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Oiling the wheels

A rebound in oil prices boosted risk sentiments (tentatively), which lifted overnight markets to close strongly.

Oil Barrels
Source: Bloomberg

Once more, hopeful news about oil supply led the rally in crude market. Russian energy minister Alexander Novak said that a meeting with Iran next month is possible, adding that the output freeze agreement with Saudi Arabia (and Venezuela and Qatar) needs to be in place for at least 12 months to be effective.

Market participants in Asia however would be cautious as they seek clarity from how Chinese equities will perform today after yesterday’s tumble. Several reasons were bandied about for the sharp fall in China stocks on Thursday, including a tightening of monetary conditions and anxiousness ahead of the G20 meeting.

As a result, we may not see much of a bounce in Asia despite outperformance in European and US markets. Japan has started strongly, with the Nikkei 225 climbing quickly past 16400 while Australia’s ASX is flat.

 

SGX seeks acquisition

Singapore Exchange (SGX) announced that it has made a non-binding bid to acquire Baltic Exchange, a London-based provider of information on shipping markets. Discussions are still in its preliminary stages. The SGX is likely looking to strengthen its derivative businesses, and probably complement its iron ore swaps and futures business.

The local exchange launched iron ore lump premium swaps and futures last August to provide more hedging capability for market participants to manage risks amid volatility in the prices of the metal. The news was welcoming as SGX shares rose +1.1% at the open today after dropping 4% in the first four days of the week.

 

Noble posts first loss

The embattled commodity company reported its first annual loss in almost 20 years yesterday. A net loss of S$1.67 billion was announced after full-year revenue fell to $66.7 billion from $85.8 billion. This compared to a profit of $132 million in the previous year. Noble announced a $1.2 billion write down in long term contracts, blaming the collapse in coal prices for the decision.

Recent rating downgrades by Moody’s to junk status has investors concerned about the credit facilities and higher borrowing costs of the company. CEO Yusuf Alireza said the company is moving towards refinancing of the revolver facility, with term sheets agreement with a number of banks, but did not reveal details on the size of the facility.

Bloomberg reported on 24 Feb that Noble is seeking a renewal of a $1.2 billion revolving credit facility. Noble share prices jumped 4.5% at the open today, after diving 10.6% in the past two sessions.

 

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