Lehman Brothers to file Bankruptcy - Markets Crash

Global equities took a beating on Monday as the US financial market crisis worsened with Lehman Brothers Holdings Inc set to file bankruptcy.

Taiwan's Taiex plummeted 4.09 per cent, Australia's ASX fell 1.76 per cent, Singapore's Straits Times declined 3.11 per cent and Philippines PSEi dropped 4.16 per cent. The BSE Sensex plunged 4.66 per cent below 14000 and NSE's Nifty tumbled 4.85 per cent.

Lehman has been driven to file for Chapter 11 following failure of talks between prospective buyers and the US government declining to fund a takeover of the ailing investment Bank. Barclays Plc was the first to pull out for want of guarantees from the government and Wall Street firms against losses on Lehman's assets. Bank of America Corp. withdrew later, opting instead to acquire Merrill Lynch & Co. for $50 billion.

Adding fuel to fire, American International Group Inc plans to approach the Federal Reserve for help, even as it looks to sell some of its assets and raise more capital.

The US mortgage market is worth about $12 trillion and consumer credit is $2.59 trillion. So far, the losses suffered by securities firms are only 3.4 per cent of the consumer credit and mortagage credit available.

Freddie Mac and Fannie Mae, which were bailed out by the US government, both control nearly half of the $12 trillion mortgage market. The failure of these housing credit giants triggered default swaps to the tune of $1.6 trillion.

What isn't known is how all of this credit was leveraged. By conservative estimates, if this credit was leveraged five times, then a $1 trillion credit loss turns into a $5 trillion liquidity loss. A $2 trillion loss becomes a $10 trillion liquidity loss, which is only $3 trillion less of the US GDP.

The losses will increase as more people miss their mortgage payments. Credit card debt will also rise as people who just lost their jobs default.

"Given the likelihood of more credit losses, it will choke global liquidity. This crisis will slow the global economy without exception. Sectors related to exports such as IT and auto will feel the heat. The next major effect will be on real estate as funding for the same is through PE money.

The sector is already starved for funds. FIIs may not have funds to divert to Indian markets. Rupee will depreciate further, which in turn will make imports costlier. Overall, a total muddle," said V Theegala, analyst at large brokerage.

BSE IT index plunged 6.71 per cent, Auto index declined 2.52 per cent and Realty slumped 9 per cent.

Said Ranjan Sadhu, fund manager at Raxson Global, "Financials (stocks) will continue to be slammed, commodities won't have the same 'fire' we saw over the past few years, and debt-heavy corporations will find it harder to rollover their bonds."

BSE Bankex dropped 5.24 per cent.

"Gold and silver don't do well in deflationary environment. We expect them to under perform over the next twelve months," Sadhu added. Gold in international market was trading at $781 per ounce.

- Economic times

Gold demand to rise ahead of festive season

Demand for gold is expected to increase following a downward trend in prices during the forthcoming festive season, a top industry official said.

"Gold demand will go up during the forthcoming festive season. The downward trend in gold prices may also help increase demand," Bombay Bullion Association (BBA) President Suresh Hundia said. The demand for gold revived as prices fell sharply in the last one month from an all-time high of Rs 13,764 per 10 grams as on July 15 to Rs 11,415 on September 13.

The fall in prices brings relief to local consumers in the festival season. Demand has improved significantly ahead of festivals and is expected to continue. At the beginning of the month, traders and jewellers alike anticipated a sudden buying fever amongst the consumers, owing to the festive season ahead and also the fall in gold prices. But demand in the early stage of the month did not increase as expected.

Demand for gold in the Indian market picked up only after the second week, National Commodity Exchange of India (NCDEX) Economist Manasee S Gokhale said.

Gold price may hover between Rs 10,800 to Rs 11,800 by Diwali, Hundia said adding that in view of rising demand, import of gold has improved to 98 tonnes in August 2008 as against 69 tonnes in August 2007. Indian demand for gold this month is about 5 to 10 times the average demand in the same period last year.

The last week of August had seen a record high demand for gold on the back of a rising dollar and falling crude oil prices pushing gold prices further down, increasing the demand for the same, Gokhale said. The premiums paid in the bullion market have also risen in India owing to Turkey competing with supplies of gold that normally comes to India from the Western world and European traders.

Turkey is the third largest importer of the yellow metal and in August it imported a record high amounting to 45 tonnes, thereby raising the premiums that Indians had to pay because of supply constraints, Gokhale added. Gold prices in the international market sank to a new one-year low last Thursday, falling below $750 an ounce as a stronger greenback and easing oil prices encouraged investors to pull money out of commodities.

The dollar rose to an almost one-year high versus the Euro last Thursday despite a Commerce Department report showing a soaring US trade deficit for July. Gold hasn't recorded a single upward session this month and it has fallen more than $90 in the nine trading days since Aug 28. The precious metal is now more than $250 lower than its record high above $1,000 hit in March.

"Gold price is really bad. The decline in the international market was due to people not worrying so much about high inflation since the energy prices went down," bullion analyst Amit Zaveri said. A pull-back in US dollar, a recovery in oil prices and the onset of the gold-studded Indian wedding season, could see a medium-term bounce in gold prices, he added.

September Closing Rates - BSE | NSE | NASDAQ | Dow Jones

September 30,2008 - TUESDAY - Closing Rates :


DOW JONES (Closing) - 10394.92 - Down(-748.21)

NASDAQ (Closing) - 1983.73 - Down(-199.61)

SENSEX (Closing) - 12860.43 - Up^264.68

NIFTY (Closing) - 3921.20 - Up^71.15


September 29,2008 - MONDAY - Closing Rates :


DOW JONES (Closing) - 11143.13 - Up^121.07

NASDAQ (Closing) - 2183.34 - Down(-3.23)

SENSEX (Closing) - 12629.60 - Down(-472.58)

NIFTY (Closing) - 3850.05 - Down(-135.20)


September 24,2008 - WEDNESDAY - Closing Rates :


DOW JONES (Closing) - 10854.17 - Down(-161.52)

NASDAQ (Closing) - 2153.33 - Down(-25.65)

SENSEX (Closing) - 13729.13 - Up^158.82

NIFTY (Closing) - 4161.25 - Up^34.35


September 23,2008 - TUESDAY - Closing Rates :


DOW JONES (Closing) - 11015.69 - Down(-372.75)

NASDAQ (Closing) - 2178.98 - Down(-94.92)

SENSEX (Closing) - 13570.31 - Down(-424.65)

NIFTY (Closing) - 4126.90 - Down(-96.15)


September 18,2008 - THURSDAY - Closing Rates :


DOW JONES (Closing) - 10609.66 - Down(-449.36)

NASDAQ (Closing) - 2098.85 - Down(-109.05)

SENSEX (Closing) - 13315.60 - Up^52.70

NIFTY (Closing) - 4038.15 - Up^29.90


September 17,2008 - WEDNESDAY - Closing Rates :


SENSEX (Closing) - 13262.90 - Down(-255.90)

NIFTY (Closing) - 4008.25 - Down(-66.65)

DJIA (Closing) - 11059.02 - Up^141.51

NASDAQ (Closing) - 2207.90 - Up^27.99



September 16,2008 - TUESDAY - Closing Rates :


SENSEX (Closing) - 13518.80 - Down(-12.47)

NIFTY (Closing) - 4072.90 - Up^2.00

DJIA (Closing) - 10917.51 - Down(-504.48)

NASDAQ (Closing) - 2179.91 - Down(-81.36)


September 15,2008 - MONDAY - Closing Rates :


SENSEX (Closing) - 13531.27 - Down(-469.54)

NIFTY (Closing) - 4072.90 - Down(-155.55)

DJIA (Closing) - 11421.99 - Down(-11.72)

NASDAQ (Closing) - 2261.27 - Up^3.05


September 12,2008 - FRIDAY - Closing Rates :


SENSEX (Closing) - 14000.81 - Down(-323.48)

NIFTY (Closing) - 4228.45 - Down(-61.85)

DJIA (Closing) - 11421.99 - Down(-11.72)

NASDAQ (Closing) - 2261.27 - Up^3.05



September 10,2008 - WEDNESDAY - Closing Rates :

SENSEX (Closing) - 14662.61 - Down(-238.15)

NIFTY (Closing) - 4400.25 - Down(-68.45)

DJIA (Closing) - 11230.73 - Down(-280.01)

NASDAQ (Closing) - 2209.81 - Down(-59.95)


September 4,2008 - THURSDAY - Closing Rates :

SENSEX (Closing) - 14899.10 - Down(-150.76)

NIFTY (Closing) - 4447.75 - Down(-56.25)

DJIA (Closing) - 11532.88 - Up^15.96

NASDAQ (Closing) - 2333.73 - Down(-15.51)


September 1,2008 - MONDAY - Closing Rates :

SENSEX (Closing) - 14498.51 - Down(-66.02)

NIFTY (Closing) - 4348.65 - Down(-11.35)

DJIA (Closing) - 11543.55 - Up^212.67

NASDAQ (Closing) - 2367.52 - Up^29.18


note- all rates are with respect to previous day close resp.

Emerging market funds lose sheen

Major emerging market fund groups recorded outflows during the fourth week of August with EMEA (Europe, Middle-East, Africa) equity funds hit the hardest in percentage terms, according to Emerging Markets Portfolio Funds Research.

Investors pulled money out of the diversified Global Emerging Markets (GEM) Equity Funds for a fifth-straight week and extended Latin America Equity Funds’ losing run to 12 weeks and $4.1 bn. Since the second week of June, EPFR Global-tracked Emerging Market Funds have surrendered a net $23.1 bn, the note said.

Appetite for exposure to emerging markets has been eroded by a sharp correction in commodity prices during the current quarter, a string of downward revisions to economic growth forecasts and painfully high inflation rates in several key markets including Russia, India, South Africa and Argentina. Investors still have appetite for direct exposure to China, although the $175 mn they committed to China equity funds was more than offset by redemptions from Asia (excluding Japan) equity funds, Greater China equity funds, India equity funds and Taiwan equity funds.

The abrupt loss of enthusiasm for Russia, fueled by state pressure on firms in “strategic sectors” and the recent incursion into Georgia, has played a role with outflows from Russia equity funds since late June exceeding $800 million, the EPFR note says. And since late June investors have pulled nearly $4 bn out of the Emerging Europe equity funds, which currently maintain a 42% weighting to Russian equities.

- Economic Times

SEBI okays NSE's plan for currency trading

with reference to post in month of June on www.livebombaystockexchange.blogspot.com regarding currency trading on Indian Stock exchanges read post now. SEBI finally gave it's nod to Currency trading on NSE

India's first exchange for trading in foreign currency derivatives is likely to go live on the NSE's platform. NSE, the country’s largest stock exchange by volumes, on Tuesday got an in-principle approval from the Securities and Exchange Board of India (SEBI) to start an exchange to trade foreign currency derivatives, sources said.

According to plans, NSE will have a separate segment on its existing stock and derivatives bourse to trade in forex derivatives. It would also use its clearing corporation to settle the trades on the new segment.

“It’s not only the NSE brokers, most of the large and medium sized banks have been very supportive in NSE’s endeavour to start a currency exchange,’’ a source said. “They will get another asset class to invest in,’’ the source added.

Last week RBI, the banking regulator, along with stock market regulator SEBI, had made public the rules that would govern currency derivatives exchanges in the country. Soon after three bourses-NSE, Multi Commodities Exchange (MCX), the largest commodities trading bourse in the country, and Bombay Stock Exchange (BSE), the oldest stock exchange in Asia-had jumped into the fray to start forex exchanges.

Over the last few weeks, both NSE and MCX, had been conducting awareness programmes among probable market participants for a currency trading platform. When a forex derivatives trading platform goes live, Indian investors would also get newer forex trading and hedging products, industry players said. At present, in the forex trading space, market participants have the option of either trading in spot or the forward contracts.

To start with, RBI-Sebi combine has allowed futures contracts in rupee-dollar contracts. The roadmap is to launch contracts on other currencies post the initial trading phase.

Courtesy: Times of India

Sensex emerges as the best of the world indices

After suffering the ignominy of languishing among the worst-performing markets for the past few months, matters have slightly improved for India. Outlook on equities continues to remains dismal —barring the occasional surge — but Indian equities have shown better resilience than what most market watchers had expected it to.

After a fall in more than a third of its value in the six months of CY2008, the Sensex has rebounded remarkably to become the best-performing index amongst major indices in the last month.

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Easing of crude prices has provided some relief to the bulls who have been battling a flood of negative newsflow for the past few months. The price of crude has fallen by 20% from its peak of close to $150 a barrel. This has reduced the inflationary pressures to some extent, though experts feel it is too early to celebrate.

Indian shares, one of the worst performers in the first six months of the year, is gradually regaining some of its lost ground. A return to a degree of political stability after the trust vote as well as the strengthening rupee made Sensex the outperformer in the list of major global indices. The BSE Sensex recorded a rise of 18% in the period since July 15 — the day when all global markets were at their latest bottom. Capital goods, banks and realty — the sectors most impacted in the crash propelled the resurgence. Those sectors possess a high beta — indicating a greater correlation to the benchmark index, which entails that these sectors outperform the index in good times.

Slowing crude oil prices have not yet impacted consumer inflation figures, as the US inflation rose at the fastest rate in 17 years on account of energy and food prices. Despite the pessimism, a renewed confidence in the dollar brought cheer to US markets with the Nasdaq and Dow Jones posting positive returns. The exchanges registered returns of 12% and 6%, respectively, with investors anticipating inflation to cool off as reduced oil prices find their way to the inflation index.

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Whilst a correction in commodity prices brought about a relief to the Indian and American markets, economies dependent on commodities crashed further. The Brazilian Stock Exchange declined as investors grew sceptical on the commodity-driven economy. Commodities account for the entire export revenue growth, allowing for increased imports without worsening the trade balance. BOVESPA, the Brazilian benchmark index, declined by a further 12% in the period since July 17 as investors developed cold feet on the largest Latin American economy.

Lower inflation figures notwithstanding as well as the euphoria over the Olympics, the Shanghai Stock Exchange recorded a further fall of 8% in the past month. Market forecasts that the high producer price inflation figures reflect consumer prices to rise in the coming months in the world’s thirdlargest economy. Other Asian markets like the Nikkei in Japan and Hangseng in Hong Kong remained stable, registering marginal increases.

European markets have gained in the past month despite fears of a recession in the UK. The FTSE 100, the London Stock Exchange, surged 8% despite deterioration in economic outlook for the nation. Similarly, despite a contraction in its economy in the last quarter, German markets remained largely positive on the future. The DAX grew 6% on optimism that cooling crude and a weakening euro will boost Europe’s largest economy in the coming months.

Source - Economic times