Monday, October 18, 2010

Coal India’s Share Sale Draws $314 Million of Bids in First Hour

Coal India Ltd., the world’s biggest producer of the fuel, received 13.9 billion rupees ($314 million) of bids at the upper end of the price range in the first hour of the nation’s biggest initial share sale.

Investors bid for 56.74 million, or 9 percent, of the 631.6 million shares on offer as of 11 a.m. in India, according to data on the National Stock Exchange’s website. The state-owned company’s stock is being offered at 225 rupees to 245 rupees apiece, Coal Minister Sriprakash Jaiswal said Oct. 12. The government plans to raise as much as 151.5 billion rupees from the sale.

Sixteen of 19 investors surveyed by Bloomberg News said they plan to buy shares in the world’s largest coal producer. The sale is the third offering in a state company since April as the government seeks to cut its budget deficit and fund infrastructure projects. Steel Authority of India Ltd., Oil & Natural Gas Corp. and Indian Oil Corp. also plan to sell shares.

“The IPO will easily get subscribed and that is because the valuation is fair,” Samir Arora, founder of hedge fund Helios Capital Management Pte. in Singapore, said by telephone today. “That’s the biggest attraction. It’s a large company and it’s relatively cheap.”

Institutional investors in India delay making bids until the last day of an IPO after the country’s market regulator in May made it mandatory for them to pay 100 percent of the application money upfront. Almost 90 percent of bids in Standard Chartered Plc’s $540 million India share sale in May came on the final day.

India’s coal imports surged 16 percent in the year ended March 31 as power plants burned more of the fuel to meet demand in Asia’s second-fastest growing major economy. Coal India will seek environmental clearances from the government to mine in densely forested areas in states including Jharkhand and Chhattisgarh estimated to hold half of its future output.

Government Target

The IPO by Kolkata, West Bengal-based Coal India would surpass Reliance Power Ltd.’s 116 billion-rupee sale in January 2008 as India’s biggest, according to data compiled by Bloomberg. Reliance Power sold shares at 450 rupees apiece and investors ordered shares worth as much as $189 billion. The shares slumped 48 percent from the offer price on their trading debut on Feb. 11, 2008.

Citigroup Inc., Deutsche Bank AG, Bank of America Corp., Enam Securities Pvt., Kotak Mahindra and Morgan Stanley are managing Coal India’s offering. The sale closes on Oct. 21.

The share sale will help the government raise 37.8 percent of its 400 billion rupee asset-sale target in the year ending March 31. The South Asian nation has raised 5.2 percent of its target from selling stakes in two state companies this year.

Coal Demand

Investors are buying shares as India builds power plants and steel mills to keep pace with an economy that expanded at the fastest pace in 2 1/2 years in the three months ended June 30. India’s coal demand may more than triple in the next two decades to 2 billion metric tons, Coal Minister Jaiswal said Sept. 24.

India’s Sensitive Index has gained 14 percent this year, the best performance among the world’s 10 largest stock markets. The Sensex gained about 47 percent in 2007, the most in four years. In 2008 the gauge fell almost 53 percent, its biggest decline.

Companies from emerging economies in the Asia-Pacific region raised over $72 billion in initial sales this year, more than triple the amount in the same period in 2009, according to Bloomberg data. Beijing-based Agricultural Bank of China Ltd. sold $22.1 billion of shares in Shanghai and Hong Kong last quarter in the world’s largest IPO.

Coal Production

The nation produces 530 million tons of coal a year and imports about 67 million tons annually. Coal India has proven reserves of 52.55 billion tons, of which 21.75 billion is extractable, the share-sale document shows.

Coal India may miss its production targets for 2011 and 2012 because of delays in environmental clearances, Chairman Partha Bhattacharyya said Oct. 13, without giving new estimates.

The company had aimed to produce 460 million tons in 2011 and 486 million tons the next year, Bhattacharya said on May 20. Environmental approvals to prospect for more reserves take as long as seven years in India, he said.

The environment and coal ministries are jointly identifying areas for coal mining designated as “go” and “no-go” areas to find ways to boost output of the fuel to meet surging demand.

“No-go” areas are locations with medium or heavy density forests while degraded forests are go-areas, Minister for Environment and Forests Jairam Ramesh said in June last year. Ramesh rejected last month Vedanta Resources Plc’s planned bauxite mine and halted in August two hydropower projects.

Maoist insurgents are also a risk. Rebels are active in seven eastern and central states with 40 billion tons of India’s 46 billion tons of proven coal reserves, according to CLSA Asia- Pacific Markets estimates.

Tuesday, June 22, 2010

Market overview: Retailers rise after budget

16:30 Close Footsie was overall broadly unchanged by the Budget today, closing some 50 points lower after falling early in the day, but there was some sector-specific movement. Chancellor George Osborne's Budget speech unveiled a rise in VAT to 20% from 17.5% from January 4, but the move had been widely anticipated. Clothes retailers Marks & Spencer and Next were among the retailers that went well. In compnay news, Costa Coffee owner Whitbread gave the Footsie a small caffeine rush after a trading update. Premier Inn and Costa Coffee were the star performers for the hotel and restaurant chain group as it posted a record 7.6% like for like sales rise. The FTSE 100 was held back by losses among resource stocks, which are hit by a retreat in commodity prices. Oil groups BP and BG fall back, while ENRC leads miners lower. FTSE 100 closed down 52 at 5,247.

16:05 Retailers and housebuilders have reacted postively to today's budget, though shares are lower overall. Chancellor George Osborne has unveiled a rise in VAT to 20% from 17.5% from January 4, but the move had been widely anticipated. Clothes retailers Marks & Spencer and Next are among the retailers going well. The lower than feared rise in Capital Gains Tax was good news for housebuilders, which were also heartened that an immediate rise in CGT means there won't be a rush to sell houses. FTSE 250-listed Barratt and Persimmon are showing good gains. The FTSE 100 is held back by losses among resource stocks, which are hit by a retreat in commodity prices. Oil groups BP and BG fall back, while ENRC leads miners lower. FTSE 100 down 54 at 5,245.

14:20 Retailers are among the top performers in the FTSE 100 following today's Budget. Chancellor George Osborne has unveiled a rise in VAT to 20% from 17.5% from January 4, but the move had been widely anticipated. Clothes retailers Marks & Spencer and Next, Argos and Homebase owner Home Retail Group, supermarkets Wm Morrison and Tesco and B&Q owner Kingfisher are in the top 10. Hotel and coffee shop operator Whitbread, which saw a 7.6% rise in like-for-like sales in the 13 weeks to 3 June, is today's top riser, but Footsie is lower overall, down 58 at 5,240.

13:25 Footsie has barely flickered on the raft of new tax proposals proposed by George Osborne. It has been a long time since a chancellor reeled off such a list of tax increases and perhaps investors are taking time to absorb it all. VAT is going up, CGT is going up and banks have been bit with a levy. Even so, Footsie is still little changed with fallers still largely the miners and BP. FTSE 100 down 81 at 5,217.

13:22 Capital gains tax for higher rate payers will rise to 28% from midnight tonight from 18% currently.

13:15 VAT will rise to 20% from 17.5% from January 4, Osborne says.

13:06 Corporation tax will fall by 1% over the next four years to 24% from the current 28%, Chancellor George Osborne says.

12:45 Most of the budget deficit reduction will come from spending cuts rather than tax rises, Osborne has said.

12:34 Chancellor George Osborne has begun his Budget speech. He says he wants there to be an 'enterprise led' recovery.

12:25 Footsie has continued drifting lower, leaving just five stocks in the blue. Mexican silver miner Fresnillo is the heaviest faller as metal prices fall. Bank Barclays is also weak. Oil group BG is down as crude prices slip back, as is BP. Among the handful of risers is hotel and coffee shop operator Whitbread which saw a 7.6% rise in like-for-like sales in the 13 weeks to 3 June as its low prices attracted customers during the uncertain economic conditions. FTSE 100 down 80 at 5,219.

10:30 Only nine FTSE 100 stocks are posting gains as resource stocks weigh on the FTSE 100. Miners retreat after gains yesterday on the back of China's decision to de-link its currency from the dollar. Fresnillo is the heaviest faller. Oil stocks BG and Cairn Energy are lower in line with the oil price. Among the risers is hotel and coffee shop group Whitbread, which saw a 7.6% rise in like-for-like sales in the 13 weeks to June 3. FTSE 100 down 61 at 5,238.

09:10 Resource stocks are dragging Footsie slightly lower, with miners giving up yesterday's gains and oil group BP continuing its descent. Fresnillo and Kazakh pair ENRC and Kazakhmys are the worst hit miners. The sector was on the front foot yesterday after China's decision to de-link its currency from the dollar. BP is continuing to suffer from the fallout of the Gulf of Mexico oil leak. Oil explorer Cairn Energy also falls back. FTSE 100 down 25 at 5,274.

08:40 Miners are on the retreat after yesterday's China-inspired run, dragging Footsie down with them. Fresnillo and Kazakhmys are the worst hit. BG is another weak performer. Whitbread is top of the list after a strong performance from Premier Inn and Costa Coffee in the last three months. FTSE 100 down 29 at 5,270.

Sunday, June 6, 2010

House prices catching up slowly

House prices are now less than 10 per cent below their 2007 peak, according to the Swindon-based Nationwide Building Society.

Prices have increased by 0.5 per cent month-on-month in May and the annual rate of house price inflation has dropped from 10.5 per cent to 9.8 per cent – but looking at the market generally, prices have gone up 12.2 per cent since the February 2009 trough.

The average price of a house is now £169,162.

Nationwide’s Chief Economist Martin Gahbauer said: “Housing market conditions remain characterised by thin transaction volumes and a relative scarcity of properties for sale, despite a slow return of more sellers in recent months.”

Mr Gahbauer said the forthcoming budget might have an effect on house pricing. “The coalition plans to increase the rate of capital gains tax charged on the disposal of non-business assets, potentially including second homes and buy-to-let investment properties,” he said.

“With regard to what the short-term impact will be on the housing market and house prices, the key question is around the timing and implementation of any CGT increase.

“If there is a time lag between the announcement of the increase and its actual implementation, then some second home owners and buy-to-let landlords may decide to sell in advance of the higher rate being introduced – it is difficult to know how many.

“The incentive to try to beat the higher tax rate is most pressing for those who have owned their properties for a relatively long period.”

Monday, May 24, 2010

Survey: Slight increase in New Yorkers’ consumer confidence

Consumer confidence in New York state barely grew last month, according to new data from the Siena Research Institute.

The institute, affiliated with Siena College in Loudonville, also said there’s no sign consumers are planning a buying surge anytime soon.

Consumer confidence rose 1.3 points in April, to a value of 66.8. The reading is 5 points below the nationwide confidence level.

A reading of 75.0 is the break-even point, where an equal percentage of people are optimistic and pessimistic. The consumer confidence index measures peoples’ willingness to spend, as opposed to their ability to spend.

“Overall, consumer confidence was flat in April; not horrible, but as yet still failing to make any real progress towards good,” said Doug Lonnstrom, founding director of the Siena Research Institute. “A majority of consumers still predict bad times for business conditions over the coming year, and (expect) tough times to last through 2015.”

Buying plans were up for vehicles, computers and homes. Buying plans were down for furniture and major home improvements.

The survey was conducted last month through telephone calls to 805 New York residents older than 18. There is no margin of error associated with the confidence readings, because they are index numbers developed in a series of statistical calculations.

Monday, April 26, 2010

Oil above $85 on signs US economy improving

Oil prices gained above $85 a barrel Monday in Asia as growing investor optimism about the U.S. economy boosted equity and commodity prices.

Benchmark crude for May delivery was up 16 cents to $85.28 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.42 to settle at $85.12 on Friday.

Oil prices have bobbed around the $85 a barrel for about three weeks, holding gains after a jump from $69 in February amid signs the U.S. economy is improving.

The Dow Jones industrial average rose 0.6 percent Friday, and most Asian stock indices gained on Monday, led by a 2.2 percent jump in Japan and an advance of 1.7 percent in Hong Kong.

Oil traders often look to equity markets as a barometer of overall investor sentiment.

"The economic health of the U.S. is getting better," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The positive economic data has supported the increasing confidence among investors, and that's bullish for oil."

Despite growing corporate earnings, the unemployment rate remains high and U.S. crude demand hasn't yet recovered strongly.

"Crude inventories are still very high," Shum said. "Oil prices would be a lot lower than $85 if you worried about fundamentals."

In other Nymex trading in May contracts, heating oil rose 1.15 cent to $2.262 a gallon, and gasoline increased 1.19 cents to $2.365 a gallon. Natural gas jumped 5.6 cents to $4.313 per 1,000 cubic feet.

In London, Brent crude was up 17 cents at $87.42 on the ICE futures exchange.

Tuesday, March 30, 2010

Friday, March 19, 2010

Winners and losers if inflation skyrockets

The word "inflation" strikes fear into the hearts of many Americans. It conjures worries of a stagnating economy, rising prices, a falling dollar and an income that just can't keep up with the cost of living. But while a high inflation rate hurts many Americans financially, others actually see a benefit. Following are some potential winners and losers in an inflationary cycle:
Winners
Fixed-rate mortgage holders. Anyone with large, fixed-rate debts such as mortgages benefit from higher inflation, says Mark Thoma, professor of economics at the University of Oregon in Eugene.
Find the best mortgage rates
Bankrate can help you find the lowest available mortgage rate.
"They're going to be paying back with devalued dollars," Thoma says.
A higher inflation rate also helps homeowners who bought during the peak of the real estate boom and are now "under water" by bringing equity back into the positive column more quickly.
Auto-loan holders. Auto-loan holders who bought before inflation and locked in a relatively low interest rate benefit from high inflation because they pay off a sizable debt with devalued dollars, says Nancy Lowenberg, a financial adviser with Hiawatha, Iowa-based Securian Advisors MidAmerica.
Investors in stocks. Stockholders get some protection from inflation because the same factors that raise the price of goods also raise the values of companies.
"Theoretically, the value of equities varies directly and proportionally with inflation," Thoma says. "When you double all prices and wages, you double profits and you double the value of stocks, basically."

Small-business owners with big fixed-rate debts. As prices for products go up, small-business owners find themselves better able to manage fixed-rate debt from investments in equipment and other business necessities, Lowenberg says.
"Think about a business that's expanding and borrows money to put in state-of-the-art equipment so that it can grow," Lowenberg says. "If inflation is higher than normal, and they're getting paid more for their product because raw material prices were up and they're paying their workers more, they're paying the debt back in stable dollars."
Investors in commodities. Bankrate senior financial analyst Greg McBride says commodity prices track the inflation rate closely. Buying storable commodities such as gold can be a good hedge against inflation.
Losers
The American economy. High inflation historically has hurt the American economy, McBride says.
"If you look at periods of strong growth in U.S. history, the one constant has been a very modest rate of inflation over that time."
advertisement
In periods of high inflation, consumers' purchasing power falls and their standard of living slides with it.
Also, borrowing to fund new businesses, buy homes and finance other tasks necessary for a healthy economy becomes more difficult as lenders jack up interest rates to hedge against further inflation.