Asian stocks drop as oil slide raises fears

HONG KONG: Asian stocks fell to their lowest level in more than a year on Tuesday as shares in resource firms such as BHP Billiton were pummeled by a slump in oil and metals prices to multi-month lows. Oil hovered just above a three-month low on signs of declining U.S. fuel demand, helping to lift the dollar to a seven-week high against a basket of major currencies.

But the steep decline in crude prices to $120 from a record high above $147 in mid-July is worrying some investors in Asia who had at first cheered the benefits in a region where countries are grappling with double-digit inflation. Instead, the commodity declines are now reinforcing fears of a slowing global economy, one year after a downturn in the U.S. subprime mortgage market helped spark a financial crisis still reverberating around the world.

European shares were set for a mixed open, as the focus shifted towards a Federal Reserve meeting later on Tuesday. The U.S. central bank is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.

"At the moment, people are taking the view that the glass is half-empty, rather than half-full," said Greg Goodsell, equity strategist at ABN AMRO in Sydney.

"Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth." The declines in resource firms, combined with the concerns over the global economy, brought the MSCI index of Asian stocks outside Japan at one point to its lowest level since March 2007, before it pared some of the losses. The index was down 1.8 percent as of 0600 GMT. U.S. crude futures were down $1.23 at $120.18 at 0600 GMT.

A survey on Monday showed OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members.

The falls in crude prices came even as Tropical Storm Edouard churns across the Gulf of Mexico, with forecasters expecting it will likely hit the Texas coast, a major U.S. oil and gas centre, with near-hurricane strength.

But energy companies have so far reported few production slowdowns, easing some of the concerns. Metal prices also slumped. Spot platinum dropped to as low as $1,530.00 an ounce, its weakest in more than six months, from $1,551/$1,571 late in New York on Monday, on fears of falling demand from struggling global auto makers. Gold edged down about $4 to $890.95/892.00 an ounce.

COMMODITY SHARES SLUMP

The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd losing 6 percent and Hong Kong-listed oil offshore producer CNOOC down 5.4 percent.

"Global slowdown worries have prompted an unwinding in the commodities market, which in turn has spurred a sell-off in commodity-linked stocks," said Steven Leung, director with UOB Kay Hian in Hong Kong. "If the U.S. dollar continues to advance we will see commodity stocks taking further hits in the short term."

The resource-heavy Australian index fell 1.4 per cent, while the Hong Kong and Taiwan indexes dropped more than 2 per cent each. Tokyo's Nikkei average swung between gains and losses, to end down 0.1 percent.

Falls in commodity-related shares were offset by gains in exporters such as Honda Motor which benefit from a weaker Japanese yen.

The dollar benefitted as investors sold other major currencies against the U.S. unit given expectations that other economies are also slowing. The dollar index, which measures the U.S. currency's performance against a basket of six currencies, rose 0.3 percent to 73.685 and reached as high as 73.699, the highest since mid-June.

The Australian dollar extended its slide, striking a four-month low of $0.9234 against the U.S. currency, after the central bank on Tuesday left the door open for the first cut in interest rates in seven years, that some investors believe could come as soon as September.
thanks to :- economictimes.indiatimes.com

Japanese shares down ahead of US Fed meeting

TOKYO: Japanese shares fell slightly on Tuesday as cautious investors held back ahead of an interest rate decision by the Federal Reserve later in the day.

The benchmark Nikkei 225 Stock Average slipped 18.52 points, or 0.14 percent, to 12,914.66 in its third straight losing session. The broader Topix index dropped 0.04 percent to 1,247.15.

While lower crude oil prices and a relatively stable dollar-yen exchange rate helped boost sentiment, Japanese markets stood largely idle as investors awaited Wall Street's next move, said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.

``U.S. stocks are at a crucial point right now,'' Hirano said. ``Whether they will rebound or fall further will be influenced in part by tonight's (Fed) meeting.''

Also souring the mood in Japan were reports that the government would downgrade their assessment of the country's economy in its August economic report due out Thursday.

Leading decliners were insurance and steel issues. Japan's second-largest steelmaker JFE Holdings, Inc. plunged 7.19 percent to 4,390 yen; Nippon Steel Corp. lost 4.88 percent to 526 yen. Major nonlife insurer Mitsui Sumitomo Insurance Group Holdings, Inc. shed 5.90 percent to 3,190 yen.

The consumer finance sector, however, gained on news of a possible merger between Orix Corp. and Credit Saison Co. Major credit issuer Credit Saison surged 11.22 percent to 2,330 yen, and leasing company Orix added 2.59 percent to 15,070 yen.
Pulp and paper companies and rubber products makers benefited from falling oil prices.

Oil prices fell below US$120 a barrel in electronic trading Tuesday in Asia on expectations the economic downturn in the U.S. will erode consumer demand for crude products.

In currencies, the dollar fell to 107.78 yen Tuesday afternoon from 108.22 yen late Monday. The euro was trading at US$1.5505 compared with US$1.5567
thanks to :- economictimes.indiatimes.com

HCL Q1 net dives 59% as forex losses weigh

NEW DELHI: HCL Technologies, the country’s fifth-largest IT services firm, on Friday posted a 58.8% sequential and 71% year-on-year decline in net profit for the quarter ended June 30, 2008 at Rs 141 crore, on the back of a forex loss of nearly Rs 300 crore. Consolidated revenue for the quarter grew 11.5% sequentially and 34.5% y-o-y to Rs 2,168.8 crore on the back of volume growth, largely in the US and Europe.

The company declared a 150% dividend for the quarter. HCL Technologies also announced the appointment of CEO Vineet Nayar to its board of directors, effective August 1.

During the quarter, the company’s EBITDA (earnings before interest, tax, depreciation and amortisation) grew 17.4% sequentially and 46.3% y-o-y to Rs 508.4 crore. Operating margins improved to 23.4%, against 21.6% in the same quarter last year, as utilisation rates improved. Utilisation levels improved to 73.9% at the end of the quarter, against 71.3% at March-end. The company won deals worth $310 million during the quarter.

HCL Technologies reported a forex loss of Rs 299.9 crore during the quarter as the rupee dipped over 7% against the dollar. Of this, Rs 133.4 crore was due to unwinding of forex covers during the quarter and another Rs 38.7 crore was cash loss. The remaining Rs 127.7 crore was mark-to-market forex loss. HCL had reported a forex gain of Rs 250.4 crore in the same quarter last year. “We look at forex covers as a long-term strategy. Over the past three years, we have made a net forex gain of $0.4 million,” said Mr Nayar.

For the year ended June 30, 2008, the company’s net profit declined 16.9% to Rs 1,124.8 crore. Consolidated revenue for the year stood at Rs 7,639.4 crore, a growth of 26.6% over FY07. EBITDA for the year grew 26.7% to Rs 1,693.9 crore. Operating margins for the year remained flat at 22.2%. The tech firm signed deals worth $1 billion during the financial year.

Forex loss for the year stood at Rs 306.7 crore, against a gain of Rs 328.1 crore last year. HCL now has a forex cover of $2 billion for the next seven quarters.

“The year has been great for HCL Technologies. US revenues crossed $1 billion while Europe crossed $500 million. Among verticals, financial services and manufacturing crossed $500 million each in revenues,” HCL Technologies chairman & chief strategy officer, Shiv Nadar said.

US improved its contribution to HCL Technologies’ revenues to 57.4% at the end of June, against 55.9% in the previous quarter. The growth in US was led by financial services, lifesciences and manufacturing verticals. Europe accounted for 29.1% of revenues, while Asia-Pacific made up for 13.5%.

Hi-tech manufacturing became the largest contributor to HCL’s revenues this year with a 30.7% contribution. The vertical accounted for 28.7% of revenues last year as did financial services, which now accounts for 27.3%.

Consolidated IT services, including software and infrastructure services, registered a revenue growth of 28.6% during the year while BPO services revenues grew 13.7%.

“We are trying to break the linearity in BPO services by focussing on platform-based BPO and outcome-based pricing, the results of which will be seen in the next few quarters,” said HCL BPO chief executive, Ranjit Narsimhan.

The tech company also improved its revenue mix according to contract-type. Fixed-price contracts, which offer a greater scope to increase margins, accounted for 35% of HCL’s contracts, against 30% last year.

“Going forward, we expect margins to remain intact and utilisation at the same levels,” Mr Nayar said. The firm crossed the 50,000-employee mark and had 50,741 employees at the end of June. It has earmarked $150 million as capex for 2009. The company is setting up 16,000 more seats in SEZs in Noida, Chennai and Bangalore.
thanks to :- economictimes.indiatimes.com

Gujarat wants centre to bend rules on power allocation

CHENNAI: The Gujarat government has asked for all the power from the proposed 1,000 MW project in a joint venture with the state-run Neyveli Lignite Corp (NLC) in Tamil Nadu, though the norms are that at least 57 per cent of the electricity generated to be fed to the national grid.
"We have already written to the central government asking for the entire power for consumption in our state. We are waiting for a response," a Gujarat government official who requested anonymity said on phone from Gandhinagar.
NLC too has written a letter to the centre expressing the Gujarat government's desire.
The lignite-fuelled power plant is proposed at Valia in Gujarat where the state-run Tamil Nadu-based NLC has been roped in as 74 per cent partner. The rest of the equity in the Rs.51.4 billion project will be held by the Gujarat Power Corp.
The pact between NLC and Gujarat government was signed two years ago to mine 12 million tonnes of lignite per annum and set up a 1,500 MW power project in two phases.
The first phase proposes to mine eight million tonnes of lignite and build a 1,000 MW power plant.
A senior NLC official explained that by a formula that has been in force for more than two decades, any joint venture with a state-run power company requires 57 per cent of the electricity generated to be supplied to the national grid.
The official, however, cited the case of a similar project between the Andhra Pradesh government and the state-run National Thermal Power Corp in Simhadri where the state was allowed to utilise the entire 1,000 MW generated.
He said even NLC, which is setting up a 250 MW power project in Rajasthan, will supply the entire output to the state, adding that the Gujarat government has the option of roping in the private sector as a partner if its demands were not met.
"The reason why they want to come to us is because we have much better experience in mining and handling lignite-fired power plants," the official said, adding that NLC had a mining capacity of 24 million tonnes per annum and an installed capacity of 2,490 MW.
A joint venture company will be formed once the power allocation issue is sorted out, the official added.

Ambani divorce papers may soon be in public domain

MUMBAI: The famous, but so far unseen, family agreement, which formalised the split between Mukesh and Anil Ambani, may soon become public.

"The MoU, if required, would be produced before the court by Smt Kokilaben, mother of the Ambani brothers," according to Ram Jethmalani, counsel for Reliance National resources (RNRL), an Anil Ambani group company, which is engaged in litigation with the Mukesh Ambani-controlled Reliance Industries over natural gas supply from the Krishna-Godavari (KG) basin. Mr Jethmalani spoke to ET on the sidelines of the legal proceedings in the Bombay High Court.

The family agreement assumes significance in view of the arguments advanced by RIL's lawyer Harish Salve that the MoU was a 'ghost agreement' as nobody has seen it yet and questioned the enforceability of such an MoU.

Thus, the 'family agreement' may take centre stage at the Bombay HC next week. "It's a private document between the Ambani brothers. Besides broad framework of the demerger, it also has the details of the division of the personal assets of Ambani family," said a person broadly familiar with the contents of the MoU.

A single-judge bench of the HC, in an earlier order, had directed the Ambani brothers to renegotiate the gas sales agreement as per the family agreement or the MoU. The MoU has not been submitted in the court as evidence. Mr Salve has argued that the RIL board was not party. "It's a piece of trash, as far as this case in concerned," said Mr Salve.

The case will come up before a two-judge bench of the Bombay HC on Tuesday, when RIL's counsel is likely to complete his submissions and Mr Jethmalani will begin his argument.
thanks to :- economictimes.indiatimes.com