User:Reverend Lee/NASDAQ

= EMERGING MARKETS REPORT: = Global Markets Tumble As China Fear Spills Over

By Polya Lesova

NEW YORK (Dow Jones) - Global markets tumbled on Tuesday, tracking the biggest fall on the Chinese stock market in a decade, with emerging markets taking the brunt of the hit on fears of another global sell-off.

The Dow Jones Industrial Average (DJI) fell more than 500 points at its worst level on Tuesday, dropping to its lowest point since after the terror attacks in September, 2001.

European equities also posted declines. The U.K.'s FTSE 100 indexlost 2.3% to 6,288.20, the German DAX Xetra 30 indexfell 2.3% at 6,867.34 and the French CAC- 40 indexdeclined 2.6% at 5,614.4.

The major emerging markets, including the other BRIC heavyweights -- Russia, India, and Brazil -- were all sharply lower. Russia's RTS ended down 3.3% and India's Bombay Sensex fell 1.3%. Brazil's Bovespa was last down 6.9% and Argentina's MerVal index plunged 7.5%.

In Istanbul, the IMKB-100 index closed down 4.5%.

The declines in markets around the world were triggered by a major slump on the Chinese stock market overnight.

The Shanghai Composite Index, which tracks shares listed on the larger of China's two stock exchanges, tumbled 8.8% to 2,771.79. The decline ranks as its biggest single-day drop since the benchmark plunged 9.4% on Feb. 18, 1997, after the death of reformist Communist Party elder Deng Xiaoping. The index had hit a record on Monday. It gained a staggering 130% in 2006, making it the top performer among major global indexes.

An overdue correction
Analysts said that a short-term market correction has been due for a while in China as well as other emerging markets given the spectacular gains in recent months. While the current adjustment is significant, it will not have a long- term, negative impact on global markets.

"I don't think there's any particularly unique catalyst for this other than the emerging markets rally has gone on for so long that it's exceeded a lot of fund managers' comfort level for some time now," said Cameron Brandt, global markets analyst at Emerging Portfolio Fund Research.

"The Chinese market might grind a bit lower, but it won't create a general emerging markets contagion," Brandt said. "Over the past three years, people are much more used to investing in emerging markets and they're much more comfortable with taking the markets, as individual markets rather than lumping them all together."

David Riedel, president of Riedel Research Group, said a 10% to 15% correction would be a healthy adjustment for emerging markets.

"I'm not overly concerned, with one caveat. The thing we really need to watch out for is inflation and interest rate hikes."

Riedel advised caution in the short term: "This is a significant adjustment in the emerging markets and I would wait to jump in. Investing today would be like trying to catch a falling knife."

The market downturn in China is primarily a local event, said Bob Doll, global chief investment officer of equities at BlackRock.

Still, "investors have enjoyed many months of gains in stock markets and global equity markets may be due for some sort of near-term pullback, consolidation or correction," Doll said. "We believe the China downturn, combined with some high-profile problems in the sub-par mortgage market, may turn out to be the catalyst for such an event." Doll's overall long-term view of global equities remains positive.

China intervention fears
Tuesday's decline on the Chinese market was triggered by fears that the government would intervene to slow down the market.

In addition to the fall of the Shanghai Composite Index, the Shenzhen Composite, a gauge of shares on China's smaller exchange, shed 8.5% to 709.81. The benchmarks in Hong Kong, Singapore, and Malaysia also posted sharp declines.

China's "A" share market -- restricted mainly to Chinese nationals -- has run up almost 140% in the past 12 months, soaring 46% in the fourth-quarter of 2006 alone.

"The market has risen so rapidly in the last year that there's a growing sense of concern that policy makers will tighten control of the markets," said Sijin Cheng, an analyst at the Eurasia Group.

On Tuesday, the second day after the end of the Chinese New Year holiday, " concerns rose to a point where people started taking profits in anticipation of greater controls," Cheng said.

"Most of the larger-cap stocks were hit," she said. "People were taking profits left and right."

Fears of a Chinese stock market bubble reached a boiling point on Jan. 31 when a senior Chinese legislator warned that the market may be overheating. The Shanghai Composite closed down 4.9% that day.

"There is a bubble going on, investors should be concerned about the risks...But in every bull market people will invest relatively irrationally," said Cheng Siwei, vice-chairman of the standing committee of the National People's Congress, in an interview with the Financial Times in January.

Marc Chandler, a currency analyst at Brown Brothers Harriman, said that the proximate cause of Tuesday's fall on the Chinese stock market was the government's crackdown on unauthorized trading and initial public offerings.

"There is also concern that more measures both to address fears of a bubble in the stock market and the too-strong economy may emerge from the National People's Congress meeting in early March," he said.

Tightening the screws
Lan Xue, a Citigroup analyst, said that the domestic China A market was hit by a number of rumors, including one suggesting that the chairman of the China Securities Regulatory Commission (CSRC), China's securities market watchdog, is leaving his post.

"True or not, we believe this bears little relevance to the market, as the position will be held by another government official if it is true," Xue said in a Tuesday research note. "Ultimate decision power for China's stock market does not lie with the CSRC but rather levels much higher."

There was also talk of a potential rate hike, a subject of speculation since mid-January. The Central Bank of the People's Republic of China (PBOC) raised the reserve ratio last week and January inflation came in below market estimates.

Comments by central bank Governor Zhou Xiaochuan increased rate concerns.

"If inflationary pressure increases, the central bank should consider monetary policy action, including interest rate policy," the Xinhua Finance news service reported Zhou as saying in the interview published in the Hong Kong Commercial Daily. "The central bank must take action to curb inflation and maintain a stable yuan. This is our responsibility."

Rate move unlikely
Xue doesn't believe that a near-term interest rate hike is likely. The impact of such a hike would not be significant, because "it will not bring China back to a positive real interest rate environment," Xue said.

Traders said there was also talk the government may impose a capital gain tax, another move Xue believes is unlikely.

Such a tax "can be very damaging and we don't believe the government is ready for this," Xue said. "We believe the government has no intention of killing the market, in particular with a huge IPO pipeline."

Brandt of Emerging Portfolio Fund Research agreed: "Despite the noise, Chinese officials hope to be able to do it [tightening] in a fairly targeted manner. They have a big stake in the overall growth rate. They're most likely to err on the side of caution and avoid sweeping measures that could harm the whole economy."

Still, the sell-off sparked heavy selling in New York of exchange-traded funds based on Chinese assets.

The iShares MSCI Hong Kong Index Fund (EWH), which tracks the performance of the Hong Kong market, was last down 6% at $15.70. The iShares FTSE/Xinhua China 25 Index Fund (FXI), which tracks the performance of the Chinese stock market, was down 6.7% at $98.35.

The PowerShares Golden Dragon Halter USX China Portfolio (PGJ), which comprises U.S.-listed Chinese companies, was down 11% at $19.52.

The iShares MSCI Emerging Markets Fund (EEM), was down 4.9% at $111.78.

Regional markets also took a hit. Overnight, South Korea's Kospi was off 1.1%, Thailand's SET Index shed 0.7%, and Indonesia's JSX Composite fell 1.1%.

(END) Dow Jones Newswires 02-27-071612ET Copyright (c) 2007 Dow Jones & Company, Inc.

= Wednesday Will See Release Of Several Key Economic Reports; = Statements From Fed Chair Bernanke

(RTTNews) - Wednesday will see the release of two major economic reports in the morning. Data on new homes and preliminary GDP data will be released in the morning. There will also be Congressional testimony from Fed Chairman Ben Bernanke, as well as a speech from New York Fed President Timothy Geithner.

At 8:30 am ET on Wednesday, the markets will receive the release of preliminary data on Gross Domestic Product, an overall indicator of economic activity. Economists expect GDP to show a growth rate of 2.5% for the fourth quarter. This would be a downward revision from the 3.5% growth originally reported last month. In the third quarter of last year, the economy showed a 2% pace of expansion.

Data on sales newly-built homes will be released on Wednesday at 10:00 am ET. Economists predict a moderation in this statistic, following a pace of 1.120 million units in December. Data on existing home sales was released on Tuesday and showed that they rose much more than economists had expected.

Later in the morning, a key regional manufacturing survey will be announced. The National Association of Purchasing Management - Chicago will reveal its index of business activity in the Chicago area. Economists project an improvement for February after dipping to 48.8 in January. Any reading above 50 indicates expansion in the sector, with a reading below 50 pointing to contraction.

At 10:00 am ET, Federal Reserve Chairman Ben Bernanke will testify about U.S. fiscal challenges to the House Budget Committee. Earlier in the day, at 8:55 am ET, New York Federal Reserve Bank President Timothy Geithner will speak about liquidity and financial markets, at a risk management convention, in New York.

= White House: US Economy Still `Fundamentally Sound' =

WASHINGTON -(Dow Jones)- With stock markets dropping on concerns that the U.S. and Chinese economies could cool, the White House said it's still confident about the state of the U.S. economy.

"The president's economic advisers are paying attention to the markets, as they always do," said White House spokesman Tony Fratto. "We continue to believe the U.S. economy is fundamentally sound."

The Dow Jones Industrial Average sank by more than 500 points earlier Tuesday, following a 9% decline in Chinese stocks earlier in the day. At one point the Dow was down 546, or 4.3%, at 12,086.06. Around 3:50 p.m. EST the index was down 369.32, or 2.92%.

In addition to the drop in Chinese stocks, investors were spooked by a big decline in durable goods orders last month and former Federal Reserve Chairman Alan Greenspan's warning that a recession is possible by the end of the year.

-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@ dowjones.com

(END) Dow Jones Newswires 02-27-071615ET Copyright (c) 2007 Dow Jones & Company, Inc.

= 2ND UPDATE: Wal-Mart Buys 35% Stake In China Retailer Trust-Mart =

By Dow Jones

NEW YORK (Dow Jones) -- Wal-Mart Stores Inc. said Tuesday it will acquire 35% of the parent company of Trust-Mart, a Taiwanese-owned operator of a chain of hypermarkets in China.

News services reported that Wal-Mart agreed to pay about $1 billion for the stake.

The Bentonville, Ark., company (WMT) had been negotiating to purchase the stake in Bounteous Co., one of the largest foreign-owned retailers in China, for several months.

In a presentation at a Bear Stearns retail conference, Wal-Mart's Chief Financial Officer Tom Schoewe said the Trust-Mart footprint is very complementary to the company's current store base in China with very little overlap.

Taking full control of Trust-Mart would more than double Wal-Mart's retail footprint in China, where it currently operates 68 Supercenters, three Sam's Clubs, and two Neighborhood Markets in 36 cities. The company employs 37,000 people in China, while Trust-Mart employs 31,000.

The move comes as Wal-Mart's U.S. growth has slowed, and the retailer is looking overseas for expansion opportunities. The company has experienced some high-profile failures internationally. Last year, it pulled out of South Korea and Germany after failing to gain traction in both markets.

"This is an important step in bringing additional scale to our China retail business," Wal-Mart Vice Chairman Michael Duke said in the statement.

Under the terms of the deal, the world's largest retailer may eventually acquire full control of Bounteous if certain conditions are met, Wal-Mart said in a statement on its Web site. Wal-Mart didn't release financial details of the investment.

"As Wal-Mart's U.S. square footage growth slows over the next few years, we believe the company will increasingly turn to its international division to drive its real-estate expansion," Bear Stearns analyst Christine Augustine wrote in a note to clients. "Management's plan is to increase its international business to account for 30% of revenues, from about 20% today."

Wal-Mart's international performance has been mixed, Augustine said. Wal-Mart de Mexico has been a strong performer, while U.K.'s Asda and Japan's Seiyu appear to be struggling, she said.

Bounteous operates 101 Trust-Mart hypermarkets in 34 cities across China.

Wal-Mart joins a group of rivals as they seek to gain a foothold in the fragmented, but rapidly-growing and competitive Chinese market.

Britain's Tesco PLCand Metro AG, of Germany, also have a presence in the region as they also seek growth outside of their home markets, but the biggest foreign operator in China is French supermarket Carrefour.

"This alliance positions Trust-Mart to offer even higher levels of customer service to Trust-Mart's loyal customers as we benefit from Wal-Mart's expertise in logistics and operations," Trust-Mart's Chairman John Yu said. "It also will give our suppliers new opportunities to expand in China and potentially become part of Wal-Mart's global vendor network."

Hypermarkets are huge stores that sell a range of both merchandise and food.

Both Wal-Mart and Trust-Mart will continue store expansion under their respective brands after the tie-up, the statement said.

Financial advisors were Credit Suisse (CSG) for Wal-Mart and UBS Investment Bank (UBS) for Trust-Mart.

Wal-Mart shares closed down 3.6% at $48.20 amid a widespread sell-off in U.S. stocks.

(END) Dow Jones Newswires 02-27-071740ET Copyright (c) 2007 Dow Jones & Company, Inc.

Reverend Lee 23:52, 27 February 2007 (UTC)