And just as it appears safe to dip a toe back in the water, down they go again
They were see-sawing all over the place yesterday. The backdrop is Russia and the Far East, but the cue comes from Wall Street. As the Dow opened, the story was that Alan Greenspan would be riding to the rescue, all the way from Jackson Hole in the Rockies where he was chairing the Fed’s yearly meeting of central bankers, academics and financial pundits.
Why anyone thought something positive might come out of this annual talking shop is a bit of a mystery, but there was a coordinated cut in interest rates around the world to deal with the 1987 crash, so why not this time round, too? Fat chance.Mr Greenspan wittered on about “disciplined monetary policies”, stable prices and sustainable growth as if oblivious to the carnage around him. BMW HAS hired 3,000 new staff in Germany this year to cope with the demand for its new 3 Series model (pictured left). Dr Helmut Panke, a BMW board member, said that the company has cancelled the normal summer holiday at its Munich plant and shortened the holiday at its Regensburg plant from two weeks to one week in an attempt to speed up production of the 3 Series saloon.
Dr Panke yesterday described the launch of the 3 Series as “the best and most successful model launch to date”, adding that sales figures for 1998 would show a huge rise compared with the previous year.
By the end of July almost 70,000 new cars had been produced in BMW’s Munich and Regensburg plants, Dr Panke said. AMP, THE AUSTRALIAN insurer and fund manager, yesterday announced that it had created a war chest of at least pounds 2.7bn for acquisitions in Britain and Australia. Analysts said that AMP’s decision to set up debt facilities worth around A$8bn heralded a purchase in Britain. They said that AMP was likely to target a mutual insurer such as NPI or Friends Provident, as most quoted companies would be too expensive. AMP already owns the UK life assurer Pearl Assurance and has a joint venture with Richard Branson’ s Virgin Group.
A spokesman said AMP could also be interested in building societies and added that its London-based team was looking at a wide range of acquisition targets. Earlier this week the Australian group launched a A$3.01bn hostile takeover bid for general insurer GIO Australia Holdings..
If the government steps back now, the Hang Seng Index is almost sure to plunge 15 per cent or more, investors said.The government now owns about 6 per cent of the entire Hong Kong market, ranking among the largest shareholders of HSBC, Hong Kong Telecommunications and other benchmark companies.Hong Kong has spent almost 13 per cent of its currency reserves – the world’s third-largest – to buy stocks and safeguard the Hong Kong currency’s 15-year-old link to the dollar. The Monetary Authority has about $84bn left.Separately, Hong Kong’s economy shrank 5 per cent in the second quarter, according to data released after the market closed, meaning Hong Kong is officially in a recession.. The purchases were the largest yet in Hong Kong’s two-week-battle, using their huge dollar cash reserves to hurt speculators betting that the market and the HK dollar will fall.
Despite the huge intervention the Hang Seng Index fell 93.23 points, or 1 per cent, to 7829.74, as the government accounted for about three- quarters of yesterday’s record HK$79bn of trading.Reports that renowned hedge funds, such as George Soros’ Quantum Fund, Julian Robertson’s Tiger Fund and Louis Bacon’s Moore Capital, were now betting against the Hong Kong dollar by taking short positions, heightened the market’s concerns.Many fund managers say they are reluctant to buy as long as the government, not investors, determines prices. THE HONG Kong government bought almost HK$58bn of shares yesterday to stem an unprecedented wave of selling threatening to send the Hang Seng Index spiralling down. Bruce Kasman, head of European research at JP Morgan, said: “The bottom to the global slowdown is nowhere in sight.”.
We were right to point to that fact.”But others were more bearish. But I think we will bounce back out of this in the near future”.Gartmore, the NatWest-owned investment manager which famously lost clients because of its withdrawal from shares to cash last year, said the crisis could be favourable because of the prospect of lower interest rates.”We have always said we felt markets were overvalued and therefore there was a high level of risk there. Investors taking a view on their investments of less than a year are advised to consider moving out of equities into alternative investments such as cash or bonds.
However, investment gurus are adamant that long-term investors should resist selling because of fears about the markets, in spite of admitting to a fear that this week’s Russian crisis could trigger a full-blown global slump.Paul Kafka, executive director at Fidelity, one of the biggest investment managers, said: “The best thing to do is to sit tight.” George Hodgson, European strategist at ABN Amro, said: “People are panicking a bit too blindly and it is getting a bit overdone.”Robert Matthews, director of investment management at Royal & SunAlliance, said that, short term, he was “concerned that we are all very vulnerable to bad news coming out. And recently 550 top managers joined in a mass medita- tion led by a Buddhist monk..
FUND MANAGERS and investment experts yesterday warned investors not to rush to sell their shares unless they urgently needed cash. Net income in the second quarter was down 17 %, and the shares fell 7% on August 6, the day of the announcement.Shell has certainly become more cost-conscious. It stunned the Peruvian government last month by cancelling a US$3bn plan for a natural gas project in Camisea. Shell and its partner Mobil had become increasingly frustrated about the proposed tariff structure to bring gas from the southern jungle to Lima.Shell has also announced plans to shut down certain activities in non- peripheral areas like Thailand, and it recently put its Kingfisher North Sea oil field up for sale. Last year it said it would obtain a 15% return on average capital employed by 2001.Its latest interim results released earlier this month, however, showed the return at 10.2%, considerably lower than in the same half yearly period of 1997. It is also expected BP efficiency can be injected into Amoco which has been a poor performer.Shell also took a media mauling after after the Brent Spar platform sinking fiasco and failed to distance itself from a barbarous regime in Nigeria, one of its important markets.Moody Stuart has set out to transform the company’s stuffy image internally and externally. Sir John has talked about annual savings of US$2bn by 2000, but analysts are convinced it could be double that amount – mainly from cutting jobs, but there is also plenty of scope for closing over-lapping facilities.