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Archive for the ‘Business’ Category
17 May
Small-business owners often complain of feeling caught in the cross hairs of the tax code. For a change, here’s good news.
The Tax Court has just blessed a new technique that owners of closely held businesses—and wealthy families—can use to pass assets to heirs with a minimum of taxes and complications. The ruling in the case, Wandry v. Commissioner, is stirring up excitement among experts.
![[28taxreport]](http://si.wsj.net/public/resources/images/BF-AC705_28taxr_DV_20120427191946.jpg)
Lee Hasler
David Kautter, a director of American University’s Kogod Tax Center, calls the ruling a “landmark decision, because it allows tax-free ownership transfers from one generation to another with certainty and in an orderly manner.”
Here is why Wandry matters. Our current system imposes a gift tax of up to 35% when taxpayers give assets away, with exceptions. Individuals now get one $5.12 million lifetime exemption, and they can also give up to $13,000 of assets a year to an unlimited number of recipients. (Next year the lifetime break is scheduled to drop to $1 million and the top rate to rise to 55%.)
This means an owner who wants to give a business to children or others, such as employees, can use these exemptions to transfer ownership tax-free. He can even use the $13,000 annual exclusion to transfer value bit by bit.
That is what happened in the Wandry case. Dean and Joanne Wandry, a Colorado couple, each gave units in a family-owned limited-liability company worth $1,099,000 to their heirs in 2004. To avoid paying tax, they specified the gifts should equal the dollar amount of their exemptions—a key point. (At the time, the lifetime exemption was $1 million and the annual exclusion $11,000.)
The hitch in Wandry and other cases is that the givers have to get a professional appraisal if—as is common—the company is hard to value. Often values are lowballed a bit in order to maximize the gift. But the Internal Revenue Service can contest the appraisal after the gift—and often does. In Wandry, the value rose about 20%.
That brings up an important issue: If values rise after an IRS challenge, must the giver write a big check for tax on the amounts above the exemption?
According to the Wandry decision, no. The judge held the couple intended to make a gift equal to their exemptions, so the excess was never actually given by them. No tax was due.
Here’s a simplified example: John’s business is appraised at $6 million. He gave units worth $5 million to relatives last year, with more to come in $13,000 annual gifts over time.
The IRS later determines that the $5 million of units were actually worth $6.2 million. Does John owe gift tax of about $400,000 on the $1.2 million? Not if he arranges the transaction as the Wandrys did, and the $1.2 million is deemed never to have been given. It remains John’s.
The IRS must feel like this decision stacks the deck in taxpayers’ favor, because they don’t risk writing a check if they lowball the value of a gift.
According to attorney John Porter of Baker Botts in Houston, Wandry is the latest in a line of related cases lost by the IRS. Absent the Wandry decision, often the best outcome is for a family to designate a charity to receive the excess. No tax is due, but the family gives up some control.
The Wandry case is a boon not only for business owners but also wealthy families with “family limited partnerships” or entities holding publicly traded stocks. Even though the stocks’ value is easy to determine, submerging them in a nontraded company provides valuable discounts when units are transferred to heirs.
As a “memorandum” decision, Wandry may be cited as precedent in future cases. The IRS had no comment either on the decision or whether it will appeal the case to the 10th Circuit Court of Appeals.
The catch: The IRS has more than three months to appeal the case. Mr. Porter believes its reasoning is sound, but taxpayers who rely on it while gift-tax exemptions are high and rates are low run a risk.
Still, it may be important to act soon. The decision is so advantageous for taxpayers that it could inspire a response from Congress or the IRS.
Proposals on passing wealth through partnerships that would undercut Wandry have been raised repeatedly by lawmakers, notes Kogod’s Mr. Kautter, and the decision could help revive them.
—Email: taxreport@wsj.com
A version of this article appeared April 28, 2012, on page B9 in the U.S. edition of The Wall Street Journal, with the headline: Shielding the Family Business.
Posted by StuMack under Business | Comments Off
17 May
Tue May 15, 2012 7:32pm EDT
* GM to keep pages on social networking site
* Automaker spent $1.1 bln on US ads last year -research
firm
* Move seen as first highly visible crack in Facebook ad
strategy
* Facebook stock to debut Friday; valuation could exceed
$100 bln
By Ben Klayman and Alexei Oreskovic
DETROIT/SAN FRANCISCO, May 15 (Reuters) – General Motors Co
said on Tuesday it will stop advertising on Facebook,
even as the social networking website prepares to go public.
While GM gave no specific reason for dropping Facebook ads,
a source familiar with the automaker’s plans said the company’s
marketing executives decided Facebook’s ads had little impact on
consumers.
While GM’s decision could be an exception in the advertising
world, it marked the first highly visible crack in the Facebook
strategy, said Brian Wieser, Internet and media analyst at
Pivotal Research Group.
“This does highlight what we are arguing is the riskiness of
the overall Facebook business model,” he said. “It is not a sure
thing. It sure looks likely that it will be one of the most
important ad-supported media properties, but it’s not certain
because there will be marketers who are challenged to prove the
effectiveness of the marketing vehicle.”
Facebook Inc, founded eight years ago by Mark
Zuckerberg in a Harvard dorm room, is expected to start trading
on the Nasdaq on Friday. The world’s No. 1 social networking
site raised its IPO price range on Tuesday, potentially giving
the company a valuation of more than $100 billion.
An executive at another large consumer products company said
the issue with advertising on Facebook is nobody really knows
yet if it works better than traditional media and is worth the
money spent. “Is it just a shiny new object, or is it a real
value proposition?” said the executive, who asked not to be
identified.
GM said it will still have Facebook pages, which cost
nothing to create, to market its vehicles. GM pays no fee to
Facebook for its pages, which allow the automaker to reach
consumers directly.
GM said it regularly reviews how it spends its marketing
budget and adjusts its approach as needed.
“It’s not unusual for us to move our spending around various
media outlets – especially with the growth of multiple social
and digital media outlets,” the company said in a statement.
“In terms of Facebook specifically, while we currently do
not plan to continue with advertising, we remain committed to an
aggressive content strategy through all of our products and
brands, as it continues to be a very effective tool for engaging
with our customers,” GM said.
NO. 3 U.S. ADVERTISER
GM spends about $40 million on its Facebook presence, but
only about $10 million of that is paid to Facebook for
advertising, according to the Wall Street Journal, which first
reported GM’s plans to drop Facebook ads. The remaining budget
covers the creation of content and the advertising and media
agencies involved, the newspaper said.
GM, the country’s third-largest advertiser behind Procter &
Gamble Co and AT&T Inc, spent $1.11 billion on U.S.
ads last year, according to Kantar Media, an ad-tracking firm
owned by WPP Plc. About $271 million of the total GM
spent for ads last year was for online display and search ads
excluding Facebook advertising.
Facebook ads make up a small percentage of GM’s advertising
budget, but the company said it is committed to the website to
market its vehicles.
For instance, the Facebook page for the Chevrolet Sonic
small car as of 2000 GMT on Tuesday had more than 423,000
“likes.” The first three months of Sonic’s marketing campaign
which began last October were exclusively digital, with TV ads
not running until early this year.
REACHING YOUNGER CONSUMERS
While GM rival Ford Motor Co said it was committed to
advertising on Facebook, the social media site is just one part
of the No. 2 U.S. automaker’s marketing strategy. Ford also is
boosting its spending on Facebook, including ad buys.
“You just can’t buy your way into Facebook,” said Ford
spokesman Scott Monty. “You need to have a credible presence and
be doing innovative things.”
More than 20 percent of Ford’s marketing budget is spent on
digital and social media, he said. The company launched its 2011
Explorer SUV on Facebook and other digital outlets for a
fraction of the cost of a Super Bowl TV spot, which cost $3.5
million on average per 30 seconds this year.
Automakers are increasingly turning to social media sites
to reach younger consumers on their turf for less than a tenth
of the cost of a traditional marketing campaign.
Ford first used social media on a wide scale to promote the
Fiesta small car in 2009 in a campaign dubbed the “Fiesta
Movement.” It spent $5 million on the campaign for the car,
which was returning to the U.S. market after roughly three
decades.
After the Fiesta campaign, Ford said 60 percent of Americans
who said they would buy a small car within two years said they
were familiar with the Fiesta. That kind of recognition would
cost $100 million through traditional means, the company said.
Another fan of Facebook is Japanese automaker Subaru
, which started using banner ads at the website in the
past year in addition to its free content. “Advertising plus
content equals more clicks to our website, which we like,”
Subaru spokesman Michael McHale said.
Most of Facebook’s corporate clients, like Ford, are
satisfied with the return they get from their ads, said Jason
Beckerman, chief strategy officer for Unified, which helps
companies analyze the impact of marketing campaigns on social
networking sites. In addition to Ford, clients at his firm
include German automaker BMW, P&G and Microsoft Corp
.
Beckerman, who has worked with Facebook in the past, said
companies tend to be dissatisfied when they simply “throw money”
at social networking sites. “Without the proper planning and
structure of your buys, you are asking for little to no
results.”
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16 May
Since the early days of Silicon Valley, rogue engineers and software developers have engaged in “black-ops IT,” a tradition of sneaking new technology into their companies to amuse themselves and thumb their noses at corporate protocol.
Now tech companies are increasingly trying to redirect black-ops information technology into officially approved channels to harness the creative energies of developers for new products.
Seb Ruiz
Employees at Atlassian, which runs contests challenging staff to devise features its customers would use.
Atlassian, a software-tools maker with offices in San Francisco, runs a quarterly programming contest giving employees 24 hours to produce an innovative feature that customers could use. The contest was inspired by Google Inc.’s policy of allowing its engineers to spend 20% of their time on projects they feel passionate about, says Atlassian President Jay Simons.
So far, it has produced 47 significant product features, the company says. Winners are awarded with trophies and limited-edition T-shirts. Every contestant gets pizza and beer.
This year, after some of Atlassian’s customers took notice of the event, the company decided it would send three “seasoned engineers” to help one of its customers run its own contest. Atlassian invited its customers to apply and subsequently picked Nintendo of America Inc. On Thursday, Atlassian will make good on its offer and send the three-person engineering team to Nintendo of America’s headquarters in Redmond, Wash. Nintendo declined to comment.
Spiceworks Inc., an Austin, Texas, social network that helps IT professionals buy and manage technology, this year held its first annual “Spice Wars,” a programming contest that gives developers a week to build and present a technical innovation. Winners were awarded $2,000 cash prizes in each of six categories named after Star Wars characters—Anakin, Chewbacca, C-3PO, R2D2 and two for Yoda.
Spice Wars “is the one side chance to come up with breakout ideas that you wouldn’t get in the normal course of business, and a chance to show the team that I’m willing to invest in them being creative,” says Chief Executive Scott Abel. Mr. Abel says he got the idea for the contest from his former boss, the late Apple Inc. co-founder Steve Jobs, who ran similar contests at NeXT Software Inc. when Mr. Abel worked there in the mid-1990s.
Overall, Spiceworks’s contest produced seven or eight usable innovations, including a way to run simultaneous tests to determine the best user experience, such as whether a button should be blue or green.
One of the contest’s winners, Spiceworks Technical Program Manager David Babbitt, says the event was a chance to “think about your user and decide for yourself what’s cool and build it rather than having a project manager telling you what to do.”
Mike Maples Jr., a founder of Palo Alto investment firm Floodgate, learned about black-ops IT techniques from his father, a former Microsoft Corp. executive. He says it is important to keep developers engaged and feeling that innovation is valued.
“When people take initiative, lots of management teams try to stamp that out. But the reality is, when people no longer want to [take initiative], that’s when a company is really in trouble, because there are not serendipitous breakthroughs,” Mr. Maples says.
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15 May
WSJ’s Sarah Needleman reports on concerns facing the small business community as the Supreme Court hears arguments on Tuesday regarding the mandate associated with Presidnet Obama’s health care law. AP Photo.
Small-business owners will be in the center of the Supreme Court debate Tuesday about whether the requirement that most Americans carry health insurance or pay a penalty violates the Constitution.
National Federation of Independent Business lawyer Michael Carvin will argue against the “individual mandate” in President Barack Obama’s health-care law, together with former Solicitor General Paul Clement, who is representing 26 states.
Annotated Transcript
Read through an annotated transcript of Monday’s arguments, and listen to audio excerpts.
NFIB, a conservative-leaning small-business lobby based in Washington, D.C., spent more than $1.2 million total on the lawsuit in 2010 alone, according to one recent disclosure.
“This is new to us, unchartered territory for us,” NFIB president Dan Danner said in an interview Friday. “We’ve never been a lead plaintiff in a case before the Supreme Court. We’re learning along the way.”
The NFIB, which took in almost $95 million in revenue in 2010, joined the legal challenge initiated by 13 states in May 2010.
The lawsuit moved through the lower courts based in part on an assertion by Mary Brown, the owner of an auto-repair shop in Panama City, Fla., a recent NFIB member. Ms. Brown said her business planning was jeopardized by the need to set aside funds to pay for her health insurance beginning in 2014, when a provision requiring most Americans to carry such coverage or pay a penalty takes effect.
Ms. Brown closed her shop in August and filed for personal bankruptcy the following month. And, in January, the NFIB filed a motion to add two other NFIB members as plaintiffs: Dana Grimes, the owner of a roofing company in Greenwich, N.Y., and David Klemencic, who runs a flooring business in Ellenboro, W.Va.
Mr. Grimes, 50, said in an interview with the Wall Street Journal earlier this year that if he had to pay for health coverage, he would likely have to close his company because he wouldn’t be able to afford new equipment.
Not all small business owners are on the same page, however.
Mike Roach said he opposes the lawsuit, even though he’s been a member of NFIB for 36 years. The owner of Paloma Clothing in Portland, Ore., said he initially joined the group because it was a “strong voice for small businesses.” But, he added: “They’re doing a very big disservice to their members,” by opposing the health-care law.
Mr. Roach launched a group insurance plan at his businesses in 2008, and currently pays 85% of health insurance costs for six full-time employees. Last year, those costs came to $17,000, he said.
Four more workers are covered under plans from separate providers, he said. The health-care tax credits saved his business about $5,500 last year, he said.
A large crowd of people protesting, and supporting, the health care overhaul descended Monday on the Supreme Court, which is deciding whether the law is constitutional. WSJ’s Neil Hickey reports the people had a variety of reasons for being there.
“I wouldn’t quit [NFIB] over this, but I’m not very happy about it,” he said about the lawsuit. “If you look at it carefully, this bill does a lot to help businesses with 10 to 20 employees,” he said. “We don’t get breaks like this very often,” he added, referring to the tax credits tied to the law.
Sara Garcés, chief executive of Red F Marketing in Charlotte, N.C., said she approves of the health-care law, adding that health-care coverage for her company’s 51 full-time workers accounts for about 32% of its total payroll costs.
“We’re in the advertising industry, so we’re competing with some very large national firms. We need to compete for talent on that level,” she said of her decision to provide coverage for employees.
The firm, launched in 2000, pays 80% of health insurance premiums for employees and their families, in addition to other benefits. Part-time employees who work more than 30 hours per week are also covered.
The cost of Red F Marketing’s premiums surged by 21% last year, but have since started to fall. She added that she believes the health-care law “has the potential” to bring those costs down. She isn’t an NFIB member.
According to a 2010 financial report for its legal center released last month, NFIB incurred legal expenses of about $2.9 million on the lawsuit that year, of which the NFIB itself paid roughly $1.2 million.
About $1.6 million was described in a footnote as “contributed services,” referring to an agreement with an outside law firm to handle the case.
NFIB’s Mr. Danner, declined to specify the group’s total spending on the lawsuit so far, but said that while the group opposes the health-care law’s individual mandate, it is strongly in favor of health-care reform, such as curbing medical malpractice lawsuits.
In a summer 2010 ballot, in which about 20,000 NFIB members voted, about 93% said they believed Congress should repeal the health-care law.
The NFIB has about 340,000 members, and says its average member is a business with 10 to 15 employees.
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15 May
Riyadh: Saudi Arabia, the Arab world’s largest economy, may continue to see inflationary pressures in the second quarter of this year mainly due to rent and food prices, the Saudi Arabian Monetary Agency, or Sama, said yesterday.
But recent data shows that inflation rates in 2012 are growing at a slower rate than those of 2011, Sama said in a report posted on its website.
For instance, first quarter inflation rate slowed down to 0.6 per cent compared with 1.5 per cent in the same period last year.
Saudi Arabia’s annual rate of inflation edged down to 5.3 per cent in April from 5.4 per cent in March, mainly due to lower food prices, data from the Central Department of Statistics and Information (CDSI) showed on Thursday.
Article continues below
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14 May
HSBC is selling businesses in four South American countries as it continues a strategy of leaving less promising markets.
Colombia's Banco GNB Sudameris is paying $400m for the HSBC units in Colombia, Peru, Uruguay and Paraguay.
Combined the businesses have 62 branches across the four countries and assets worth $4.4bn.
HSBC has announced 11 deals to sell or close operations that it does not consider central to its growth plans.
Speaking about the latest deal, Antonio Losada, President and CEO of HSBC Latin America and the Caribbean, said: "We are pleased to have reached this agreement with Banco GNB Sudameris as we seek to focus on our operations where we see the greatest potential for sustainable growth for HSBC."
Earlier this week HSBC said underlying profit in the first quarter increased by 25% to $6.8bn, driven by increased revenues in investment and commercial banking.
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14 May
MOSCOW |
Sat May 12, 2012 7:12am EDT
MOSCOW May 12 (Reuters) – Moscow electricity provider
Mosenergo said on Saturday its board of directors has
recommended a 2011 dividend of 0.03 roubles per share, up from
last year’s 0.02 rouble payout.
The company, controlled by gas export monopoly Gazprom
, said total payout would amount to 1.2 billion
roubles.
($1 = 30.1450 Russian roubles)
(Reporting By Alfred Kueppers)
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13 May
Fri May 11, 2012 8:54pm EDT
* Shares drop more than 9 percent; credit rating cut
* Hedging loss dents CEO Dimon’s reputation
* Union calls for separation of CEO/chairman roles
By David Henry and Douwe Miedema
NEW YORK/LONDON May 11 (Reuters) – JPMorgan Chase & Co
lost $15 billion in market value and a notch in its
credit ratings on Friday while a chorus of regulators and
politicians reacted to its surprise $2 billion trading loss by
demanding stiffer oversight for the banking industry.
The loss by one of Wall Street’s most respected banks
embarrassed chief executive Jamie Dimon, a leader lauded for
steering his bank through the fallout from the 2008 financial
crisis without reporting a loss.
“We know we were sloppy. We know we were stupid. We know
there was bad judgment,” Dimon said in an interview with NBC
television to be broadcast on “Meet the Press” on Sunday.
He said it wasn’t clear whether the bank had broken any laws
or violated any rules. “We’ve had audit, legal, risk,
compliance, some of our best people looking at all of that.”
The loss also invited regulatory scrutiny for a man who had
all but led the charge to limit it, criticizing the so-called
Volcker rule to ban proprietary trading by big banks.
The New York Times reported that the Securities and Exchange
Commission has opened a preliminary investigation into
JPMorgan’s accounting practices and public disclosures about the
trading loss.
On Friday, Securities and Exchange Commission Chairman Mary
Schapiro told reporters: “It’s safe to say that all the
regulators are focused on this.”
The debacle sparked new fears about big banks and prompted
Dallas Federal Reserve Bank President Richard Fisher, who has
called for the breakup of the top five U.S. banks, to say he is
worried the biggest banks do not have adequate risk management.
The fallout extended across much of the banking sector, with
shares of some of Wall Street’s top names declining on Friday.
Among others, Citigroup dropped 4.2 percent, Goldman Sachs
fell 3.9 percent and Bank of America slipped 1.9
percent.
JPMorgan was far away the worst performer, however, falling
9.3 percent on a day when some 212 million of its shares traded,
the most volume in its history.
Fitch Ratings cut JPMorgan’s debt ratings a notch and put
all of the ratings of the bank and its subsidiaries on negative
ratings watch.
While Fitch saw the size of the loss as manageable, “the
magnitude of the loss and ongoing nature of these positions
implies a lack of liquidity,” the ratings agency said.
“Fitch believes the potential reputational risk and risk
governance issues raised at JPM are no longer consistent with an
‘AA-’ rating,” it said.
Standard & Poor’s put JPMorgan and its banking units on a
negative outlook, but affirmed its current ratings.
In a conference call disclosing the problem on Thursday,
Dimon said the $2 billion in losses could rise by a further $1
billion, and acknowledged they were linked to a London-based
credit trader Bruno Iksil. Nicknamed the ‘London Whale,’ Iksil
amassed an outsized position which hedge funds bet against.
The Federal Reserve Bank of New York, meanwhile, had been
aware of JPMorgan’s big trading loss and is currently monitoring
the situation, according to a source close to the situation.
The Fed, which is JPMorgan’s primary regulator, aims to
ensure banks are sufficiently capitalized to withstand such
trading mistakes, not to prevent them, the source said.
‘STAKES ARE TOO HIGH’
The exact nature of the trading loss is still unclear,
although sources said a host of asset managers, arbitrageurs and
hedge funds were on the other side of the bet, viewing it as
good value and a effective way to insure portions of their
portfolio.
Blue Mountain, a hedge fund with offices in New York and
London, was among those on the other side of JPMorgan’s trade,
according to two people familiar with the situation.
Dimon will undoubtedly be pressed by investors for more
details about what exactly went wrong when he hosts the bank’s
annual shareholder meeting on Tuesday in Tampa, Florida.
A national union on Friday urged shareholders to approve a
stockholder resolution calling for an independent board chairman
at JPMorgan. Dimon currently holds the chairman and CEO titles.
“The stakes are too high to leave Jamie Dimon unsupervised,”
said Gerald McEntee, president of the American Federation of
State, County & Municipal Employees, which sponsored the
proposal. “Dimon denied that the ‘London Whale’ was making risky
bets, and now that this has turned out to be a fish story,
shareholders need to step in.”
Dimon had parlayed his bank’s reputation as a white knight
during the financial crisis into a position as the de facto
representative fighting against excessive post-crisis
regulation.
“What concerns me is risk management, size, scope,” said
Dallas Federal Reserve Bank’s Fisher answer to a question about
JPMorgan’s trading loss. “At what point do you get to the point
that you don’t know what’s going on underneath you? That’s the
point where you’ve got too big.”
The trader at the center of the storm, Iksil, who graduated
in engineering from the Ecole Centrale in Paris in 1991, was not
available for comment. The Frenchman, and the Chief Investment
Office (CIO) where he works, are known by rival credit traders
for taking extremely large positions.
Friends, colleagues and fellow traders describe an
unassuming man, a far cry from the brash image normally
associated with traders staking huge bets in fast-moving
financial markets, including derivatives.
“He’s a really nice bloke. A quiet bloke. He’s not an
arrogant trader, he’s quite the opposite. He’s very charming,”
one former colleague at JPMorgan said of Iksil, whom he said was
married with “a couple of kids”.
JPMorgan characterized the costly trading strategy that led
to the loss as a hedge, rather than as proprietary trade, or a
bet with the bank’s own money. But that line has been difficult
for regulators and experts to define as they seek to craft the
Volcker rule.
One friend and former JPMorgan colleague said Iksil and the
team were not carrying out proprietary trading in disguise, and
that the unit’s activities were known at the highest levels of
the bank.
“The CIO does not do prop trading, let’s be clear on that
… It involves taking positions in the form of investments,
trades, credit-default swaps, or other, with the aim of
rebalancing the risks of JPMorgan’s balance sheet.
“The information comes from the very top of the bank and I
do not even think that the CIO team members at Bruno’s level are
given the full picture,” the ex-colleague said.
Iksil was brought into the CIO unit to head its credit desk,
an asset class it had not previously covered, a person who
worked in the unit said. It built up large credit positions over
several years through trades which were vetted by management and
the losses now likely resulted from a combination of these
trades going wrong, the person said.
The CIO desk had grown rapidly in the past five years and
was given free range to trade in a whole range of financial
products, the only exception being commodities, they added. The
CIO is run by New York-based Ina Drew, who is Chief Investment
Officer.
Credit market traders said other banks have comparable
functions to JPMorgan’s CIO. The French banks, Citigroup,
Deutsche Bank and UBS were all cited as
examples of large treasury functions that hedge credit exposures
in similar ways.
“The argument that financial institutions do not need the
new rules to help them avoid the irresponsible actions that led
to the crisis of 2008 is at least $2 billion harder to make
today,” U.S. Representative Barney Frank said in a statement.
The Democrat co-authored the 2010 Dodd-Frank financial
reform law designed to avoid a repeat of the recent credit
crisis.
Posted by StuMack under Business | Comments Off
13 May
Fri May 11, 2012 12:47am EDT
Singapore shares fell by midday, dragged down by casino
operator Genting Singapore PLC and investors
retreating from risky assets on concerns about global growth.
Genting shares plunged as much as 4.5 percent to a two-month
low after it posted a decline in quarterly earnings and several
brokerages lowered their target prices.
By midday, Genting recouped some losses and was down 3.6
percent at S$1.61 with 74.2 million shares changing hands. This
was 2.9 times its average daily volume over the last five
sessions.
CLSA cut its target price for Genting to S$2.33 from S$2.39,
and kept its buy rating. CIMB Research trimmed Genting’s target
price to S$1.95 from S$2.00 and kept its outperform rating.
The benchmark Straits Times Index was down 0.7
percent at 2,882.76, extending its losses for the third-straight
session.
A surprise loss from JPMorgan Chase & Co added to
jittery sentiment. Asian markets tracked a sharp fall in U.S.
stock index futures on Thursday evening after the bank said it
suffered a trading loss of at least $2 billion from a failed
hedging strategy.
“I don’t think JPMorgan’s news would have helped but that’s
not the main reason (for today’s market decline),” said Markus
Rosgen, head of Asia Pacific Equity Strategy at Citigroup.
“If you look at the latest economic data that we’ve had this
week, export growth is slowing in China and in Taiwan. People
are reassessing growth expectations.”
1221 (0421 GMT)
(Reporting by Charmian Kok in Singapore;
charmian.kok@thomsonreuters.com)
************************************************************
12:00 STOCKS NEWS SINGAPORE-CIMB cuts CityDev target price
CIMB Research has cut its target price for Singapore
property developer City Developments Ltd to S$9.05
from S$9.14 and kept its underperform rating.
CityDev shares were 0.2 percent lower at S$10.20, but have
gained about 15 percent since the start of the year.
CityDev, Southeast Asia’s second-largest developer, posted a
45 percent drop in first-quarter net profit to S$156.8 million
on Thursday, hurt by lower margins from property development and
an absence of one-time gains.
This was below CIMB’s expectations because of disappointing
profit margins for new projects, which could be a recurring
trend with new sales largely from the mass market, the broker
said.
CIMB cut its core earnings-per-share estimates for CityDev
in 2012-2014 by 3-14 percent due to higher cost assumptions, it
said.
For related story click
1136 (0336 GMT)
(Reporting by Charmian Kok in Singapore; Editing by Chris
Lewis; charmian.kok@thomsonreuters.com)
************************************************************
11:21 UPDATE 1-STOCKS NEWS SINGAPORE-Brokers upgrade Noble
after results
Several brokers upgraded their ratings on Noble Group Ltd
, citing an improved outlook after the Singapore-listed
commodities company posted its first-quarter results.
Noble shares were down 1.3 percent at S$1.155 at 0316 GMT,
slightly underperforming the broader Straits Times Index
which lost 0.6 percent. Noble stock has gained more
than 2 percent so far this year.
CIMB Research said a strong rebound in Noble’s energy and
metals, minerals and ores segment more than offset seasonal
weakness from its agricultural division in its first quarter.
Noble will be a beneficiary of improving economies and new
Chief Executive Yusuf Alireza brings a renewed focus on profits,
CIMB added. It upgraded Noble to outperform from trading buy and
raised its price target to S$1.42 from S$1.40.
DMG & Partners Securities said it was positive on Noble on
the back of increased confidence in its earnings outlook,
stronger performance from sugar with the April-December
production cycle and potentially better crushing margins in
China.
The broker upgraded Noble to buy from neutral and lifted its
price target to S$1.60 from S$1.30.
DBS Vickers said Noble’s agricultural harvest and further
expansion of energy division was expected to boost profit
sequentially. It raised its earnings estimates for Noble’s
2012-2014 fiscal years by 3-4 percent on higher contributions
from the mining and ores segment.
DBS Vickers upgraded Noble stock to buy from hold and raised
its price target to S$1.40 from S$1.30.
Noble posted a 46 percent fall in first-quarter net profit
on Thursday, dragged down by losses on supply chain assets.
1116 (0316 GMT)
(Reporting by Eveline Danubrata in Singapore; Editing by
Chris Lewis; eveline.danubrata@thomsonreuters.com)
*********************************************************
11:05 STOCKS NEWS SINGAPORE: Fortune REIT rises after broker
upgrade
Shares of Singapore-listed Fortune Real Estate Investment
Trust FORT.SI rose as much as 3.6 percent to a four-year high
after it reported a rise in its distribution income for the
first quarter.
Units of Fortune REIT were up 2.6 percent at HK$4.28, and
have gained about 14 percent since the start of the year.
Fortune REIT said its income available for distribution in
January-March rose 16.9 percent to HK$131.8 million ($16.98
million)from a year ago, which exceeded OCBC Investment
Research’s expectations.
“Retail continues to remain a bright spot in the Hong Kong
economy,” said OCBC in a report.
OCBC raised its target price for Fortune REIT to HKS$5.22
from HK$4.88 and kept its buy rating, citing expectations that
two Hong Kong retail properties acquired in February will see
full contributions in the next three quarters.
The broker also increased its 2012 distribution per unit
forecast for Fortune REIT to 31.7 Hong Kong cents from 29.4 Hong
Kong cents.
For related story click link.reuters.com/pem28s
1043 (0243 GMT)
(Reporting by Charmian Kok in Singapore;
charmian.kok@thomsonreuters.com)
*********************************************************
10:13 STOCKS NEWS SINGAPORE-UE E&C falls after OCBC cuts
target price
Shares of UE E&C Ltd fell 6 percent to S$0.55
after OCBC Investment Research cut its target price on the
Singapore construction and engineering firm to S$0.71 from
S$0.82, while keeping its “buy” rating.
The broker said UE E&C could be hurt if labour costs rise,
given the Singapore government’s stricter foreign manpower quota
for the construction industry.
Shares of UE E&C have gained about 43 percent so far this
year.
The construction firm saw an improvement in overall gross
margins for its first quarter, but this could go down if labour
costs rise, OCBC said.
UE E&C reported on Thursday a 19 percent year-on-year fall
in first-quarter net profit to S$4 million, mainly due to lower
contribution from existing projects, the broker said in a
report.
For UE E&C’s first quarter results, click
0938 (0138 GMT)
(Reporting by Leonard How in Singapore;
leonard.how@thomsonreuters.com; Editing by Chris Gallagher)
*********************************************************
08:41 STOCKS NEWS SINGAPORE-Index futures down 0.2 pct
Singapore index futures fell 0.2 percent on Friday,
indicating the benchmark Straits Times Index is likely
to open down.
Asian shares retreated early on Friday, spooked by
JPMorgan’s $2 billion huge loss from a failed hedging
strategy, with investors warily watching political turmoil in
the euro zone as they await new Chinese data for clues on its
growth outlook.
For related story click
(Reporting by Charmian Kok in Singapore;
charmian.kok@thomsonreuters.com)
Posted by StuMack under Business | Comments Off
12 May
Fri May 11, 2012 4:57pm EDT
* Global shares retreat as Europe outweighs U.S. sentiment
* Safe-haven government debt rises, Bunds near record lows
* Oil slides on weak Chinese industrial production data
By Herbert Lash
NEW YORK, May 11 (Reuters) – Global stocks retreated on
Friday as uncertainty over Europe’s festering debt crisis
overcame an early bounce driven by better-than-expected U.S.
consumer sentiment, while oil prices fell after weak data from
China reduced demand expectations.
Safe-haven government debt rose, with the yield on the
benchmark 10-year U.S. Treasury note falling for the eighth
straight week. Whether Greece can remain in the euro zone and
concerns about the health of Spanish banks spurred buying.
The euro retreated against the U.S. dollar late in the
session on news that the Greek Socialist party leader had been
unable to form a national unity government after holding
last-ditch talks with rivals.
Data showing U.S. consumer sentiment rose to its highest
level in more than four years in early May lifted shares earlier
in the day, but concerns over Europe and JPMorgan Chase & Co’s
$2 billion trading loss led equity markets to retreat.
“Today there is a flight to safety; Greece is not resolved,
Spain is not resolved,” said Lou Brien, market strategist with
DRW Trading Group in Chicago.
“And JPMorgan adds a bit of concern simply because they were
assumed to be the well-run bank, and if this sort of thing could
happen there, where else could it happen?” Brien said.
JPMorgan’s stock fell 9.3 percent to $36.96, the biggest
drag on the S&P 500 index. The next-biggest drag was Citibank
, down 4.2 percent at $29.35.
The Dow Jones industrial average fell 34.44 points,
or 0.27 percent, to close at 12,820.60. The Standard & Poor’s
500 Index declined 4.60 points, or 0.34 percent, to
1,353.39. But the Nasdaq Composite Index inched up just
0.18 of a point, or 0.01 percent, to end at 2,933.82.
Tim Ghriskey, who oversees about $2 billion as chief
investment officer of Solaris Group in Bedford Hills, New York,
said JPMorgan will become a political issue.
“This will increase regulations on banks and the overhang on
large banks will last for awhile,” Ghriskey said.
The KBW index of large U.S. financial services firms’
shares fell 1.2 percent, and in Europe, the euro zone STOXX
banking index fell 1 percent.
The euro slid to a 3-1/2-month low in volatile trade. The
euro has dropped against the dollar in eight of the last 10
sessions for a cumulative 2.4 percent decline, hit by the
turmoil in Greece.
The euro slid 0.12 percent to $1.2919, while the U.S.
dollar index rose 0.21 percent to 80.283. Against the
Japanese yen, the dollar was down 0.03 percent at 79.90.
Europe stoked market jitters. The failure by politicians in
Greece to agree on a new government sent the country hurtling
toward a new vote, with radical leftists leading in the polls
and poised to scrap a 130-billion-euro bailout that has staved
off default.
The 10-year U.S. Treasury note rose 9/32 in
price to yield 1.84 percent.
European shares erased early losses to end higher on the
U.S. consumer sentiment data, although many investors remained
wary over Spain’s banks and Greece’s political impasse.
The Greek stock market dropped to levels last seen 20 years
ago during an earlier crisis over a mechanism to reduce
exchange-rate swings in Europe before the euro’s advent. German
Bund futures rose as high as 143.09, up 48 ticks on the
day.
The FTSEurofirst index of top European stocks rose
0.3 percent to close at 1,022.52.
The MSCI world equity index turned lower,
falling 0.3 percent to 314.99.
Prices of crude oil, copper and gold all fell.
Brent crude oil prices fell below $112 a barrel early in the
session after a weak reading of industrial growth in China
sparked worries that demand may slow from the world’s No. 2 oil
consumer.
Chinese industrial output expanded in April at its slowest
annual pace in nearly three years. When paired with poor trade
figures from Thursday, the data suggest China’s economy
continues to slow after a weak first-quarter performance.
Brent crude futures for June delivery shed 47 cents
to settle at $112.26 a barrel.
The U.S. June light sweet crude contract declined 95
cents to settle at $96.13 a barrel.
Gold fell almost 1 percent, capping a 3.7 percent loss for
the week, its biggest weekly decline this year.
U.S. gold futures for June delivery slid $11.50 to
settle at $1,584 an ounce.
Posted by StuMack under Business | Comments Off
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