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Posts Tagged ‘India’

Head south young S’poreans

In India, Indonesia on 27/05/2011 at 9:25 am

Indonesia is the best place for entrepreneurs to start a business, a BBC survey suggested. The US, Canada, India and Australia are seen as among the next best countries at supporting new businesses.

So head south to Indonesia or Oz, young entrepreneurs.

High Oil Prices: India in trouble

In Energy, India, Uncategorized on 23/03/2011 at 9:15 am

On all four counts* … India scores badly. New Delhi has already seen street rallies protesting rising food prices. And if India needs higher subsidies, its weak and cash-strapped coalition government – dented anew by last week’s WikiLeaks claims – seems powerless to deliver them. The sovereign most exposed to an oil shock could be the least well prepared to deal with it.

*a country’s oil intensity (how much oil it takes to produce a unit of output), its energy trade balance, its current level of price inflation, and the government’s fiscal position. The first two give an indication of a country’s exposure to higher prices; the latter two suggest how much scope it has to absorb and defray them through fuel, electricity and food subsidies.

FT’s Lex

US$120 oil: Losers in region

In India on 26/02/2011 at 8:23 am

According to BarCap, the big losers are South Korea, Thailand, Taiwan and India. US$120 oil would drag both Korea and Thailand into current account deficit (in Korea’s case, so would $110 crude). In Taiwan it would drag 4.3 ppts off the current account as percentage of GDP.

Just when you tot it was safe

In China, Economy, Emerging markets, India, Indonesia on 29/04/2010 at 5:18 am

Thinking of starting to  invest seriously in emerging markets? Standard Chartered warns of bubble in emerging markets. Extract from Guardian article:

Gerard Lyons, chief economist at Standard Chartered, said Asia was the main recipient of western capital, but there was also evidence of speculative activity in Latin America, Eastern Europe and Africa.

A combination of a prolonged period of low interest rates in the west and strong growth in emerging markets meant the money would continue to flow in. “The size of the flows could become more significant,” he added. “There is a significant risk, even though it is a consequence of economic success.”

The report noted that many countries did not have the capacity to absorb the capital inflows, with the result that the money boosted share and property prices, adding to inflationary pressures.

“The longer it takes to address this, the bigger the problem will be. Just as excess liquidity contributed to problems in the western developed economies ahead of the financial crisis, excess liquidity has the potential to cause fresh economic and financial problems across the emerging world.”

Massive flows of capital from emerging economies, especially those in Asia, helped to inflate the asset bubbles in the west that led to the financial crash of 2007. Standard Chartered said global liquidity flows had now reversed, with emerging economies now on the receiving end. Recipients included countries with current account surpluses such as China, and those running current account deficits such as Vietnam and India.

Lyons said China was the emerging economy investors were looking at for signs of trouble. “China is not a bubble economy but it is an economy with bubbles.” But he added that the problem was not confined to Asia, and that hedge funds were now looking at “frontier markets” in Africa.

While emerging markets needed foreign direct investment to help them grow, Standard Chartered said the influx of hot money was a big worry. “Although hot money is regarded as temporary, it persists until the incentive to speculate is eliminated.”

Oh and there is the Greek crisis. 2008, here we come again?

Value in China stocks: Indexation guru

In ETFs, Investments on 03/04/2010 at 3:53 am

Princeton University economist Burton Malkiel, the author of  “A Random Walk Down Wall Street”, a book that introduced many to the idea of investing via indexed-linked funds, sees value in Chinese shares, he tells the FT.

The FTSE-Xinhua index of the 25 largest Chinese stocks quoted in Hong Kong (”H” shares) is different [from the Shanghai "A" shares which he thinks overvalued], he says. This year, while the Shanghai has gained 53.8 per cent, the FTSE Xinhua is up 6.8 per cent – less than the S&P 500.

A “matched pair” study – comparing oil company CNOOC with ExxonMobil, its equivalent in the S&P, and so on – shows that FTSE-Xinhua price/earnings multiples are higher than in the S&P. But their rate of earnings growth is also higher. Crucially, their “PEG ratio” (the earnings multiple divided by the growth rate) is actually lower. So, Malkiel says, Chinese “H” shares are “moderately priced” compared to the S&P.

That is why he is buying China. But Malkiel is not selling his principles. He recommends investing in “H” shares via exchange-traded funds tied to the index – and not backing anyone who says they can beat the market. (Note there is an ETF traded here that tracks  the FTSE-Xinhua index of the 25 largest Chinese stocks quoted in Hong Kong (”H” shares): DBXT FTChina25.)

Bubble or collapse in China?

He would not be surprised if China took a near-term hit. But long term, he believes it is the place to be … He is concerned about asset bubbles forming in real estate, banking, and in the stock market. “This is bound to occur wherever economies grow fast, and China’s expansion over the past decade has been unprecedented in the history of industrialisation.”

But will the economy collapse if any of these asset bubbles burst? “Absolutely not,” says Mr Malkiel. “They will correct, and restart because of the strength of the underlying story and the country’s extraordinary balance sheet.”

He does not think the country can continue to rely on export-led growth for both geopolitical and economic reasons.

“China potentially has the largest consumer market in the world, but its consumption is less than 40 per cent of GDP, a ratio that has not changed over the past decade. In the US, the ratio is about 70 per cent.”

But key reasons for low consumption remain extant: people need to save because there are virtually no government safety nets; and the one-child policy makes it difficult for children to adequately care for their parents.

The divide between the Haves and the Have Nots is what most worries Mr Malkiel. “There are seismic gaps in China between rich and poor, especially seen in the affluent east versus the impoverished central and western regions.”

This has already led to some unrest. Potential instability is a great danger. “But that’s why the government is developing infrastructure, education and a nascent social safety net,” he says.

He contends that a purchasing power-adjusted gross domestic product weighting, which adjusts for the renminbi’s significant undervaluation by this measure, suggests equity exposure of between 6 and 12 per cent.

So how does he (and his clients) invest in China?

As chief investment officer of China-focused AlphaShares, he is certainly helping investors find their way into the mainland. He has crafted a series of indices, some of which are trading as ETFs, that provide specific sector exposure (infrastructure, consumer, technology and real estate) and market exposure (all cap and small cap).

But his firm has also developed a set of private actively managed funds. These include a China-linked fund, which invests in non-Chinese companies that are directly benefiting from China’s growth, and an enhanced index fund – a broad-market fund with an enhanced weighting of small and value stocks. A buy-write fund aims to exploit Chinese market equity volatility by going long the highly liquid FTSE Xinhua 25 Index and writing options against it to pick up premium income. AlphaShares may take these funds public.

Mr Malkiel squares this active management with his long-term embrace of passive investing by citing the inherent inefficiencies in the way the Chinese market functions and is tracked. He believes unprecedented growth, trifurcated shares [mainland, Hong Kong and foreign classes], and volatility present special opportunities that cannot be captured through traditional indices.

Finally, it should be no surprise, he is a bull on emerging markets, and equities in general.

For a 40-something US investor with a family, he is recommending a portfolio with 80 per cent equity exposure. And he thinks half of that should be foreign stocks. He believes long-term investors will be best served with half of this international exposure being in emerging markets such as Brazil, India, and China.

He remains a believer that passive exchange traded funds are the most efficient means of gaining market exposure around the globe. His recommended 50 per cent US exposure is close to the MSCI All-Country World Index weighting of 44 per cent. However, he deviates significantly in his exposure to so-called EAFE countries, the developed world ex-US and Canada. He recommends 25 per cent EAFE exposure versus the global weighting of almost 41 per cent, in the belief that Europe and Japan will not experience significant growth in the coming years.

He departs from market-cap benchmarking even more materially in recommending 25 per cent equity exposure to emerging markets, twice the All-World Index’s weighting.

Mr Malkiel justifies this by citing a perceived fundamental shift in growth away from developed to emerging markets. “My portfolio strategy remains passive, I’m not picking stocks,” he says. “I’m adjusting for economic realities. And we see the need for such investment modification in China where a low free float [on which most indices are based] undercounts China by at least a factor of four.”

Connected post

http://atans1.wordpress.com/2009/12/08/bull-in-a-china-shop-but-will-he-find-value-in-s-chips/




Where shld Standard Chartered base its CEO?

In China, India, Temasek on 04/03/2010 at 5:28 am

Last sat ST reported that analysts were saying  that Standard Chartered will be forced to relocate its CEO into Asia in imitation of HSBC.

If it does, it will be a test of Temasek protestations that it does not interfere with the commercial decisions of its investee companies. Remember it is the single largest shareholder in SC (195 ), and all the other big shareholders are “peanuts” as Mrs SM might put it.

The logical place for the CEO is to base himself in HK, SC’s biggest market and which is part of China: it and HSBC are targeting China as the biggest driver for growth.

But could Temasek or its shareholder resist the temptation to have  SC’s CEO here. Singapore is way behind HK in IPOs, hedge fund HQs (Soros prefers HK as his Asia HQ), fund mgt,   and in wealth mgt where S’pore wants to be a global player, the head so HSBC and JP Morgan’s private bank are basing themselves in HK, or thaz what reports are saying.

Already the private bank’s  and PE’s global HQs of SC are here, giving SC  the perfect excuse for relocating its CEO here.And S’pore’s nearer India, another big driver for SC’s future growth. As  to HK and China, he can fly there on SIA, not Cathay, of course.

And relocating here will give our MSM the excuse they need to exult the merits of this government before the expected early general elections.  Hard for the MSM to laud the government given the growing inability of ministers to avoid contradicting one another.

Note the news that SC’s CEO will also donate his bonus to charity, came only after it was reported that HSBC’s CEO would donate his. SC is always playing catch up to HSBC. At one time they were the same size, but one is a global player, the other is 19% owned by Temasek. But then OCBC was once on par with HSBC.

I’m a shareholder of HSBC for over 25 yrs.

BTW the relative sizes of both and how both had a gd crisis:

“The ranking three years ago and for most of the preceding few years saw HSBC as the biggest bank, Barclays and Royal Bank of Scotland chasing its tail, Lloyds some way behind that and Standard Chartered as the enthusiastic, fast-growing puppy.

‘Today HSBC isn’t just the biggest British bank. Its market value of more than £120bn is more than that of all the other four added together. It’s in a league of its own.”

“Today the market value of Standard Chartered, at an almost unbelievable £32bn, is only £2bn less than Lloyds’ and £5bn less than Barclays. And it is £11bn more than RBS (although that’s to ignore all the “B” shares that RBS has flogged to taxpayers).”

Excerpt from http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/the_new_banking_hierarchy.html

and if you want to read why HSBC and SC did so well a gd read.

SingTel: African indirect approach is best

In India, Telecoms, Temasek on 23/02/2010 at 5:19 am

I read a media report that some analysts were querying when it didn’t invest in Africa direct, rather than allow Bharti to buy Zain’s African assets.  My tot,” what weed are these analysts on?”

Well for starters, the Indian govt would not be impressed with SingTel, Temasek and the S’pre govt if SingTel used its32% in Bharti to flow Bhart’s African ambitions which have the Indian govt’s blessing. Remember India thinks it has to counteract China’s grow influence in Africa.

And Bharti wants Africa. It made two attempts to merge with MTN,Africa’s largest telco.

If SingTel tried to use its 32% stake in Bharti to kill Bharti’s African ambitions,  SingTel, Temasek and the S’pore govmin would be the losers, just like us footie fans because the EPL bid has caused FIFA to raise the price of World Cup footie for us.

Then also SingTel’s mgt expertise is in developed couuntries — Little Red Speck and the Lucky Country.  Its ventures in India, Indonesia, Thailand, the Philippines, and Bangladesh: countries which once in trlco terms are like Africa today are thru associates where mgt are in the hands of experienced local mgrs who are not SingTel employees.   Zain is selling out partly because it can’t make serious $ in Africa. Africa generated about 45% of group revenues in the first nine months of last year but only 10% of net profits. Its managerial experience like that of SingTel is in developed telco mkts.

And would straight-laced, conservative SingTel be able (or want to or would we want it) to deal with cowboys in chaos. Example:   The privatisation of Nitel, Nigeria’s former state telecoms monopoly, is in a mess.  The Nigerian government found itself arguing with some of the preferred bidders over whether they had, in fact, bid at all. China Unicom – named as part of the winning consortium – said “it had not started any negotiations with respect to any substantive and legally binding agreements. It said its unlisted parent had not had any direct discussions with parties to the proposed privatisations. It said the European arm had been “in contact with potential bidders” for Nitel but did not name them,” according to the FT. At first, Unicom said it knew nothing of the bid.

Nope better for SingTel to let Bharti do the work. With all its experience, its share price is 11% down since the annc. of the Zain deal.  Clearly there is some concern.

If we don’t get to see the World Cup, SingTel will have a massive PR crisis on its hands in its home mkt. It doesn’t need Africa to add to its woes.

SingTel: Did you know?

In Investments, Temasek on 26/01/2010 at 5:53 am

SingTel is in the news because of reports that its successful bid for EPL rights made FIFA up the price for the World Cup rights for S’pore.  Great screw-up: sabo Starhub, end up saboing S’poreans?

But S’poreans might want to know (not reported in MSM) that its 32% owned associate in India has just issued a set of bad results. Dominant operator Bharti Airtel announced a 2% (‘peanuts’ Mrs Goh Chok Tong would say) year-on-year increase in earnings in the fourth quarter.  Bharti’s average revenue per user dropped 30% over the past year to US$7 per month.

Twelve companies all with big ambitions and plenty of cash are fighting a price war. Worse more players are coming.

So while the value of its Indian investment is in peril, it is focusing in S’pore on the entertainment biz.  No wonder it is trying to sell a 25% stake in Optus at a highish valuation. It got to look gd somewhere.

Global diversification via one blue chip

In China, India, Investments on 20/01/2010 at 6:14 am

Tony Tan, deputy chairman of GIC is optimistic about Asia’s prospects and expects it to enter a ‘Golden Age’ in the next decade.

So if you believe him (remember MM Lee, GIC’s chairman, talked of something similar just before the global credit crunch and subsequent global recession), what to buy leh?

Just as CapitaLand is a “no-brainer” China play, maybe  this is “no brainer” for dummies to get global exposure?

“[W]ill continue to outgrow America over the coming years. Already 60% of its sales are overseas, and its bridgehead into China and India looks more robust than most.”

Of course you could buy an ETF that invests in a global index.

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