Govt to buy stocks from support fund next week: Tarin

ISLAMABAD: The government will start taking positions in the stock market from the next week with the help of Rs20 billion market support fund.This was stated by Advisor to Prime Minister for Finance, Shaukat Tarin during the meeting of National Assembly Standing Committee for Finance.He said the government will ensure protection to the small investors while providing safeguarding of big brokers is not among the priorities of the government.Shaukat Tarin told the meeting that 500 million dollars will be received from the World Bank during this quarter. Similar amount is also expected to come form China in the first week of January, he added.He informed the rate of inflation is steadily dropping.

Wall Street gains as GMAC gets financing

NEW YORK – Wall Street staged a big advance in the next to last session of 2008 Tuesday after Washington's latest lifeline to the auto industry bolstered hopes that the government will do whatever is necessary to cut short the recession.
Investors found solace in news that General Motors Corp.'s troubled financing arm received $5 billion of financing. The Treasury Department said late Monday it would provide the money to GMAC Financial Services LLC from the $700 billion bank rescue program.
The injection is on top of the $17.4 billion in loans the Bush Administration agreed to provide to the auto industry on Dec. 19. GMAC said Tuesday it would immediately resume lending to certain customers it had previously said were too great a risk for auto loans because of tight credit markets.
"This is trying to slow down the economic train wreck," said Jack Ablin, chief investment officer at Harris Private Bank. "Investors are taking a step back, and realizing that this will enable auto buyers to finance their cars and add liquidity to the market."
Ablin also said the move will have an effect on the entire economy, especially amid a backdrop of sluggish consumer spending, which drives more than two-thirds of the U.S. economy.
Wall Street got another disappointing reading about the mood of Americans after the Conference Board reported its Consumer Confidence index dropped to a record low. The trade group reported the index's reading fell to a 38 in December from a revised 44.7 in November, well below the expectation of 45 economists surveyed by Thomson Reuters.
Investors were well prepared for a downbeat report after consumers reluctant to spend left retailers with their worst holiday season in years. The International Council of Shopping Centers said Tuesday that weekly same-store sales, those from stores open a year or more, dropped 1.5 percent last week at the 40 retailers it polls.
The Dow Jones industrial average rose 184.46, or 2.17 percent, to 8,668.39. But even with that advance, the blue chips are still down 36.04 percent for the year with one more trading day remaining.
Broader indexes also moved higher. The Standard & Poor's 500 index rose 21.22, or 2.44 percent, to 890.64, leaving it down 40.79 percent for the year; while the Nasdaq composite index added 40.38, or 2.67 percent, to 1,550.70, leaving it down 43.06 percent for 2008.
With many traders away for the holidays, volume was low, which can exaggerate price moves. Advancing issues led decliners by 4 to 1 on the New York Stock Exchange, with consolidated volume at a light 3.23 billion shares, up from 2.98 billion on Monday.
Most investors are looking past 2008 for clues about how stocks will fare in the coming year.
Subodh Kumar, global investment strategist at Subodh Kumar & Associates in Toronto, said the market's moves in the final days of the year are more noteworthy than some investors realize; stocks have been fairly steady despite low volume that could easily lead to sharp declines. But he predicts trading will remain volatile into mid-2009.
"It's still relatively encouraging that the markets have been able to hold up," he said.
Investors might have been able to overlook the disappointing consumer data after a surprise uptick in the Chicago Purchasing Managers' index, which measures business conditions across Illinois, Michigan and Indiana. It advanced in December for the first time since August. Wall Street had expected a decline. The index, which rose 34.1 from 33.8 in November, is considered a precursor to the Institute for Supply Management's manufacturing survey on Friday.
Bond prices were higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.06 percent from 2.10 percent late Monday. The yield on the three-month T-bill, in great demand because it is considered one of the safest investments, rose to 0.06 percent from 0.03 percent late Monday.
Light, sweet crude fell 99 cents to $39.03 on the New York Mercantile Exchange. Oil prices rose Monday as investors worried fighting between Israel and Hamas in Gaza would disrupt oil shipments.
The dollar was mixed against other major currencies, while gold prices fell.
In corporate news, shares of GM rose 20 cents, or 5.6 percent, to $3.80 after GMAC was given government financing. GM owns 49 percent of GMAC, while private equity firm Cerberus Capital Management holds the remainder.
The Federal Reserve last week approved GMAC's application to become a bank holding company, a move that cleared the way for the company to receive money from the financial rescue fund. In addition to the cash infusion for GMAC, the government also agreed to lend $1 billion to GM so it can contribute to the financing arm's reorganization as a bank holding company.
Meanwhile, General Motors said it is offering financing as low as zero percent over the next week for several 2008 and 2009 models in a big year-end sales push.
The Russell 2000 index of smaller companies rose 16.62, or 3.57 percent, to 482.77.
Overseas, Japan's Nikkei stock average rose 1.28 percent in the final session of the year, ending 2008 with a loss of 42 percent. Markets in Japan are closed for a holiday Wednesday. Britain's FTSE 100 rose 1.70 percent, Germany's DAX index rose 2.24 percent, and France's CAC-40 rose 2.76 percent.

KSE decides to utilize MPFs

KARACHI: Karachi Stock Exchange (KSE) has decided to utilize Members Protection Funds (MPFs) in view of the prevailing market conditions.This will provide an opportunity of borrowing up to Rs500 million each from the fund for a particular time period. The opportunity is for those stock members who are unable to clear payments against losses.Presently there is more than Rs2 billion in KSE Members Protection Funds.

Asian markets open mixed

Tokyo stocks opened only slightly lower Friday after a down day on Wall Street, buoyed by the possibility of an interest rate cut by the Bank of Japan.

Asia stocks opened mixed, but with little movement.

The Japanese government said Friday it expected a shrunken economy when the fiscal year ends in March. But investors on the Nikkei index, concerned with the growing recession, held out hope for the interest rate drop and held the index to a .16 percent fall.
Elsewhere, stocks were mixed, but with little movement. Australia's All Ordinaries index fell .41 percent and the Shanghai composite index was down .39 percent. But Seoul's KOSPI index was up .56 percent and Hong Kong's Hang Seng index rose .24 percent.
On Wall Street Thursday, a selloff accelerated in the last hour of a volatile session as traders squared up positions for a handful of options expiring Friday, known as "quadruple witching."
The Dow Jones industrial average ended down 219 points, or 2.5 percent. The broader Standard & Poor's 500 index fell 19 points, or 2.1 percent, and the Nasdaq composite shed 27 points, or 1.7 percent. All three indexes seesawed in early trading.
The market is typically more volatile ahead of "quadruple witching," when equity options, stock index futures, stock options and single-stock futures all expire on the same day. There are four such Fridays in the year, and they tend to be preceded by increased market volatility.
"Most of the action around that occurs the day before," said Fred Dickson, chief market strategist at D.A. Davidson & Co. "What we are seeing at the end of the day is an option and futures selloff related to tomorrow's expiration."
Investors also focused on the recession, which has delivered a slew of sour economic reports and has chipped away at global demand for oil.
A torrent of bad news that had been ignored in the previous session came back to haunt the markets in the afternoon session. "We have had a market that has really, up until yesterday, been pretty resilient in the face of negative news," said Art Hogan, chief market analyst at Jefferies & Co. "The market has been ignoring a lot of bad news and it is not ignoring it today."
With the holiday week approaching, trading has also slowed. "Volume is fairly low," said James Shelton, chief investment officer at Kanaly Trust Company. "The markets are getting ready for the holidays."
Market breadth was negative. On the New York Stock Exchange decliners beat out advancers 3 to 2 on a volume of 1.4 billion shares. Meanwhile on the Nasdaq, decliners beat out advancers nearly 2 to 1 with a total market volume of 2 billion.
The dollar gained against other major currencies, with the yen just off the 13-year high it reached against the dollar Wednesday. Meanwhile, the 15-nation euro and the British pound both lost against the greenback.
Treasury prices, meanwhile, continued to rally, sending yields to record lows. The benchmark 10-year note rose 1-4/32 to 114-30/32 and its yield fell to an all-time low of 2.07 percent, down from 2.18 percent late Wednesday.

Swift measures to prevent KSE members from defaulter

KARACHI: Karachi Stock Exchange (KSE) Board has resolved to take swift measures to prevent its members, having expired membership cards, from going to default on Thursday.

According to sources, the special committee, formed for CFS market, has decided to buy the shares of expired membership cards holders below 12.5 percent prices of the market price of December 24.

KESC Board said that CFS financers would buy their shares costing Rs. 3.90 billion below 12.5 percent price of market price of December 24.

Stock market turmoil to hit banks

KARACHI: The current equity market turmoil has raised concerns over its impact on various stakeholders, particularly the banking sector, which carries substantial exposure through a combination of direct investment, margin financing and CFS financing.“The banking sector is already going through a tough phase due to declining deposit growth and rising bad loans because of high interest rates and credit crunch. Our estimates suggest that banks have an exposure in the range of Rs100-150 billion in the stock market, which is 20-25 per cent of their equity base,” stated Farhan Rizvi, analyst at JS Research, in a report.With the Karachi Stock Exchange index already down 24 per cent since the lifting of floor on Dec 15, “we think further erosion in the sector’s book value along with capital adequacy ratio (CAR). Moreover, default on margin financing and Continuous Funding System (CFS) exposures also remain significant risks for the sector.”According to an analysis of 11 JS Universe banks (78 per cent of the banking sector), he said the exposure in capital markets was in excess of Rs100 billion ($1.3bn) as of Sept 30, which was 24.6 per cent of their equity. That did not include margin financing against shares whose statistics were not available and were reported to be in the range of Rs30-50bn for all banks.“We have already seen a sharp decline in revaluation surplus during the quarter ended Sept 30, with Rs23bn fall in investment revaluation reserve,” he added.Apart from concerns over equity investment, other major risk facing the banking sector is exposure in CFS MK-II and margin financing. The CFS has been particularly in the limelight due to a lawsuit filed by a few brokers and counter-suit by some banks.According to Sept 30 financial accounts, total exposure of banks in JS Universe in CFS MK-II was Rs9bn (60 per cent of total outstanding amount of Rs15.2bn). Moreover, according to various news reports, exposure in margin financing was in the range of Rs35-50bn.The banking sector continues to remain under stress due to a combination of economic slowdown, liquidity crunch and increasing asset quality concerns, which has forced banks to make heavy provisions for non-performing loans (NPLs).According to official data released by the State Bank, total banking sector provisions rose by Rs44bn till Dec 13.

Asian markets fall

TOKYO: Asian stock markets were mostly lower on Monday as a US pledge to loan troubled automakers $17.4 billion failed to ease worries about a deteriorating world economy. Hong Kong's Hang Seng Index dropped 1.7 percent to 14,874.61, and Australia's key index was down 1.6 percent. South Korea's Kospi dipped 0.2 percent after opening higher and Singapore's benchmark was down 0.5 percent. Tokyo bucked the regional trend, with its Nikkei 225 stock average rising 130.68 points, or 1.5 percent, to 8,719.20 despite the latest bad news about the country's exports. Last week in New York, Wall Street finished a choppy session mostly higher. The Dow fell 25.88, or 0.30 percent, to 8,579.11. The Standard & Poor's 500 index rose 2.60, or 0.29 percent, to 887.88. U.S. futures were up modestly, meaning Wall Street was poised for a higher open. In currencies, the dollar strengthened to 89.98 yen, up from 89.24 yen, and the euro rose to $1.4007 from $1.3913 late Friday.