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| Market News: News Archive : Morning News Call Week ending |
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Dec 31, 2009
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THURSDAY, DECEMBER 31, 2009, CANADIAN EDITION
TOP STORIES
• Bombardier Transportation gets US$405 mln contract
• AIG executive resigns over pay limits
• Geely gets Chinese govt support for Volvo deal
BEFORE THE BELL
Toronto's main stock index may open higher on Thursday, the last trading session of the year, as firmer commodity prices boost shares of energy and mining companies on the resource-laden market. With no major economic or corporate events scheduled for the day, investors may take cues from Wall Street, which is set for a higher open. European shares turned negative, as investors pared back positions ahead of the New Year break. Asian stocks rose, racking up a 68 percent gain for the year, as a jump in U.S. consumer confidence reinforced views that the world's largest economy is gradually recovering. Oil rose above US$79 a barrel, gaining for a seventh straight session supported by a drop in U.S. crude and fuel stocks as icy weather stoked demand. Gold gained more than a percent to trade around US$1104 an ounce.
STOCKS TO WATCH THIS MORNING
• Black Diamond Income Fund (BDI_u). The company said on Wednesday it would acquire Nortex Modular Space for total consideration of $17.1 million and issuance of 500,000 shares of its parent Black Diamond Group Ltd.
• Bombardier Inc. (BBDb). The Berlin-based unit of the world's No.1 trainmaker, Bombardier Transportation, said on Thursday it received a contract worth about US$405 million to provide fleet-maintenance services to the Spanish national rail operator, RENFE, for 14 years.
• Crocotta Energy Inc. (CTA). The oil and natural gas company said on Thursday it agreed to sell certain non-core properties for $33 million.
• QLT Inc. (QLT). The biotech company said on Wednesday it acquired OT-730, a drug under investigation for the treatment of glaucoma, for US$7.5 million from privately-held Othera Pharmaceuticals Inc.
ANALYST RECOMMENDATION
• Black Diamond Income Fund (BDI_u) rating raised to strong buy from outperform at Raymond James
EXDIVIDEND
• Bank of Nova Scotia (BNS). Amount $0.49
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
After tough year, Dubai expats pack up, eye Asia
For lawyer Wilfred Goh, the sign it was time to leave Dubai came early in 2009, when the financial crisis took its toll, plunging the emirate's main stock index down roughly 70 percent in a matter of months.
After speaking to friends and government officials, Goh decided to return to Asia, with the thought that Hong Kong, China or Singapore offered better job opportunities. Goh, 47, eventually got a job back home in Singapore.
"We just felt Dubai's economic climate was not very good and they had started to retrench people," said Goh, who works at the Central Chambers Law Corp in Singapore.
The flight of top foreign work talent from the Gulf's financial hub began in early 2009, and levelled off as the market recovered toward the middle of the year. But then Dubai dropped a bombshell in November, disclosing a delay on a massive debt pile. The US$26 billion debt debacle sank Dubai's markets and spurred many foreign professionals to hasten their retreat from the city-state for more job security.
Precise numbers of job losses is unknown, but estimates say thousands of foreigners have been fired or forced to leave Dubai this year.
The defection of executives from Dubai to places such as Hong Kong looks to reverse a trend seen about four years ago when financial and legal executives from Asia flocked to the emirate to capitalise on its rapid expansion and economic growth.
Dubai's zero percent tax rate also helped lure executives.
Not all foreign workers are shipping out.
But should the situation worsen, a further brain-drain from Dubai could have serious implications for its economy. Estimates say that expatriates make up more than 80 percent of Dubai's 1.7 million population.
On Nov. 25, Dubai requested a delay in payments on US$26 billion in debts linked to conglomerate Dubai World and its two property units, Nakheel and Limitless. The news was especially bad for Nakheel, which cut 400 jobs in July on top of the 500 jobs it eliminated in 2008 after Dubai's property sector sank.
Stock indexes in Hong Kong, Mumbai, and Shanghai rose at least 50 percent this year. Dubai's rose around 13 percent.
Its stock index hit 8,500 points in November 2005, dropped, and rose back up to 6,300 points by February 2008. The index is now trading around 1,800 points.
THIRSTY FOR JOBS
Kara Keough, a marketing manager for an international real estate company, moved from Dubai to Singapore in September after completing a three-year contract with a major property developer.
"My husband and I decided to evaluate our long term options. Job opportunities in Dubai were becoming rare," she said.
Keough, 26, and her husband, who works in recruiting, moved to Dubai from Brisbane, Australia in 2006. The couple ultimately decided Singapore would be a better city to live and work in.
Still, others see promise in Dubai's economic future despite the recent turmoil.
Steve Brice, head of global markets for Standard Chartered in South Africa said fears of a large exodus of financial service professionals were overblown.
"Assuming you can keep your job in Dubai I don't see any problems of the long term viability of the region," Brice said.
Brice left Singapore for Dubai in August 2005 to become head of research at Standard Chartered for the Middle East and Africa.
"Obviously oil prices are still very high and don't look like they are going down significantly over the next 5-10 years," said Brice who moved away from Dubai for personal reasons. "In that environment I think the region is still going to thrive and Dubai is still the financial and trading hub for that region."
Brice's colleague Philippe Dauba-Pantanacce was also optimistic.
"Despite the noise surrounding Dubai's debt debacle, this region is still one of the most resilient and promising regions in the world," said Dauba-Pantanacce, a senior economist at Standard Chartered who has worked in Dubai for two years.
Where they are optimistic, others are however packing up.
A senior executive at a multinational company and his wife who have worked and lived in Dubai all their lives said they are planning to move to Singapore in 2010.
"We would rather experience the professional working environment in Asia," she said, adding that Asia's growth prospects were also a major factor.
A senior executive at the National Bank of Abu Dhabi who moved to Abu Dhabi from Dubai after 11 years said the prospects for Dubai are dim. Both the executives did not want to be named because of the sensitivity of the matter.
"Companies are unable to raise finance, job opportunities have disappeared, the real estate industry is in quagmire and tourism is down," said the executive.
--- Farah Master, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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Dec 30, 2009
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WEDNESDAY, DECEMBER 30, 2009, CANADIAN EDITION
TOP STORIES
• Magna leads race for Karmann roof unit
• Saab says bid deadline dropped, to resume output
• GMAC to get US$3.5 bln in gov't aid - report
BEFORE THE BELL
Toronto's main stock index may open lower on Wednesday, as weaker commodity prices, pressured by a firmer dollar, drag the resource-laden market. Canada could follow world stocks, which tread lower on profit taking. Wall Street is also set for a lower start, with investors finding little reason to propel stocks higher as the market's solid year draws to a close. Shares of financial institutions will be in the spotlight after WSJ reported that GMAC Financial Services is close to getting about US$3.5 billion in added aid from the U.S. government, on top of the US$12.5 billion already received since December 2008. European shares edged lower in thin trading, with losses in commodities overshadowing gains in banking stocks. Asian share markets fell as year-end trade dwindled, with profit-taking pulling down shares and bankruptcy worries about Japan Airlines weighing on the Nikkei. Oil held steady below US$79 a barrel as bearish industry data showed a surprise rise in U.S. crude inventories. Gold edged lower to US$1092 an ounce.
STOCKS TO WATCH THIS MORNING
• Magna International Inc. (MGa). At least four suitors are in the race for insolvent German automotive supplier Karmann's roof business, a source close to the situation said on Wednesday, with the auto parts maker leading the pack.
• Nortel Networks Inc. (NRTLQ). Canada's industry minister approved Ciena Corp's US$769 million bid for a unit of bankrupt Nortel Networks and said on Tuesday the deal was likely to be of net benefit for Canada. Separately, Ciena said it would close the deal in the first-quarter of 2010.
• Petaquilla Minerals Ltd. (PTQ). The company said on Tuesday Julie Baarsen replaced Bassam Moubarak as the CFO of the company.
• Research in Motion (RIM). The International Trade Commission said on Tuesday that it would investigate allegations by Prism Technologies that the BlackBerry maker violated one of its patents.
• Result Energy Inc. (RTE). The company on Tuesday re-affirmed 2010 forecast and said continued to expect full year capital expenditure of of $60 million. The company anticipated 2010 production to average 1,400 boepd.
ANALYST RECOMMENDATION
• Corriente Resources (CTQ) price target raised to $8.60 from $7; rating market perform at Raymond James
EXDIVIDEND
• Calfrac Well Services Ltd. (CFW). Amount $0.05
• E-L Financial Corp. (ELF). Amount $0.125
• Great West Life Assurance Co. (GWL_pa). Amount $0.3469
• Laurentian Bank of Canada (LB). Amount $0.36
• Logistec Corp. (LGTa). Amount $0.0775
• Winpak Ltd. (WPK.). Amount $0.03
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
U.S. banks may only be deferring anger on pay
Wall Street's efforts to quell public outrage over its pay practices could in fact be setting up its top executives, bankers, and traders for even bigger payouts down the road, which in turn could reignite the outcry.
To align pay with the long-term performance, banks are giving executives a larger proportion of their compensation in stock and are spreading the equity payouts over more years.
Wall Street is working hard to tweak the terms of compensation packages to ensure that traders, bankers and executives are not incentivized to take out-sized risks.
Morgan Stanley is the latest to consider proposals to align pay with long-term performance, through measures like awarding compensation based in part on the bank's share performance relative to peers, the Wall Street Journal reported on Tuesday.
Goldman Sachs Group Inc plans to pay top managers their 2009 bonuses in stock rather than cash, to help deflect outrage over the more than US$20 billion of payouts expected to be made to employees.
It is not clear what impact any of these actions will have on risk-taking on Wall Street. But one thing that is clear: these moves do not necessarily presage a new era of reduced pay in the financial sector.
If banks like Morgan Stanley and Goldman Sachs Group Inc continue to rebound from the financial crisis, their shares could surge and their newly designed compensation plans could mean extra big paydays years from now.
"It may very well work out to be much better for the executives, if the companies perform well," said Kenneth Raskin, the head of law firm White & Case's executive compensation practice.
That in turn could lead to more public outcry over pay in the financial sector, which received more than a trillion dollars of government support in 2008, experts said.
But experts said that what is upsetting many Americans is the notion that whatever the formula that major Wall Street firms use to pay employees, their losses are socialized while their gains are privatized.
"Main Street doesn't care whether it is deferred stock or restricted stock, or whether 75 percent of it is kicked down the road," said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University.
"All they care about is these guys are making tens of millions of dollars."
An obvious solution to this problem is to regulate major banks to the point where they are more like utilities. Presumably, when financial companies are taking less risk, their returns on equity will be lower, and their pay packages will also be lower.
But Wall Street is fighting regulation ardently, through for example, keeping as much derivatives trading as possible off exchanges and away from clearing houses.
Another compensation practice that may help calm public anger is "clawing back pay," which forces executives to pay back money they received during good times if the bank subsequently racks up big losses.
Morgan Stanley is considering having most of the top 30 Morgan executives submit 65 percent or more of their pay to clawbacks, the Wall Street Journal reported.
A Morgan Stanley spokeswoman declined to comment when reached by Reuters.
SHAPING DEBATE
The issue of how banks pay their top employees has reached a crescendo in recent months as firms repaid the billions in bailouts they got from taxpayers while also setting aside billions of dollars to pay employees.
Morgan Stanley Chief Executive John Mack announced that he would not accept a bonus in 2009 as analysts believe the company is likely to report an annual loss. Morgan Stanley, which reported a profit in the third quarter for the first time in three quarters, has set aside US$10.8 billion for compensation this year.
The Obama administration's pay czar, Kenneth Feinberg, has influenced pay across the industry by mandating that banks under his watch reduce cash pay in favor of deferred stock compensation. Feinberg had the authority to set pay at Citigroup Inc and Bank of America Corp before they repaid their bailouts.
But whether the practices advocated now really satisfy the public remains to be seen. It is possible that in a few years the American public will care much less about Wall Street pay.
"We have a very short memory," said Marshall Front, chairman of fund manager Front Barnett Associates.
--- Steve Eder, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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Dec 29, 2009
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TUESDAY, DECEMBER 29, 2009, CANADIAN EDITION
TOP STORIES
• Int'l Royalty says Royal Gold's offer is superior
• Morgan Stanley to overhaul pay for top execs - report
• ING sells stake in Chinese insurer Antai to CCB
• Kazakhstan eyes stake in BG, Eni gas venture
BEFORE THE BELL
Toronto's main stock index may open lower on Tuesday, as weaker commodity prices drag the resource-laden market. With no major corporate or economic events scheduled for the day, the market could follow Wall Street all session, which is expected to open higher, ahead of key economic indicators. The U.S. S&P/Case-Shiller home price index for October is expected to have risen 0.2 percent, compared with a gain of 0.3 percent in the previous month, according to a Reuters poll. The Conference Board consumer index is expected to rise to 52.5 in December, from 49.5, in the prior period. European stocks rose, extending their brisk Christmas rally, while Asian shares were mixed. Oil held steady below US$79 a barrel, as the firm dollar offset colder U.S. weather and expectations of a further drawdown in crude inventories. Gold pared some early losses to trade around US$1108 an ounce in light trading, with European and other major metals markets closed since late last week for Christmas.
STOCKS TO WATCH THIS MORNING
• BNK Petroleum Inc. (BKX). The company said on Monday it was awarded additional 300,000 acre oil and gas concession in a European Union country.
• Canplats Resources (CPQ). The gold and silver producer said late on Sunday that Minera Penmont's rival bid to acquire the company is better than Goldcorp's (G) sweetened offer.
• Corriente Resources Inc. (CTQ). The metals explorer said on Monday China's CRCC-Tongguan Investment Co Ltd agreed to buy all of its outstanding shares in a deal worth about $679 million.
• International Royalty Corp.(IRC). The company said on Tuesday Royal Gold's $749 million offer to buy the company is superior to Franco-Nevada's (FNV) unsolicited bid. It also asked its shareholders to reject Franco-Nevada's $6.75 a share offer.
EXDIVIDEND
• AG Growth Intl Inc. (AFN). Amount $0.17
• Agf Master Ltd Partnership (AFP_u). Amount $0.20
• Airboss Of Amer Corp. (BOS). Amount $0.04
• Alaris Rty Corp. (AD). Amount $0.07
• Alliance Grain Traders Inc. (AGT). Amount $0.135
• Andrew Peller Ltd. (ADWa). Amount $0.0825
• Arbor Mem Svcs Inc. (ABOa). Amount $0.11
• Biomerge Industries Ltd. (TOT). Amount $0.03
• Brascan Soundvest Focus-Unit (BSF_u). Amount $0.027
• Brompton Advtg Oil & Gas Inc. (AOG_u). Amount $0.0325
• Cameco (CCJ). Amount $0.06
• Canadian Banc Recovery Corp. (BK). Amount $0.0625
• Canadian Energy Svcs L P (CEU_u). Amount $0.0792
• Canadian Pacific Railway (CP). Amount $0.2475
• Capital Power Corp (CPX). Amount $0.315
• Capital Power Income L.P. (CPA_u). Amount $0.1467
• Cervus Equipment Corp. (CVL). Amount $0.18
• Ci Master Limited Partnership (CIP_u). Amount $0.09
• Colabor Group Inc. (GCL). Amount $0.3791
• Exchange Income Corp (EIF). Amount $0.13
• Extendicare (EXE_u). Amount $0.07
• Faircourt Gold Income Corp. (FGX). Amount $0.0417
• Fidelity Partnership 1996 (FZP_u). Amount $0.426
• Global Strategy Master LP (LPV_u). Amount $0.02
• Homeq Corp. (HEQ). Amount $0.07
• IESI-BFC Ltd. (BIN). Amount $0.125
• Mks Inc. (MKX). Amount US$0.15
• Mullen Group Ltd. (MTL). Amount $0.125
• Newalta Inc. (NAL). Amount $0.05
• Newfoundland Capital Ltd. (NCCa). Amount $0.10
• Niko Resources (NKO). Amount $0.03
• Nova Scotia Power Inc. (NSI_pd). Amount $0.3688
• Petrobakken Energy Ltd. (PBN). Amount $0.08
• Power Financial Corp. (PWF). Amount $0.35
• Prime Dividend Corp. (PDV). Amount $0.0625
• Realex Properties Corp. (RLXa). Amount $0.0075
• Recap Energy Inc. (RLX.V). Amount $0.0075
• Sentry Select Primary Metals Corp. (PME). Amount $0.05
• Sherritt International Corp. (S). Amount $0.036
• Shoppers Drug Mart Corp. (SC). Amount $0.215
• Silvercorp Metals Inc. (SVM). Amount $0.02
• Superior Plus Corp. (SPB). Amount $0.135
• Swiss Wtr Decaffeinated Coffee (SWS_u). Amount $0.03
• Timbercreek Mtg Invt Corp. (TMC). Amount $0.068
• Transforce Inc New (TFI). Amount $0.10
• Trican Well Service Ltd. (TCW). Amount $0.05
• Trinidad Drilling Ltd. (TDG). Amount $0.05
Note: All values in Canadian currency, unless otherwise stated
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INSIGHT
As trade heats up, Tokyo bourse gets turbocharge
Tokyo's stock exchange, long derided as one of the world's slowest major bourses, is launching a new platform to give it a much-needed shot of speed and to fight off global and domestic rivals.
The "Arrowhead" system, with the ability to handle thousands of orders in the blink of an eye, will make Asia's largest bourse -- infamous for system malfunctions and sluggish execution -- a viable platform for electronic traders, officials hope.
And it may be the answer for Japan's dominant exchange to the rise of alternative trading platforms, which have been siphoning off volume by offering faster trades and finer price points.
"Over the last decade we've fallen far behind others in speed, but we'll catch up on that front," said Hiroaki Uji, the TSE executive managing the Arrowhead project, which runs on some 200 servers whose location in Tokyo is kept secret.
"Our capacity will rise by about five to six times from the present, which means we can cope with more orders and we expect algorithmic trading to pick up," Uji added at a media briefing this month.
But speed may do little to reverse the long-term trend of Tokyo's waning importance in Asian equities markets, as bourses such as Shanghai ride the growing clout of their companies and economies.
At the peak of Japan's asset bubble in 1989, the Tokyo exchange's market capitalisation accounted for about 40 percent of the value of global markets. It now contributes just 7 percent, data from the World Federation of Exchanges showed.
"I think if somebody really wanted to invest in Japan, then they would invest in Japan whether or not the exchange is slow or fast," said Graham Elliott, chief executive of MF Global FXA Securities in Tokyo, a futures and options broker.
FAST AND FURIOUS
Arrowhead was developed by Japanese electronics conglomerate Fujitsu Ltd. The US$145 million system will process trades in 5 milliseconds, 600 times faster than the 2 to 3 seconds needed on the current system, and on a par with the New York and London stock exchanges.
The system will debut the first week of January and will allow the exchange to handle 46 million orders a day from the current 7 million a day.
The TSE said the new system will lead to greater use of algorithms and other automated trading strategies. Specifically, Arrowhead should pave the way for more high-frequency trading, where algorithms are used to trade thousands of shares in milliseconds to profit from tiny spreads and market imbalances.
UBS estimates that about 30 percent of Japanese equity trading is now high-frequency. Such trading accounts for some 60 percent of equity volumes in the U.S.
The Asian Investor reported this month that several U.S. high-frequency hedge funds, such as D.E. Shaw & Co, were said to be building up their local desks in order to take advantage of the new infrastructure of the TSE.
D.E. Shaw, the world's fourth largest hedge fund, declined to comment on the report.
The TSE offers "co-location", allowing trading firms to place their computers next to its own to shave microseconds from execution times.
"The launch will create an environment to see more players entering the market," said Toshiyasu Karashima, executive director and head of planning at Nomura Securities.
"Many players are showing interest. We may see more high-frequency market makers entering the market, which could possibly raise the liquidity."
A LITANY OF PROBLEMS
In step with the launch of Arrowhead the TSE will also reduce tick sizes, the smallest increment by which a stock can move. For instance, one will be able to buy or sell Sony Corp at 1 yen intervals, versus the current tick size of 5 yen.
Alternative exchanges known as proprietary trading systems have drawn some business away from the TSE by offering smaller tick sizes as well as faster trades.
While still accounting for one percent of all stock volumes, PTS run by SBI Holdings, kabu.com Securities Co Ltd and four other firms have together recently eclipsed the trade value on the Jasdaq exchange, Japan's third-largest.
Many market participants say Arrowhead will likely benefit the PTS because it will draw more trading volume to Japan.
A successful launch would also help the TSE improve its reputation among investors following a series of embarrassing computer glitches. The image boost as important as the bourse prepares to go public after April 2010.
In 2006 news of an accounting scandal at Livedoor Co sparked a massive sell-off of the then-popular Internet company. Unable to handle the rush of orders from panicked investors, the TSE had to curtail its trading hours for three months.
Earlier this month, the exchange was ordered by a court to pay US$120.5 million in damages to Mizuho Securities for a botched trade in 2005, and the TSE has warned the fine could push it into the red.
The biggest losers from Arrowhead will likely be the small brokers who still do much of their business over the phone or who don't have the money to invest in the needed computer upgrades to take advantage of its speed.
"It will become increasingly difficult to employ old-fashioned sales methods like calling clients, informing them of what's going on in the market and taking their orders over the phone," said Sadakazu Osaki of Nomura Research Institute.
--- Chikafumi Hodo, Reuters
About Thomson Reuters: The unique insights of Thomson Reuters drive productivity and performance by helping our clients generate investment and business ideas, gain fresh perspectives on the markets, and, ultimately, make more money.
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This publication is not, nor is it to be construed as, a solicitation or recommendation to investors to purchase, sell or hold any of the securities referred to in this publication. Global Securities Corporation is a member of the Canadian Investor Protection Fund
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(Please note Canadian quotes are delayed 15 min)
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