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Indian stock market daily morning report by Nirmal Bang (October 26, 2009, Monday)

Contributed by Nirmal Bang

By Nirmal Bang

MARKET PREVIEW

Asian stocks gained after Toyota Industries Corp. reported unexpected profit and South Korea’s economy grew at the fastest pace in seven years, boosting the prospects for company earnings. Toyota Industries, a component manufacturer controlled by the world’s biggest carmaker, jumped 6.8% in Tokyo. Honda Motor Co., which gets 47% of its sales in North America, jumped 3% as the weakening yen lifted the outlook for export earnings.

South Korea’s third-quarter gross domestic product increased 2.9% from the previous quarter, the central bank said today. That was the fastest pace since the first quarter of 2002 and compared with the 1.9% growth estimated by economists.

Shares on the MSCI Asia Pacific Index traded at an average of 23 times estimated earnings, compared with 18 times for the S&P 500 and 16 times for Europe’s Dow Jones Stoxx 600 Index.

The Bank of Japan will probably forecast this week that deflation will extend into fiscal 2011, an indication that borrowing costs are likely to stay near zero. Bloomberg. The central bank will release its semiannual outlook on Oct. 30 at 3 p.m. in Tokyo. The BOJ will probably highlight that consumer prices will be stuck in negative territory and use that to convince investors that a rate hike is still far, far away.

The economy in the U.S. probably grew in the third quarter at the fastest pace in two years as government stimulus helped bring an end to the worst recession since the 1930s, economists said before reports this week.

The world’s largest economy grew at a 3.2% pace from July through September after shrinking the previous four quarters, according to the median estimate of 65 economists surveyed by Bloomberg News. Americans flocked to auto showrooms and real-estate offices last quarter to take advantage of government programs such as “cash-forclunkers” and tax credits for first-time homebuyers. The Commerce Department’s report on gross domestic product is due Oct. 29.

Capmark Financial Group Inc., the lender owned by Goldman Sachs Group Inc. and KKR & Co., among other companies, filed for bankruptcy protection after posting a second-quarter loss of about $1.6 billion. Capmark is one of the largest U.S. commercial real estate finance companies.

CORPORATE

Global CEOs head for hot Indian market
As the coldest season of the year begins to take North America and Europe in its grip, top executives of the world’s biggest corporations are preparing for a long economic winter in the world’s richest countries. They are stocking up in India. Jeffrey Immelt, the astute CEO of GE, was an early bird. Last month, he was here making a case for “reverse innovation”, the flow of knowledge and products from emerging economies such as India to the developed world.. (ET)

BSNL seeks sharp cut in Zain price
State-run telecom behemoth Bharat Sanchar Nigam Ltd, or BSNL, is ready to pay no more than $10 billion for the 46 per cent equity it is eyeing in Kuwait’s Zain Telecom, much lower than the $13.7 billion tag that the Kharafi family has attached to it. “We think at the current price the deal will be very expensive,” said BSNL Chairman and Managing Director Kuldeep Goyal, who refused to divulge the figure he had in mind. Zain Telecom will be the first overseas foray by BSNL, which provides services across India except Delhi and Mumbai, where fellow public sector company MTNL is the service provider. (BS)

Crompton Greaves' march across Europe pays off
What do the world’s highest wind turbine, the Paris metro and a sweaty Delhi resident sheltering under a ceiling fan have in common? The answer lies in an Indian company that has in a period of four years transformed itself into a transnational entity to be reckoned with: Crompton Greaves. Beginning with its 2005 acquisition of Belgium-based power transformer maker Pauwels, Crompton Greaves has undertaken a seemingly inexorable march across Europe buying up companies in the power systems sector in Hungary, Ireland and France in consecutive years. (BS)

Provogue wears a new attitude
Apart from a new brand ambassador, the apparel maker has gone in for aggressive store expansion, Provogue has done it again. It has switched its brand ambassador, this time from Saif Ali Khan to Hrithik Roshan, for its new campaign. The brand needed the buzz as much for its new line as for ensuring that its aggressive store expansion drive matches the growth of curious consumers. The brand has come a long way from 2000 when it was grappling with retail space constraint (just a few multi-brand stores and one exclusive store). It now has 134 exclusive stores and is set to open 20 more by March next year. This is apart from the brand’s presence in 110 multibrand outlets. It has also set a target of opening 25-30 exclusive studio stores every year, with this year’s plans costing Rs 15 crore. To move into smaller towns that have its catchment audience for less than three of its stores, it will tie-up with franchisees. (BS)

ECONOMY

Business confidence outlook adds shine to recovery
Adding shine to the momentum of economic recovery, the Confederation of Indian Industry Business Confidence Index (CII-BCI) has predicted a return to better business conditions than before the downturn. The index for the period between October 2009 and March 2010 surged by a robust 7.4 points to 66.1 points, against a mere 2.4 point increase during the first half of the financial year. Most of the major economic indicators are also pointing to a revival with the industrial output index of the government rising 10.4 per cent in August. The purchasing manager’s index compiled by HSBC also showed a recovery in September when it stood at 55. A reading over 50 in PMI signifies expansion. The CII-BCI, brought out twice a year, is derived from an average of the current situation index (CSI) and the expectations index (EI). (BS)

Import rules take effect on security-risk cellphones
The commerce ministry has prohibited import of mobile phone handsets (classified under ITC (HS) Code ‘8517’) without International Mobile Equipment Identity (IMEI) number or with all zeroes’ IMEI, with immediate effect from October 14, 2009. Import of ‘CDMA mobile phones’ (classified under ITC (HS) Code ‘8517’) without Electronic Serial Number (ESN)/Mobile Equipment Identifier (MEID) or with all zeroes as ESN/MEID is also prohibited with immediate effect from the same date. (BS)

India, China in talks for FTA
A day after Indian Prime Minister Manmohan Singh and Chinese Premier Wen Jiabao smoked the peace pipe, New Delhi today said it was in discussion with Beijing for a free trade agreement aimed at breaking the duty barriers for bilateral trade. “We have signed a comprehensive economic partnership pacts with Singapore and the Republic of Korea and recently a trade in goods agreements with the Asean. We are in discussions with Japan, China, Thailand and Malaysia and other countries to conclude agreements of a similar nature,” Singh said at the 4th East Asia Summit. Faced with a huge trade imbalance in favour of China, the Indian industry is strongly against signing any FTA-like agreement with the neighbouring country. (BS)

Targeted interest subvention scheme in works
A new targeted interest subsidy scheme is being worked out for industries that have high employment generation potential such as handloom, leather, gems and jewellery. The new scheme would replace or supplement a clutch of other interest subvention schemes where government doles out incentives without accessing either the performance of the industry or its potential to create more jobs. According to a senior official in the Planning Commission, the new scheme would cover all those sectors where bank credit growth has been sluggish. However, in order to protect the interest of the banking sector, all these subvention schemes will be performancelinked. “We’ll be soon identifying those sectors, where such scheme can be introduced and then work with the concerned administrative ministries. (ET)

INTERNATIONAL

Geithner Makes Bills-to-Bonds Gap Unprecedented With New Sales
Treasury Secretary Timothy Geithner’s plans to lock in near record-low borrowing costs in 2010 may mean a second year of losses on longer-term bonds. After selling $1.9 trillion of short-term securities to finance President Barack Obama’s efforts to end the worst recession since the 1930s, the Treasury plans to lengthen the average due date of its outstanding debt to 72 months from a 26- year low of 49 months. That may mean boosting sales of 10- and 30-year bonds by 40% over the next year to $600 billion. (Bloomberg)

Dollar Weakens as Asian Stock Gains Reduce Demand for Safety
The dollar fell as Asian stocks gained amid signs the global economy is recovering, reducing demand for the greenback as a refuge. The dollar weakened against 11 of its 16 major counterparts amid speculation reports this week will show confidence among U.S. and French consumers improved. The pound fell on bets a Bank of England policy maker will signal an extension of the central bank’s asset-purchase program. The yen and euro strengthened after an official Chinese paper said the country should increase reserves in the currencies. (Bloomberg)

South Korea’s GDP Expands at Fastest Pace in 7 Years
South Korea’s economy expanded at the fastest pace in seven years, stoking speculation the central bank will raise borrowing costs for the first time since the collapse of Lehman Brothers Holdings Inc. Gross domestic product increased 2.9 percent in the third quarter from three months earlier, when it grew 2.6 percent, the central bank said in Seoul today. That was the fastest pace since the first quarter of 2002 and compared with a median estimate of 1.9 percent growth in a Bloomberg News survey. From a year earlier, GDP rose 0.6 percent. (Bloomberg)

New 'windows' open up to computer users
With its advanced features, Microsoft’s Windows 7 comes off better than Vista and the last generation Windows XP. If you have been holding off buying a new computer, then Windows 7, the latest operating system (OS) from Microsoft, will give you a good excuse to buy one. Windows 7, or Win 7, is largely believed to be better than Microsoft’s previous OS Windows Vista and way more advanced than the last generation Windows XP. But is it really all that? First impressions - While it is easy to get infatuated with a new design and swanky features, the viability of an OS is only determined when you begin using it eight hours a day. (BS)