ABB Open Offer Over - what next?

This is an update to the previous post on ABB Open Offer - http://prabhakar-views.blogspot.com/2010/05/abb-open-offer-would-you-buy-now.html


Swiss Engineering company ABB has successfully acquired 75% stake in Indian unit - ABB's  open offer has got over subscribed, report CNBC-TV18, quoting sources. LIC and ICICI Prudential life tendered a part of their holding in the offer. Wherein, LIC tendered 50% of its holding and ICICI Prudential tendered 70%. ABB open offer was for 23% stake at Rs 900 per share.
Now ABB (Parent) holds much larger stake in the Indian subsidiary and it gives them better management control too. We don't know yet if the parent wants to delist the company from India after buying remaining 25% stake too in the future but now that looks like only trigger if price has to move up.
Stock of ABB may not perform going ahead as poor performance continues - ABB Ltd India suffered a second-quarter net profit decline of 54 per cent year-on-year to Rs 38.3 crore (Rs 83.60 crore). The power and automation technologies major attributed the fall to increased pressure on pricing and continued costs on exit from the rural electrification business. Sales revenue dipped nearly 4 per cent to Rs 1,446 crore year-on-year (Rs 1,505 crore) on account of delayed orders worth Rs 8,531 crore for the first six months ended June. The latest quarter saw orders worth nearly Rs 1,235 crore.

STEEL View and news

CLSA in its report on 14/July/2010 report on Indian Steel sector has said. “Cost of iron ore and coking coal of steel is set to decline by US$62/tonne in FY12 and headline steel prices should also plummet”. This would be Negative for TATASTEEL, SAIL & JINDALSTEEL which have captive mines positive for company’s converters like BHUSANSTL & JSWSTEEL the report said.

China which is facing overcapacity + China steel almost in the red as prices fall –CISA report says. Whenever China sees a problem they can flood the market so investor should take informed decision as Commodity prices are cooling globally on growth concerns, if India has high price this could become a Dumping ground, Lower Steel Prices can benefit user industry.

News Collected.
Rio Q2 iron ore output dips, flags China risks

SYDNEY, July 14 (Reuters) - Rio Tinto on Wednesday reported a 2 percent fall in second-quarter iron ore production from a year ago and raised concerns of a possible double-dip recession and slower Chinese growth. Still, the world's No.2 iron ore miner said it was running its mines close to capacity and forecast total 2010 output of 234 million tonnes, slightly up on an earlier forecast and ahead of 2009's 217 million.

Two major China steel mills guide August prices lower

SHANGHAI, July 13 (Reuters) - Two of China's top steel mills cut some August prices on Tuesday, bowing to pressure from slowing demand in major steel-using markets that has already forced many of their rivals to cut production. Baosteel, one of the top three steelmakers in China and the world, kept some of its prices unchanged but cut others by up to 300 yuan ($44.31) per tonne, or around 5 percent from July, marking a second successive month of falling prices.

China steel almost in the red as prices fall -CISA

SHANGHAI, July 16 (Reuters) - China's massive steel sector, which has begun cutting production in the face of falling prices and softening demand, is nearing the break-even point, the China Iron & Steel Association (CISA) said on Friday. "Most steel products prices have extended falls in July, to a level almost below the mills' production costs, and this will continue supporting prices," CISA said in a statement on its website.

The July-September period will see erosion of profitability of steel companies as the gloomy demand scenario would prevent them from hiking rates amid high input cost pressure, a government official said today. "The current quarter would be the weakest link in the financial year 2010. Margins, profitability of steel companies will take a hit amid high input cost pressure, sluggish demand scenario,” Joint Plant Committee Chief Economist A S Firoz told PTI.

Stocks in India to Cap Gains on Valuations, Downgrades, Merrill Lynch Says

India’s benchmark stock index, the best performer among measures for the 20 biggest equity markets last quarter, may cap gains after share prices exceeded the outlook for earnings, Bank of America Merrill Lynch said. “Markets are slightly on the higher side of valuations,” Jyotivardhan Jaipuria, head of research at the local unit of Bank of America Merrill Lynch, said in an interview in Mumbai yesterday. “We will have a spell of earnings downgrades now which is largely driven by what’s happening around the world.” http://www.bloomberg.com/news/2010-07-13/indian-stocks-to-cap-gains-on-valuations-downgrades-merrill-lynch-says.html  

Dow below 1000 in 5-6yrs says Elliot analyst Robert Prechter

Below given are collections of information about Robert prechter and only a chart I have put this is just to create awareness about a great Elliot Wave analyst. I have also Baltic Index data which shows Global trade is dwindling. Read the view for education purpose and take informed decision.

Robert R. Prechter, Jr. (b. 1949) is an American author and stock market analyst, known for his financial forecasts using the Elliott wave principle. Prechter has authored or edited 14 books, including Conquer the Crash, a New York Times bestseller. http://en.wikipedia.org/wiki/Robert_Prechter  

Robert Prechter http://www.elliottwave.com/info/prechter_bio.aspx  

Robert Prechter, an Elliott Wave technical market analyser predicts the Dow will fall to below 1,000 in a severe once in 300 years correction. The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.” http://www.nytimes.com/2010/07/04/your-money/04stra.html?_r=2  In 2002, he published “Conquer the Crash,” which predicted misery ahead. Even so, he said in 2008 that the market would soon rally sharply — then said late last year that stocks were about to fall and that the great decline would resume.

For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”

Recollect South sea  I can calculate the motions of heavenly bodies, but not the madness of people."  http://prabhakar-views.blogspot.com/2010/05/isaac-newton-lost-million-in-stock.html  Isaac Newton, Lost $2.72 Million in the Stock Market, Still the Best Scientist

DOW (10198) Charts

Baltic freight index slides to 14-month low

LONDON, July 7 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to its lowest level in over 14 months on Wednesday due to weak cargo activity. The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 5.12 percent, or 109 points, to 2,018 points in its 30th consecutive decline to remain at its lowest since May 5 last year when it fell below the key 2,000 point level.

http://www.bloomberg.com/apps/quote?ticker=BDIY:IND  Baltic index below 2000 now

Recession or Depression impact for investor

If Recession or Depression happens what would be impact for investor as these things are said after it has happened only and not before

I have seen 2Double dip recession one in 1990-1992 it was very early for me to understand the other was 2001-2003 and this was worst period to be an analyst in simple words Rs.100 stock became half and then became half and there was no stopping for price erosion, in 2002 & early 2003 if I talk about Stock market people use to hate me and then came a time from April/2003 Nifty from a low of 920 has made a high of 6357 by January/2008 in 5years stock market gave more than 5times returns and most analyst, investor and traders today have not seen worst of market what happened in 2008-2009 crash is just a blip and recovery was also fast, so pain was less comparatively.

Now Indian Government in my view has prepared itself for the worst and PM has already warned of Double Dip recession in G20 summit and the strong decision to raise fuel in my view is to save funds today for any fresh stimulus tomorrow.

Nobel Prize-winning economist Paul Krugman talks about Depression which I have never seen or my 70 years old father so I would lack experience to face this. I do not have record of market behavior to understand how market behaved in India. India with strong growth will not be impacted as much as Globe but we will not be isolated as RBI in a statement said, “India has become more vulnerable to slowdowns and financial crises abroad as foreign trade plays a bigger role in the economy -Trade represented 35% of GDP for the year to March 31, 2008, up from 21% a decade earlier”.

So investors should understand that many of analyst and investor lack experience to handle a global crisis and my simple advise is Market in long term 5-6years can also give good gains. But many so called investor are today 6months to one year where I advise then to take informed decision as we can only say the impact after it happen and not before it can happen.

The Third Depression By PAUL KRUGMAN

http://www.nytimes.com/2010/06/28/opinion/28krugman.html?_r=2  Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31. Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

Double Dip Recession http://www.investopedia.com/terms/d/doublediprecession.asp  

The causes for a double-dip recession vary but often include a slowdown in the demand for goods and services because of layoffs and spending cutbacks from the previous downturn. A double-dip (or even triple-dip) is a worst-case scenario. Fear that the economy will move back into a deeper and longer recession makes recovery even more difficult.

Prime Minister Manmohan Singh today warned that fiscal contraction across industrialized countries could result in double-dip recession. http://www.business-standard.com/india/news/fiscal-contraction-can-cause-double-dip-recession-pm/399644/  
http://graphics.thomsonreuters.com/10/GLB_CYC.swf Double Dip Monitor

US Payrolls

US Unemployment