Conquer The Wallstreet !!!: Friday, November 28, 2008

Friday, November 28, 2008

French’s plan to recapitalize its banks has been blocked by EU

The French government reacted furiously to the Commission’s argument tied with French’s plan to shore up its six main retail banks capital over injecting cash to the banks’ balance sheet. EU competition commissioner has blocked the plan and was arguing “They have to apply the same criteria to everyone . . . support should be sufficient to offset the negative impact of the current financial crisis and no more”. The Austrian, Spanish and Hungarian framework schemes are still awaiting a green light.

Christine Lagarde, French finance minister, persuaded Neelie Kroes, EU competition commissioner, today to lift her veto on France’s €10.5bn ($13.3bn) support package but Ms Kroes is sticking to her view that banks cannot use state aid to increase their lending books.

Here is from FT.com:

French intended to recapitalise all its lenders at the same time to ensure they did not tighten credit to business and households. Paris argued that without state support, and in view of the frozen interbank lending markets, banks would have shored up their capital positions by reducing loans, with catastrophic consequences for the real economy.

The finance ministry wanted to provide €10.5bn in subordinated loans to BNP Paribas, Société Générale, Crédit Agricole, Caisse d’Epargne, Banque Populaire and Crédit Mutuel. In return, the banks agreed to increase the stock of credit to households, business and local government by 3-4 per cent in 2009.

French officials said they accepted the argument that banks rescued from collapse by injections of public money, such as the UK’s Northern Rock or Dexia, the Franco-Belgian lender, should have to wind down their loan portfolios and eventually sell off their assets.

However, France’s six high-street banks were fundamentally sound but were under pressure from the markets to bolster their balance sheets, officials said. They added that EU leaders and the Commission endorsed this preventative recapitalisation approach in October.

The French plan is one of a number of banking aid measures notified to Brussels but still not approved. The Austrian, Spanish and Hungarian framework schemes are still awaiting a green light.

A number of aid packages to individual institutions, such as that proposed for Germany’s Commerzbank, also remain under discussion.

SocGen 3rd Q profit falls 84% was tied to Lehman Bankruptcy and US Bond

Sources :

Brussels blocks French bank bail-out

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Goldman Sachs reduced its forecast on quarterly notebook shipment growth to 1%

Goldman Sachs today has reduced its forecast on quarterly notebook shipment growth in the fourth quarter of 2008 from 6% to only 1%, while shipments in the first quarter of 2009 will drop 18% sequentially.

On November 19, Goldman Sachs is projecting a 5 percent decline in 2009 in developed economies (the United States, Western Europe, and Japan), or 65 percent of IT spending, compared with 4 percent expected growth in 2008 and 7 percent growth in 2007. The slowdown will span all vertical markets (financial services, communications, and so on).

The good news is Goldman Sachs expects IT spending in developing economies, which accounts for 35 percent of IT spending, to hit 7 percent growth in 2009

The report notes that Dell and Hewlett-Packard are gaining in share of server dollars spent, while Sun Microsystems and IBM are losing share. Dell took the No. 1 spot through aggressive discounting, while HP's share remains strong due to its strength in blade computing, according to the report. IBM is apparently being hit by its System x servers, down 18 percent year over year.

For the first time IBM has ever been a share-loser in the history of Goldman Sachs' survey, reflecting "lagging product sets."

Microsoft’ gains apparently come from enterprise product upgrades like SQL Server and SharePoint Server, according to the report.

Chart courtesy of Goldman Sachs via CNet News
According to the report, 52 percent of survey respondents are planning decreased budgets for 2008 in the past three months, which will almost certainly minimize a fourth-quarter budget flush. Indeed, 41 percent of respondents say that their "end-of-year IT spending activity will be less than recent years," and only 17 percent expect fourth-quarter IT spending to increase.

Chart courtesy of Goldman Sachs via CNet News
Market intelligence firm IDC on November 12, said worldwide IT spending will grow just 2.6 percent in 2009 compared with the previous year, down from the IDC's pre-crisis forecast of 5.9 percent growth. IDC expects IT spending to return to growth rates approaching 6.0 percent in 2012 but estimates more than 300 billion dollars in industry revenues will have been lost due to slower spending over the next four years.

Related Posts :

Spending in IT to slowdown; Microsoft to offer 0% Financing

Sources :

Digitimes Systems: Goldman Sachs trims 4Q08 notebook shipment growth to 1%, says paper, November 28, 2008
CNet News: Silver lining in Goldman Sachs' projected decline in IT spending, November 19, 2008 11:07 AM PST

China's FX reserves will "hopefully" reach US$2 trillion this year

China's Reserves To Pass $2 Trillion; China's Reserves Can Stimulate The Economy
Report and analysis by Maithreyi Seetharaman of Bloomberg News
Video courtesy of Bloomberg Video
According to Bloomberg, National Bureau of Statistics chief economist Yao Jingyuan, said China's foreign-exchange reserves will "hopefully" reach US$2 trillion this year.

Trade surpluses helped to swell the reserves, the world's biggest, to US$1.9 trillion at the end of September, according to the central bank. Larger reserves would strengthen the nation's finances as the government boosts spending and cuts interest rates to counter the financial crisis.

Yao quoted the US$2 trillion figure while arguing that China was stronger than when the Asian financial crisis hit in 1997 and 1998.

The reserves, along with high levels of savings by Chinese households, will help the nation to weather the crisis, bureau spokesman Li Xiaochao wrote in a report published yesterday on the finance ministry's Website.

IMF forecast China’s foreign exchange reserve to reach $2.2 trillion by the end of December and $2.7 trillion by the end of 2009. Diversifying away from investing in U.S. Treasury bills has brought losses.

ETFs/Stocks :

iShares FTSE/Xinhua China 25 ETF        FXI
ProShares UltraSh FTSE/Xinhua China 25  FXP

China’s economic indicators are showing an accelerated decline

Sources :

Bloomberg: China’s Currency Reserves May Rise to $2 Trillion (Update1), November 27, 2008 04:11 EST
Bloomberg News Video: Video: China's Reserves To Pass $2 Trillion; China's Reserves Can Stimulate The Economy, November 28, 2008 16:54:13

UBS cut its price target on BAC by 48%

According to Reuters, Bank of America is continuing to face further credit risk and losses after acquired Countrywide Financial Corp and bought Merrill Lynch. The Bank has more than $250 billion in residential mortgages from Countrywide acquisition and charge offs in the portfolio are increasing as BAC has stopped offering some of the most toxic types of mortgages.

Today, UBS cut its price target on Bank of America Corp (BAC) by 48 percent, citing tighter credit conditions, uncertainty over near-term prospects of the Merrill Lynch & Co (MER) deal and risk of additional write-downs.

Tight credit conditions will continue into 2009 as banks focus on maintaining sufficient capital and liquidity levels in a difficult operating environment, analyst Matthew D O'Connor said in a note to clients.

"This will likely put further pressure on both consumers and commercial borrowers, leading to higher credit losses in 2009," he said.

Analyst O'Connor said there is a risk in Merrill's earnings power as its businesses related to capital markets are facing continuous pressure, and recent widening of credit spreads could mean additional write-downs at both Bank of America and Merrill.

Related Posts :

Bank Executives pledge to not use the taxpayer money to pay their executive bonuses

Sources :

UBS slashes target on Bank of America by 48 percent

A Bearish Outlook for Solar Industry

International PV strategy conference Shanghai by SolarPlaza 25 November 2008.
Photo courtesy of Solarplaza
In the meeting of the European Photovoltaic Industry Association (EPIA) in Valencia on the 4th September 2008, The Association unanimously agreed that photovoltaic energy could provide 12% of European electricity demand by 2020. The Current economic downturn causes reducing budget on new PV installation plan. The Plan of solar tax credits cut are also expected will give more pressure to Solar Industry in the future.

Spain as the world's biggest market in 2008 has reduced its support for solar energy. Feed-in tariffs will be cut by 30% in 2009 and, even more significantly, only 500 MWp of new installed PV power will be eligible for this feed-in tariff. This could lead to a decrease in volume for the Spanish market of more than 60%.

While The US Federal alternative-energy investment tax credits will expire on December 31, 2008. After the expiration date, the Solar Industry will face higher cost on panel installation except the Government extends the tax credits.

In the 3rd China International New Energy Summit was held in Beijing on Nov. 27 2008, Suntech Power (STP) CEO Shi Zhengrong told that the company is expecting 0% gross margin in Q4, compared to 21.6% gross margin in Q3. The gross margin drop is mainly due to the dramatic drop of PV module ASP and the weakening Euro. It is reported that nearly half of the company’s factory has been shut down due to weakening demand.

Here are some analyst's outlooks for Solar Industry in the coming years, via Tech Trader Daily of Barron’s:

Gordon Johnson, solar analyst at Hapoalim Securities, asserted in a research note today that the Street is under-estimating the size of the 2008 solar marker in Spain. He thinks there will be 2.1 GW of solar installations in Spain this year, well beyond the 1.1 GW he previously estimated.

He contends that many projects have been rushed ahead of next year’s 500 MW cap on subsidized solar installation in Spain for next year. As a result, he thinks Spain will actually surpass Germany and be the largest solar market for all of this year. But here’s the thing: as a result, he thinks that there will be much more inventory flooding into the world market next year than the Street is expecting, severely pressuring solar industry pricing.

Johnson thinks that solar demand growth will plunge from 61% this year to -2.5% next year. Johnson argues that “the entire solar value chain will be negatively affected by the pending massive decline in the world’s largest solar consuming market” - Spain - in 2009.

Jesse Pichel, an analyst at Piper Jaffray, has a much more upbeat view of the group. In a research note yesterday, he noted that the Obama Administration may seek to stimulate demand in the U.S. by making improvements to the current investment tax credit program, including replacing tax credits with cash refunds, increasing the tax credit percentage for a two year period, providing financing and encouraging solar installations on government buildings.

Nomura Research analyst Shailesh Jaitly earlier this week picked up coverage of the solar sector with a bearish stance on the group. Jaitly launched on five companies, setting a Buy rating on Suntech (STP), Neutral ratings on Canadian Solar (CSIQ), E-Ton and Motech, and a Reduce rating on Trina Solar (TSL). Jaitly forecasts that demand is Europe, which is now 77% of the market is “expected to contract severely,” pushing down solar module pricing 19% sequentially in Q4 and another 13% in Q1.

Nomura expects a 50% fall in ASPs from now through the end of 2010, reaching grid parity. Jaitly also notes that the slowdown in the semiconductor industry is resulting in a flood of polysilicon into the solar sector, further pressuring prices. Not least, the Nomura analyst thinks there is a risk that polysilicon prices could fall towards the marginal cost of production, which at older plants Jaitly says is $30-$40/kg, a fraction of the current price.

Macquarie Reseach analyst Kelly Dougherty yesterday repeated a long-term bullish stance on the solar sector, but nevertheless chopped price targets and estimates for First Solar (FSLR), Sunpower (SPWRA), Energy Conversion Devices (ENER) and Evergreen Solar (ESLR). New targets for:
- FSLR, $160, from $220.
- SPWRA, $50, from $70.
- ENER, $40, from $63.
- ESLR, $2.50, from $3.50.
“The near-term outlook for the solar sector surely isn’t pretty. Activity has all but ceased for some companies in select markets and pricing is falling precipitously for many,” Dougherty writes. “This is due to the impact of a massive credit crunch coupled with expectations for a significant price decline next year as tip over into a module over-supply situation. Those projects that are going forward are being done at higher funding costs by financiers that have become increasingly discerning, especially when it comes to the technology and the modules being used.” And the slide of the Euro, Dougherty adds, “is exacerbating the issue.” Doughtery says the fundamentals of solar remain strong long term, and suggests investors “really assess the longer-term solar landscape and invest in those companies that are best positioned to weather what’s likely to be some pretty choppy waters over the next few quarters.”

ETFs/Stocks :

Claymore/MAC Global Solar Index ETF  TAN
First Solar, Inc.                    FSLR
JA Solar Holdings Co., Ltd.          JASO
Evergreen Solar, Inc.                ESLR
Canadian Solar Inc.                  CSIQ
SunPower Corporation                 SPWRA
SunPower Corporation                 SPWRB
Energy Conversion Devices            ENER
Trina Solar                          TSL
Suntech Power                        STP
China Sunergy Co., Ltd. (ADR)        CSUN
LDK Solar Co., Ltd.                  LDK
ReneSola Ltd. (ADR)                  SOL
Solarfun Power Hldgs Co., Ltd.       SOLF
Yingli Green Energy Hold. Co.        YGE

Sources :

Seeking Alpha: Expect Continued Drops in Solar, November 28, 2008
Renewable Energy Focus: PV industry ups its 2012 projection, September 5, 2008
Solar Feeds: Second wave of major new Chinese module manufacturers coming in 2009, October 31, 2008
The Arizona Republic: Demand for solar panels exceeds supply, November 28, 2008
Tech Trader Daily of Barron's: Solar: Can U.S. Upside Trump European Slowdown?, November 26, 2008

UK takes over 58% of RBS shares

According to Telegraph, the troubled bank, Royal Bank of Scotland, said Investors only signed up to buy just fewer than 56 million new shares, or 0.24% of the total offered by RBS in October.

Under the terms of its agreement with the government, the government agreed to buy any shares not purchased by investors. The Treasury will take up the remaining 22.9 billion shares and control 57.9% of the bank.

The RBS shares were on offer at 65.5 pence each, but held little appeal for investors because they traded well below that in the run up to the November 25 capital raising deadline, falling as low as 41.7 pence on November 18. RBS shares closed at 55 pence yesterday.

RBS was one of three British financial services firms that tapped government help to fulfill stricter capital requirements intended to help Britain's battered banks survive the credit crisis. Lloyds TSB and the mortgage lender HBOS, which have recently agreed to combine, also relied on the government to take up any shares they cannot sell to investors but some analysts warned that even those stricter capital rules might not guarantee the stability of Britain's banks as the turmoil in the financial markets continues.

The RBS was Britain's second-biggest before a run on its shares in September and October forced it into the arms of the government as investors became increasingly concerned about its capital position. The bank may now post its first annual loss in 40 years as bad loans rise, and has taken more than £7bn of credit losses this year. RBS will probably take more write-downs in the fourth quarter, newly-appointed chief executive Stephen Hester said earlier this month.

Outgoing RBS chief executive Sir Fred Goodwin and chairman Sir Tom McKillop apologized last week at a meeting in Edinburgh to approve the £20bn capital raising.

The bank is expected to buy the preference shares back from the government as soon as possible because it will be forbidden from paying any dividends to ordinary shareholders while the preference shares are outstanding.

The drastic fundraising plan comes on top of a £12 billion pounds rights issue by RBS earlier this year—at the time the biggest ever rights issue in Europe.

RBS has been one of the hardest hit European banks in the financial crisis because of its large exposure to sub-prime loans and its expensive purchase of ABN Amro bank just before the credit crunch.

Sources :

Telegraph: RBS now 58pc owned by UK government, November 28, 2008 8:09AM GMT
Breitbart: RBS says British government to buy bank majority, November 28, 2008 06:35 AM EST
The International Herald Tribune: U.K. takes over Royal Bank of Scotland, November 28, 2008

Japan deepens into unprecedented recession

Japanese factory output falls 3.1% from September, as recession deepened;
Report and analysis by Elliot Gotkine of Bloomberg News
Video courtesy of Bloomberg News Video
Japan deepened into unprecedented export recession last month as manufacturers sharply cut back production, consumers spending dropped and jobless rose. The Trade Ministry said today that Factory output fell 3.1% from 1.1% in September. Household spending fell a worse-than-expected 3.8%, drops for eight consecutive months.

Exporter companies plan to cut its production output by 6.4% this month and will cut further by 2.9% in December as global financial crisis worsens. Japan’s exports tumbled 7.7% last month, the fastest pace in seven years, while exports to Asia, half of total Japan’s shipments, fell for the first time since January 2002.

Companies plan to fire at least 30,067 temporary and part-time workers by March 31 next year. Toyota Motor Corp., the world’s second biggest carmaker, will lay off half of its temporary staff. The Company will cut 3,000 contract staffs and slashed output by 17% in October. The Company reduced its net profit full-year forecast to ¥550 billion, or $5.5 billion - about a third of last year's earnings.

The Electronic Giant Panasonic became the latest victim to the global whiplash. It revised its annual profit forecast by 90% yesterday.

The Government said Japan’s inflation slowed for a second month. Consumer prices excluding fresh food rose 1.9% from a year earlier.

Meanwhile, Japan's unemployment rate stood at 3.7 percent in October, down a slight 0.3 percentage point from the previous month and better than a market forecast of 4.2 percent.

The number of jobless in October totaled 2.55 million, a decline of 160,000 from a year earlier, the Ministry of Internal Affairs and Communications said Friday.

The bleak Japanese output data followed China's warnings on Thursday that the world's fastest-growing major economy was in a sharp slowdown that threatened its stability, and a drop in euro zone business sentiment to a 15-year low that prompted calls for a big cut in the region's interest rates.

Some economists saw Japan's economy shrinking for a full year, which would be the country's longest ever contraction.

Japan tackled its last decade-long spell of deflation with a policy of massively inflating banks' balances with zero-interest cash, but analysts are divided whether the central bank is ready to drive its rates, now at 0.3 percent, to zero again.

ETFs/Stocks :

CurrencyShares Japanese Yen Trust  FXY  $104.27

Japan announced a 27 trillion yen ($275 billion) stimulus package

Sources :

Bloomberg: Japan’s Recession Deepens as Factory Output Slumps (Update1),November 28, 2008 02:33 EST
The International Herald Tribune: Japanese manufacturers sharply cut back production, November 28, 2008
Reuters: Japan output fall worse than expected, November 28, 2008 3:57am EST
Bloomberg News Video: Video: Japanese Factory Output Falls 3.1% From September, 28 November 2008 14:23:41

Friday, November 28, 2008

French’s plan to recapitalize its banks has been blocked by EU

Goldman Sachs reduced its forecast on quarterly notebook shipment growth to 1%

China's FX reserves will "hopefully" reach US$2 trillion this year

UBS cut its price target on BAC by 48%

A Bearish Outlook for Solar Industry

UK takes over 58% of RBS shares

Japan deepens into unprecedented recession

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