IPP Investment Commentary

IPP Investment Digest
Weekly roundup of headline news.
For the week ending 9 Nov 2008

 Equity Markets: The US indices perked up on Fri after two sessions of loss, following the US Presidential election. European indices also edged higher on Fri on news of rate cuts, after sharp drops on Thu. Some of Asia’s indices closed the week up, with STI, Hang Seng and Nikkei moving up 3.86%, 1.97% and 0.07% respectively.

 Commodities: Crude oil prices remain low on pressure of Opec’s rising spare capacity by 1.6m barrels a day, and recession fears. Crude oil Nov contract (Nymex Nov West Texas Intermediate) at one point fell to $60.16 a barrel. Gold often seen as an inflation hedge also saw low prices as inflation risk abate.  Currencies: US$ weakened (-2.45%) against £ over the week, while gaining marginal strength against the € (+0.83%) and ¥ (+0.13%). S$ weakened by 0.60% against the US$ over the week.

 Economy: IMF forecasts growth to be -0.3% and -0.2% in advanced economies and Japan for 2009. China, widely counted on to sustain global growth is forecast to grow at 8.5% in 2009. US reported Oct job loss to be at 240,000, economists had forecasted loss at 200,000. US unemployment in Oct was 6.5%.

 Interest Rate: Bank of England cut interest rate by 150 bps to 3% - lowest level in 50 years. Swiss National Bank and ECB both cut interest rate by 50 bps to 2% and 3.25% respectively. Reserve Bank of Australia cut interest rate by 75 bps to 5.25%, with more cuts expected. LIBOR rates have come down versus a month ago, with 3-month, 6-month and 1-year rates at 2.71%, 2.97% and 3.17% respectively (as at 5 Nov).

 Banks/IMF: IMF approved a US$15.7 bn loan for Hungary, the approval makes US$6.3 bn immediately available and the remainder will be available in five installments subject to quarterly reviews.

 Corporates: Toyota Motor reported Q2 net profits that fell 69% and warned of possibility of zero profits in 2H. Ford Motor cuts salaried expense by another 10%, further to a 15% cut earlier in the year. Goldman Sachs cut 3,000 jobs, while Fidelity Investments plan to cut 1,290 jobs. Mattel announced 1,000 job cuts worldwide. DBS is expected to cut 900 jobs; its Q3 net profit of S$379m is sharply lower on a year-on-year basis (S$610m last year).

 Politics: US elected its first African American President (44th), letting the Democrats take lead in the White House beginning next Jan. Three terrorists, who set off bombs in Bali in 2002, killing hundreds of people, were executed in Indonesia.

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