15 Jan 2012: Merkel urges for immediate action

INDICES POINTS CHANGE
FTSE 100 5637 Down 46bp
S&P 500 1289 Down 49bp
NIFTY 50 India 4866 Up 72bp

Major Stories

  • Merkel urges for immediate action
    • Angela Merkel calls for swift action to implement the tougher fiscal rules in the light of the recent S&P downgrades
    • The Euro 500bn Euro Stability Mechanism is set to replace the old rescue fund around mid-year, but now it has been suggested that this needs to be implemented sooner
  •  Investors chase municipal bonds
    • US state and municipal bonds are becoming increasingly popular with investors owing to high returns
    • US Mutual Funds and ETFs had inflows of $1.1bn this week
    • These municipal bonds also offer tax breaks, which had prompted wealthy individuals to move towards investing in these; this high demand has led to yields falling down to 1.71% (AAA- 10 year), lowest levels since 1981

Section from India (Compiled by Arun K Sam)

  • Indian companies look to China for debt: Reliance Communications is in the early stages of talks with state-owned China Development Bank for a syndicated loan of $925 million, the same size as the convertible bond, the first source said. China Development Bank arranged loans worth $1.93 billion for Reliance Communications last March. Its stock rose 1.3 per cent on Wednesday to close at 82.10 rupees, far below the 654-rupee conversion price on the convertible bonds, which were issued in February 2007 when markets were booming. Shares in the company, which has reported eight straight falls in quarterly profit, were trading around 410 rupees when the company issued the bonds 2007.
  • 2012 for Indian Companies: More than two dozen Indian companies in the BSE-500 index face redemptions on foreign currency convertible bonds worth a combined 330 billion rupees by the end of March 2013, according to research by Indian brokerage Edelweiss. A global dollar funding crunch, as western banks conserve capital and the rupee’s 16 per cent fall in 2011, make for a challenging refinancing environment for Indian companies. High domestic interest rates after 13 policy rate increases since March 2010 make local finance less attractive.
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