GOLDMAN NUMBERS CHEER UP WORLD ST | Dalal Street To Mirror Trend In Asian Mkts Today

GOLDMAN NUMBERS CHEER UP WORLD ST
The Economic Times, April 19, 2009,

Dalal Street To Mirror Trend In Asian Mkts Today

Our Bureau MUMBAI

WORLD markets cheered the much-awaited rebound in the first-quarter earnings of US bank Goldman Sachs, sparking hopes that other key financial houses would follow suit. Asian investors are holding on to it like a ray of hope while money managers, though confident that the development will lower the risk aversion to emerging markets, are snooping for more clues to figure out whether it is a one-off case or not.

“More than anything, such positive events in recent weeks have changed the risk perception of overseas investors and triggered some flow of money into equities, but a bit of caution is certainly warranted,” said Kotak Asset Management’s VP-equity funds, Krishna Sanghavi.

After the Goldman results on Monday night, Asian markets such as Hong Kong and Singapore on Tuesday rose 4.5% and 1.1%, respectively, while European indices gained 1-2%. Investors in Indian equities were denied an opportunity to extend gains to Tuesday on the back of positive Goldman earnings, as markets were closed for Ambedkar Jayanti.

The US market, which was banking on possible spinoffs from the Goldman numbers and Federal Reserve chairman Ben Bernanke’s statement that the slump may be slowing down, slipped. At the time of going to press on Tuesday, stocks were trading marginally lower on an unexpected fall in retail sales and producer prices there.

Back home, market players said stocks on Wednesday would mirror the trend in other Asian markets.

GOLD DUST

On Monday,

Goldman announced earnings of $1.81 billion in Q1 as a surge in trading revenue outweighed asset writedowns

Buoyed by the earnings and a 54% gain in its stock price, it raised $5 billion in a share sale to help repay $10 billion in government rescue funds

The bank said it sold 40.65 million shares at $123 each, 5.5% less than Monday's closing price of $130.15

After AIG bailout, banks that bought credit-default swaps got $22.4 billion in collateral and $27.1 billion in payments to retire contracts

Goldman was most profitable Wall St firm before it converted to a bank in 2008 & posted its first quarterly loss since going public in 1999

If Goldman returns the money, it may pressure other banks to follow suit or risk appearing dependent on the government

The Impact

World markets cheer rebound in Q1 earnings of Goldman Sachs

After the Goldman results Monday night, Asian markets such as Hong Kong and Singapore on Tuesday rose 4.5% and 1.1%, respectively, while European indices gained roughly 1-2%.

Asian investors are holding on to it like a ray of hope

Money managers confident the development will lower the risk aversion to emerging markets, but are looking for clues to figure out if it is a one-off case