Hang Seng index rises 0.3 percent on Monday, while the China Enterprises Index loses 0.1 percent.]]> |||
Hong Kong - Hong Kong stocks were almost flat on Monday, capping a volatile month in which major indexes registered their worst performance in nearly four years amid global market turmoil triggered by concerns over the Chinese economy.
The Hang Seng index rose 0.3 percent, to 21,670.58, while the China Enterprises Index lost 0.1 percent, to 9,741.41 points.
For the month, the Hang Seng index lost 12 percent, its fourth straight month of decline and the worst performance since September 2011.
Materials and industrial sector stocks fell sharply but energy and financial shares ended the day higher.
CITIC Securities shares slumped 5 percent, after four senior executives from China's largest brokerage admitted to insider trading.
Germany's DAX and France's CAC are on track for their worst month in four years.]]> |||
London - European shares fell on Monday, with Germany's DAX and France's CAC on track for their worst month in four years, hit by sliding Chinese stocks and prospects of a near-term U.S. rate increase.
At 08h05 GMT, the DAX, the CAC and the euro zone's Euro STOXX 50 were down about 1 percent. Volumes were likely to be thin, with British markets closed for a public holiday.
All three indexes are down about 9 percent in August so far.
“The market turmoil will continue in the near future. China is the catalyst, but the real reason for the sell-off is the nervousness about the first US rate hike,” Koen De Leus, senior economist at KBC in Brussels, said.
“The underlying trend is still up, but the time of making easy money on the stock markets is over.”
The Federal Reserve left open on Friday the possibility of a September increase, though several of its officials said the prolonged turmoil in financial markets might delay the first policy tightening in nearly a decade.
Shanghai stocks, which have plunged more than 40 percent since mid-June, were down about 1 percent on Monday, while MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.4 percent and was on track for a fall of about 10 percent this month.
Shares in Belgian insurance company Ageas rose about 3 percent after it said on Sunday it had agreed to sell its Hong Kong insurance unit to China-based asset manager JD Capital for $1.4 billion, exiting a business it acquired eight years ago.
South Africa’s rand looks set for a rough week as traders turn their gaze from China back to the US Federal Reserve.]]> |||
Johannesburg - South Africa's rand traded weaker against the dollar early on Monday after the Federal Reserve's vice-chairman suggested over the weekend that the United States may raise rates in September.
At 06h30 GMT the rand eased 0.14 percent to 13.3275 per dollar, extending losses to a third straight session following a modest recovery from last week's all-time low.
The unit collapsed to 14.00 versus the greenback last Monday on the back of a global stocks sell-off triggered by concerns over China's slowing economy as well as the timing of rate hike in the US.
“The week ahead could be telling for the SA currency as market players turn their gaze away from China and back to US Fed,” analysts at NKC African Economics said in a note.
The Federal Reserve's vice-chairman said on Saturday inflation was likely to rebound as pressure from the dollar faded, allowing the bank to raise interest rates gradually.
Concerns of a “taper tantrum”, similar to 2013 when investors pulled out of emerging markets after the US ended its massive bond-buying programme, look set to keep currencies in those economies on the back foot, traders said.
A slew of data from the US this week ending with employment numbers on Friday will be searched for clues on the Fed's next move.
Locally, trade data due later in the session is expected to provide opportunity to gauge South Africa's vulnerability to foreign portfolio outflows.
Yields on government bonds were higher in early trade, with the benchmark paper due in 2026 adding 2 basis points to 8.365 percent.
The waves of cash surfed relentlessly by some of Silicon Valley's largest venture-backed businesses are showing signs of receding.]]> |||
San Francisco - The waves of cash surfed relentlessly by some of Silicon Valley's largest venture-backed businesses are showing signs of receding amid concern the companies may already worth more than they're likely to be valued once they finally go public.
Investors have created 132 privately held companies valued at $1 billion or more each, according to tracker firm CB Insights, including ride-hailing service Uber, accommodation service Airbnb and messaging app Snapchat. After a turbulent week for equities, prompted by worries about the faltering Chinese economy, it may take longer for companies aiming to join their ranks to raise multimillion-dollar funding rounds, and they may not get the investment terms they want.
“Many companies in the market for funding right now are struggling to meet their valuation expectations and are going to have to reassess,” said Jon Sakoda of venture firm NEA.
In the last couple of years, the biggest VC-backed firms, dubbed “unicorns” in 2013 by venture capitalist Aileen Lee of Cowboy Ventures, raised increasing amounts of money at a rapid pace. Airbnb, for instance, raised three nine-figure funding rounds starting in 2011.
In June it sealed a $1.5 billion deal that propelled its valuation to $25.5 billion, the third-largest among venture capital-backed companies worldwide.
Venture capitalists started seeing indications a few months ago that late-stage investors, the ones who back unicorns, would be less willing to write nine-figure checks for all but the most impressive startups.
“Investors are now being much more selective identifying which companies can succeed under the scrutiny of the public markets,” said Roger Lee, an investing partner with Battery Ventures.
An end to the six-year stock market bull run seemed inevitable, they said, and they are less confident that all of these companies will live up to their hefty valuations when they go public, which is how these investors make money.
The number of IPOs trading at less than their offering prices has bolstered their doubts. As of late last week, 58 percent of the 38 tech and biotechnology IPOs so far this year were underwater, according to data provided by market-intelligence firm Ipreo and analysed by Reuters.
To gauge investor faith in late-stage companies, Barry Kramer, a lawyer at Fenwick & West specialising in venture capital, keeps an eye on whether more deals come with strict protections for investors.
One of several he's watching is known as a “senior liquidation preference,” where new investors are guaranteed their money back before any other investor in the event the company is acquired at a price below what the investor paid.
At the end of last year, about 26 percent of late-stage Silicon Valley venture deals came with that protection, but today, it's about 40 percent, Kramer said.
“That's an important signal to me,” he said, adding it's too early to draw conclusions after just two quarters. It can also indicate less negotiating leverage for the start-up, another sign of weakness.
Still, the biggest and fastest-growing of the group will likely be insulated from the market unease.
Take Uber, which just closed a $1 billion funding round in China ahead of schedule and with more investors than it could accept.
It is difficult to know how much effect the recent market rout has had on the valuation of the biggest VC-backed companies, because start-ups are typically valued when they seek funding, perhaps once a year.
One indicator could be GSV Capital, a Nasdaq-traded fund that buys shares of private companies from early employees and others. The fund, which as of June 30 held 12.5 percent of its assets in data-analysis company Palantir and 7.7 percent in storage company Dropbox, has dropped 6 percent since Aug. 20.
Some companies said they have noticed worry among investors. San Mateo, California-based Apttus, which provides cloud software for businesses, closed a $108 million funding round about three weeks ago.
“There is very much concern about frothiness and an impending correction,” said Apttus CEO Kirk Krappe.
Apttus raised the cash it wanted, but other companies got the brush-off. One late-stage venture investor said that five to six startups he declined to fund last quarter because of what he considered pricey terms came back willing to re-enter negotiations after being turned down elsewhere.
A year ago, he would have heard back from only one or two in that situation, he said. The investor didn't want to be identified for fear of offending his portfolio companies.
Dollar slips against the yen and euro on Monday amid persistent fears over China's economic malaise.]]> |||
Tokyo - The dollar slipped against the yen and euro on Monday on fears that China's economic malaise could drag on global growth, reversing a rally that had been fuelled by hopes of a September US rate rise.
In Tokyo afternoon trade, the dollar weakened to 121.10 yen from 121.52 yen late Friday in New York.
The euro rose to $1.1249 and 136.24 yen from $1.1188 and 135.97 yen in US trade.
Speaking at the weekend on the sidelines of the Fed's central banking symposium in Jackson Hole, Federal Reserve vice-chairman Stanley Fischer acknowledged that the turmoil rooted in China had raised some questions about the economic situation, even if US data remains good.
“The change in the circumstances which began with the Chinese devaluation (of the yuan) is relatively new and we are still watching how it unfolds. So I wouldn't want to go ahead and decide right now (on a September rise),” he said in a CNBC interview.
“We've got a little over two weeks before we make the decision and we've got time to wait and see the incoming data and see what exactly, what is going on now in the economy.”
Fischer's remarks were taken as a sign that the US central bank was still considering a rate rise as early as next month.
Higher rates tend to boost the dollar as investors seek out higher-yielding assets.
But on Monday, renewed concerns about China set in as markets look ahead to the release of manufacturing data this week.
Some economists tipped a contraction in activity in August, which would be the first since February, according to Bloomberg News.
“We have no doubt that financial market volatility will have as much or more bearing than economic data volatility on the Fed's 17 September policy decision,” National Australia Bank said in a commentary.
“In this respect we have to be mistrustful that the strong resurgence in Chinese stock prices will hold.”
Shanghai shares had sank 2.61 percent by the break Monday. The index plunged more than 16 percent from Monday to Wednesday last week before bouncing 10 percent in the next two sessions.
The dollar was mostly stronger against other Asia-Pacific currencies.
It rose to Sg$1.4130 from Sg$1.4027 on Friday, to 46.78 Philippine pesos from 46.64 pesos, and to 1,182.89 South Korean won from 1,175.90 won.
It also gained to Tw$32.55 from Tw$32.28, to 35.89 Thai baht from 35.85 baht and to 66.32 Indian rupees from 66.08 rupees, while it declined to 14,029 Indonesian rupiah from 14,038 rupiah.
The Australian dollar eased to 71.54 US cents from 71.68 cents, while the Chinese yuan fetched 18.99 yen against 18.93 yen.
Central bankers from around the world are telling their American counterparts that they are ready for a US interest rate hike.]]> |||
Jackson Hole - Central bankers from around the world are telling their American counterparts that they are ready for a US interest rate hike and would prefer that the Federal Reserve make the move without further ado.
In private and in public at last week's global central banking conference in Jackson Hole, the message from visiting policymakers was that the Fed has telegraphed an initial monetary tightening and, following a year-long rise in the dollar, financial markets globally are as ready as they can be.
The powerful group gathered at the end of a roller-coaster week in markets in which the Dow tanked by 1 000 points on Monday on concerns of a slowdown in China but recovered to trade higher by the end of the week. Remarks by Fed officials that liftoff could come in September were blamed by some for that volatility.
But for Agustin Carstens, the top central banker in Mexico, a rate hike by his neighbor sends an encouraging sign of economic health, even if it does force growth-challenged Mexico to also raise rates within days.
“If the Fed tightens, it will be due to the fact that they have a perception that inflation is drifting up, but more important that unemployment is falling and the economy is recovering,” Carstens told Reuters in an interview.
“For us, that is very good news,” he added.
While Yao Yudong, head of the People's Bank of China Research Institute of Finance and Banking, last week blamed the Fed for the market turmoil and said a US hike should be delayed, most central bankers from emerging markets contacted by Reuters at Jackson Hole and over the past month shared Carstens' view.
An end to more than six years of rock bottom US rates will touch off a wave of potentially painful adjustments as countries deal with the likelihood of an even stronger dollar as well as capital outflows from some emerging markets and changes in the relative prices of traded goods. An end to uncertainty for policymakers, however, could outweigh those difficulties.
Effects of the Fed's easy money have been felt in countries as diverse as Chile and Switzerland. Annual inflation in Chile has consistently come in above the bank's target range of 2 percent to 4 percent.
In Switzerland, the central bank has been forced to keep rates negative since it removed its cap on the franc at 1.20 to the euro, sending the currency soaring and putting a major strain on the export-dependent Swiss economy.
“Latin America has seen a surge of inflation” as countries “internalize” the evolution of Fed policy, Central Bank of Chile Governor Rodrigo Vergara told the conference.
Those sorts of trends have been under way for some two years, when then Fed chairman Ben Bernanke set off a global “taper tantrum” when he suggested the central bank was preparing to scale back its bond-buying program.
Two years after the taper tantrum, Fed officials say some volatility is unavoidable when the shift in policy occurs.
“For emerging markets, the smaller economies, they're often looking for a weaker currency. So from their perspective a tightening move by the Fed might be helpful to weaken their currency and help them do what they want to do,” St. Louis Fed President James Bullard said in an interview.
There are opponents to a hike - most notably the People's Bank of China and the International Monetary Fund, which has urged the Fed to delay until the world economy is on a stronger footing.
But even frequent Fed critics said at Jackson Hole that the time was coming to hike.
“It's a long anticipated event,” Reserve Bank of India Governor Raghuram Rajan said on a conference panel, sitting alongside Fed Vice Chairman Stanley Fischer. “It has to happen some time - everybody knows it has to happen - but pick your time.”
Those comments were supported by central bankers from Japan, South Korea and Indonesia. When asked earlier this month whether he thought the Fed should hike in September, Bank Indonesia Senior Deputy Governor Mirza Adityaswara told Reuters in Jakarta: “The more certainty there is, the better.”
A senior South Korean policymaker echoed that sentiment.
“A lift at an already expected timing would be better in a sense that it clears up one of the big uncertainties over the issue and it would mean the US economic recovery is deemed sustainable,” he said, speaking on condition of anonymity as he was not authorised to comment publicly by the Bank of Korea.
Oil feels the pressure in Asia on Monday as dealers take profits from huge gains in the previous session.]]> |||
Tokyo - Oil prices fell in Asia on Monday, coming under pressure as dealers took profits from huge gains in the previous session and tried to gauge the outlook for the US economy and its taste for crude.
The US benchmark, West Texas Intermediate for October delivery, eased 79 cents to $44.43 while Brent crude for October fell $1.00 to $49.05 in late-morning trade.
WTI jumped $2.66 (6.3 percent) on Friday, capping its strongest weekly increase in four and a half years, while Brent surged $2.49 (5.2 percent) after prices plunged on concerns about China's faltering economy.
Dealers said the rebound was largely due to news the US economy grew at an annual rate of 3.7 percent in the second quarter, up from a previous estimate of 2.3 percent, stoking hopes of a pickup in demand from the world's top oil consumer.
“Better-than-expected US GDP numbers and the strong rally of global stock market were some of the contributing factors for the recovery in the price of crude,” said Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at consultancy EY.
Oil has been on a roller-coaster ride in recent weeks over fears of a harder-than-expected slowdown in China, the world's top energy importer, at a time when world markets are awash with supplies.
Signs of rising demand in the US have dragged prices up from six-and-a-half year lows, however, and “key manufacturing and unemployment data from the US and ongoing developments in Yemen will set the tone for prices in the coming weeks”, Gupta said.
Dealers are closely monitoring fresh Saudi-led air raids in Yemen against Shi’a Huthi rebels on Sunday, amid fears that the crisis in the country could threaten key crude producers in the Middle East.
Yemen has been gripped by growing turmoil since the Shi’a rebels launched a power takeover in Sana’a in February. It borders major oil producer Saudi Arabia.
Daniel Ang, investment analyst at Phillip Futures in Singapore, said investors “remain wary of a volatile week ahead”.
“We believe that bearishness is still in play, and thus, aim a support at $44.00 for WTI and $48.50 for Brent,” he said.
Global financial markets looked set for another rough week on Monday, with stocks and commodities falling ahead of US data.]]> |||
Hong Kong - Global financial markets looked set for another rough week on Monday, with stocks and commodities falling ahead of data that could give clues on when the US will raise interest rates and surveys which are likely to point to further weakness in China.
Confusion over policy direction in the world's two largest economies sent global markets into turmoil early last week, with the wildest price swings in years pushing investors to the exits.
European shares looked set to follow Asian shares and US stock futures lower on Monday, with Germany's share index expected to open down 1.35 percent and France's CAC 40 likely to fall 1.39 percent, according to IG. The UK market is closed for a public holiday.
US stock futures slid 1 percent, suggesting weakness on Wall Street later in the session.
“This is a market that is walking on glass; China seems to be the central theme feeding into a lot of these things but today the focus is very much on US interest rates again,” said, James McGlew, executive director of corporate stock broking at Argonaut in Australia.
MSCI's broadest index of Asia-Pacific shares outside Japan shed more than 1 percent and is set to fall 10 percent this month, its worst monthly drop since May 2012.
Selling intensified as China markets extended losses. Shanghai stocks, the epicentre of this month's whip-saw action, were down more than 3 percent at one point. They have plunged more than 40 percent since mid-June.
Japan's Nikkei and Australia were down 2 percent before paring losses.
“A pull back in the market was to be expected as some investors are taking profits after the two-day rally,” wrote Gerry Alfonso, director of Shenwan Hongyuan Securities, referring to a brief rebound late last week.
“Investors seem to be waiting until the manufacturing PMI figure is released later this week before making significant decisions.”
A Reuters poll showed China's official factory sector activity likely fell to a 3-year low in August. Other surveys on Chinese factory and service sector activity will also be released on Tuesday.
Traders are also on edge ahead of U.S. business surveys, factory orders, trade data and Friday's nonfarm payrolls this week, after comments by a top Federal Reserve official suggested that a September rate rise was more likely than some investors expected.
Fed Vice chairman Stanley Fischer, speaking at the central bank' conference in Wyoming, said recent volatility in global markets could ease and possibly pave the way for a rate hike.
Prospects of higher interest rates and returns in the United States combined with China's slowdown have diminished the appeal of emerging markets as investors have dumped riskier assets.
Investors sold $5.9 billion of emerging market assets between Aug. 20-26, a sharp increase from $1.5 billion the week earlier, according to Nomura fund flows data.
Credit markets, often a harbinger of things to come for equities, spelt further pain in store for emerging markets.
An index for Asian high-yield credit has fallen sharply this month compared to a relatively steady performance in the investment grade index, according to Thomson Reuters data.
The dollar eased 0.6 percent to 121.03 yen after rising to the week's high of 121.76 on Friday following the Fed officials' comments that kept prospects of a September hike alive.
The euro was up 0.6 percent at $1.12550 after touching an eight-day low of $1.1156 on Friday.
The market will watch the European Central Bank's policy meeting on Thursday to see if it will be inclined to ease monetary policy further in the wake of the recent global market mayhem, though no imminent change is expected.
US crude oil prices dipped as their biggest two-day surge in quarter of a century ran its course.
US crude was down 1.3 percent at $44.62 a barrel after jumping more than 6 percent on Friday on frenetic short-covering fuelled by violence in Yemen, a storm in the Gulf of Mexico and refinery outages.
The contract was still down nearly 5 percent on the month, when it hit a 6-1/2-year low last week in the wake of China-led global growth fears.
Gold struggled to recover from last week's losses, even in the face of a softer dollar. Spot gold was flat at $1 133.98 an ounce, after dropping more than 2 percent last week in its steepest decline in five weeks. For the month, the metal was up 3.5 percent.
The petrol price is going to drop - but food inflation is expected to rise and the Reserve Bank is weighing interest rates.]]> |||
Johannesburg - South Africa’s joy at the incoming drop in the price of petrol could be short-lived as the Reserve Bank mulls over interest rates next month and food inflation is set to increase as a result of the drought.
On Friday, the Department of Energy announced that the price of petrol would decrease by 69c a litre and diesel by more than 50c a litre on Wednesday morning.
But economists warned that the respite might not last long as the rand looked set to remain vulnerable and the crude oil prices continued to show an upward trend.
Econometrix economist Azar Jammine said most economists had anticipated a 72c a litre drop in the petrol price, but the fact that it was only reduced by 3c a litre less showed just how the volatility of the currency could influence most decisions in a short time and impact on the entire economic outlook going forward.
Jammine said this put the Reserve Bank in a difficult position when considering its monetary policy stance next month. “It is a difficult position because it has to balance its concerns on the volatility of the currency with the difficulties the economy may encounter if it were to increase interest rates,” Jammine said.
“This may result in consumers cutting down further on their spending and could stifle the economy even further,” he said.
Friday’s announcement of the fuel price drop this Wednesday came in a week of high drama in which the economy plunged into further crisis with news that the gross domestic product, the broadest measure of the value of all goods and services produced within the country, contracted by 1.3 percent, the business confidence index remained bleak and the rand fell to R14, its lowest level ever against the US dollar.
Although the rand clawed back some gains to close at R13.3097 on Friday, concerns remained on the medium to long-term prospects of the economy with commodity prices still depressed.
Analysts pointed out that persistent power cuts and lack of clear direction from President Jacob Zuma’s government were the main reasons for the economic paralysis.
The drought in the country’s major food-producing provinces together with a lack of clear strategies to stabilise the mining industry and boost foreign investments could add further woes to an economy that is already battered.
ETM market analyst Ricardo da Camara said the situation would send worrying messages to potential investors and slow growth of an already battered economy. Da Camara said all these pointed to structural problems that could force the currency into a crisis.
“If we remain at the current volatility level we could be in for a tough ride going forward,” said da Camara.
“It (the rand) might have recovered slightly, but the pace at which it is depreciating against the major trading currencies points to a crisis that could be with us before we even know it,” he added.
The Transvaal Agricultural Union of South Africa said it should be the government’s priority to stabilise the economy and ward off the threat of recession.
Union president Louis Meintjes said the government should start in areas that it had control over. “The government should contribute to lessen the impact of excessive wage demands and minimum wages,” he said.
A volatile ride for global markets this week ended calmly even as lingering worries over Chinese economic growth weighed on stocks.]]> |||
New York - A volatile ride for global markets this week ended calmly on Friday even as lingering worries over Chinese economic growth and the Federal Reserve's plans to raise interest rates weighed on stocks, but oil rebounded sharply for a second day.
US crude jumped more than 6 percent as a rally in gasoline prices and air raids in Yemen forced traders to scramble to cover short positions. US crude gained 17.2 percent in two sessions, the second-largest two-day rise in 25 years.
Those Fed officials who are anxious to raise rates said at an annual global central bankers' conference in Jackson Hole, Wyoming that continued market turmoil may lead the US central bank to delay tightening monetary policy beyond September.
The Fed is waiting to see how data and markets unfold over the coming weeks before deciding whether to raise rates at its meeting in mid-September, Vice Chair Stanley Fischer told CNBC.
Chinese stocks jumped for a second straight day, rising more than 4.0 percent, after authorities said pension funds managed by local governments will soon start investing 2 trillion yuan ($313.05 billion) in stocks and other assets.
The move was the latest response by Chinese authorities, including the People's Bank of China, to shore up the economy after they cut rates, lowered reserve requirements and injected liquidity into the banking system.
Stocks on Wall Street mostly edged higher at the close, as European equity markets did hours earlier, suggesting fears of Chinese contagion were overdone and that a US rate hike is not the end of the world, said Andrew Wilkinson, chief market strategist at Interactive Brokers in Greenwich, Connecticut.
“There's an element of throwing the baby out with the bath water. Everything got thrown out on that view,” Wilkinson said.
“It's really a question of volatility having settled down somewhat even though it remains relatively high and people still view equities as being a decent place to be,” he said.
The Dow Jones industrial average closed down 11.76 points, or 0.07 percent, to 16,643.01. The S&P 500 rose 1.21 points, or 0.06 percent, to 1,988.87 and the Nasdaq Composite added 15.62 points, or 0.32 percent, to 4,828.33.
Major European equity indices finished higher after a late-session rally, helping MSCI's all-country stock index gain 0.19 percent. The pan-European FTSEurofirst 300 index rose 0.34 percent to close at 1,435.13, and euro zone's blue-chip Euro STOXX 50 index gained 0.18 percent. But Germany's DAX shed 0.17 percent, or a decline of just under 17 percent from its record high in April.
Gold rose as technical indicators and the notion the Fed may delay a rate hike provided support. US gold for December delivery rose 1 percent to settle at $1,134 an ounce.
US Treasuries prices retreated from a one-week peak. Benchmark 10-year Treasuries notes fell 5/32 in price to yield 2.1860 percent.
German bond yields edged lower, defying the sudden surge in oil, as data showed consumer prices in Europe's biggest economy had been weighed down by falling energy costs.
Oil saw its biggest one-day bounce since 2009 on Thursday, with North Sea Brent and US light crude rising more than 10 percent. US crude notched its first weekly gain in nine weeks, ending its longest losing streak since 1986.
Brent climbed $2.49 to settle at $50.05 a barrel on Friday and US crude rose $2.66 to settle at $45.22 a barrel.
The US dollar gained for a fourth straight session, buoyed by calmer financial markets and generally positive US economic data that supported the notion that the world's largest economy was on a stable growth path.
The dollar index was up 0.5 percent at 96.088. The euro slipped 0.5 percent to $1.1187. Against the yen , the dollar rose 0.29 percent to 121.38.