading in New York, the highest since May 2008. The yield on the 10-year Treasury note climbed to 2.29 percent from 2.28 percent late yesterday.

Cost of Living
Americans are growing more concerned about the rising cost of living, today’s confidence survey showed. Consumers said they expect an inflation rate of 4 percent over the next 12 months, the highest since May, compared with 3.3 percent in the prior survey.

Fuel costs may be the culprit. The average price of a gallon of regular gasoline at the pump rose to $3.83 on March 15, the most since May, according to AAA, the nation’s biggest motoring organization.

“Miserable,” said Kevin Lawn, 34, an electrician from Monrovia, Maryland. “That’s how gas prices feel.”

Lawn said his 13-year-old son will probably have to curtail his trips to competitive motocross races because of the price of gasoline. “This past weekend I spent $300 in fuel costs just to go to North Carolina,” he said.

At the same time, an improving labor market is giving many Americans cause for optimism. Payroll growth in February capped the best six months since 2006, and the unemployment rate stayed at 8.3 percent, a three-year low.

‘Better Shape’
“American consumers and the overall economy are in much better shape than they were a year ago,” Don Johnson, vice president of U.S. sales operation for General Motors Co. (GM), said on a March 1 conference call.

“Based on what we see in terms of pent-up demand and importantly the strength of the economy, we do not believe that short-term fluctuations in pump prices will curtail industry growth this year,” he said.

Stocks are also giving consumers a lift. The S&P 500 is on pace for the best first quarter since 1998, after rallying 12 percent this year.

A record 38 percent of those polled in the confidence survey said the most important economic development was an increase in employment. Asked about their view of the jobless rate in the year ahead, respondents were the most optimistic since 1984.

Income Levels
How Americans perceive the outlook varies by income. Households making less than $75,000 a year were less likely to say the economy will keep improving, while those with higher salaries were more optimistic.

Republicans seeking their party’s nomination for president, including former House Speaker Newt Gingrich, blame President Barack Obama for the increase in energy costs.

Obama countered yesterday that his detractors are “stuck in the past.”

“They dismiss wind power; they dismiss solar power; they make jokes about biofuels,” Obama told students at Prince George’s Community College in Largo, Maryland, outside Washington. “They were against raising fuel standards. I guess they like gas-guzzlers.”

The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, climbed to 84.2 from 83 the prior month.

Expectations Index
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 68 from a one-year high of 70.3.

Today’s Labor Department report on the cost of living showed that the consumer-price index climbed 0.4 percent in February, the most since April, after increasing 0.2 percent the prior month. From a year earlier, prices rose 2.9 percent in February. The so-called core measure, which excludes more volatile food and energy costs, advanced 0.1 percent from the prior month.

A separate report today from the Fed showed industrial production was little changed in February as automakers cut back following a surge the previous month and mining declined.

Output at factories, mines and utilities fell short of the median projection in a Bloomberg News survey of economists that called for a 0.4 percent gain. January production was revised to a 0.4 percent increase, previously reported as no change. Factory production, which makes up about 75 percent of total output, rose at the slowest pace in three months.

 

[Muthukali]

Treasuries Extend Slump as S&P 500 Adds to Weekly Gain

Treasury 10-year notes extended the biggest weekly drop in eight months amid concern inflation may accelerate as the economy improves. Oil increased, while U.S. stocks capped the biggest weekly gain of the year.

Ten-year Treasury yields added one basis point to 2.29 percent at 4 p.m. in New York after the cost of living in the U.S. rose the most in 10 months. The benchmark note’s rate surged 26 basis points this week. The S&P 500 added 0.1 percent to 1,404.17, the highest since May 2008, and climbed 2.4 percent in five days. The VIX, the benchmark gauge of U.S. stock options, slid to an almost five-year low. Oil halted a two-day drop as the dollar fell versus 14 of 16 major peers.

Stocks rallied this week, Treasuries slid and money-market rates rose after the Federal Open Market Committee members raised their assessment of the U.S. economy on March 13. Reports yesterday showing growth in manufacturing in America’s northeast and a drop in jobless claims also bolstered confidence in the world’s largest economy.

“We’ve seen stronger data in the U.S.,” said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, one of 21 primary dealers that trade Treasuries with the central bank. “The Treasury market is trading on U.S. fundamentals and Fed expectations.”

The difference in yields between 10-year notes and Treasury Inflation Protected Securities climbed to 2.41 percentage points, the most since August, as investors sought a hedge against rising prices.

The consumer-price index climbed 0.4 percent in February, matching the median economist forecast and reflecting a jump in gasoline that failed to spread to other goods and services. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.1 percent, less than projected.

Fed Statement
The Fed’s policy statement on March 13 drove money-market derivative traders to bring forward the time when they predict the Fed will first lift its target of zero to 0.25 percent and damped speculation the Fed will buy more debt in a third round of quantitative easing, or QE3.

Forward markets for overnight index swaps, whose rate shows what traders expect the federal funds effective rate to average over the life of the contract, signal a quarter percentage point advance in approximately the September and October 2013 period, according to data compiled by Bloomberg as of March 15. Last month, such an increase in the effective rate wasn’t predicted until early 2014. This year the effective rate has averaged 0.15 percentage point below the top end of the target range that the Fed reiterated three days ago.

Gains Pared
The S&P 500 pared early gains today after reports on industrial production and consumer confidence trailed estimates, tempering optimism about the economy after data yesterday showed jobless claims matched a four-year low and a Fed gauge of manufacturing in the New York area showed the strongest growth in a year. The Dow (INDU) Jones Industrial Average slipped 20.14 points, or 0.2 percent, to 13,232.62 to snap a streak of seven straight gains and retreat from the highest level since 2007.

Energy, raw-material producers and financial shares led gains among the 10 main groups in the S&P 500, while consumer- discretionary companies and utilities fell the most. Bank of America Corp. and Alcoa Inc. rose at least 1.4 percent for the biggest gains in the Dow, while United Technologies Corp., Microsoft Corp. and Walt Disney Co. fell the most.

The S&P 500 closed above 1,400 for the first time in almost four years yesterday and is up almost 12 percent this year, poised for its best first quarter since 1998.

Financials Rally
Financial shares in the S&P 500 rose 5.9 percent as a group this week to lead gains among 10 industries after most U.S. banks passed Fed stress tests. The group has surged 21 percent this year. Thomas Lee, JPMorgan’s chief U.S. equity strategist, and Jonathan Golub, his counterpart at UBS AG, said in reports that financial companies may add to the rally if longer-term interest rates continue to rise, boosting profitability from lending.

The yield curve, or difference between rates on 10-year and two-year Treasuries, climbed to a five-month high of 193 basis points today.

“We believe this week’s move in Treasuries is the culmination of recent economic success,” Golub wrote in a report dated today.

Quadruple Witching
Futures and options on equity indexes expire today in a process known as quadruple witching. About 1.1 billion shares of S&P 500 companies changed hands in the first hour of trading, almost double the average for that time period over the past 10 days. About 8.3 billion shares had changed hands on all U.S. exchanges by the end of the day, the second-busiest session of the year.

The Chicago Board Options Exchange Volatility Index slid 6.2 percent to 14.47, the lowest level on a closing basis since June 2007, amid reduced demand for options to protect against losses in stocks. The gauge known as the VIX (VIX) lost 15 percent this week, its biggest slide in more than three months.

Oil increased 1.9 percent to $107.06 a barrel on speculation demand will climb as the economy gains momentum. Treasury Secretary Timothy F. Geithner said yesterday rising oil prices show “we still face a dangerous and uncertain world” and there’s no easy way to lower gasoline costs. Brent crude, gasoline, heating oil and natural gas rose at least 2 percent to lead gains among 13 of 24 commodities in the S&P GSCI Index, which rallied 1.5 percent for its biggest gain in almost a month.

European Shares
Three shares gained for every two that fell in the Stoxx 600. Subsea 7 SA, the oilfield-services provider formerly known as Acergy SA, rose 5.3 percent after declaring a special dividend and saying it will buy back shares. Porsche SE (PAH3) retreated 3.6 percent as Sanford C. Bernstein & Co. downgraded the sports-car maker.

The German five-year yield rose nine basis points to 1.06 percent, its highest level of the year.

The yen was poised for its sixth consecutive weekly decline against the dollar. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, slipped 0.5 percent.

The MSCI Emerging Markets Index (MXEF) fell 0.2 percent, trimming its weekly gain to 0.3 percent. India’s Sensex index fell 1.2 percent and Russia’s Micex Index (MICEX) lost 0.7 percent. China’s Shanghai Composite Index (IFB1) increased 1.3 percent, halting a two- day slide. Emerging-market equity funds lured $456 million for the week ended March 14, Citigroup Inc. analysts led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global.

 

[Muthukali]

VietinBank plans Vietnam’s first dollar bond in eight months

Vietnam Joint Stock Commercial Bank for Industry and Trade, known as VietinBank, plans to meet with bond investors from March 19 about Vietnam’s first dollar-bond since July.

VietinBank will sell its debut US dollar-denominated notes about five days after the meetings, Chairman Pham Huy Hung said by telephone today. Standard & Poor’s gave the lender a B+/B issuer credit rating with negative outlook Friday, reflecting the credit rating company’s view on Vietnam’s sovereign rating.

The Hanoi-based lender plans a $500 million overseas bond sale this year that may offer a coupon of between 5 percent and 6 percent, Hung said in an interview in September.

The last dollar-note from a Vietnamese company was the $40 million of 6 percent convertible bonds for Vincom Joint-Stock Co., the country’s largest listed real-estate company by market value, according to data compiled by Bloomberg.

The coupon will be determined based on market conditions, VietinBank’s Deputy General Director Le Duc Tho said at a company conference in September.

HSBC Holdings Plc and Barclays Plc were appointed as advisers and will jointly arrange the sale, Tho told Bloomberg on Sept. 12.

 

[Muthukali]

Apple to Pay Dividend, Buy Back Stock to Return Some of Cash

Apple Inc. (AAPL) will pay its first dividend in 17 years and buy back $10 billion in stock, heeding investors who urged it to return part of the $97.6 billion in cash amassed by robust demand for iPhones and iPads.

Shareholders will receive a quarterly dividend of $2.65 a share starting in the period beginning July 1, Cupertino, California-based Apple said today in a statement. The buybacks will begin in the fiscal year starting Sept. 30 and happen over three years, the company said.

Chief Executive Officer Tim Cook is showing more willingness than co-founder Steve Jobs to channel part of cash and investments directly to investors. The move will cost $45 billion over three years, Cook said, and may broaden Apple’s shareholding base by attracting fund managers who only hold dividend-paying companies.

“It was high time to do this,” said David Rolfe, chief investment officer of Wedgewood Partners Inc., which holds Apple shares.

The dividend will cost Apple about $10 billion a year and represents a yield of 1.8 percent on the stock’s closing price today. The company generated $16 billion in cash in the first quarter of fiscal 2012, which ended in December. Shaw Wu, an analyst at Sterne Agee & Leach Inc., predicts that Apple will generate about $75 billion in cash this year.

Apple rose 2.7 percent to $601.10, closing above $600 a share for the first time.

Top 10 Yield
“This is something that large shareholders have been asking for,” Wu said before the announcement.

Including instances where a company has scrapped and re- established dividends, today’s was the largest initiation for a company in the Standard & Poor’s 500 Index, surpassing Cisco Systems Inc.’s announcement of a $1.3 billion dividend in March 2011. Apple’s move pushed the dividend yield of the benchmark gauge of American equities to 2.14 percent, from 2.06 percent, Howard Silverblatt, S&P’s senior index analyst, said in an interview.

Apple’s dividend may provide a short-lived boost to some pockets of the economy, said Richard Sichel, CIO of Philadelphia Trust Co., which manages $1.6 billion and holds Apple in some funds.

“More than anything, it’s a psychological boost,” Sichel said.

At 1.8 percent, the yield on Apple’s dividend would be the tenth-highest among U.S. technology companies with market values larger than $10 billion, data compiled by Bloomberg show.

Intel, Microsoft Higher
It’s lower than that offered by Intel Corp., which yields 3.03 percent, based on today’s closing price, and Microsoft Corp., which yields 2.48 percent on that basis. It tops Cisco’s dividend yield of 1.59 percent and International Business Machines Corp.’s 1.46 percent yield.

After today’s announcement, Google Inc., owner of the most popular search engine, is now the only technology company with a market value of more than $100 billion that doesn’t offer a dividend.

The growing amount of money on Apple’s balance sheet followed the introduction of the iPhone, the best-selling smartphone, and the iPad, the leading tablet computer. The company last week began selling a third-generation iPad, which comes with a high-definition screen and faster processor. Apple sold more than 3 million iPads on its debut weekend, a record, Apple said in a separate statement today.

“It’s literally become a cash machine,” said Charlie Wolf, an analyst at Needham & Co. in New York.

Contrast With Jobs
Gene Munster, an analyst at Piper Jaffray Cos., said Jobs, who died in October, resisted efforts to get Apple to return money to shareholders.

“It would have been unheard of under Jobs’s watch,” said Munster. “This is just finance 101, but it looks like rocket science next to what they’ve done in the past.”

Of Apple’s $97.6 billion in cash and investments at the end of December, about $64 billion was overseas. Oppenheimer said Apple will only use money held in the U.S. for the dividend and buyback to avoid tax consequences.

A dividend is a boon to shareholders, including Apple employees, who have already seen the company’s stock rise 48 percent this year.

Fidelity Management, Apple’s largest shareholder, will make $128.81 million each quarter from the dividend, based on its holdings as of Dec. 31. Vanguard Group Inc., the second-biggest shareholder, will receive $98.54 million and State Street Corp. will make $92.12 million.

‘War Chest’
“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” Cook said in the statement. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.”

On the conference call, Cook said adding a dividend will expand Apple’s investor pool. Some investors will only buy shares in companies that pay a dividend.

Apple last paid a dividend in 1995, before Jobs returned as CEO and led the introduction of top-selling products including the iPod, iPhone and iPad. The final dividend, of 12 cents a share, was suspended amid leadership upheaval and dwindling computer-market share. According to a company filing, Apple’s cash, equivalents and short-term investments dropped by about half, to $491 million, in the year through Sept. 29, 1995.

Highlighting its turnaround since that period, Apple has surpassed Exxon Mobil Corp. (XOM) as the world’s most valuable company. The iPhone maker’s market value is $560.4 billion, based on today’s closing price. That compares with $410 billion for Exxon Mobil.

 

[Muthukali]

Vietnam stocks: Dong Hai, PetroVietnam Drilling & Well Services

Shares of the following companies had unusual moves in Vietnam trading on Monday. Stock symbols are in parentheses and prices are as of close in Ho Chi Minh City.

The VN Index, the benchmark measure of the Ho Chi Minh City Stock Exchange, fell 0.1 percent to 438.07.

The VN-30 Index, a free-float adjusted, market capitalization-weighted index of 30 stocks that have the highest market value and liquidity on the bourse, increased 0.1 percent to 497.22.

Dong Hai Joint-Stock Co. of Ben Tre (DHC VN), a paper manufacturer, rose 4.8 percent to VND8,700, the biggest gain since March 9. Nguyen Thanh Nghia, a major shareholder, plans to buy 1 million shares to boost his stake to 12.5 percent from 5.8 percent, according to a statement on the exchange’s website.

PetroVietnam Drilling & Well Services Joint-Stock Co., (PVD VN), which offers technical services to the oil and natural-gas industry, gained 2.7 percent to VND38,000.

Oil traded near the highest price in a week in New York as investors bet that a US economic recovery and Saudi Arabian crude output near the strongest level since at least 1980 signal fuel demand is increasing.

Sai Gon-Quy Nhon seen most expensive in Vietnam materials sector

Vietnam’s Sai Gon-Quy Nhon Mining Corp seems to be the most expensive among 120 stocks in the country’s materials sector, data from Thomson Reuters StarMine shows.

At current prices, the miner is trading at over 26 times its intrinsic value of 3199.89 dong, as calculated by StarMine.

The stock is not tracked by analysts currently.

The miner also scores badly on StarMine’s valuation metrics with a Value-Momentum score of 27 and an Earnings Quality score of 25.

It has an enterprise value-to-sales ratio of 72 and trades at a price-to-book ratio of 7.8.

Year-to-date, the stock is flat compared to a near-24 percent rise in the benchmark HNX index.

 

[Muthukali]

SET down 0.01%

The Stock Exchange of Thailand (SET) composite index on Monday fell 0.06 point, or 0.01 per cent, to close at 1,189.50 points. The market value was 40.33 billion baht, with 6.31 billion shares traded.

The SET50 index went down 0.51 point, or 0.06 per cent, to stay at 837.93 points, with a total transaction value of 25.78 billion baht.

The SET100 index ended the session at 1,819.45 points, down 0.42 point, or 0.02 per cent, with a total trade value of 33.02 billion baht.

The SETHD index stood at 1,121.21 points, down 1.90 points, or 0.17 per cent, with a total transaction value of 8.74 billion baht.

However, the Market for Alternative Investment (mai) index rose 0.11 point, or 0.04 per cent, to close at 293.90 points, with a total turnover of 934.06 million baht.

Top five most active values were as follows;

BBL closed at 190.00 baht, up by 4.50 baht, or 2.43 per cent.

JAS closed at 2.90 baht, up by 0.12 baht, or 4.32 per cent.

TLGF closed at 11.40 baht, up by 11.40 baht.

BANPU closed at 602.00 baht, down by 10.00 baht, or 1.63 per cent.

IVL closed at 38.75 baht, down by 0.50 baht, or 1.27 per cent.

 

[Muthukali]

Stocks, Commodities Retreat on China as Treasuries Halt Slump

Stocks fell, pulling the Standard & Poor’s 500 Index down from an almost four-year high, and commodities slid amid concern growth will slow in China. Treasuries rebounded following the longest drop since 2006.

The S&P 500 slipped 0.3 percent to 1,405.52 at 4 p.m. in New York and the MSCI All-Country World Index fell 0.7 percent, snapping a three-day rally. The S&P GSCI Index declined 1.5 percent as lead, silver and corn led losses among 21 of 24 commodities. Ten-year Treasury (USGG10YR) yields slipped two basis points to 2.36 percent after increasing for nine straight days. The dollar rose versus 15 of 16 major peers.

China, the world’s biggest energy consumer and steelmaker, is raising fuel prices for the second time in less than six weeks and BHP Billiton Ltd. said the nation’s steel production is slowing. Vehicle sales may miss industry forecasts this year as economic growth slows, an official from the China Association of Automobile Manufacturers said. U.S. housing starts fell from a three-year high, Commerce Department data showed.

“There will be some sort of slowdown coming out of China and the Asian economies,” said Tim Price, who helps oversee more than $1.5 billion of assets at PFP Group LLP in London. “It can definitely take the heat out of the commodities markets.”

Rally Halted
The S&P 500 had rallied for three straight days before today, extending its 2012 advance to 12 percent. The index is poised for its best first quarter since 1998 as a decline in the unemployment rate to a three-year low and growth in manufacturing bolstered optimism in the economy.

The benchmark gauge of American equities closed at the highest level since May 2008 yesterday, while the S&P SmallCap 600 Index reached a record and the Nasdaq Composite Index rallied to an 11-year high. Today’s decline was the biggest for the S&P 500 in two weeks.

“With this improving economy and rising confidence, its very hard for a correction read to take hold here in a big way,” David Kelly, who helps oversee about $394 billion as chief market strategist at JPMorgan Funds in New York, told Bloomberg Television. “So we’ll have small corrections, but I don’t think a big one right now.”

Industrial and commodity companies led losses among five of the 10 main industries in the S&P 500 today. Alcoa Inc., Caterpillar Inc. and United Technologies Corp. fell at least 1.5 percent for the biggest declines in the Dow Jones Industrial Average.

Housing Starts
Toll Brothers Inc. and D.R. Horton Inc. paced declines in an S&P homebuilders index. U.S. builders broke ground on 698,000 homes at an annual rate, in line with the median forecast of economists surveyed by Bloomberg News and down 1.1 percent from a January pace that was stronger than previously reported, Commerce Department figures showed today.

The 10-year Treasury yield jumped 44 basis points in the previous nine days. Two-year Treasury yields rose two basis points to 0.40 percent and 30-year rates lost three basis points to 3.45 percent, retreating from the highest level since October.

U.S. stocks posted the best returns when 10-year Treasury yields rose to close to 4 percent, according to a study by S&P that tracked market performance since 1953.

The S&P 500 advanced 1.7 percent a month on average during periods when 10-year yields climbed to a range of 3 percent to 4 percent, according to data compiled by New York-based S&P. That’s the best performance among six categories of rising yields studied by the firm. Stocks began to fall when yields exceeded 6 percent, the study found.

Stocks, Yields
While rising yields tend to boost borrowing costs for companies and act as “a depressant in intrinsic value calculations,” they can also suggest a strengthening economy and prompt investors to switch to equities, according to Sam Stovall, S&P’s chief equity strategist.

Oil fell the most in more than three months in New York, retreating 2.3 percent to $105.61 a barrel, as Saudi Arabia, the world’s biggest crude-exporting country, said it can boost output immediately to stave off shortages. Silver futures dropped 3.4 percent to $31.83 an ounce and gold slid 1.2 percent to $1,647 an ounce.

European Stocks
The Stoxx Europe 600 Index (SXXP) fell 1.1 percent as Bayerische Motoren Werke AG and Daimler AG slid more than 4 percent, leading a gauge of automakers down 4 percent for the biggest drop in two weeks. Mercedes dealers are offering record markdowns of 25 percent on high-end models such as the S300 sedan, according to data stretching back to 2009 at cheshi.com, which tracks prices at more than 3,000 Chinese dealerships.

Chinese Premier Wen Jiabao announced this month an economic growth target of 7.5 percent for 2012, down from an annual 8 percent over the past seven years. China’s steel production is slowing as the economy focuses more on consumers than large infrastructure projects, according to Ian Ashby, president of iron ore at BHP, the world’s third-largest exporter.

David Joyce, managing director of expansion projects at Rio Tinto Group (RIO), the second-biggest iron-ore exporter, said at a conference in Perth, Australia, that the company is seeing a slowdown in China, its biggest customer.

Credit default swaps linked to China rose 10 basis points to 107 basis points, climbing from the lowest level in almost a year, according to CMA in London.

The yield on the 10-year German bund slipped two basis points to 2.04 percent, falling for the first time in six days.

Currencies
The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 0.2 percent. The Australian dollar tumbled 1.2 percent against the dollar and dropped 0.8 percent versus the yen, falling for the first time in four days against the two currencies.

The MSCI Emerging Markets Index (MXEF) lost 1.1 percent, a fourth consecutive decline, its longest losing streak of the year and paring its 2012 gain to 15 percent. The Hang Seng China Enterprises Index (HSCEI) lost 1.5 percent to close at the lowest level since Jan. 16.

OAO Gazprom fell 2.6 percent in Moscow as the Micex Index (MICEX) slid 1.7 percent. The FTSE/JSE Africa All Shares Index (JALSH) dropped 1 percent in South Africa.

 

[Muthukali]

Vietnam Index up 0.5 pct, outlook positive - Vietnam

The VN Index, the benchmark measure of the Ho Chi Minh City Stock Exchange, gained on Tuesday for the first time in three days, rising 0.5 percent to 440.29.

The VN-30 Index, a free-float adjusted, market capitalization-weighted index of 30 stocks that have the highest market value and liquidity on the bourse, increased 0.8 percent to 501.29.

Foreigners bought VND304.40 billion ($14.63 million) worth of shares and sold stocks worth VND207.43 billion, the exchange said.

Volume of shares traded: 62.75 million shares.

Value: VND992.46 trillion.

In Hanoi, the HNX Index on the Hanoi Stock Exchange gained 2.04 percent to finish at 74.39 points, with 78.31 million shares changing hand, valued at 797.05 billion.

Broker/trader comments
Chau Thien Truc Quynh, head of retail brokerage, Viet Capital:

“Stocks rose as demand for selective shares, including securities, emerged late in the trading day in hope for solid earnings reports in the first quarter.”

“Sentiment was also stimulated by the monthly inflation data of Hanoi and Ho Chi Minh City.”

“The market outlook will likely be positive in the medium term but risky in the short term as some funds will close their portfolios for net asset values from now until the end of the first quarter.”

“Stocks with solid fundamentals such as banking, food and foodstuff and consumer goods will continue leading the market in the next rally.”

Nguyen Tuan, investment director, FLC Securities:

“Stocks are still on an upward trend but not as strong as expected when major cash flows are on the sidelines.”

“Banking stocks are likely to continue leading the market during a fresh rally in the near future.”

Nguyen Hoai Nam, analyst, Kim Eng Securities:

“Stocks are likely to move sideways to gather more steam in the near term.”

Binh Dinh Minerals, Rang Dong, Everpia, Elcom
Shares of the following companies had unusual moves in Vietnam trading on March 20. Stock symbols are in parentheses and prices are as of close in Ho Chi Minh City.

Binh Dinh Minerals Joint-Stock Co. (BMC VN), a miner and trader of metal ores, jumped 4.8 percent to close at VND45,500, the highest level since March 5. The company will pay shareholders a 2011 dividend of VND5,000 per share, it said in a statement filed on its website.

Rang Dong Light Source & Vacuum Flask Joint-Stock Co. (RAL VN), a maker of thermos flasks and fluorescent lighting products, rallied for an eighth day, rising 4.9 percent, to VND34,600, the highest since Oct. 2, 2009. The Hanoi-based company will pay a dividend of VND1,500 a share on April 25, according to a statement on the exchange’s website.

Everpia Vietnam Joint-Stock Co. (EVE VN), which designs, produces and sells bedding products, rose for the first time in three days, jumping 4.9 percent to VND25,800. The company expects profit after tax to add 6.2 percent, to VND160 billion, and revenue to increase 12.4 percent to VND900 billion this year, it said in a statement filed on the exchange’s website.

Elcom Corp. (ELC VN), which offers telecommunications, information technology, automation and electronics products and services, slid 1.1 percent to VND27,700. Elcom plans to pay 2010 dividend by issuing new shares, according to a statement on the exchange’s website. Investors will get 25 new shares for every 100 existing ones they have, it said.

 

[Muthukali]

SET rises 7.10 points - Thailand

The Stock Exchange of Thailand main index went up 7.10 points or 0.60% to close at 1,196.60 points at the end of trading session on Tuesday afternoon. The trade value was 28.88 billion baht, with 4.45 billion shares traded.

The SET50 index ended at 843.65 points, up 5.72 points or 0.68%, with a total trade value of 17.17 billion baht.

The SET100 index rose 11.35 points or 0.62% to stand at 1,830.80 points, with a total turnover of 22.70 billion baht.

The SETHD index went up 7.03 points or 0.63% to 1,128.24 points with a total trade value of 6.65 billion baht.

The MAI index rose 1.08 points or 0.37% to close at 294.98 points, with total transaction value of 948.50 billion baht.

Top five most active values were as follows;

SCB - stood at 150.50 baht, up 2.60 baht (1.35%)
TCAP - stood at 31.50 baht, up 1.75 baht (5.88%)
BBL - stood at 190.50 baht, up 0.50 baht (0.26%)
JAS - stood at 2.88 baht, down 0.02 baht (0.69%)
BANPU - stood at 610.00 baht, up 8.00 baht (1.33%)

 

[Muthukali]

SET rises 11.07 points - Thailand

The Stock Exchange of Thailand main index went up 11.07 points or 0.93% to close at 1,207.67 points at the end of trading session on Wednesday afternoon. The trade value was -39.09 billion baht, with 5.31 billion shares traded.

The SET50 index ended at 852.14 points, up 8.49 points or 1.01%, with a total trade value of 27.67 billion baht.

The SET100 index rose 17.71 points or 0.97% to stand at 1,848.51 points, with a total turnover of 33.80 billion baht.

The SETHD index went up 6.27 points or 0.56% to 1,134.51 points with a total trade value of 10.66 billion baht.

The MAI index rose 0.16 point or 0.05% to close at 295.14 points, with total transaction value of 857.32 million baht.

Top five most active values were as follows;

DTAC - stood at 80.25 baht, up 4.50 baht (5.94%)
PTT - stood at 354.00 baht, down 1.00 baht (0.28%)
SCB - stood at 152.50 baht, up 2.00 baht (1.33%)
PTTGC - stood at 72.50 baht, up 2.25 baht (3.20%)
TCAP - stood at 33.00 baht, up 1.50 baht (4.76%)