Sebi allows foreign investors to buy shares via primary markets

Representative image.Representative image.
NEW DELHI: Markets regulator Sebi has allowed foreign investors to acquire shares through primary markets in depositories and clearing corporations.

Prior to this, foreign investors could acquire shares of depositories and clearing corporations only through secondary market.

The move comes at a time when Central Depository Services Limited (CDSL) is preparing to launch its initial public offering.

As per norms, total foreign holding in depositories and clearing corporations is capped at 49 per cent.

The Securities and Exchange Board of India (Sebi) has now amended Stock Exchanges and Clearing Corporations regulations as well as Depositories and Participants norms, to drop a provision that required purchase of shares by foreign investors within 49 per cent limit only through secondary markets.

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As 2016 ends, ‘Trumponomics’ tempts investors back to equities: Poll

U.S. President-elect Donald Trump is seen speaking on a television on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Nov. 9, 2016.

U.S. President-elect Donald Trump is seen speaking on a television on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Nov. 9, 2016.

Michael Nagle | Bloomberg | Getty Images
U.S. President-elect Donald Trump is seen speaking on a television on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Nov. 9, 2016.

Global investors’ equity holdings rose to six-month highs in December on bets that U.S. President-elect Donald Trump’s promised fiscal splurge would spur higher growth and inflation, a Reuters monthly poll showed on Thursday.

Trump’s plans to cut taxes and boost spending have sent Wall Street to record highs in December as investors pile into everything from banks, to energy and materials and other infrastructure-related names.

The last Reuters asset allocation poll of 2016 surveyed 45 fund managers and chief investment officers in mainland Europe, the United States, Britain and Japan.

It showed equity holdings at 45.3 percent, the highest since June, capping an eventful year that saw a significant worldwide lurch towards populist, anti-establishment political movements but also signs of economic recovery — from the United States to emerging markets.

Possibly the biggest upset was the Nov. 8 U.S. presidential election win for tycoon Trump, whose economic and trade policies will shape next year’s investment landscape.

“Trumponomics will be a key factor to watch in 2017,” said Matteo Germano, global head of multi-asset investments at Pioneer Investments.

“If his proposed infrastructure spending, fiscal easing and tax reforms are effectively implemented, the U.S. reflation stimulus will likely strengthen GDP growth, inflation and earnings growth.”

While failure to deliver this may trigger volatility, investors reckon that will throw up opportunities for canny stock-pickers.

“Be ready to buy dips,” said Trevor Greetham, head of multi-asset at Royal London Asset Management (RLAM). He argued that the surge in populism that had dominated the political and economic landscape in 2016 would continue to exert its “erratic influence” in 2017, and he expected volatility to rise generally.

Next year about putting 'Trumponomics' in place: Pro

Next year about putting ‘Trumponomics’ in place: Pro  Tuesday, 20 Dec 2016 | 5:52 AM ET | 03:29

“This will create good opportunities to buy stocks, but it would make sense to trim exposure when things appear too good to be true,” he said.

The poll showed cash holdings dropping more than one percentage point to 5.4 percent, the lowest since February, reflecting growing confidence that the rally triggered by Trump’s election win still had legs.

As well as the energy and infrastructure-related names that may benefit directly from “Trumponomics,” poll participants also saw opportunities in commodities, beaten-down European banks, defense, technology and value stocks in 2017.

The poll was carried out from Dec. 15 to 21, immediately after the U.S. Federal Reserve’s December meeting at which it raised interest rates and signaled it could hike them three times in 2017, once more than previously expected.

Some participants worried about the potential fallout — reflected in cuts to emerging market equities and bonds — but the overall mood was positive, with U.S. equity exposure raised to 41 percent, the highest since September, and UK stocks raised to 11.3 percent, the highest since July.

Whilst investors acknowledged that equities did not look cheap, some managers argued that they still offered better value than bonds, and were likely to continue to do well as growth accelerated in 2017.

Some, such as Ryan Boothroyd, an analyst with the multi-asset team at Henderson Global Investors, argued that Japanese and euro zone equities were better ways to play U.S. domestic strength than the more crowded U.S. trades.


Investors can still find good dividend stocks in a rising rate environment

There are still plenty of dividend-yielding stocks for investors, even in a rising interest rate environment.

Investors do have to pick carefully though, as not every high-yield sector makes sense right now, Josh Duitz of Alpine Funds said on CNBC’s “Closing Bell” on Thursday.

“It depends on the sector. Certainly in consumer staples — where you have stocks trading at 20 [price-to-earnings ratios] with low growth — and utilities, I certainly would lighten up in those sectors,” Duitz said.

He explained that his firm tends to prefer companies who have dividends that are supported by growing earnings and free cash flow.

Bill Smead of Smead Capital Management agreed, saying it’s always a good call to pick companies that can grow their dividend over time. He said on “Closing Bell” that his firm looks for quality companies with good valuations because it likes to own stocks for a long time.

“We can’t do anything about what is going to keep something out of favor in the short run, but we know from history that if you buy outstanding companies when they’re discounted significantly, you have a tendency to get paid a better dividend,” Smead said.


Tossing DARTs at the market: Retail investors jump back into stocks


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Lars Baron | Getty Images

The U.S. retail investor returned to the markets with a vengeance in November.

Data compiled by Sandler O’Neill indicated that both E*Trade and Charles Schwab saw double-digit increases in daily average revenue trades (DARTs), a standard industry measurement of the level of daily trading. During the month, Schwab’s DARTs soared by 36 percent month-over-month, while Interactive Brokers (IAB) saw a 22 percent jump. The IAB data is through November 25, while Schwab’s is for the entire month.

Data released from the Investment Company Institute also indicate strong inflows into domestic stock mutual funds this month.

This type of retail trading—where individuals trade in and out of individual stocks or funds or exchange-traded funds (ETFs) through a brokerage account—is a very small part of overall trading volumes (roughly 7 percent). However, overall stock trading volumes were also much higher in November, indicating that professional investors (hedge funds, pension funds, market makers) were also much more active, according to Sandler O’Neill data.

Month over month, November cash equity volumes soared by 24 percent, and are up 16 percent year-over-year.

The derivatives markets—more typically a professional’s market—also had a great month. In addition, the Chicago Mercantile Exchange (CME) saw record volume in November.


Fears over US election spur investors’ dash for cash

A man casts his electronic ballot at a polling station in Washington, D.C., on November 6, 2012. Fears that cybercriminals will try to interfere in the upcoming election have increased due to recent hacks of the DNC.

Getty Images
A man casts his electronic ballot at a polling station in Washington, D.C., on November 6, 2012. Fears that cybercriminals will try to interfere in the upcoming election have increased due to recent hacks of the DNC.

Rising anxiety among global investors propelled the swiftest weekly dash into cash since 2013 as money managers dumped bonds and drove the longest sell-off in the benchmark S&P 500 since the financial crisis.

The index has shed 2.9 per cent over the past eight trading days in its longest string of declines since 2008 as the US presidential race between Hillary Clinton and Donald Trump has tightened and fuelled volatility. Money market funds, a proxy for cash, absorbed more than $36bn in the week to November 2, according to fund flows tracked by EPFR.

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Selling was concentrated in low-rated corporate credit strategies and US stocks, with the latter seeing $3.5bn of outflows. So-called high-yield bond funds suffered redemptions of $4.1bn over the past week, the biggest withdrawal so far this year. Redemptions from US stock funds have passed $92bn this year.

“Part of what we are seeing is the manifestation of uncertainty playing out in markets,” said Jim Sarni, managing principal at Payden & Rygel Investment Management. “The assets people perceive as being the riskiest are seeing people pull back … I look at these near-term outflows and think it is people taking chips off the table to keep powder dry in case opportunities arise following the election.”

The scrambling of positioning has pushed the Vix index — a measure of expected equity volatility known as Wall Street’s fear gauge — to its highest level since the immediate aftermath of the UK’s Brexit vote. Other gauges of skittishness — Bank of America Merrill Lynch’s index of implied Treasury volatility and the implied volatility in the euro-dollar currency pair — hit three-and-a-half-month highs on Thursday.

Haven instruments have benefited from the volatility, with US Treasury funds gaining $2.3bn over the past five trading days — the largest inflow since the first week of July. Gold funds received $205m of fresh cash in the past week, a period that saw the metal rise to its highest level in a month.

Money, cash, USD, handling cash

Susana Gonzalez | Bloomberg | Getty Images

While the tightening in the US election has sparked short-term concerns, investors have also been troubled by potential threats on the horizon, said Dan Suzuki, an investment strategist at Bank of America Merrill Lynch. “We think there’s a lot to be concerned about,” he said.

Hopes that members of oil-producing cartel Opec, along with other major crude exporters, will agree to cut output at a meeting scheduled for later this month have cooled. The price of US crude oil, which slid 1.5 per cent on Thursday, has fallen 14 per cent after touching a high of $51.93 in late October.

Other risky assets have also been under pressure in a sign that investors are reducing their bets before the election. The risk premium investors demand to hold the debt of low-rated US companies rose to 5.15 per cent on Thursday, from as low as 4.6 per cent two weeks ago, according to BofA data.

Investors also point to rising inflation expectations pushing up bond yields and the potential for a sharp rise, or “taper tantrum”, should central banks begin to rein in accommodative monetary policies.

“Whether it is now or whether it is next year, the taper tantrum risk


Snapchat investors are buying into a camera company

Snapchat Spectacles

Source: Snapchat

Snapchat has made all its money to date from digital advertising. But as investors prepare for an upcoming IPO, they have to consider what the parent company Snap will look like in a very different business.

There’s not much subtlety to it

“Snap Inc. is a camera company,” says the front page of its website. “We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.”

Last month, Snap introduced Spectacles, sunglasses that allow users to take 10-second videos and quickly share them with friends. They’re expected to start selling within months for $130.

Based just on its core business of delivering immersive ads inside its social media app, Snap’s revenue is predicted to jump almost fivefold by 2018 to $1.76 billion, according to eMarketer. While Snap still appears to be burning quite a bit of cash, growth numbers like that from a software-based company suggests enormous future profitability.

Facebook, after losing money in 2007 and 2008, turned profitable in 2009 and two years later generated $668 million in net income on $3.7 billion in revenue.

Snapchat changes name is Snap

Snapchat changes name to Snap  Monday, 26 Sep 2016 | 11:13 AM ET | 04:08

But Facebook is almost purely an advertising company and didn’t begin experimenting with hardware until the 2014 acquisition of virtual reality headset maker Oculus.

Snap is already asking investors to think about the company in a very different way, and they won’t have much sales data on Spectacles to help guide them. Snap is expected to file a confidential IPO prospectus by the end of this year and has chosen Morgan Stanley and Goldman Sachs to lead the offering, according to sources familiar with the matter, who asked not to be named because the details are still private.

Bloomberg previously reported on the lead bankers and The Wall Street Journal reported last week that Snap could debut by March in an offering that values the company at more than $25 billion. Snap didn’t immediately respond to a request for comment.

At that kind of price, Snap would be valued at about 27 times estimated 2017 revenue. Facebook is currently worth 16.7 times sales, and had a price-to-sales ratio of 26.5 at its valuation peak, according to FactSet.Twitter trades at 5 times revenue, and Alphabet at close to 7 times.

As a device company, Apple commands a multiple of just 2.9 times revenue, which is significantly higher than how investors value Fitbitand GoPro.

The biggest question for investors: Can Snap succeed in hardware? Materials, distribution, sales and marketing all require significant new investments and, more importantly, a change in strategy. Morphing from a digital ad company to a hardware company carries risks for investors, since the market tends to pay a premium for software companies.

Google has struggled, notably with Google Glass, and it’s still very early days on the market for Facebook’s Oculus. Microsoft is a rare example of a company that’s successfully jumped from software to hardware, but it was a quarter century from the time Bill Gates founded Microsoft until it unveiled the Xbox game console. And let’s not forget how miserably Microsoft failed with the Zune music player and its perpetual struggle with mobile phones.

From searching on LinkedIn, here’s what we know about the Spectacles team. The product has at least two internal recruiters in Los Angeles and one in New York and an industrial designer from the eyewear industry. Additionally, there’s a technical program manager who came from Microsoft, an engineer from Apple and a software engineer who recently graduated from the Massachusetts Institute of Technology.

Of the 120 or so open roles Snap lists on recruiting site Greenhouse, eight are specifically targeted at helping develop a


Investors moving billions into real estate ahead of a big market change

Real estate stocks are getting a place of their own in the market this week, and investors are taking notice.

As of the close of trading Friday, the industry will become its own sector in the S&P 500, bringing the broad market index up to 11 divisions. The move primarily affects real estate investment trusts (REITs), moving 28 issues with nearly $600 billion in market cap out of the financial sector and into the new real estate heading.

The decision came primarily because officials at S&P Dow Jones Indices believe the industry has become large enough that it should be split from the broader financials that include commercial and investment banks, insurers, brokerages and exchanges.

Practically speaking, there’s an important impact on investors.

Portfolios that track the S&P 500 will have to be readjusted to accommodate the new sector, which is expected to account for just over 3 percent of the total index. Financials, which currently account for about 13.1 percent of the S&P 500, likely will drop below 12 percent.

That means investors looking to achieve balance in their portfolios will have to adjust their allocations accordingly.

Ahead of the move, investors have been piling money into real estate funds. In fact, the sector has generated the largest inflows to exchange-traded funds this year of any of its peers, pulling in $1.08 billion in August alone and $7.6 billion for 2016, according to figures released Thursday by State Street Global Advisors.

Among individual funds, the biggest gainer by far has been the $35.7 billion Vanguard REIT Index Fund, which has pulled in $4.57 billion this year. The $2.87 billion Schwab U.S. REIT ETF has collected $706.2 million, while the $4.3 billion iShares Cohen & Steers REIT fund has had inflows of $355.2 million. (All numbers according to FactSet.)

Investors in the sector have been rewarded. The Vanguard fund is up 12.6 percent year to date, nearly doubling the 6.7 percent that the S&P 500 has returned.

S&P chose Friday to introduce the real estate sector because the day also marks a “triple witching” in the market. The term refers to the expiration of contracts for stock index options, index futures and options during the final hour of trading.

That will give market participants time to reallocate on a day where conditions are conducive to making changes.

“It’s a day with a huge amount of liquidity in the market, trading is faster and more efficient than usual, and it’s a good day for people to rebalance their portfolios,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “There will be some people who will be rebalancing their portfolios to make sure their weight in real estate is the right weight.”

The sector is part of the Global Industry Classification Standard implemented in 1999 to help investors make sure they could see what was moving the market and make decisions accordingly.


Big bank investors need to keep an eye on this metric, analyst says

A magnifying glass is held over a 50 subject one dollar note sheet after being printed by an intaglio printing press

With second-quarter earnings season on the horizon for major U.S. banks, investors should keep an eye on fixed income trading operations, Jeff Harte, a Sandler O’Neill analyst, said Monday.

“The credit markets have been a lot more favorable and that is really what hurt first quarter. I mean, we are probably a little ahead of consensus for the quarter, but if there is any potential there I think there is potential for upside surprises,” Harte told CNBC’s “Squawk on the Street.”

Analysts who track U.S. banks say the Fed’s likely rate hike delay will come back to bite Wall Street. The flattened yield curve means banks that do mortgage and consumer lending will see lower returns for longer than expected.

Harte’s firm also cut its 2017 earnings estimates for Bank of Americaand Citigroup by 1 to 2 percent.

“Bank of America was really accounting based … And for Citigroup it was more consistent with management’s kind of current-quarter guidance on consumer revenue,” he said.

The S&P 500 touched a record intraday high Monday. Both S&P Bank and S&P Regional Banking shares rose more than 1 percent Monday.

“Second quarter got a lot better and I think the outlook is still pretty good for investment banking, especially relative to how the stocks have traded,” Harte said.

Still, market watchers have come down too harshly on big banks, Harte said.

“The pessimism on the revenue off of universal banks, specifically for 2016, is a little overdone,” he said.

Investors have a change of heart on debt

Pile of money on scale

It increasingly looks like the best of times for corporate borrowers but the worst of times for private equity firms.

A Dickensian tale is playing out in bond markets, where investment-grade corporate bond issuance took off in February but high-yield issuances remain low and are regarded as practically toxic in 2016.

“So far in 2016, global junk bond volume and activity is the lowest since 2009,” a report from finance industry data tracking firm Dealogic said.

It’s part of a creeping trend that hasn’t gone unnoticed in the private equity business. Debt financing for private equity deals slowed in the second half of last year, as credit spreads increased, a Bain & Co. report said. After four consecutive years of increasing global debt volume for leveraged buyouts, the cash available to private equity firms fell 13 percent last year, from $153 billion to $133 billion, the report shows.

At the same time, private equity firms invested more cash, in part incentivized to increased spending with the expectation of rising interest rates. The $282 billion in private equity investments were more than at any point since the financial crisis, Bain reported.

And that means private equity firms big and small have to put more cash on the table.

Consider private equity titan Apollo Global Management’s acquisition of ADT. Part of Apollo’s deal to buy out the home security company included a $750 million investment from Koch Equity Development, the investing arm of Koch Industries. The private equity firm spent $4.5 billion in equity to support the $6.93 billion deal, in part because of the challenges it might have faced had it sought to refinance more than $3.5 billion in debt the company carried.

Read MoreApollo Global to buy security services provider ADT Corp.

It’s not just bad news for private equity — which would prefer to have more cash on hand to do more deals later — it’s also bad news for big banks, which make more off high-yield issuances than they do investment-grade financing.

But corporate borrowers are encountering a much friendlier bond market. It’s just that lenders aren’t necessarily expecting investment-grade rated companies to necessarily conduct any mergers and acquisitions once they’ve raised more cash.

The $155 billion issued in investment-grade bonds issued so far in 2016 is more than any other year-to-date tally dating back to 1995, according to Dealogic data.

A Tuesday report from Bank of America Merrill Lynch suggests the positive trend for corporate borrowers will continue.

“We expect the busy supply volumes to continue into March as well, for total monthly supply between $120 [billion] and $140 [billion],” analysts wrote.

[“source -livemint”]

Home Depot builds investors a buyback dream home

Home Depot employee helps a customer as she shops in the paint department at the store in Miami.

Getty Images
Home Depot employee helps a customer as she shops in the paint department at the store in Miami.

Home Depot might be the quintessential American stock of this market cycle, exemplifying many of the crucial themes that investors have come to rely on.

The home improvement retailer in the past several years has curtailed its ambitions, refused to expand the chain, defended high profit margins, tallied more sales from its core domestic customers and bought back an enormous portion of its shares.

It’s all worked extremely well for Home Depot and its shareholders, who have enjoyed a 240 percent surge in the stock price over the past five years, versus approximately 45 percent for the S&P 500 and 72 percent for the SPDR S&P Retail sector ETF. Tuesday’s fourth-quarter earnings report showed all these trends clicking yet again with brisk comparable-store sales growth of 7.1 percent and a per-share earnings increase of 11.4 percent.

Yet in some respects, Home Depot is an exceptional case, demonstrating how rare it is for a company to combine generous buybacks, financial discipline and strong top-line growth.
[“source -cncb”]