Market Overview: Feb 19 – Feb 24

Fed's ratUS stock market had a weak week. Consumer Price Index in January jumped 0.2%, which exceeded economists’ estimate of 0.1%, dampening the hope for a near-term rate cut.....

YT Kum, CFA 26.02.2007
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US stock market had a weak week. Consumer Price Index in January jumped 0.2%, which exceeded economists’ estimate of 0.1%, dampening the hope for a near-term rate cut. HSBC announced an unprecedented profit warning, saying that the profit would be reduced by huge non-performing US home loans. The market regarded this rare warning as an alert to the mortgage market in US, leading to weakness in financials such as Countrywide Financial last week. The merger plan of Sirius Satellite Radio and XM Satellite Radio Holdings went under the spotlight, but it failed to boost major indexes. Wal-mart and HP reported better-than-expectation quarterly earnings last week, but HP’s stock price did not ride on the positive result

. For the week, Dow Jones Industrial Index closed at 12,647.5, down 0.94%; Nasdaq Composite closed at 2,515.1, edged up 0.15%; S&P 500 closed at 1,451.2, down 0.30%.

Bank of Japan raised its key interest rate by 0.25% to 0.5%, which is at the highest level over the decade. The rate hike gave financials, like Mitsubishi UFJ, upward momentum. Despite of lending rate increase, some property giants like Mitsui Fudosan and Mitsubishi Estate surged last week, due to the optimistic view upon the growth prospect of the Japan’s economy. Looking forward, there are a lot of important economic figures going to release, including unemployment rate and CPI. For the week, NIKKEI 225 gained 1.75% to 18,188.4, which is near the seven-years high.

Mainland and Taiwan market were closed for Chinese Lunar New Year holidays last week. Right before the Lunar New Year holiday started, People’s Bank of China raised the reserve requirement ratio by 50 basis points to curb excess liquidity. Hong Kong ended its relatively short Lunar New Year holiday on last Wednesday, and had a good start at the beginning of pig year. Hang Seng Index rose 0.70% to 20,711.7 for the week. China Mobile advanced 6.0% last week, leading the strong run. HSBC continued its weakness after its rare profit warning. Moreover, HSBC lowered the mortgage rate by 0.13%, triggering a price war in mortgage market. After HSBC’s announcement, BOCHK, BEA and Citibank followed. HKEx decided not to impose the phase 2B of trading spread narrowing, which is for stocks priced under HK$2. IPOs launched last week had mixed performance. Hong Long Holdings and Huiyuan Juice rose 24% and 66% respectively at the first day of launch, while China Properties dipped under the offering price by 3%. Hang Seng China Enterprise Index closed nearly flat at 9,956.3.

With inflation reached two-years high, investors in India concerned the interest rate would advance further. Sensex closed at 13,632.5, slumped by 4.9%. Singapore Straits Times Index rose 2.27% to 3,310.4.

Stock markets in Europe moved in a narrow range. Material stocks and financials dragged indexes down while energy stocks drove up. Disappointing figures in US housing market heightened worries upon prospects of some material stocks. On another hand, oil price surged led energy stocks to perform well last week. For the week, London FTSE 100 lost 0.28% to 6,401.5; Frankfurt Xetra DAX closed at 6,992.6, up 0.51%; Paris CAC 40 advanced by 0.05% to 5,716.4.

Crude futures in New York rose 2.95% last week, closing at US$61.14/ barrel, due to the worries on Iran’s uranium enrichment program. Gold futures closed at US$682/once, up 1.97%, and Copper futures rebounded by 7.6%. USD is quoted at 121.0800 Yen and the Euro was $1.3167. British pound quotes at $1.9634 and Aussie, $0.7917.

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About Author

YT Kum, CFA  YT Kum is a consultant for Morningstar, contributing to manager selection and asset allocation activities in Asia, and is responsible for providing investment thought leadership on topics relevent to investors in Asia.  

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