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8 December 2016

OVERNIGHT MARKETS AND NEWS

Dec E-mini S&Ps (ESZ16 +0.10%) are up +0.02% and European stocks are up +0.30% at an 11-month high as the markets expect the ECB later today to announce an extension of its QE program. Government bond prices fell and EUR/USD (^EURUSD) rose to a 3-week high on speculation the ECB may also announce a slower pace of asset purchases and that this will be the last extension of QE before the ECB starts to taper its bond buying.

The weaker dollar has boosted crude oil prices with Jan WTI crude (CLF17 +0.86%) up +0.78%, which has also lifted energy producing stocks. Stock markets around the world also rose on signs of economic strength in China after China Nov exports unexpectedly rose for the first time in 8 months and after China imports posted their largest increase in 2 years.

Asian stocks settled mostly higher: Japan +1.45%, Hong Kong +0.27%, China -0.21%, Taiwan +1.21%, Australia +1.20%, Singapore -0.03%, South Korea +2.21%, India +1.74%. Japan's Nikkei Stock Index climbed to an 11-month high as strength in Chinese Nov imports boosted exporter stocks.

The dollar index (DXY00 -0.34%) is down -0.28% at a 3-week low. EUR/USD (^EURUSD) is up +0.31% at a 3-week high. USD/JPY (^USDJPY) is down -0.29%. The Total Investment & Insurance Solutions

Mar 10-year T-note prices (ZNH17 -0.18%) are down -7 ticks.

China Nov exports unexpectedly rose +0.1% y/y, stronger than expectations of -5.0% y/y and the first increase in 8 months. Nov imports unexpectedly rose +6.7% y/y, stronger than expectations of -1.9% y/y and the biggest increase in 2 years.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly initial unemployment claims (expected -13,000 to 255,000, previous +17,000 to 268,000) and continuing claims (expected -33,000 to 2.048 million, previous +38,000 to 2.081 million), (2) USDA weekly Export Sales. The Total Investment & Insurance Solutions

Russell 1000 earnings reports today include: Toro (consensus $0.22), Cooper Cos (2.25), Broadcom (3.36).

U.S. IPO's scheduled to price today: Ichor Holdings (ICHR), Athene Holding (ATH).

Equity conferences during the remainder of this week include: Citi Global Health Care Conference on Wed-Thu, Barclays Global Technology, Media and Telecommunications Conference on Wed-Thu, Bernstein Consumer Summit on Wed-Thu, Capital One Southcoast Energy Conference on Wed-Thu, ACI European Biopolymer Summit on Thu.

OVERNIGHT U.S. STOCK MOVERS

L-3 Communications Holdings (LLL +1.96%) was downgraded to 'Neutral' from 'Buy' at Bank of America/Merrill Lynch with a price target of $170.

Priceline.com (PCLN +1.48%) was rated a new 'Buy' at CLSA with a price target of $1,900.

Tailored Brands (TLRD +3.39%) was upgraded to 'Buy' from 'Neutral' at Mizuho Securities with a 12-month target price of $25. The Total Investment & Insurance Solutions

Lululemon Athletica (LULU +4.54%) surged 13% in after-hours trading after it reported Q3 adjusted EPS of 47 cents, higher than consensus of 43 cents, and then said its board approved up to $100 million in stock repurchases.

Ollie's Bargain Outlet Holdings (OLLI +1.11%) fell over 2% in after-hours trading after it reported Q3 comparable store sales rose +1.8%, below consensus of +2.1%.

Corning (GLW +2.46%) gained over 1% in after-hours trading after it announced a new $4 billion share repurchase program.

United Natural Foods (UNFI +0.88%) slid over 2% in after-hours trading after it reported Q1 EPS of 58 cents, below consensus of 62 cents.

Verint Systems (VRNT +0.26%) tumbled over 12% in after-hours trading after it reported Q3 adjusted EPS of 59 cents, weaker than consensus of 70 cents, and then lowered guidance on fiscal 2017 adjusted EPS to $2.50, below a September 7 view of $2.85.

Comtech (CMTL +6.43%) dropped 7% in after-hours trading after it reported Q1 revenue of $135.8 million, below consensus of $139.2 million, and then cut its quarterly dividend to 10 cents a share from 30 cents a share.

H&R Block (HRB +2.86%) jumped nearly 6% in after-hours trading after it reported Q2 revenue of $131.3 million, higher than consensus of $127 million.

Casey's General Stores (CASY +0.93%) fell over 2% in after-hours trading after it reported Q2 EPS of $1.44, below consensus of $1.57. The Total Investment & Insurance Solutions

Voyager Therapeutics (VYGR -1.93%) surged over 30% in after-hours trading after it announced positive results on its phase 1b trial of its VY-AADC01 gene therapy that showed improved measures of motor function in in patients with advanced Parkinson's disease.

MARKET COMMENTS

Dec E-mini S&Ps (ESZ16 +0.10%) this morning are up +0.50 of a point (+0.02%). Wednesday's closes: S&P 500 +1.32%, Dow Jones +1.55%, Nasdaq +1.32%. The S&P 500 on Wednesday pushed up to a new record high and closed higher on carry-over support from a rally in European stocks to a 7-1/4 month high on expectations that the ECB on Thursday will extend QE past March 2017. Stocks were also boosted by reduced interest rate concerns as the 10-year T-note yield fell -4 bp. The Total Investment & Insurance Solutions

Mar 10-year T-notes (ZNH17 -0.18%) this morning are down -7 ticks. Wednesday's closes: TYH7 +11.00, FVH7 +7.00. Mar 10-year T-notes on Wednesday closed higher on the -2.28% slide in crude oil prices, which undercut inflation expectations. T-notes were also boosted by carry-over support from a rally in German bunds ahead of Thursday's ECB meeting. The Total Investment & Insurance Solutions

The dollar index (DXY00 -0.34%) this morning is down -0.284 (-0.28%) at a 3-week low. EUR/USD (^EURUSD) is up +0.0033 (+0.31%) at a 3-week high. USD/JPY (^USDJPY) is down -0.33 (-0.29%). Wednesday's closes: Dollar index -0.260 (-0.26%), EUR/USD +0.0035 (+0.33%), USD/JPY -0.25 (-0.22%). The dollar index on Wednesday closed lower on a -4 bp decline in the 10-year T-note yield, which reduced the dollar's interest rate differentials. In addition, there was strength in EUR/USD on short-covering ahead of Thursday's ECB meeting.

Jan WTI crude oil prices (CLF17 +0.86%) this morning are up +39 cents (+0.78%) and Jan gasoline (RBF17 -0.20%) is -0.0038 (-0.25%). Wednesday's closes: Jan crude -1.16 (-2.28%), Jan gasoline -0.0291 (-1.89%). Jan crude oil and gasoline on Wednesday closed lower on the +3.783 million bbl increase in crude stockpiles at Cushing to a 5-1/2 month high and on the +3.425 million bbl increase in weekly EIA gasoline supplies, a larger increase than expectations of +1.6 million bbl.The Total Investment & Insurance Solutions

InGovern recommends voting against removal of Mistry as director from TCS -The Total Investment & Insurance Solutions

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8 December 2016

TCS (The Total Investment & Insurance Solutions)

Bengaluru-based InGovern Research Services, which provides proxy voting advisory has recommended to vote against the proposal to remove Cyrus P Mistry as Director from the Board of Tata Consultancy Services Ltd (TCS). However, considering the voting power of promoters, the proxy advisory firm advised Mr Mistry to resign from TCS Board to protect his reputation. The Company has called for an extraordinary general meeting (EGM) on 13 December 2016 for this purpose.

"The proposal for Mr Mistry’s removal as a Director is because of his replacement as Chairman in Tata Sons Ltd. As per Tata Sons, one of the primary reasons of his replacement was non-performance of Tata companies excluding TCS and Jaguar Land Rover (JLR). Hence, since the promoter itself accepts that the performance of TCS has been good, we do not see any logic as to why a shareholder should vote for removal of a Director, who was the Chairman, for performance issues," InGovern says.

In addition, there is no negative commentary about Mr Mistry’s evaluation as the Chairman, it is assumed that he had got a favourable rating from the Board. "However," the proxy voting advisory says, "the (TCS) Board, in the explanatory statement to the proposal, expresses that it agrees that removal of Mr Mistry would be in the best interests of the company. We seek the logic as to why the Board has recommended removal of a Director who was given a favourable rating in his evaluation as Chairman a few months back itself. The plausible reason is that he was a nominee of Tata Sons on Board of TCS and since he was replaced as Chairman of Tata Sons, it is natural that he is removed from the Board of TCS."

The Articles of Association (AoA) of TCS gives the authority to Tata Sons to appoint and replace the Chairman of Board of the Company. On basis of this, on 9 November 2016, Tata Sons replaced Mr Mistry with Ishaat Hussain as Chairman of TCS. The Total Investment & Insurance Solutions

Tata Sons holds 73.26% stake in TCS and other promoter entities hold 0.07%, resulting in total 73.33% equity stake. "Since the proposal of removal of Mr Mistry from the Board is an ordinary resolution, it is certain that the proposal will pass with requisite majority," InGovern says.

However, the proxy voting advisory says it believe his (Mr Mistry's) removal from the Board altogether is not the best outcome for TCS. The Total Investment & Insurance Solutions

It says, "Consider Shapoorji Pallonji (SP) Group’s beneficial interest in TCS. SP Group, represented by Mr Mistry, holds about 18.4% in Tata Sons, which holds 73.33% in TCS. This gives SP Group a beneficial interest of 13.48% in TCS. If this beneficial interest had been a direct stake in the company, it would have been the largest stake after the promoters and much higher than the largest public shareholder LIC’s 3.21% stake in TCS. For a director representing a beneficial stake of 13.47%, which ranks second among all shareholders of the company, and having received a favourable rating in his evaluation, there is no logic for his removal from the Board. On the contrary, his beneficial stake of 13.47% would reflect his ‘skin-in-the-game’ or alignment of his interests with that of the company and hence would be in best interests of the company." The Total Investment & Insurance Solutions

Another reason attributed to Mr Mistry's removal is the possibility that his presence on the Board may create an environment of constant conflict and discord on the Board. "We do not believe this hypothesis as it has been historically proved that the effectiveness of the Board increases when there are directors with an opposing point of view and who are not supposedly ‘Yes-Men’ of the promoters in the Board. On basis of these points, we recommend shareholders vote against Mr Mistry’s removal from the Board of TCS," InGovern says. The Total Investment & Insurance Solutions

At the same time, looking at the voting power of promoter group, the proxy voting advisory says advises Mr Mistry to resign before the vote. It says, "In case of TCS where the Board has not expressed any opinions contrary to that of Tata Sons and has replaced Mr Mistry as its Chairman and it is a certainty that the proposal for his removal will be passed given the promoter’s 73.33% voting power, it is prudent for Mr Mistry, to protect further damage to his reputation, to resign from the Board before the EGM."

"With regards to the articles of association of TCS giving the authority to Tata Sons to appoint and replace Chairman of Board of TCS without the need to seek prior opinion of the Board, we believe such a provision greatly restricts the powers of the Board while giving a shareholder extra rights over that of other shareholders. Not letting the directors – representative of all shareholders – to appoint their leader is also an abuse of rights of the minority shareholders of the company. We recommend shareholders raise concern that such a provision be removed from the articles of association of TCS and the Board is given the right to appoint its own Chairman," InGovern says. The Total Investment & Insurance Solutions

The proxy voting advisory firm also raises question on independence of four independent directors in the Board of TCS. At present, there are 10 directors on the TCS Board. Mr Hussain, who replaced Mr Mistry as Chairman and Mr Mistry are non-executive non-independent Directors, while N Chandrasekaran is the Managing Director and Aarthi Subramanian is executive Director of TCS. 

 

TCS Board (The Total Investment & Insurance Solutions)

There are six independent Directors, including Aman Mehta, Venkataraman Thyagarajan, Clayton M Christensen, Ron Sommer, Vijay Kelkar and OP Bhatt. Except Mr Kelkar and Mr Bhatt, the other independent directors have exceeded a tenure of 10 years and thus “we consider not truly independent,” InGovern added.The Total Investment & Insurance Solutions

Demonetisation: Inflows in Jan Dhan accounts fall after public warning -The Total Investment & Insurance Solutions

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8 December 2016

Following the Income Tax Department's warning on not allowing misuse of Jan Dhan accounts for laundering black money post-demonetisation, inflows into such accounts have come down significantly, the government has said. The Total Investment & Insurance Solutions

In a release late on Wednesday, the Union Finance Ministry said there has been a continuous fall in deposits in last couple of weeks, after an initial surge in deposits after the demonetisation of high-value currency on November 8. The Total Investment & Insurance Solutions

"Since the time the government has alerted people not to allow their accounts, particularly Jan Dhan accounts, to be used by others for the purpose of converting their black money, there has been a considerable decrease in the inflow of funds in Jan Dhan accounts," an official statement here said.

"The average per account deposit in Jan Dhan accounts is Rs 13,113 for this entire period from November 8 to December 2, which is not alarming, given the need to bring all cash to banks,"A

Total amounts deposited during November 8-15 were Rs 20,206 crore, while during November 16-22, people deposited Rs 11,347 crore in such accounts. This further fell to Rs 4,867 crore during November 23-30. Total daily deposit in Jan Dhan accounts was Rs 410 crore on December 1 and Rs 389 crore on December 2. The Total Investment & Insurance Solutions

"The Income Tax Department has identified the local clusters and bank branches where the inflow of Jan Dhan deposits have been more than normal, in order to investigate money deposits in Jan Dhan accounts which belonged to somebody else," the statement added.The Total Investment & Insurance Solutions

CB Bhave appointed non-executive chairman in Vistaar Financial Services-The Total Investment & Insurance Solutions

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8 December 2016

Vistaar Financial Services Private Limited, an  NBFC (non-banking finance company), focused on lending to small businesses in rural and semi-urban areas, announced the appointment of CB Bhave as the non-executive chairman and independent director of the company, according to a release from the company. The Total Investment & Insurance Solutions

Bhave served as the chairman of Securities and Exchange Board of India (SEBI) from February 2008 for a period of three years, prior to which he was the chairman and MD (managing director) of National Securities Depositories Limited (NSDL). Bhave, a 1975-batch IAS officer, has worked with the government in various capacities and roles. He was responsible for revolutionising the Indian capital market by getting market players to accept the new system of dematerialised shares and debentures. The Total Investment & Insurance Solutions

On his appointment, Bhave said, “A large part of the Indian economy is still outside the formal financial activity. Vistaar Finance along with others is engaged in the process of integrating the sector and including them in the formal lending activity in order to grow faster.”

Vistaar Finance is one of the first NBFCs with complete focus on lending to MSMEs (Micro, Small and Medium Enterprises) and has recently crossed the loan portfolio size of Rs1,000 crore and currently has 198 branches primarily in rural and semi-urban areas spread across 135 districts and 12 states.The Total Investment & Insurance Solutions

Nifty, Sensex may head higher - Thursday closing report-The Total Investment & Insurance Solutions

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8 December 2016

Indian equity markets surged on Thursday as positive global cues, rupee appreciation and value buying buoyed investors' sentiments. Besides, positive global indices, stimulus hopes from the European Central Bank (ECB) in its upcoming monetary policy review, and commercial banks reducing lending rates enhanced the risk-taking appetite. The BSE market breadth was skewed in favour of the bulls - with 1,820 advances and 823 declines. On Wednesday, the equity markets slipped after the Reserve Bank of India (RBI) decided to keep its key lending rates unchanged in its fifth bi-monthly monetary policy of 2016-17. Clearly, the market has shaken off that disappointment. The Total Investment & Insurance Solutions

The trends of the major indices in the course of Wednesday’s trading are given in the table below:

 

Major Indices (The Total Investment & Insurance Solutions)

The key Indian indices closed with substantial gains -- more than 1.5% each -- as healthy buying was witnessed in all the 19 sub-indices of the BSE, led by automobile, banking and metal stocks. The wider 51-scrip Nifty of the National Stock Exchange (NSE) gained by 144.80 points or 1.79% to 8,246.85 points. The Sensex touched a high of 26,733.87 points and a low of 26,357.35 points during the intra-day trade.

In the sectoral landscape, metal stocks rallied the most, pushing S&P BSE Metal index to 10,937, up 2.93%, thanks to a rise in shares of Vedanta, Tata Steel and NMDC. Auto stocks were the second best performers. The S&P BSE Auto index rose 2.63% to 20,558. The Total Investment & Insurance Solutions

The BSE Midcap and Smallcap indices gained 1.5% and 1.3%, respectively. However, the gap between advances and declines narrowed as the day progressed. More than 2 shares gained for every share falling against the ratio of 5:1 in early trade on the BSE. The Total Investment & Insurance Solutions

Lenders also gained after the RBI reversed an order that forced banks to deposit all their extra cash with it in a bid to absorb excess liquidity. The Total Investment & Insurance Solutions

The top gainers and top losers of the major indices are given below:

 

Top Gainer (The Total Investment & Insurance Solutions)

Elsewhere, stocks slipped in China, as investors grappled with a mixed set of data showing better-than-expected trade activity in November but a sharp fall in foreign exchange reserves, Reuters reported. The blue-chip CSI300 index fell 0.2% to 3,470 whole the Shanghai Composite Index lost 0.2% to close at 3,215. 

Hong Kong stocks rose for the third straight session on Thursday, drawing some support from Wall Street although demand was tempered by weakness in mainland shares after China's falling foreign exchange reserves deepened concerns over capital outflow. European shares opened to a three-month high. 

The closing values of the major Asian indices are given in the table below: The Total Investment & Insurance Solutions

Asian Indices (The Total Investment & Insurance Solutions)

White House defends new Air Force One deal after Trump's attack on expense -The Total Investment & Insurance Solutions

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7 December 2016

The White House defended the deal of new Air Force One aircrafts with Boeing company, after President-elect Donald Trump called for cancelling the order claiming the new aircraft too expensive in a Twitter post earlier on Tuesday. The Total Investment & Insurance Solutions

"I think the American people would expect that future presidents would benefit from unique and upgraded capabilities while flying aboard Air Force One," White House press secretary Josh Earnest told reporters on board the presidential plane flying to Tampa, Florida. The Total Investment & Insurance Solutions

However, it's up to the Trump administration to determine whether the project will be completed, said Earnest. The Total Investment & Insurance Solutions

"The updated Air Force One is not set to come online until 2023," he said. "This is a longer-range plan, but ultimately the planning work that we have done on behalf of future presidents is something the next administration will have to decide to carry forward." he said.

"Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!" Trump tweeted. The Total Investment & Insurance Solutions

"We want Boeing to make a lot of money, but not that much money," he then told reporters in a briefing.

However, the $4-billion price tag Trump claimed for the cost of the new aircraft could not be immediately confirmed. The Total Investment & Insurance Solutions

Earnest said some of the data Trump referenced to "don't appear to reflect the nature of the financial agreement between Boeing and the Department of Defence."

The upgrades to the new plane, which include security enhancements, are being made per the recommendation of national security experts, he added. The Total Investment & Insurance Solutions

Also on Tuesday, Boeing said in a statement that the company is "currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serve the unique requirements of the President of the United States." The Total Investment & Insurance Solutions

The two 747-200 aircrafts currently used as Air Force One has been in flight since the Reagon era in 1980s. Though the two planes have been heavily modified, they are due to reach the end of their planned 30-year life in 2017. The Total Investment & Insurance Solutions

In January, Boeing secured a contract from the Pentagon to start development work on the 747-8 jumbo jets that would replace the aging planes, according to a Wall Street Journal report. 

Boeing was the US government's second biggest federal contractor last year behind Lockheed Martin Corp., according to federal procurement data.The Total Investment & Insurance Solutions

RBI directs banks to re-activate dormant accounts with 'due diligence' -The Total Investment & Insurance Solutions

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7 December 2016

Noting an increase in re-activation of dormant accounts post-demonetisation, the Reserve Bank of India (RBI) on Tuesday said the genuineness of the transactions must be ascertained with 'due diligence' in the process. The Total Investment & Insurance Solutions

"Operation in dormant accounts with banks may be allowed after due diligence as per risk category of the customer. As stated therein, 'due diligence' would mean ensuring genuineness of the transaction, verification of the signature and identity etc," RBI said in a notification here.

As part of the customer due diligence procedure, certified copies of officially valid documents for proof of identity and address are to be obtained while establishing an account based relationship, it said.

"Regulated entities shall, among others, take steps for preserving the customer account information including preservation of records pertaining to the identification of the customers and their addresses obtained while opening the account, for at least five years after the business relationship is ended," it added. The Total Investment & Insurance Solutions

RBI asked the banks to ensure compliance as applicable on activation of dormant accounts, customer due diligence and record management, scrupulously.The Total Investment & Insurance Solutions

Income Tax department seizes Rs130 crore post-demonetisation-The Total Investment & Insurance Solutions

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7 December 2016

The Income Tax Department has carried out investigations into over 400 cases post-demonetisation seizing as much as Rs 130 crore in cash and jewellery, an official statement said on Tuesday. The Total Investment & Insurance Solutions

"The Income Tax Department has carried-out swift investigations in more than 400 cases since the demonetisation of old high denomination currency announced by the government on November 8, 2016.

"More than Rs 130 crore in cash and jewellery has been seized and approximately Rs 2,000 crore of undisclosed income has been admitted by the taxpayers," said the Finance Ministry statement. The Total Investment & Insurance Solutions

Detecting serious irregularities beyond the Income Tax Act, the Central Board of Direct Taxes (CBDT) decided to refer such cases to the Enforcement Directorate (ED) and the Central Bureau of Investigation, enabling them to examine the criminal conduct for immediate necessary action, it said. 

More than 30 such references have already been made to the ED, and are being sent to the CBI, it addded.

The cases referred from the Delhi unit include the Axis Bank, Kashmere Gate in which complicity of officers of the bank in the malpractices was detected, the statement said. The Total Investment & Insurance Solutions

"The concerted and coordinated enforcement action of the Income Tax Department, ED and CBI in detecting the malpractices and taking swift action is going to continue in the coming days," it said.The Total Investment & Insurance Solutions