Three days ago regulators issued a statement saying they would not ban short-selling. They repeated that statement earlier today, then reversed course. In France, the short-selling ban includes a group of select bank and financial institutions. Here is the AMF News Release. The Chairman of the Autorité des marchés financiers (AMF), acting in accordance with Article L. 421-16 II of the Monetary and Financial Code, has decided to place a ban on creating any net short position or increasing any existing net short position, including intraday, by any person established or residing in France or in another country, in the equity shares or securities giving access to the capital of the following credit institutions and insurance companies: April Group Axa BNP Paribas CIC CNP Assurances Crédit Agricole Euler Hermès Natixis Paris Ré Scor Société Générale This decision shall enter into force as soon as it is published on this AMF website as from 22.45 today and shall remain in effect for a period of fifteen days. It may be extended beyond that date pursuant to the conditions provided in the aforementioned Article L. 421-16 II. This decision does not apply to financial intermediaries acting as market makers or liquidity providers when they are operating under a contract with the relevant market undertaking or with the issuer concerned, or when acting as counterparty for block trades in equities. The AMF will publish a FAQ to deal with the technical questions raised by this decision. Spain Bans Shorting and Derivatives Based Shorting FT Alphaville, in Will the short-selling ban come up short? notes the Spain ban includes artificial shorting via derivatives. Here's the Spanish statement (translated using Google Translate). Note the specific references to derivatives: .... The ban will remain for a period of 15 days from the date, may be extended if deemed neces.
Leading Wall Street Research Firm Values India Unit At $15.8 Billion
Mumbai: The Indian unit of Vodafone Group Plc, which is preparing for an initial public offering (IPO), has been valued up to $15.8 billion by international brokerages in recent weeks. This could fetch billionaire investor Ajay Piramal's 5.5% stake around $870 million giving him 36% return within 24 months.
The recent reports from global analysts estimated Vodafone's valuation between $14-16 billion. On Thursday, Piramal said he expected a reasonable 17-20-% return pegging it in sync with the more conservative estimates in London's financial district. He acquired minority stake for $640 million valuing Vodafone's local arm at $11.6 billion one day earlier.
Piramal, 57, may recoup a maximum of $900 million if he sells the stake back to Vodafone in the event of IPO being shelved, said a source who did not wish to be named. At this price, Vodafone India's valuation will be around $16.3 billion.
Piramal's entry came weeks after Citigroup analysts estimated valuation of Vodafone Essar—which is being renamed after Ruias of Essar exited—at $14.2 billion. In June, Bernstein Research, a pedigree Wall Street firm, said the Indian operations of the telecom giant could fetch $15.8 billion. The most conservative figure tumbled out of BNP Paribas which pegged the valuation at $13.9 billion, while that of Deutsche Bank analysts was on the higher side, at $15.1 billion. A Vodafone Group Plc spokesperson declined to comment on valuations.
The troubles plaguing India's telecom sector—from hyper competitive tariffs to regulatory uncertainty—saw Vodafone India's equity valuation dropping from $19 billion when the global giant acquired Hutchison's majority interest four years ago. It fell to $16.5 billion as Vodafone bought out erstwhile partner Essar's 33% interest earlier this year. So Vodafone had suffered 38% decline in equity value when Piramal entered India's second largest mobile telephony company (by revenue) this week.
This appears to be a steep fall when compared to Vodafone's listed local peers—Bharti Airtel and Idea Cellular-—both of which saw market capitalization drop only in single digits during the same time frame. Bharti Airtel's current m-cap of $33 billion was about 4% lower than what it had in 2007. The drop was closer to 9% for Idea Cellular. "Bharti has much bigger revenue, faster growth and probably a bigger brand from the India perspective," said Jagannathan Thunuguntla, head of research, SMC Global.
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NICOLAS SARKOZY, France's president, rushed back from his holiday on August 10th to defend the country from financial attack. In a day of rumour, panic and denials, shares in Société Générale, the country's third-biggest bank, fell by almost a fifth before recovering some ground and closing down 15%.
The immediate cause for worry was a question-mark over whether France will keep its triple-A rating after Standard & Poor's cut America's on August 5th. France's debt stood at 82% of GDP last year, from 64% in 2007. This is one of the highest of any AAA-rated country. That, investors fear, means it could be the next target for a downgrade, especially if already anaemic economic growth falters further. The extra yield required by investors to hold French debt instead of German Bunds jumped to almost triple the average level of 2010 while the cost of insuring against a default by France reached new highs during the week.
After an emergency meeting of ministers, Mr Sarkozy pledged to fulfil recent promises on debt reduction, regardless of whether economic growth slows. More reassuringly, Moody's, S&P and Fitch, the three major credit-rating agencies, all said France's rating was stable.
As Société Générale's shares tumbled, the cost of insuring its debt against default soared by 55 basis points, suggesting it will face a significant increase in borrowing costs. Shares of other French banks were also hit. Those in BNP Paribas, the euro zone's biggest bank, fell by 9.5%; Crédit Agricole's fell by 12%.
"French banks have a bit of everything—exposure to Greece and to Italy—and investors are extremely worried about their funding costs," says one analyst. Some investors feared that Mr Sarkozy's meeting was held to address a sudden crisis at Société Générale. The Elysée palace denied that any bank had been present at the meeting and Société Générale denied "all market rumours".
The ultimate fear is that if France's rating was cut then the European Financial St
Financial Turmoil Evokes Comparison to 2008 Crisis By NELSON D. SCHWARTZ It feels eerily familiar: Stocks are plummeting. The economy is slowing. Politicians are scrambling to find solutions but are mired in disagreement.
Many Americans are wondering whether they are in for a repeat of the financial crisis of 2008.
The answer is a matter of fierce debate among economists and market experts. Many say the risks are lower today — at least in terms of an immediate crisis — because the financial system over all is healthier and there are fewer hidden problems. But the experts add that there are reasons to worry, and they do not rule out a quick downward spiral if politicians in the United States and in Europe cannot calm investors by addressing fundamental financial threats.
The core problem, as it was three years ago, is too much debt that borrowers are having a hard time repaying — but this time it is government debt rather than consumer debt.
"So far it's not as bad as 2008, but it could get much worse because the sovereign debt concerns are much more global than the subprime mortgage risk of 2008," said Darrell Duffie, a professor of finance at Stanford and an expert on the banking system.
A growing lack of confidence is perhaps the most troubling similarity to 2008 and the biggest worry. "There's a level of fear out there that is a little similar," said Michael Hanson, a senior economist with Bank of America Merrill Lynch. "It's not just the fundamentals. It's the fear of the unknown."
Most of the attention so far has been focused on volatility in stocks, with investors spooked by three heart-stopping declines in the last five trading days — including Wednesday's 4.6 percent drop in the Dow Jones industrial average.
But the bigger concern of many financiers and government officials was signs of stress on Wednesday in European credit markets, which are essential to financing the day-to-day operations of banks and companies there.
Unitech-Real Estate Titanic
A closer look at Unitech's FY11 Annual Report under-scores the depths which this once Real Estate darling is now plumbing.
-Debtor situation deterioration is a concern with debtors rising 69 per cent yoy to Rs 21.5 bn. Pile-up has happened in Greater Noida properties and certian Commercial projects sold before FY09.
-Unitech's non property revenues declined 22 per cent yoy in FY11 to Rs 2.3 bn, as construction business declined. Key disappointment was a slow 12 per cent yoy rise in Realty Revenues to Rs 29.5 bn.
-Unitech's execution ramp-up was slower than expected here. Deliveries declined 38 per cent yoy to 4.3 mn sq feet.
-Unitech resorted to exotic accounting to show a lower working capital by reclassifying FY10's cash balance as an investment and writing off half of that during FY11.
-The cash balances of Rs 2.3 bn were shown as yield enhancement certificates and Rs 1.14 bn has been written off in FY11 which equals 14 per cent of PBT. Possibility of another Rs 1.16 bn to be written off in FY12 exists.
-Surprise surprise, the Bank Term loans have been replaced by Public Deposits which rose 4X FY10 numbers, worse the deposits carry the same coupon of 14 per cent just as bank loans did.
-So what was the Rs 6.8 bn raised through equity warrants utilised for? Another Rs 8 bn has been spent on land acquisitions which led the corporate to report a negative cash flow of Rs 6.3 bn against Rs 17 bn in FY10.
-Even though the markets have debunked the land bank theory the local realtors refuse to see the sharp change in market perceptions.
-This explains why a Rs 35000 stock drops to Rs 29 in a matter of 5 years, and there is more downside.
-EPS will work out to Rs 2.6 in FY12 and Rs 3.2 in FY13, tight conditions may even push the stock to sub Rs 20 levels.
