IC October 2008 business news

05 March 2009

As the saying goes, ‘May you live in interesting times.' In years to come the events of this September will no doubt form the basis for several series of lectures on financial markets in universities around the world. The shock to the banking community of Lehman Brothers filing for Chapter 11 bankruptcy protection sent the markets haywire, with share indexes around the world plummeting, as investors pulled their money out for ‘safe havens' like gold and government bonds.

But even more spectacular than their dive, was the global rebound that came on the back of the news that the US Government was planning a US$ 700 billion bailout. It's hardly surprising - anyone would be happy to hear the Government was prepared to spend the equivalent of the GDP of Australia to take their bad debts off their hands!

As IC went to press shares were falling back again and commodity prices were rising on the back of market nervousness about the ‘small print' of the offer. It was of course one thing for US Treasury Secretary Henry Paulson to make the announcement, but it also had to be scrutinised by elected representatives to ensure there were enough safeguards for the taxpayer.

But while the daily ups and downs over the course of the last few weeks have been dramatic to say the least, the net effect for share prices has not been too severe. They are down overall of course, but the fall of 3.59% for the Dow between weeks 34 and 38 is no greater than some of the monthly losses earlier in the year. In fact was mild by comparison to the losses seen in May and June.

The same goes for the FTSE 100 - down 4.21% over the period and the Nikkei 225, which lost 5.88%. These are significant losses, but in net terms, September was far from being the worst month these indexes have seen over the last year.

Crane losses

But it was a different story in the lifting sector, with IC's share index recording its biggest monthly fall since December, with a 15.31% drop to 346.45 points.

Part of this was a result of the general market malaise, which tends to affect cyclical stocks like those of crane manufacturers more severely than the blue-chip companies that make up Indexes like the Dow.

However, another factor in play was the revised profit forecast that Terex issued at the start of September. Profits per share are now expected to come in between US$ 6.35 to US$ 6.65, compared to the previous forecast of US$ 6.85 to US$ 7.15. Even though the lowest of these new figures would represent a 9% increase on 2007 profit levels, the news contributed to Terex's stock losing nearly 30% of its value between weeks 34 and 38.

Other heavy falls for crane manufacturers took the IC Share Index to its lowest since 2006.

Outlook

After such extraordinary events in September, what happens next in the markets is anyone's guess. The US rescue package is expected to bring stability to the markets, but after the events of the last month, if not the last year, would you bank on it? (Pun intended).

October IC Share Index

Stock Currency Price at start Price at end Change % Change 12 months ago 12 month % change

IC Share Index* 409.10 346.45 -62.64 -15.31 648.16 -46.55

Dow Jones Industrial Average 11430 11020 -411 -3.59 13807 -20.19

FTSE 100 5391 5165 -227 -4.21 6423 -19.60

Nikkei 225 12666 11921 -745 -5.88 16414 -27.37

Hitachi Construction Machinery YEN 2540 2405 -135 -5.31 4220 -43.01

Konecranes € 22.60 18.50 -4.10 -18.14 27.56 -32.87

Kobe Steel YEN 258 228 -30 -11.63 413 -44.79

Manitowoc US$ 24.33 18.19 -6.14 -25.24 44.01 -58.67

Palfinger € 14.66 13.37 -1.29 -8.80 33.00 -18.97

Tadano YEN 835 686 -149 -17.84 1433 -52.13

Terex US$ 48.18 33.81 -14.37 -29.83 83.67 -59.59

*IC Share Index, end April 2002 (week 17) = 100

Exchange rates - value of US$

Currency Value at start Value at end Change % Change Value 12 months ago 12 month % change

YEN 108.35 104.85 -3.50 -3.23 116.21 -9.78

0.6723 0.6953 0.0230 3.43 0.7168 -3.00

UK£ 0.5331 0.5499 0.0168 3.15 0.5004 9.88

Period: Week 34 - 38

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