Singapore’s three banks could post sharp declines in quarterly profits from a year earlier, hit by bad debt charges and lower trading income.
But analysts may focus more on the quarter-on-quarter numbers and look for forward-looking trends as the April-June period saw Singapore’s economy pulling out of its worst recession ever.
In recent years, a confluence of factors created a new reality in the world of equity trading. The emergence of ultra sophisticated electronic trading methods,…
If the financial crisis has proven anything, it is that capital markets have become an insiders’ game in which trading profits crowd out the legitimate business of investment. The whole business-models of the most lucrative firms on Wall Street are a menace to the rest of the economy. Until the Obama administration recognizes this most basic abuse and shuts it down, it will be more enabler than reformer.
The corporate media – after ignoring the fact that high frequency trading skews the market – is now starting to spotlight it. Bloomberg interviewed the former head of Nasdaq, who says that high frequency traders account for 73% of the volume on the sto…
By Laurence Peter
BBC News
The EU’s carbon trading system is too generous to industry, allowing windfall profits through the sale of emissions permits, a green campaign group says.
The UK-based Sandbag group says analysis of EU official data for 2008 shows industry could earn up to 5.4bn euros (£4.6bn) from selling permits.
Industry is accumulating surpluses of permits as the recession forces plants to reduce or halt production, it says.
But an EU official said it was too early to assess the system’s impact.
"Let’s not panic about it yet," said Barbara Helfferich, European Commission spokesperson for the environment.
She said the carbon price – about 14 euros per tonne of CO2 – had remained "relatively stable over the past few months".
"The best measure is the market – if there were an over-allocation of permits you would see the price radically drop," she told BBC News.
Accumulating permits
The second phase of the Emissions Trading Scheme (ETS) runs from 2008 to 2012 and covers about 50% of the EU’s CO2 emissions, generated by power plants and energy-intensive industries such as cement, steel and glass manufacturers.
The EU decided to give most of the CO2 permits to these industries for free in the first and second ETS phases.
It is widely acknowledged that industry made big profits from the sale of CO2 permits in the first phase, from 2005 to 2007.
The Sandbag report says industry is likely to have 700 million surplus permits in the 2008-2012 phase, which it will either be able to sell for windfall profits or bank for future use, "depressing the price of carbon in the next phase of trading".
The group argues that the availability of these permits is a disincentive for industry to reduce CO2 emissions, undermining the EU’s target of achieving a 20% cut in greenhouse gas emissions by 2020.
The group urges the EU to rescue the ETS by raising the target to 30% by 2020, or 40% if a deal is reached at the global climate summit in Copenhagen in December. A tougher target would mean making fewer CO2 permits available.
Planning for future
The BBC’s environment correspondent Roger Harrabin says the research shows that Europe’s power firms are still short of CO2 permits, so are buying up the surplus from cement and steel.
In effect, Europe’s power consumers are indirectly subsidising through their power bills those firms worst hit by the downturn, he says.
Citing data from the EU’s 2008 register of verified emissions and CO2 permits, Sandbag says just 10 European installations account for nearly 60% of the whole industrial surplus of CO2 permits.
Of these, three installations are run by the steel firm Arcelormittal, accounting for 15% of the surplus, it says.
A spokesman for Arcelormittal, Jean Lasar, said that in the first phase "we did make some profits – but we didn’t design the system".
In the economic downturn Arcelormittal has stopped production at various sites in Europe, meaning CO2 emissions have fallen.
But Mr Lasar said the firm was passing on some permits to its partner energy utilities, who make use of gas emitted during steel production.
"We haven’t sold any permits in this trading period… we are keeping them, we might need them at a later stage," he told BBC News.
"We can’t be expected to shape our carbon strategy on what is happening now in the market. The long-term strategy is to significantly reduce emissions," he said. </p
This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.
By Laurence Peter
BBC News
The EU’s carbon trading system is too generous to industry, allowing windfall profits through the sale of emissions permits, a green campaign group says.
The UK-based Sandbag group says analysis of EU official data for 2008 shows industry could earn up to 5.4bn euros (£4.6bn) from selling permits.
Industry is accumulating surpluses of permits as the recession forces plants to reduce or halt production, it says.
But an EU official said it was too early to assess the system’s impact.
"Let’s not panic about it yet," said Barbara Helfferich, European Commission spokesperson for the environment.
She said the carbon price – about 14 euros per tonne of CO2 – had remained "relatively stable over the past few months".
"The best measure is the market – if there were an over-allocation of permits you would see the price radically drop," she told BBC News.
Accumulating permits
The second phase of the Emissions Trading Scheme (ETS) runs from 2008 to 2012 and covers about 50% of the EU’s CO2 emissions, generated by power plants and energy-intensive industries such as cement, steel and glass manufacturers.
The EU decided to give most of the CO2 permits to these industries for free in the first and second ETS phases.
It is widely acknowledged that industry made big profits from the sale of CO2 permits in the first phase, from 2005 to 2007.
The Sandbag report says industry is likely to have 700 million surplus permits in the 2008-2012 phase, which it will either be able to sell for windfall profits or bank for future use, "depressing the price of carbon in the next phase of trading".
The group argues that the availability of these permits is a disincentive for industry to reduce CO2 emissions, undermining the EU’s target of achieving a 20% cut in greenhouse gas emissions by 2020.
The group urges the EU to rescue the ETS by raising the target to 30% by 2020, or 40% if a deal is reached at the global climate summit in Copenhagen in December. A tougher target would mean making fewer CO2 permits available.
Planning for future
The BBC’s environment correspondent Roger Harrabin says the research shows that Europe’s power firms are still short of CO2 permits, so are buying up the surplus from cement and steel.
In effect, Europe’s power consumers are indirectly subsidising through their power bills those firms worst hit by the downturn, he says.
Citing data from the EU’s 2008 register of verified emissions and CO2 permits, Sandbag says just 10 European installations account for nearly 60% of the whole industrial surplus of CO2 permits.
Of these, three installations are run by the steel firm Arcelormittal, accounting for 15% of the surplus, it says.
A spokesman for Arcelormittal, Jean Lasar, said that in the first phase "we did make some profits – but we didn’t design the system".
In the economic downturn Arcelormittal has stopped production at various sites in Europe, meaning CO2 emissions have fallen.
But Mr Lasar said the firm was passing on some permits to its partner energy utilities, who make use of gas emitted during steel production.
"We haven’t sold any permits in this trading period… we are keeping them, we might need them at a later stage," he told BBC News.
"We can’t be expected to shape our carbon strategy on what is happening now in the market. The long-term strategy is to significantly reduce emissions," he said. </p
This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.
• Morrisons to make extra £50m profit for first half of year
• Next says profits will be £30m higher than forecast
Supermarket group Morrisons and fashion retailer Next cheered the City this morning as they said profits for the last six months will be considerably higher than expected.
Both companies rushed out unscheduled trading updates today after calculating that, despite the recession, their earnings have beaten market forecasts.
Morrisons said it will make an extra £50m profit for the six months to the start of August. Its store modernisation plan is also expected to yield an extra £20m in savings, which should push pre-tax profits up from the previous forecast of £670m to around £740m.
This sent shares in the UK’s fourth largest supermarket chain soaring by 10% to 279p when trading began in London. Other retailers also rallied, with Marks & Spencer, Sainsbury’s and Tesco all among the biggest risers on the FTSE 100.
Nick Bubb, retail analyst at Pali International, said today’s trading updates were a welcome surprise.
“The green shoots are alive and well and it will take a hurricane in the autumn to blow them over,” Bubb said.
Morrisons said that the number of customers visiting its stores was continuing to rise. The average basket size has also increased, indicating that it continues to be one of the winners of the economic downturn.
“The strong start to the year has been maintained through the second quarter,” the company said. “An increasing number of customers are shopping with Morrisons attracted by the group’s fresh offering, keen positioning on price and promotions and its industry-leading service and availability.”
Bank of America analyst John Kershaw said Morrisons had “hit expectations for six”.
“We felt Morrisons was driving sales and margins but this profit performance is in a different orbit,” said Kershaw, who raised his target for its shares from 280p to 310p.
Kershaw added that Morrisons would have benefited from the sunny weather in May and June.
David Buik, City commentator at BGC Partners, said that today’s figures showed that Morrisons’ chief executive, Marc Bolland, was the right man to succeed Sir Stuart Rose at Marks & Spencer.
“Morrisons has never looked back [since Bolland took over] and is clearly snapping at the heels of Tesco, Asda and Sainsbury’s,” said Buik. “If there was any way that M&S could crowbar Marc Bolland out of his current employers, he would make a massive contribution to M&S rising like the phoenix from the ashes.”
Next also said it was profiting from the warmer weather, as it told investors that it expected profits for the current financial year would be £30m higher than forecast.
Sales of summer clothing rose sharply and Next struck better deals than expected with suppliers. It began its end of season sale last weekend with less unsold stock than a year ago, which should mean less pressure to slash prices.
“The initial clearance rates have been encouraging,” said Next.
It had been due to release its first-half trading statement next week, but said today that like-for-like sales on the high street were down 1.9% – a smaller drop than expected. Sales through its catalogue business were up 1.1%.
Shares in Next slipped slightly today, down 0.6%, having risen by 20% in the last month.
The firm did caution that rising unemployment would have an impact on its performance in the next six months, and warned that swine flu could outweigh the benefits of good weather later this summer.
“Our forecasts do not account for any significant impact on sales from swine flu, and as yet we have observed no material effect. However, there is downside risk to our expectations if wider infection rates deter shoppers,” Next said.
DALLAS — A federal judge has dismissed a civil insider trading lawsuit against Dallas Mavericks owner Mark Cuban.
U.S. District Judge Sidney A. Fitzwater granted Cuban’s motion Friday. Fitzwater gave the Securities and Exchange Commissi…
Joseph Saluzzi – partner and co-head of equity trading for Themis TradingThemis – gives a succinct and stunning explanation of high-frequency trading.This is a topic that professional stock traders know a lot about, but the public knows nothing about.S…
• Investment bank delivers profits of $3.44bn
• Big bonuses likely to be paid to 29,400 Goldman Sachs staff
The investment bank Goldman Sachs delivered a clear signal that the good times are returning on Wall Street by milking a recovery in financial markets to generate profits of $3.44bn (£2.12bn), raising the prospect of average pay packages of as much as $900,000 for its employees.
Goldman’s second-quarter earnings, which amounted to $38m per day, were up 65% on 2008 and confirmed the US bank’s status as one of the stand-out winners from the credit crunch which paralysed the financial industry for much of last year.
The firm’s revenue of $13.76bn was the highest in its 140-year history. Its success on the trading floor is likely to translate into record bonuses, to the dismay of critics who view runaway compensation as a key factor contributing to the global economic meltdown.
Goldman’s chief financial officer, David Viniar, put the bank’s higher profits down to “basic blocking and tackling”. Speaking on a conference call, Viniar said Goldman had done “very well” in its core operation trading stocks, shares, debt and other financial products: “It was very widespread, day after day, client-facing business in very liquid markets and very liquid products.”
The bank’s trading and principal investments division saw revenue almost doubled with a 93% leap to $10.78bn. This easily offset a drop in income from Goldman’s financial advisory arm, which was hampered by a dearth in corporate takeovers.
Viniar said the bank had a “very, very strong culture of risk management” and had secured loyalty from its clients: “At the depths of the crisis, we were there trying to provide them with liquidity and with the services they wanted.”
During the quarter, Goldman dedicated 49% of its revenue to paying its staff – amounting to a compensation fund of $6.65bn, or $226,000 for each of its 29,200 staff. If the bank’s bottom line prospers to the same degree for the rest of the year, employees could end up with average annual pay of more than $900,000 – an increase of nearly 150% on last year’s figure of $363,000.
Such payouts have aroused huge controversy. In London, where Goldman employs 5,500 staff, some 38 MPs have signed an early day motion noting the prospect of the bank’s bonuses “with concern” and calling on the government to intervene over vast payouts in the financial industry.
The Liberal Democrat treasury spokesman, Vince Cable, accused Goldman executives of having short memories: “In ten months, they’ve gone from taking a begging bowl to the US government to paying out massive bonuses. If we are to have stability in the finance sector, we must see pay restraint in all banks, irrespective of which country they are based in.”
Goldman’s success has generated its fair share of detractors. Critics point out that the bank was the biggest counterparty in financial insurance policies to the insurer AIG and that its collateral calls contributed to the US company’s collapse, requiring AIG to seek $150bn of government aid.
Furthermore, Goldman itself received $10bn from the US government’s troubled asset relief fund, which it paid back last month to avoid any further caps on dividends or remuneration. The firm converted to a ‘bank holding company’ last year, allowing it to take retail deposits, as the business model of a standalone Wall Street bank came under threat.
A leading US labour organisation, the Service Employees International Union, said Goldman’s pay practices are a strong argument for root and branch change in Wall Street’s compensation policy to end a culture of rewarding bankers for taking risks.
Stephen Lerner, director of the SEIU’s financial reform campaign said: “They have some kind of moral and economic amnesia. After we bail them out with tens of billions in taxpayers’ funds, they go back to exactly the same practices as before.”
Defending the bank’s compensation practices, Viniar said Goldman had a long established “pay for performance” policy and pointed out that staff saw a sharp drop in payouts when times were tougher in 2008. But he said: “If we do perform well, our employees will be rewarded appropriately.”
Analysts say that Wall Street trading houses face less vibrant competition after the demise of rivals such as Bear Stearns and Lehman Brothers, making it slightly easier to gain a financial edge. Gerard Cassidy, a banking analyst at RBC Capital Markets, said Goldman’s brand, viewed as trustworthy, and its ability to attract top talent contribute to the firm’s success.
“The economy’s not out of the woods yet but I would say the dark days of Wall Street are behind,” said Cassidy. “In the first quarter, we saw the first rays of sunshine.This quarter, we’ve got confirmation that the sun is shining brighter and that it will continue to do so as the economy recovers.”
- Cheow Xin Yi
SHORTER trading halts and prompt disclosures of information relating to
employee share options are some of the key changes in listing rules
announced by Singapore Exchange (SGX) yesterday, in its bid to improve
market efficiency and transparency.
The revisions, following a public consultation in May, will take effect
from Dec 3.
Said Ms Yeo Lian Sim, SGX’s senior executive vice-president and head of
risk management and regulation: “These listing rule changes will not only
improve market efficiency and shorten trading halts, it will also add
clarity and promote accountability of listed companies.”
SGX said it would be shortening trading halts to a minimum 30 minutes,
instead of the current 60 minutes, to “minimise market disruption”, citing
“increasing familiarity with market practices and wider availability of
information”.
But Mr David Gerald, president of the Securities Investors Association of
Singapore, said the shorter minimum trading halt would make it harder for
retail investors to make informed decisions.
They would have to monitor the information more carefully, he added.
On employee stock options, SGX wants issuers to announce promptly each
grant of options as well as other information such as the date of grant,
the exercise price and the number of options granted to directors,
controlling shareholders and associates.
