Bombay Blasts Trigger Global Market Reaction

Strategic Insights -

A series of co-ordinated bomb blasts in Bombay, India, triggered a global market reaction, with international investors selling off London-listed large-caps with interests in India. This included Standard Chartered, the biggest foreign-owned bank in India, which saw its shares plummet by 36p to £12.87. The Bombay stock exchange's Sensex index was closed at the time of the explosions, leaving international bourses to reflect the initial reaction of investors. The blasts put downward pressure on a FTSE 100 already struggling from a weak opening on Wall Street, leaving the benchmark index 39.6 points lighter at 5,857.3.

Key Takeaways:

  • Standard Chartered, with a substantial presence in India, saw its shares close 36p lighter at £12.87, with the company employing 13,000 staff across 102 offices in 31 cities.
  • India is forecast to account for 8% of Standard's profits this year, making it the company's third-largest territory in revenue terms.
  • Other affected companies included Cairn Energy, down 49p at £20.95, and Vedanta Resources, the only Indian constituent in the FTSE 100, down 22p at £13.70.
  • International Power was the worst-performing blue-chip, off 10 1/4p at 285p due to arbitrage activity related to its Euro 200 million convertible bond issuance.
  • Vodafone Group contributed to the FTSE 100's retreat, down 2p at 117 3/4p, following a downgrade from UBS.
  • Enterprise Inns hardened 3 1/4p to 958p, despite overall market weakness, as Credit Suisse repeated its "outperform" recommendation.
  • Marks & Spencer added 2p to 585p following a trading update and multiple share purchases by outgoing chairman Paul Myners.

Statistics:

  • The Bombay blasts put the FTSE 100 index 39.6 points lighter at 5,857.3.
  • Standard Chartered's shares closed 36p lighter at £12.87.
  • India is forecast to account for 8% of Standard's profits this year.
  • The Sensex index was closed at the time of the explosions.
  • The Dow Jones industrial average recouped earlier losses to end modestly higher by 31.30 points at 11,134.80.

Sources:

  • The Times, 2006
  • UBS
  • Credit Suisse
  • Enterprise Inns
  • Marks & Spencer