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Financial Services Roundup: Market Talk

19 Jul 2017 8:20 am

0710 GMT - China stocks rebounded strongly, with the state-owned giants in coal and steel helping lead the way as liquidity worries eased. The Shanghai Composite rose 1.4% to notch a 3-month high amid a 6% surge for brokerages. Analysts say while there is demand for brokers to catch up, state-backed funds also likely bought shares to reverse Monday's sharp losses, which were especially seen in Shenzhen-listed stocks. The Shenzhen Composite rose 1.5% today while the ChiNext added 1% as small caps got off the mat. Earlier Wednesday, China's central bank injected a net CNY170 billion ($25 billion) into the money market after releasing a net CNY140 billion yesterday. (yifan.xie@wsj.com)

0624 GMT - Australia's announcement to require higher capital levels for the country's banks will improve the system's "resilience to any weakening in credit conditions," says Moody's, especially for the big banks there. "However, Moody's has already factored this assessment into its ratings," so no move amid today's disclosure will occur. The ratings firm puts the total additional capital needed by the company's Big 4 banks at A$9.1 billion ($7.2 billion). In comparison, the quartet's normalized annual internal capital generation is A$6.5-7.5 billion. (kevin.kingsbury@wsj.com; @kevinkingsbury)

0501 GMT - Amid increasing competition in Malaysia's banking industry, there's now talk that the country's smallest bank by assets, Alliance Financial (2488.KU), may be looking to merge with fifth-largest lender Hong Leong Bank (5819.KU). UOB KayHian says Alliance may be the buyer in the merger, instead of being the acquisition target. The broker says scale has always been a stumbling block for Alliance and without scale, the bank has to stay competitive by targeting niche segments. The merger can propel Alliance to become the fifth-largest lender in the country. But Alliance last week dismissed speculation that it was the subject of a merger. Officials at Hong Leong weren't immediately available to comment on the broker's report. UOB maintains a hold rating on Alliance with a target price of MYR4.10, from MYR4.20 previously. (yantoultra.ngui@wsj.com; @yantoultra)

0307 GMT - Singapore Exchange (S68.SG) is resuming the midday break as well as making adjustments to the equities market structure in a bid to increase participation as well as build up the local bourse. SGX had done away with the lunch break in 2011, but after consultations, the exchange said that the market will break for one hour from noon Singapore time starting Nov. 13, covering the same time as the Hong Kong stock market's lunch break. SGX has also increased the minimum bid size for relevant securities in the S$1.00-S$1.99 (U$0.73-US$1.46) category to S$0.01 vs the current S$0.005. (venkat.pr@wsj.com)

0227 GMT - There's a relief rally in Australian bank shares today after the industry's regulator imposed fresh capital benchmarks which aren't as onerous as feared. But while the lenders won't need to do any dilutive capital raisings to get to the regulator's minimum levels, that doesn't mean they won't, says Omkar Joshi, portfolio manager at Regal Funds Management. "I wouldn't be surprised if one of the banks went early to raise the capital given the amount required is relatively small." He adds that this point marks the end of potential capital increases required, dividends from here should be safe notwithstanding an anticipated downturn in earnings. (robb.stewart@wsj.com; @RobbMStewart)

0221 GMT - What was absent from the Aussie bank regulator's paper today on capital requirements was mention of changes to home-loan risk weights or the impact of finalizing so-called Basel IV measures--so expect further debate. Still, UBS reckons the market expects the banks will get their Tier 1 common-equity capital ratios above the 10.5% minimum, perhaps closer to 11%. The investment posits that at the low end, the banks have a A$7.9 billion ($6.2 billion) capital shortfall across the bank majors--though that jumps to A$17.7 billion assuming mortgage-risk weights rise to an average 30% from 25% now. UBS adds CBA (CBA.AU) faces the biggest capital shortfall, with ANZ (ANZ.AU) the smallest. Amid big gains for the Big Four, CBA is up 3% and ANZ has jumped 3.9%. (robb.stewart@wsj.com; @RobbMStewart)

0202 GMT - The Australian prudential regulator's target for "unquestionably strong" capital ratios appears to be manageable for the country's biggest lenders, says Macquarie. It estimates that increasing mandated core Tier 1 ratios to 10.5% and adding a small buffer will translate to A$2-4 billion ($1.6-3.2 billion) of additional capital for most banks. Macquarie says the firms should be able to achieve that organically with some use of discounted dividend-reinvestment plans. Still, earnings face a 2-3% hit. Beaten-down shares of the Big Four have bounced on the news, rising 3-4%. (robb.stewart@wsj.com; @RobbMStewart)

0107 GMT - Malaysian stocks are little changed this morning, as is the case with most Asian markets, following directionless action overnight. Meanwhile, trading volume in Malaysia has picked up of late. The FBM KLCI remains at 1755, with banks RHB Bank and CIMB up 0.8% and 0.5%, respectively. Meanwhile, British American Tobacco drops 0.7%. (yantoultra.ngui@wsj.com; @yantoultra)

0055 GMT - Zhongyuan Bank (1216.HK) looks set for a weak debut Wednesday. The Henan-based lender closed just 2.4% and 1.2% higher on 2 local pre-listing trading platforms. Only 39% of the public offering has been subscribed so far, while the international tranche is only moderately overbooked thanks to 3 cornerstone investors, according to the company. The listing price of HK$2.45--at the lower end of a HK$2.42-HK$2.53 indicative range--will generate net proceeds of HK$7.1 billion and puts market cap at HK$48.1 billion ($6.2 billion).(john.wu@wsj.com)

0054 GMT - It time for bulls to take a breather on stock-exchange operator Bursa Malaysia (1818.KU), says Affin Hwang as it downgrade to hold following 14% stock gains this year. Its price target also eases 4.6% to MYR10.30 as it thinks escalating market risks and lofty valuations will caused the market to consolidate this quarter. That as the investment bank does expect Bursa's 2Q results to be impressive and that the company will likely reward shareholders with a special dividend. (yantoultra.ngui@wsj.com; @yantoultra)

0023 GMT - Australian bank stocks have popped in early trading even as the country's biggest regulator boosted capital requirements. But they have until the start of 2020 to reach the new target--easing near-term fears of potentially dilutive capital-raisings. The country's Big 4 banks have logged early stock gains of 3%, helping the S&P/ASX 200 index, Australia's benchmark, rebound as much as 1% in early trading. It's currently up 0.6% after having skidded 1.2% yesterday amid the Aussie dollar's run to 2-year highs against the greenback. The currency's gains which have since been extended. (kevin.kingsbury@wsj.com; @kevinkingsbury)

2327 GMT - Could Vocus (VOC.AU) be at risk of a private-equity snub? With KKR and Affinity circling the Australian telecom company, Morningstar sees similarities to the recent process involving Fairfax Media (FXJ.AU), which ultimately failed to land firm bids from suitors after they conducted due diligence. While the investment-research firm admits there's no way of knowing what might get turned up in the dig through Vocus' books, it also noted there's assets a buyer could sell to partially offset the purchase price. Meanwhile, a helter-skelter series of acquisitions has left Vocus struggling to integrate assets--an area of expertise that's bread and butter for private equity. Vocus closed yesterday 27% below Morningstar's per-share fair-value estimate. (robb.stewart@wsj.com; @RobbMStewart)

(END) Dow Jones Newswires

July 19, 2017 04:20 ET (08:20 GMT)

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