Indian shares on US bourses defy global gloom, gain USD 7 bn

Even as the Indian markets took a beating this week, their counterparts listed on American bourses gained nearly seven billion dollars, defying the worldwide market gloom.


Led by IT major Wipro and private sector lender ICICI Bank, the 16 Indian companies trading as American Depository Receipts coughed up about 6.86 billion dollars for the week ending 17th October.



Wipro witnessed a gain of 2.44 billion dollars while ICICI Bank scrip, which had taken a severe beating in recent times in the domestic market, rose as much as 1.25 billion dollars.



Another leading private sector lender HDFC Bank's market capitalisation rose 494 million dollars.



Swinging between the extremes, global markets including the American bourses had seen high volatility, with Japan's Nikkei touching a 20-year low.



Further, the US benchmark Dow Jones Industrial Average witnessed one of the worst trading sessions in decades, before the closing the week in the green.



However, Indian benchmark index, Sensex plunged below the psychological 10,000 level on Friday last week, its lowest level in over two-years, with major bluechips taking a heavy beating.



In contrast, the 16 Indian shares listed on Nasdaq and the New York Stock Exchange collectively saw a value increase of over 11.54 billion dollars on 13th October (Monday) against the cumulative loss of 19.45 billion dollars they suffered during the week ending 10th October.



Other major gainers are IT bellwether Infosys which posted a jump of 1.17 billion dollars in market capitalisation and software exporter Satyam Computer Services gained 664 million dollars.



ICICI had recently announced mark-to-market losses to the tune of 93 million dollars, owing to its exposure in instruments of troubled financial institutions including the bankrupt Lehman Brothers.



Interestingly, in the domestic bourse, the scrip had touched an all-time high of Rs 1,465 in January this year before tumbling to a two-year low of Rs 364.



BPO firms - ExlService Holdings and Genpact; internet companies - Sify Technologies and Rediff; telecom entity Tata Communication, pharma major Dr Reddy's and copper producer Sterlite Industries, also gained during the week.



However, outsourcing firm WNS, IT company Patni Computer Systems, telecom entity Mahanagar Telephone Nigam Ltd and auto maker Tata Motors saw marginal declines in their market capitalisation.

S Korea guarantees foreign loans

South Korea's government has agreed to guarantee foreign-currency borrowing by the country's banks to help stabilise financial markets.

The finance ministry, the central bank and the financial services commission said about $100bn of borrowing would be covered by the package.

The government will also provide $30bn of liquidity to banks, and there will be more aid to small businesses.

South Korea's economy is the third largest in Asia and 13th in the world.

It enjoys major export success in a number of manufacturing industries, but especially shipbuilding, car-making, and electronics.

However, the country has appeared particularly vulnerable to the global credit crisis because its banks lacked sufficient dollars to service maturing foreign debt.

Falling currency

In a statement, the government said it would guarantee for three years all external debt taken on by South Korean banks before 30 June 2009 in order "to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market".

A further $750m will be injected into the Industrial Bank of Korea, so it can expand lending to small businesses.

The shortage of dollars is having a dramatic effect on the country's exchange rate, making it more difficult for businesses and individuals to get access to credit, says the BBC's John Sudworth in Seoul.

The South Korean won has fallen by almost 30% against the dollar this year making it Asia's worst performing major currency.

The government said that despite the crisis, the economy and the financial sector were "sound", and that its foreign exchange reserves were "sufficient".

The US, the EU and other governments have also announced multi-billion dollar packages aimed at stabilising markets.

French bank admits trading loss

French Finance Minister Christine Lagarde has called for a special audit of all French banks after Caisse d'Epargne admitted a big trading loss.

The mutual savings bank said it lost 600m euros ($807m; £466m) in a derivatives trading incident last week.

In a statement, the bank said that the losses would not threaten its financial viability or affect its customers.

It blamed the "extreme volatility" in the markets in the week of 6 October for the incident.

A Caisse d'Epargne spokesman said the loss was caused by a "small team", which had been sanctioned for exceeding its trading risk limit.

The bank said that it had sacked one of the assistants to finance director Julien Carmona.

Merger plans

Caisse d'Epargne said this latest incident would not affect its plans, announced on 8 October, to merge with another mutual bank, Banque Populaire.

The merger would create one of France's biggest banks with 480bn euros of deposits and more than six million customers.

The two banks together are the majority shareholders in the investment bank Natixis, which has been among the worst-hit in France by the US sub-prime mortgage crisis.

Seperately, rumours of a big derivatives loss forced Societe Generale and Dexia to issue denials earlier in the week.

Leaders to rethink global finance

President George W Bush has invited world leaders to gather in the US by the end of the year to discuss reform of the global financial system.

The summit would be the first of a series announced after talks between Mr Bush, French President Nicolas Sarkozy and EU Commission chief Manuel Barroso.

But the agenda is unclear and differences are already emerging.

Mr Bush said any plan must not undermine free markets. Mr Sarkozy said "hateful practices" must be abandoned.

Before he arrived at Camp David, the US presidential retreat in the state of Maryland, the French leader warned the world could not "continue to run the economy of the 21st Century with instruments of the economy of the 20th Century".

Calls for action

After the meeting, Mr Bush said: "It is essential that we work together because we are in this crisis together."

He went on to invite world leaders to an economic summit after the US election in November, to discuss responses to the current financial crisis.

"Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again," he added.

But Mr Bush said any plan to rethink financial mechanisms should "preserve the foundations of democratic capitalism" and include "a commitment to free markets, free enterprise and free trade".

'New order'

Mr Sarkozy said the crisis could offer a "great opportunity" to build the capitalism of the future and leave behind the "hateful practices" of the past.

"We cannot continue along the same lines because the same problems will trigger the same disasters," he warned.

Mr Sarkozy said the hedge funds, tax havens and financial institutions operating without supervision should all be re-thought.

"This is no longer acceptable," he added. "This sort of capitalism is a betrayal of the sort of capitalism we believe in."

European Commission President Manuel Barroso, who also took part in the talks, said: "We need a new global financial order."

Details of the summits are still to be worked out, but White House spokesman Tony Fratto said the first was likely to be held in November.

He added that Mr Sarkozy had recommended New York as a location. UN Secretary General Ban Ki-moon has proposed using the organisation's headquarters there as a venue.

That summit would seek to "review progress being made to address the current crisis and to seek agreement on principles of reform needed to avoid a repetition," the leaders said in their statement.

"Later summits would be designed to implement agreement on specific steps to be taken to meet those principles," it added. Other world leaders are to be consulted over the plan.

Correspondents say such meetings would echo the Bretton Woods conference of 44 nations after World War II, which established many of the institutions and monetary systems that are now under threat