Asia Mid-Session Update: Nikkei pares opening gains, BoJ cuts purchases in daily JGB operation; Indian assets rally on sovereign upgrade at Moody’s
Fri, 17 Nov 2017 0:47 AM EST
Japan
-The Nikkei opened +1.1%, but has since pared gains: Fast Retailing +0.8%, Sony +0.9%; Softbank -1%
-USD/JPY lower by over -0.3%
-BoJ cut planned purchases of 1-3 year JGBs in daily operation (first cut since April); Cuts planned purchases of 1-3 year JGBs to ¥250B from ¥280B; Raised planned purchases of Treasury bills to ¥500B v ¥100B prior
Australia
-The S&P ASX 200 opened +0.5%; Financials Index +0.6% Consumer Discretionary Index +0.5%, Utilities Index -0.4%; Virgin Australia (says not aware of any unannounced information), Santos Energy +1%
- (AU) Australia sold A$400M in 2033 Bonds, avg yield 2.8774%, bid to cover 2.84x
China
-Shanghai Composite Opened -0.2%, Hang Seng opened +0.7%; Hang Seng Information Technology Index +1.7%, Hang Seng Financials Index +0.8%, Hang Seng Materials Index -1.3%; Tencent +1.5% (all-time high)
-PBOC reduces injected amount in daily open market operation: CNY30B v CNY330B injected in 7,14 and 63-day reverse repos prior; Net drain CNY10B v CNY310B injection prior; Weekly net injection CNY810B v CNY230B drain w/w
-MOF sold 50-year bonds at lower than expected yield: Sold 50-year bonds: Avg yield 4.37% v 4.46%e
-MOF also sold 3-month bills at avg yield of 3.7644%
- (CN) PBOC set yuan reference rate at 6.6277 v 6.6286 prior (Prior close: 6.6283)
- (CN) State Owned Enterprises (SOEs) in Shanghai planning CNY800B/per year in new investments as part of plan to accelerate restructuring of these companies – China Daily
Other Asia:
India
-Indian assets rally following sovereign upgrade at Moody’s: Sensex +1%; Indian Rupee (INR) +0.6%; 10-year bond yield down over 10bps.
-(IN) MOODY'S RAISED INDIA SOVEREIGN RATING TO BAA2 FROM BAA3; Outlook revised to Stable from Positive: Moody's rating for India is now above the BBB- ratings (lowest level of investment grade) that both S&P and Fitch have for the country.
South Korea
-The Kospi index opened +0.2% and traded at intraday record high earlier today; Samsung +0.9%, Hynix +0.8%
--Korean Won (KRW) flat and pares earlier gain amid warning from Bank of Korea (BoK)
- Won has appreciated ‘fast’ in a short time; reiterates FX authorities closely monitoring markets, said an unnamed BoK official
- On Thursday’s session, the Korean Won rallied by more than 1% to trade at the highest levels since Sept 2016 versus the US dollar.
Malaysia
-Q3 Y/Y GDP beat estimates supported by private spending, along with the services and manufacturing sector, says Malaysia’s Central Bank: (MY) MALAYSIA Q3 GDP Y/Y: 6.2% V 5.7%E
-Ringgit (MYR) +0.1%
Singapore
-Straits Times equity index opened +0.7%
-Oct Non-Oil Domestic Exports above estimates supported by China: (SG) Singapore Oct Non-Oil Domestic Exports M/M: 12.5% v 7.7%e; Y/Y: 20.9% v 11.9%e; Non-oil Domestic Exports to China +53.3% y/y
US
-S&P 500 Futures -0.1%, Nasdaq Futures flat
-Afterhours Movers: FOXA (21st Century Fox) Comcast reportedly approached Fox over possible bid; not clear if Comcast sought all of Fox or only some assets; +8.5% afterhours; ROST (Ross Stores) Reports Q3 $0.72 v $0.67e, Rev $3.33B v $3.27Be; Raises FY17 $3.24-3.28 v $3.22e (prior FY17 $3.16-3.23); +7.8% afterhours; WSM (Williams-Sonoma) Reports Q3 $0.79 v $0.84e, Rev $1.30B v $1.29Be; Guides Q4 $1.49-1.64 v $1.66e, Rev $1.61-1.68B v $1.64Be; -8.1% afterhours
-Fed Speak: (US) Fed Williams (moderate, non-voter): Reiterates 4 rate hikes by end-2018 'reasonable' guess for policy; Open to raising rates in Dec 2017 or holding steady
-Tax Reform: (US) Senate Finance Committee advances Republican tax legislation by vote of 14 to 12; full Senate expected to consider the measure during the week of Nov 27th; The revised tax proposal by the Senate is said to target the carried interest break, according to a separate press report
- During the NY afternoon on Thursday, House of Representatives passed GOP tax reform bill (as expected)
-Politics: (US) In mid-Oct, Special counsel Robert Mueller said to have issued subpoena to President Trump’s election campaign in relation to documents on Russia – US press
***Levels as of 00:30ET***
- Nikkei +0.1%, Hang Seng +0.7%; Shanghai Composite -0.6%; ASX200 +0.2%, Kospi +0.1%
- Equity Futures: S&P500 -0.1%; Nasdaq100 flat; Dax -0.2%; FTSE100 -0.3%%
- EUR 1.1766-1.1822 ; JPY 112.40-113.15; AUD 0.7569-0.7608 ;NZD 0.6842-0.6884
- Dec Gold +0.4% at 1,283/oz; Dec Crude Oil +0.2% at $55.27/brl; Dec Copper +0.3% at $3.062/lb
- 16-Nov-2017 14:00:00 - NORWAY'S $1 TRILLION SOVEREIGN WEALTH FUND RECOMMENDS REMOVING OIL AND GAS STOCKS FROM ITS BENCHMARK INDEX -CENTRAL BANK DEPUTY GOVERNOR EGIL MATSEN TO REUTERS
- 16-Nov-2017 14:00:00 - OIL, GAS STOCKS CURRENTLY ACCOUNT FOR AROUND 6 PCT OF NORWAY WEALTH FUND'S EQUITY BENCHMARK, OR ABOUT $37 BILLION -CENTRAL BANK
- 16-Nov-2017 14:00:00 - IF BENCHMARK CHANGE IS APPROVED BY PARLIAMENT, NORWAY'S WEALTH FUND WOULD CUT STAKES IN OIL, GAS SECTOR COMPANIES OVER TIME -CENTRAL BANK
- 16-Nov-2017 14:00:00 - CUTTING FUND'S INVESTMENT IN OIL, GAS STOCKS WOULD MAKE NORWAY'S GOVERNMENT WEALTH LESS VULNERABLE TO A PERMANENT DROP IN OIL PRICES -CENTRAL BANK
- 16-Nov-2017 14:00:00 - PROPOSAL TO REMOVE OIL, GAS STOCKS FROM NORWAY FUND'S BENCHMARK BASED PURELY ON FINANCIAL ARGUMENTS AND ANALYSIS OF GOVERNMENT'S EXPOSURE -CENTRAL BANK
- 16-Nov-2017 14:00:00 - TO REPLACE OIL AND GAS STOCKS, NORWAY FUND WOULD INCREASE ITS STAKES IN ALL OTHER SECTORS PROPORTIONALLY UNDER ITS CURRENT MANDATE -CENTRAL BANK
- 16-Nov-2017 14:00:00 - NORWAY'S WEALTH FUND IS INVESTED IN SHELL, BP, CHEVRON, EXXON MOBIL, TOTAL, ENI, AMONG OTHERS
Norway's $1 trillion wealth fund proposes to drop oil, gas stocks from index - Reuters News
16-Nov-2017 14:00:02
- If approved, fund would cut stakes in oil, gas stocks
- Divestments would take place over time
- Purpose is to cut state's overall exposure to oil, gas
- Fund is built on revenues from domestic oil, gas industry
- Graphic: http://tmsnrt.rs/2tskfub
By Gwladys Fouche
OSLO, Nov 16 (Reuters) - Norway's trillion-dollar sovereign wealth fund is proposing to drop oil and gas companies from its benchmark index, which would mean cutting its investments in those companies, the deputy central bank chief supervising the fund told Reuters.
If accepted by the finance ministry and adopted by parliament, the fund would over time divest billions of dollars from oil and gas stocks, which now represent 6 percent - or around $37 billion - of the fund's benchmark equity index.
The proposal came in a letter sent by the central bank to the finance ministry and signed by its governor, Oeystein Olsen, and the chief executive of the fund, Yngve Slyngsad, Deputy Central Bank Governor Egil Matsen said in an interview.
It aims to reduce the exposure of the fund - and therefore the Norwegian government- to oil price fluctuations.
"Our advice is to simply remove the oil and gas sector, as it is defined in the FTSE reference index, from the fund's reference index," Matsen said.
"That would mean all companies that the FTSE has classified with the sector, should be removed from our reference index."
The fund is the world's largest sovereign wealth fund. It invests Norway's revenues from oil and gas production for future generations in stocks, bonds and real estate abroad.
It is among the largest investors in a wide range of oil companies, holding stakes at the end of 2016 of 2.3 percent in Royal Dutch Shell RDSa.L, 1.7 percent of BPBP.L, 0.9 percent of Chevron CVX.N and 0.8 percent of Exxon Mobil XOM.N.
It also held 1.7 percent of Italy's Eni ENI.MI, 1.6 percent of France's Total TOTF.PAand 0.9 percent of Sweden's Lundin Petroleum LUPE.ST, among others.
At the end of the third quarter, Royal Dutch Shell was the fund's third-biggest equity investment overall, worth around $5.34 billion and exceeded only by its ownership in Apple APPL.O and Nestle NESN.S.
"It clearly stands out, perhaps not surprisingly, but not obviously, that indeed there is a substantial difference ... in return between the oil and gas sector and the broad stock market in periods when the oil price changes substantially," Matsen said.
"Oil price exposure of the government's wealth position can be reduced by not having the fund invested in oil and gas stocks."
The fund could still invest in the sector if other parts of the fund's mandate are fulfilled by having some investments in some of the companies, Matsen said.
"But clearly the direction is that ... if the ministry and the politicians think it is good advice and they say yes to it, clearly the investments in the oil and gas sector will decrease over time," he added.
Oil and gas stocks would be replaced by investments in other companies.
"The straight answer is that all other sectors would be weighted up in proportion ... (under) our current mandate," said Matsen.
At the end of 2016, the fund's equity investments were split between investments in the financial sector (23.3 percent), industrial companies (14.1 percent), consumer goods (13.7 percent), consumer services (10.3 percent), healthcare (10.2 percent), technology (9,5 percent), oil and gas (6.4 percent), basic materials (5.6 percent), telecoms (3.2 percent) and utilities (3.1 percent).
The timing of the coming divestments is as yet unclear. The proposal has to be reviewed by the Finance Ministry, which in turn needs to decide whether to propose it to parliament.
At the earliest, the ministry's first opportunity could come in the spring, with a vote in parliament in June.
In addition to its holdings via the fund, Norway has exposure to oil and gas via large untapped offshore hydrocarbon reserves, as well as its 67 percent stake in the national oil company, Statoil STL.OL.
The fund has grown so large that even though the Norwegian state is taking less than 3 percent of the fund's value every year for its fiscal budget in recent years, oil spending now accounts for one in five crowns spent by the state.
Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- EDAP -10.8%, BSTI -6.6%, CATO -5.8%, ANW -5.7%, SECO -4.3%, BBY -3.8%, LB -3.8%, XNET -2.7%, STNG -2.4%
M&A news:
- MAT -1.2% (reports that Hasbro's latest proposal has been rebuffed by Mattel)
Other news:
- AXGN -11.8% (proposes common stock offering including portion by holders)
- MRTX -5% (commences common stock offering)
- APPN -4.4% (prices follow-on offering of 3.8 mln shares of common stock at $20.25 per share)
- NCLH -1.5% (prices 10 mln shares of common stock shares by certain funds affiliated with Apollo Global Management (APO) at $54.35 per share)
Analyst comments:
- ACOR -2.9% (downgraded to Underperform from Mkt Perform at Raymond James)
Gapping up
In reaction to strong earnings/guidance:
In reaction to strong earnings/guidance:
- RH +20%, SGH +18.5%, SBPH +18.4%, NTAP +13.5%, CSCO +6.4%, FGL +5.8%, SMRT +5.5%, SJM +4.6%, WMT +4.5%, HP +4%, QIWI +3.8%, KO +1.2%, APC +1.2%, (sees FY18 cap-ex $4.2-4.6 bln; sales volume +10.6% at mid-point) SPB +1%, NTES +0.8%
M&A news:
- EVLV +44.1% (Segel Vision discloses proposal to acquire EVINE LIVE for $2.66/share)
- TIME +15.6% (Koch Brothers plan to support Meredith (MDP) takeover of TIME, according to WSJ)
- ROK +8.4% (Emerson (EMR) confirms proposal to acquire Rockwell Automation for $225/share in cash & stock, or approximately $29 bln)
Other news:
- LEDS +29.1% (continued strength following earnings)
- SBPH +18.4% (announces positive top-line results from the second cohort of Part A of the Phase 2 ACHIEVE Trial -- Low dose of Inarigivir Soproxil (50mg) Monotherapy demonstrates a favorable safety profile and significant dose-dependent antiviral activity, meeting both primary endpoints)
- ACHN +7.9% (prices offering 18,367,346 shares of its common stock by existing stockholder at $2.75 per share)
- IDXG +5.9% (announces that the New York State Department of Health has reviewed and approved for marketing the Company's TERT service offering)
- WSM +2.3% (following RH guidance)
- PYPL +2% (SYF acquires $6.8 bln in receivables from PYPL)
- PG +1.8% (Trian confirms preliminary voting tabulation by independent Inspector of Elections - P&G shareholders have elected Nelson Peltz to P&G's Board)
- SNOA +1.7% (FDA has approved an expanded claim for the company's signature dermatology product, Alevicyn Dermal Spray)
- FCAU +1.6% (reported Oct EU sales)
Analyst comments:
- P +5.1% (upgraded to Outperform from Market Perform at BMO Capital Markets)
- YY +2.6% (upgraded to Overweight from Neutral at JP Morgan)
- DSW +2.5% (upgraded to Positive from Neutral at Susquehanna)
- RF +1.3% (added to Conviction Buy List at Goldman)
- ALK +1.3% (named Top Pick at Morgan Stanley; Overweight)
- DG +1.2% (upgraded to Buy from Hold at Deutsche Bank)
J.M. Smucker beats by $0.12, beats on revs; guides FY18 EPS above consensus (106.51)
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Best Buy reports EPS in-line, revs in-line, comps below guidance; guides Q4 EPS below consensus, revs in-line (57.30)
- Reports Q3 (Oct) earnings of $0.78 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.78; revenues rose 4.2% year/year to $9.32 bln vs the $9.36 bln Capital IQ Consensus. Enterprise comparable sales increased 4.4% vs. guidance for +4.5-5.5%
- "Our Q3 results include the negative impact of two significant factors. First, despite our moderate expectations for mobile phone launches in the quarter, revenue in the mobile category was materially lower than expected. This was due to the fact that a major new phone did not launch until November, which is in our Q4. The related revenue impact in the quarter was more than $100 million. Second, like most retailers, we felt the impact of the natural disasters in south Texas, Florida, Puerto Rico and Mexico. We estimate the loss of revenue impacted our Enterprise comparable sales by 15 to 20 basis points, and that the related costs negatively impacted our EPS by approximately $0.03."
- Domestic online revenue of $1.1 billion increased 22.3% on a comparable basis primarily due to higher conversion rates and higher average order values. As a percentage of total Domestic revenue, online revenue increased 190 basis points to 12.7% versus 10.8% last year.
- Domestic gross profit rate was flat versus last year at 24.7%. Improved margin rates across multiple categories were offset by an approximately 25-basis point negative impact from lapping the $25 million Q3 FY17 periodic profit sharing benefit from the company's service plan portfolio.
- Co issues guidance for Q4, sees EPS of $1.89-1.99, excluding non-recurring items, vs. $2.03 Capital IQ Consensus Estimate; sees Q4 revs of $14.2-14.5 bln vs. $14.36 bln Capital IQ Consensus Estimate; sees enterprise comparable sales growth of 1.0% to 3.0%