<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Citi shares revive to hit 3-month high
</TR><!-- headline one : end --><TR>Surge baffling to many observers but some say bank is getting healthier </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Gabriel Chen
</TD></TR><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->BY SOME accounts, it is near death's door, yet Citigroup shares are not only showing robust signs of life but surged to a three-month high this week.
Many market watchers on Wall Street and elsewhere remain baffled by the once-mighty financial giant's remarkable Lazarus act over the past month.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
CITI REBOUNDING
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>Citi shares are trading around US$4 and have hit US$4.48 this week - a stunning revival given that just a month ago, they were below US$1, driven down by investor concerns that the tens of billions of dollars being pumped into it appeared to be having little effect.
The stock's surge means the investment made by Government of Singapore Investment Corporation (GIC) into the bank is looking far prettier.
GIC is exchanging its US$6.88 billion (S$10.35 billion) in preference shares for ordinary shares at US$3.25 apiece. With Citi's shares at US$3.97 on Wednesday, GIC's investment is theoretically in the black.
Citi shares crossed the US$3.25 mark on Monday.
While the run-up is good for Citi investors, experts cannot seem to agree as to why the stock is gaining.
Some investors say the price rise is underpinned by fundamental reasons, like growing signs of profitability, while others suggest it is technically driven.
Those who think Citi is getting healthier cite the fact that the bank, which has reported five straight quarterly losses totalling US$37.5 billion, is turning around.
Chief executive Vikram Pandit said last month that it was profitable in January and February. The bank reports first-quarter results today and investors are expecting a positive performance - something which cannot be ruled out after US bank Goldman Sachs posted surprisingly strong results this week.
Wells Fargo, the second-biggest US home lender, has also reported net profits of about US$3 billion for the first-quarter - figures that beat analyst expectations.
Other experts say the share price rise is down to technical reasons.
Traders like the kind of strategy where they have a dollar each way - buying a firm's bonds while shorting its stock.
This investment strategy was extremely popular for a stock like Citi. At the end of last month, nearly 1.21 billion Citi shares, or about 23 per cent of its float, were sold short.
So market experts suggest that the Citi rally could be explained by institutional traders covering their short positions.
Furthermore, they also stress that the stock run-up must be 'technical' because fundamentally, the bank is still beseiged with problems.
For one thing, it faces significant risks, including writing down loans in areas like commercial property and credit cards.
Meanwhile, there is market talk that Citi plans to sell its Japanese investment banking unit Nikko Citigroup as well as Nikko Asset Management, a move that should strengthen its balance sheet. A Citi spokesman declined to comment on the speculation.
</TR><!-- headline one : end --><TR>Surge baffling to many observers but some say bank is getting healthier </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Gabriel Chen
</TD></TR><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->BY SOME accounts, it is near death's door, yet Citigroup shares are not only showing robust signs of life but surged to a three-month high this week.
Many market watchers on Wall Street and elsewhere remain baffled by the once-mighty financial giant's remarkable Lazarus act over the past month.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>Citi shares are trading around US$4 and have hit US$4.48 this week - a stunning revival given that just a month ago, they were below US$1, driven down by investor concerns that the tens of billions of dollars being pumped into it appeared to be having little effect.
The stock's surge means the investment made by Government of Singapore Investment Corporation (GIC) into the bank is looking far prettier.
GIC is exchanging its US$6.88 billion (S$10.35 billion) in preference shares for ordinary shares at US$3.25 apiece. With Citi's shares at US$3.97 on Wednesday, GIC's investment is theoretically in the black.
Citi shares crossed the US$3.25 mark on Monday.
While the run-up is good for Citi investors, experts cannot seem to agree as to why the stock is gaining.
Some investors say the price rise is underpinned by fundamental reasons, like growing signs of profitability, while others suggest it is technically driven.
Those who think Citi is getting healthier cite the fact that the bank, which has reported five straight quarterly losses totalling US$37.5 billion, is turning around.
Chief executive Vikram Pandit said last month that it was profitable in January and February. The bank reports first-quarter results today and investors are expecting a positive performance - something which cannot be ruled out after US bank Goldman Sachs posted surprisingly strong results this week.
Wells Fargo, the second-biggest US home lender, has also reported net profits of about US$3 billion for the first-quarter - figures that beat analyst expectations.
Other experts say the share price rise is down to technical reasons.
Traders like the kind of strategy where they have a dollar each way - buying a firm's bonds while shorting its stock.
This investment strategy was extremely popular for a stock like Citi. At the end of last month, nearly 1.21 billion Citi shares, or about 23 per cent of its float, were sold short.
So market experts suggest that the Citi rally could be explained by institutional traders covering their short positions.
Furthermore, they also stress that the stock run-up must be 'technical' because fundamentally, the bank is still beseiged with problems.
For one thing, it faces significant risks, including writing down loans in areas like commercial property and credit cards.
Meanwhile, there is market talk that Citi plans to sell its Japanese investment banking unit Nikko Citigroup as well as Nikko Asset Management, a move that should strengthen its balance sheet. A Citi spokesman declined to comment on the speculation.
