WELLINGTON: Asian stocks are set to slide on Thursday, as ongoing fears that Greece's debt woes could spread to larger euro zone nations hit global markets.
The main US indices were between 0.6 per cent and 0.9 per cent lower, with resources and industrial stocks the hardest hit, as investors feared possible contagion from the Greek crisis could damage global growth.
The euro hit a 14-month low against the U.S. dollar and traditional safe havens such as the yen and US Treasuries gained as anxious investors eyed heavily indebted Spain and Portugal, while violent protests against austerity measures rocked Greece.
British and Europen shares fell by as much as 1.3 per cent, as banks continued to suffer, with rating agency Moody's saying it was reviewing Portugal's rating for a possible downgrade.
Asian stocks listed on Wall Street fell 0.8 per cent, while MSCI's measure of Asia Pacific stocks excluding Japan was 1.9 per cent lower.
Japanese markets will be open for the first time this week after being closed for the "golden week" series of public holidays.
Japanese shares look likely to match the sharp losses seen on global equity markets over the past few days, with Nikkei futures traded in Chicago 380 points below the last closing level in Osaka.
Australian shares are also set to open lower, with share price index futures down 54 points to 4,637, a 37 point discount to the underlying S&P/ASX 200 index close on Wednesday.
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Heard on the Street
Godrej Consumer zooms 9% on fund talk
Shares of Godrej Consumer surged 9% to close at Rs 307.90 on Wednesday, defying the bearish trend in the broader market. According to grapevine, the company is looking to raise between Rs 600-1,000 crore by way of a qualified institutional placement (QIP) to part finance likely acquisitions in the future, including the purchase of Sara Lee’s stake in its joint venture. Analysts tracking the company say Godrej Consumer may also acquire a hair colour firm in Latin America shortly.
A highly placed official of the Godrej Group is learnt to have been in Singapore recently to meet some foreign institutional investors and appraise them of the company’s plans for the recent acquisitions (one in Indonesia and the other in Nigeria). Buzz is that Godrej Consumer may be able to sell shares to institutional investors at a slight premium to the market price. This is in contrast to most qualified institutional placements by companies in recent times, which had to be deferred till the stock price cooled down to levels that were palatable to fund managers.
On the BSE, 3.68 lakh shares on Godrej Consumer were traded, compared to its two-week daily average volume of 1.27 lakh shares. A fund manager with a sizeable stake in the company said the stock was not exactly cheap at current levels. “The robust earnings growth in 2009-10 was helped to a significant extent by favourable raw material prices. The growth rate for this year will be healthy, but not as strong as it was last year,” the fund manager said. He added that investors will be closely watching the company’s strategies to maximise gains from its recent acquisitions. That will be the deciding factor in the stock getting re-rated hereon, he said.
‘ Friendly circles’ stock up RIL ahead of SC verdict
Reliance Industries shares saw good amount of buying interest at lower levels on Wednesday. The stock fell to an intra-day low of Rs 1,000, but climbed to Rs 1,020.75 at close, flat over the previous close. Dealers tracking the counter said the rebound was driven by support from “friendly circles”. Fund managers are awaiting the Supreme Court verdict on the gas dispute before taking a call on the stock, brokers said.
While foreign funds were heavy sellers, domestic fund managers used the declines in many other stocks to take up fresh positions or add to the existing positions, they said. Buzz is that there was good demand for shares of JSW Steel and Jindal Steel and Power. The Big Daddy of domestic institutions, a foreign fund that has trouble getting sleep, and a private insurer ‘Fun Life’ are said to have together picked up close to 10-12 lakh shares of JSW Steel. Also, the Big Daddy is learnt to have picked up around 5 lakh shares of Jindal Steel and Power.
South Indian Bank recovers from audit scare
SOUTH Indian Bank shares stabilised on Wednesday after crashing nearly 14% in the past couple of sessions. The fall was triggered after the bank said that it missed recording the interest expense on a special deposit scheme due to an accounting error. This dragged down the bank’s profits in the last quarter as the excess earnings for the first nine months had to be adjusted.
The move prompted some analysts to downgrade the stock. When contacted, VA Joseph, managing director and chief executive said: “The scheme was not linked to our IT system. This has been accounted at the end of the year now and steps have been taken to see that this does not recur.” But analysts are wondering how an error of such magnitude missed the attention of the bank and its auditors for three quarters.
Contributed by Santosh Nair
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Src: Economictimes, DP blog