29 Dec 2011: Successful Italian bond auction lifts mood in Eurozone

INDICES POINTS CHANGE
FTSE 100 5521 Up 25bp
S&P 500 1250 Down 125bp
NIFTY 50 India 4675 Down 65bp

Major Stories

  • Italian bond auction ‘successful’
    • Italy completes its Euro 9bn auction of six-month bonds, sold at an average yield of 3.25%
    • This brought some relief to Italian bond market, which is the 3rd largest in the world, from last month, when bond yields were as high is 6.5%
    • Thursday will see bond auctions of longer time-periods in Italy which will be a big confidence test in the Eurozone
    • ECB’s recent 3-year loans to several banks might see the banks borrow at low rates from ECB and invest into these higher yielding bonds (a carry-trade), but of course, banks would first use that loan money for survival
  • China proves to be the best IPO market; better than the US
    • Despite the steep share price fall on mainland China, and Honk-Kong stock exchange, China has outshone US to be the top venue for initial public offerings
    • $73bn were raised in Shanghai, Shenzhen and HK this year, which is more than twice of the money raised at NYSE and NASDAQ this year
    • Although, deal-flow has been much weaker in China and HK this year, and indices are down, this had belied the IPO industry, indicating a shift in the IPO activity from US to China
    • This has mainly come as a result of low commissions in China, which are 2.2% as compared to 3.5% a decade ago
  • BNP Paribas to step back from Russian-arm of its business
    • BNP plans an exit from its independent retail-banking/consumer credit business from Russia
    • The bank will still offer consumer credit and mortgages, but this will be through its joint venture with Sberbank, Russia’s biggest bank in terms of assets
    • This joint venture agreement sees Sberbank with a 70% stake, and BNP with a 30% stake, with BNP still having the veto rights over key posts such as CEO, Risk Officers etc.
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