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Financial Services Roundup: Market Talk

30 Jul 2018 8:20 am

The latest Market Talks covering Financial Services. Exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

0735 GMT - Early outperformance in Chinese big caps persisted throughout today's trading as small caps saw noted declines. The Shanghai Composite finished down 0.2% to log a 4th-straight drop (down 1.3% in that time). Infrastructure and financial stocks continued to do well. But the Shenzhen Composite, made up of generally smaller companies, slid 1.4% and the startup-heavy ChiNext skidded 2.2%. Health-care names were hard hit again with some 10% limit-downs, including troubled vaccine maker Chengsheng. Some entertainment stocks were also hit as Chinese police look into so-called hidden contracts. Talent Television hit a fresh 3 1/2-year with its 10% drop while Huayi Brothers fell 6.8%. (john.wu@wsj.com)

0648 GMT - London shares are set to fall in opening trading as Asian indices drop after downbeat tech-stock results dragged Wall Street lower Friday. The FTSE 100 Index is tipped to open 40 points adrift at 7661 as Asian indices drop overnight. "A sharp fall in the Nasdaq saw the index post its second successive weekly decline, as disappointing guidance from Facebook and Twitter, following on from a poorly received update from Netflix, caused some investors to question the basic assumptions around those companies' growth models and whether they are sustainable at current levels," says Michael Hewson at CMC Markets. "This is likely to see markets in Europe start the week on the back foot." (philip.waller@wsj.com)

0524 GMT - State-run Bank of Baroda reported reduced bad-loan provisions for last quarter, contrary to what many other Indian corporate lenders have reported. It's helped stoke the stock this morning. Kotak Securities says Baroda's key stengths include a strong liability franchise, comfortable capital position and high coverage ratio. Jefferies upgrades the stock to buy while having greater comfort on asset quality, predicting Baroda's gross bad loans will decline by 6 percentage points within the next year while boosting FY earnings estimates 11%. Shares have jumped 9% to put July's surge at 33% and erase most of the year's drop. They're on pace for the best day since late October's announcement of government aid for the sector and the biggest monthly gain since 2009. (debiprasad.nayak@wsj.com)

0514 GMT - OCBC gets even more bullish on Singapore Exchange as talks have resumed with India's National Stock Exchange over a potential partnership to create an India-focused offshore trading hub in Gujarat state. Their rift have weighed on SGX, down 13% from January's high to S$7.43, including a 1.85% drop today after its F4Q miss and changing out it will do dividends. The investment bank's target rises 5.4% to S$8.32, near the year's peak. (saurabh.chaturvedi@wsj.com; @journosaurabh)

0443 GMT - ICICI Bank is gearing up for recovery after witnessing a sharp increase in stressed assets the past few quarter. India's 2nd-largest private-sector lender said late Friday that bad-loan additions last quarter were the least in nearly 3 years. Still, the company swung to the red. Jefferies says core profitability, while modest, should improve on improving loan growth and net interest margins, adding that early resolution of stressed assets and any recoveries from that would be further bottom-line catalysts. Elara Capital believes a lower delinquency rate, in addition to a focus on relatively smaller loans, will keep asset quality in check. Shares are up 1.5%, putting this month's bounce at 8% and cutting the year's drop to 5.3%. (debiprasad.nayak@wsj.com)

0157 GMT - Shares in China's bigger companies are higher while smaller-cap names are lower with most equities in the region this morning. The Shanghai Composite is up 0.6% after 3-straight declines, as is the large-cap CSI 300 with financials up nearly 1%. But the Shenzhen Composite has eased 0.1% and the startup-heavy ChiNext is off 0.4% as some new delisting rules hit pockets of the market. Meanwhile, troubled vaccine maker Chengsheng logs a 10th-straight 10% drop while peer Kangtai bounces 1.9% after hitting a 3-month low. Haitong Securities thinks Chinese stocks have bottomed, recommending banks and so-called consumer "white horses" ahead of an anticipated uptick in market P/E. (john.wu@wsj.com)

0130 GMT - Moody's says recent mortgage-rate increases by smaller Australian banks could pave the way for the country's big 4 lender to follow soon. But despite very-high levels of household leverage there, the ratings firm contends that modest rate rises can be accommodated without a meaningful impact on bank delinquency rates or credit costs. That amid Australia's solid job market, loan-serviceability buffers and strong collateral. (james.glynn@wsj.com; @JamesGlynnWSJ)

0124 GMT - Foreign selling of Malaysian equities picked up last week, totaling a net MYR498.4 million ($122.8 million) that was double prior-week levels. There was no day of net buying last week, putting the daily streak at 7. Meanwhile, there's been 13-straight weeks of net selling by foreigners. The country's largest lender by assets, Maybank, saw the largest net outflow last week at MYR13.2 million. Nevertheless, shares rose 0.9% amid the benchmark KLCI's 0.8% gain. MIDF says the outflow may indicate some investors selling on strength. (yantoultra.ngui@wsj.com; @yantoultra)

0056 GMT - Can't decide between Standard Chartered and HSBC? Go for the former, says Goldman Sachs, for lower valuation, more attractive payout and better growth in the current interest rate environment. Standard Chartered is now trading at 40% discount to its British peer HSBC in terms of price-to-book which is "one of the widest levels" in history, GS elaborates, adding that 2018 would mark the first clean year for revenue growth following 2 years of de-risking efforts. Standard Chartered last closed at HK$71.7, down 20% from its January peak whereas HSBC declined 11% to HK$74.85. (john.wu@wsj.com)

[Dow Jones] While there remains considerable uncertainty around AMP's future, at least its capital base looks fine. While some analysts expected AMP to launch an equity raising, that didn't happen alongside the wealth manager's initial reset on Friday. "Management demonstrated ongoing strength in its capital position with a reduction in the near-term payout ratio to assist in increasing this position over the next 12 months," Credit Suisse says. AMP is trading on a 40% price-to-earnings discount to the market and a 7% dividend yield, although the bull concedes a fundamental valuation approach probably isn't the best way to value the stock currently. (david.winning@wsj.com; @dwinningWSJ)

[Dow Jones] AMP's reset on Friday has Shaw & Partners fretting about what's to come. In particular, the bear is concerned at the magnitude of future wealth management fee reductions, noting AMP only received a 35 basis points pretax profit margin on its Wealth Management business in 2H. "If fees are cut by 45 basis points across all products, then there won't be a profit from that business," Shaw says. That's a big deal, given Wealth Management accounted for 40% of AMP's underlying profit in 2017. (david.winning@wsj.com; @dwinningWSJ)

[Dow Jones] AMP's earnings are only now starting to reflect the pain that the wealth manager is in, says Bell Potter. AMP's reset on Friday included A$800 million in additional costs and provisions, including A$290 million for potential client advice remediation. Bell Potter notes AMP is also cutting fees for its MySuper products, which it expects to be the first of many. "We believe this is only the start of the necessary business remedial action, and risks the company will face," the bear says. Its price target drops 16% to A$2.75/share, while its FY19 and FY20 underlying EPS forecasts fall by 3.7% and 3.3%, respectively. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

July 30, 2018 04:20 ET (08:20 GMT)

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