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AIG Says No, Steel to fall 5%, RIL Freak Trade

AIG rejects Prudential’s lowered offer of $30 billion for the Asia insurance unit, from $35 billion. They were supposed to use the money to pay back the US taxpayers from whom they’ve borrowed, er, $182 billion.  Who can now wait for an IPO in Hong Kong, which as someone needs to remind AIG, is completely screwed with EU debt and China slowdown crisis.

WSJ: World steel prices are expected to fall 5% in June because of growing inventories and increasing production in Europe and China.

[STEEL]

With so much capacity still coming on the market, excess steel, particularly from China, is beginning to hit the export markets. According to Chinese trade statistics, Chinese finished-steel exports tripled in April from a year earlier.

"The Chinese typically export their production excesses when pricing begins to crack at home, and we have already seen this trend pick up in the past few months," said Michelle Applebaum, steel analyst for MAR Inc. Ms. Applebaum said daily Chinese steel output rose in April to a record 1.85 million metric tons, which is up 4.2% from March andnearly 20% from a year earlier. At the same time, prices are falling in China.

The price of hot-rolled steel, a basic component for most steel products, fell 3.6% in China in May, while prices of rebar, used in reinforced concrete, dropped 2.1%.

Reliance’s stock fell over 20% in a freak trade yesterday on the BSE. Alarmingly, this happened on a “freak” order of 60,000 shares, which the Economic Times has decoded:

According to market sources, a trader with a leading Mumbai-based broking firm wanted to sell ICICI Bank shares at Rs 840 per share through the algorithm trading system. While punching the order, a serious mistake was committed, as the trader punched RIL’s code instead of ICICI Bank’s. It is learnt that a sell order for 60,000-odd shares got executed at Rs 840 per share. On realising his mistake, the trader would have scrambled to buy back the shares, but at a price higher than at which he sold them in the freak trade.

But think about it – 60,000 shares, is a value of 6 crores – which is honestly not much. Reliance traded 450 crores in the NSE cash market and 160 cr. on the BSE cash market, going to show that the BSE is becoming lesser and lesser relevant. Or, as I see it, seriously prone to manipulation, because the order depth was just not there to take even a 60,000 share order.

(And do you believe this “trader punched the wrong code” business? ICICI’s BSE Code is 532174 and Reliance is 500326. The names have VERY different letters too. It takes some very twisted fingers to get this wrong as a “punching error”.)

  • Soham Das says:

    >"wanted to sell ICICI Bank shares at Rs 840 per share through the algorithm trading system"

    What kind of an algo trading system is it, which takes manual intervention? Or is it one of those simple VWAP kind of execution algos?

    Surely looks like, fat finger-itis is a fast spreading disease