MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JULY 12, 1998 (5)
FRIDAY'S WORLD MARKET OVERVIEW
Mexico Stocks Post Firm Gains On Q2 Hopes
MEXICO CITY, July 10 (Reuters) - The Mexican bourse held earlier gains at the close on Friday, driven by a favourableoutlook for second quarter earnings about to be posted by key companies, dealers and analysts said.
The 35-share IPC share index (^MXX - news) ended up 34.29 points, or 0.76 percent, at 4,566.88 points.
Francisco Blanco, research head at Arka brokerage, said earnings hopes had helped drive the IPC's recovery since it dipped to a year low of 4,048.99 on June 15.
''All these 500 points we have recouped has been to a great extent due to discounting reports,'' he said.
''And the issue will be more relevant this coming week as we are expecting a good slew of them,'' he added.
Blanco said demand for phone company Telefonos de Mexico (Telmex) and cement makers, including Cemex, drove the market.
Telmex (TELMEXL.MX) rose 0.20 pesos to 22.05, while Cemex (CEMEXCPO.MX) ended up 0.70 pesos at 38.40 pesos. The two stocks together accounted for 20 percent of all shares traded.
Roberto Galvan, analyst at Bursametrica consultancy, noted that volume of 47.8 million shares was thin due to ''some caution over Sunday's (Upper House) elections in Japan.''
Volatility in Japanese and other Asian markets is one reason that Mexican stocks have slumped in 1998. Friday's gains cut the IPC's losses for the year so far to 21.2 percent in dollar terms.
Dealers said the IPC retreated from a maximum of 4,609.57 points in the final half hour on profit-taking.
Broadcaster Grupo Radio Centro (RCENTROCPO.MX) headed the prominent gainers, up 2.18 pesos (21.4 percent) to 12.38 pesos on news U.S.-based Chancellor Media Corp (AMFM) was to buy a 50-percent stake in the company.
The company's American Depositary Receipts (RC) came in second on the percentage gainers' list on the New York Stock Exchange, ending up 1-15/16, or 18.6 percent, at 12-3/8.
Turnover was a moderate 928 million pesos. On the broad market, climbers outpaced fallers by 54 to 28, out of 96 stocks traded.
European Bourses travel nowhere
Wary European markets lose a week's record gains ahead of Japanese election
European shares fell for a second consecutive session Friday to end little changed on the week as developments in the Japanese economic crisis seemed destined to come to a head over the weekend.
With Japan facing Upper House elections Sunday, traders were careful not to push the yen much stronger against the dollar in case a surprise result upset the ruling party' economic reforms.
"If [Prime Minister Ryutaro] Hashimoto doesn't get the magic 61 seats he may be forced to resign, which would put back the government's tax plans and that would definitely upset the market," one Japanese stock trader in London said.
After tracking Asian bourses lower in the morning, European shares bounced back on news U.S. wholesale prices unexpectedly eased 0.1 percent in June, the first fall for three months.
The recovery was short-lived after the Dow Jones industrial average fell 0.6 percent and Treasurys weakened as investors worried about a higher than expected core inflation figure.
British stocks were weak all day on concern that domestic interest rates could rise soon despite Thursday's decision by the Bank of England's Monetary Policy Committee to leave the key repo interest rate unchanged.
The FTSE-100 index fell 40 points, or 0.67 percent, to 5,929.7, little changed from the 5,988.4 level where it started the week.
Zeneca PLC was one of the biggest losers, falling 62p to 2,404 after a surprise profit warning from U.S. market leader DuPont (DD) prompted analysts to downgrade forecasts for the British drugmaker.
In Frankfurt, the DAX ended the week at 5,982.42, down 14.35 points, after spending much of the day down about 50 points and touching a low of 5,912.60.
In electronic trading, the Xetra DAX closed above 6,000 at 6.001.24, up 0.40 points.
"Wall Street's not going into negative at the open made a difference over here," a trader said.
France's CAC-40 blue-chip index was the biggest loser in Europe, falling 1.45 percent amid a report the 1999 budget may include a plan to tax capital gains on some trades.
As dealers headed off for a four-day weekend to mark Bastille Day, the index ended down 62.83 points at 4,256.35, below the week-earlier level of 4,304.38 despite a string of record closes at the start of the week.
Asia Reels On Tax Rumor, Yen
Tokyo loses 2.17 percent, Hong Kong drops 2.7 percent as others post losses
No major Pac Rim stock exchange was left unscathed by a weakened yen and speculation that tax cuts in Japan would be too low to spur that country's recession-bound economy.
Stocks in Tokyo and Hong Kong lost more than 2 percent, while those in Singapore and Sydney shed more than 1 percent.
The benchmark Nikkei 225 average fell 356.89 points, or 2.17 percent, to 16,090.06.
The market slid on speculation that the tax cuts pledged by Prime Minister Ryutaro Hashimoto could be as little as two trillion yen, far less than the four trillion yen the market has fixated on. The speculation was fueled by comments made by some members of Hashimoto's ruling Liberal Democratic Party
The sharp drop in stocks comes just ahead of Sunday's Upper House election, seen as a referendum on Hashimoto's stewardship of the economy.
Investors were unruffled, saying much of the activity was day traders unwinding position ahead of the poll.
"It's a Friday. It's the last day of trading before the election. It's only natural for them to get out of their positions," said an equity fund manager at the investment advisory arm of a money center bank.
Banks were particularly hard-hit as the yen weakened. A weakening yen weighs on banks by inflating the yen value of their dollar-denominated loans to Asia. That forces them to raise more capital to meet international adequacy requirements.
Volume was a beefy 597 million shares, up from 397 million on Thursday.
Yen proves slippery slope for Hong Kong
Hong Kong stocks, riding the volatility of the currency markets, closed sharply lower Friday in line with a drop in the Japanese yen and brokers said the market would remain weak, trapped in a tight range.
The Hang Seng index closed down 228.01 points, or 2.70 percent, at 8,205.77, after sliding to a low of 8,129.56 in early afternoon trade.
"People have been dumping shares from the open because they are worried about the dollar/yen," one dealer at DBS Securities said. The currency moved about two yen against the dollar during the day but traded on the weak side of 140 yen for most of the day, brokers said.
This was due to concerns over the results of Japan's parliamentary elections to be held Sunday.
The yen weakness in turn sparked local fears of another round of exchange rate volatility, pushing local interbank rates up by about 100 basis points. Turnover remained low.
"There's a complete lack of volume," Archie Hart, director at Deutsche Bank Research, said. "So most of the market moves are meaningless."
The commercial and industrial sector was the market's worst performer. The conglomerates and manufacturers were seen as most vulnerable to the negative aspects of a further decline in the yen, brokers said.
Singapore stocks see further softening
Singapore share prices ended softer, battered by a raft of bad news, including rumors of company bankruptcies in Malaysia, the decline of regional currencies and market jitters ahead of weekend parliamentary elections in Japan.
The benchmark Straits Times Industrials index ended down 13.30 points, 1.21 percent, at 1,090.35. An estimated 147.06 million shares changed hands. Declines outnumbered gains 296 to 55.
Selling was across the board, dealers said, and affected most index shares.
Sydney sags on futures
Sagging sentiment in offshore markets pushed the Australian share market to a sharply lower close on Friday.
The All Ordinaries benchmark index slumped 41.0 points, or about 1.5 percent, to 2,747.9. The market fell away in the afternoon as traders slashed the premium held by the September share price index(SPI) futures contract.
"We have seen profit taking after the negative leads from overseas," said Henderson Charlton Jones dealer Phillip Toop. "Some premium also came out of the SPI and commodity prices are not helping anyone."
"It was a futures-driven afternoon," said a dealer at a European-owned investment bank. "There was not much positive to come out of Asia or Japan, so we have seen our market squeezed." |
