India Morning Report: My right shift key doesn’t work. Will the right UBS please step up!

The McDonald Happy meal is still Rs 20/- and the $5 Big Mac Meal still under INR 200 all taxes paid ( Large fries and coke), so it is not PPP. However, Bhanu(UBS)’ target of 68 is very near and there are no buyers in the currency yet, thus the new Box from 70 to 78-80 should be in play in the coming week. That should also see the traditional Exports rise because of depreciation an import spending goes down finally proving true before the policy implemented is taken seriously by those still trying to understand India from an investment point of view starting from Ford which began in India in the first wave of reforms and is still unable to use it as an export base or get a competing model up against Suzuki.. but the three traditional arguments above hold no water because of the vast difference between reported statistics and trend forming prices, markets and the still unexplored new CPI barely a year old. Bond markets have traditionally neglected volatility especially in Valuations and recovery LGD models from KMV to other modified Merton and non Merton / non Fama-French models.

Domestic consumption is firmly isolated from the one fifth of GDP that is Exports as long as oil prices stay south which looks likely as even $15 Bln less in buying is hardly to be noticed except for the improbable hysteria still not shown by markets. one would probably see Fed buying reduced by half by the end of 2013 in the strongest such scenarios and the markets have broken trends enough to stand tall in that event nullifying any tail risk or God events as a result. Such rabid unnecessity aside, Indian commentators are not expecting a recovery in the currency, and with Foreign interest likely to return in to the investment cycle and in ETF inflows to India and the EMs in the next two months, 80 thus could be my ventured level for the currency, 60 being overshot long ago. A long recovery trade in the Rupee could in fact still be impossible at those levels and any attempt to recover the 60 levels might not even be theoretically feasible right now.

UBS of course has lost all pretentions to Investment Banking and its PPP valuation of 78 is probably a non starter even if they receive 100% of revenues in bonuses as a stay away handshake from the European Private Banking Management. credit Suisse is still due for a hole in the shoe quarter as its ROE calculations seem to suggest this quarter and th Euroean trend t increase bonus percentages flares the remaining  investment bankers to a quick relapse of their own holes. Traders at Deutsche bank of course would have ore room to create a new stand in Asia after having completed restructuring and HSBC may not have deprioritised the same as well. stanchart does well with a long term view so it may be planning to sit out further bullish rupee moves too.

Foreign Banks in India: European Banks deleveraging in Asia Part II

English: Skyline of Mumbai from across Back Bay.
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According to the news flow, borrowing costs across Asia have risen upto 50%, that’ is a sizable loss on balance sheets too

where Asian swaps would have been incomplete rings and with this situation of freeze in financing however expected, those betting on Asia’s growth despite the picture of the slowdown ( not when you considered Asia in subdued growth but when you – and many did – bet on contrarian growth or that the globe did not matter )

There is no denying however that Asia will still grow at 4% and Central Asia & Africa as a region would grow albeit at its speculative trade/underdeveloped paradigm rate which was Europe’s version of an Emerging market European banks have to exit faster though if they want to be not caught in the flurry of exits. TThey will not get a penny’s worth in 3 months if deleveraging continues. Expecting banking assets to be illiquid is a readjustment that will cause such reactions in the market esp with Asian banks already suffering at the hands of repo financed Europe for a decade in Swaps and derivative contracts.

I remember AIG spent two years trying to get anyone interested in its business last time  despite profits in Asia. Credit Suisse needing to deleverage its market book is not a good sign for its advisory business. nor UBS focus on private banking / wealth as its future. Credit Agricole is shutting shop in 21 countries after losing EUR 637 mln in the latest quarter and quitting 1000 jobs in Investment Banking businesses after 850 jobs in France and 650 jobs in Consumer Finance and Factoring

In India, the costs have risen on par despite the strong ECB performance till October by the sheer drop in the rupee not the whole 20% but the one from 50 – 55 ( 54.50 today) a further 10% even as only 3-4 FCCB borrowers are out of the race. Opacity in news flows continues to trouble those with exits firmly completed though, and that is the raison d-etre of having a TV channel to shout from as the index takes the wrong ones to 45 despite R Power, Welspun , Orchid and a couple of others having exited the Dollar debt that was to be a pain and / or matched with their Export inflows

Bharti has a $12 bln of External debt in Dollars on its balance sheet which it has not swapped or hedged. Suzuki gets an import bill of almost $1.6 bln dollars. Indian Oil companies’ entire Oil imports are a huge loss to the exchequer as they have the purchases of $5-10bln every other month again unhedged and miscommunication and bank managements will have to share the blame for these treasuries’ inefficiencies
It is not clear if the INR 80 bln announced by REC as external debt is converted at current rates another $200 mln is to be issued this year maximum from dollar markets apart from a current $250 mln issue. REC Ltd has otherwise worked with very low rates and is repaying $200 mln worth Its book is Rs 1 Tln (930 bln) and new $1 billion at 8.25% may be at least a percent higher

Foreign Banks in India: Looking cheerful again

Citibank Handlowy i wieżowce Stalexportu
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While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

1. HSBC is recruiting heavily in India(HT). With 50 branches and a retail operation that is almost profitable, HSBC plans to continue expanding its India footprint to a $1 bln profit by 2013. This 6 months saw it make $394 mln in Corp Advances and $451 mln overall in India, incl Investment Banking and Asset Management, no mean feat and Stuart Davies has a hard time recruiting enough, confusing watchers who probably just left the bank and more..

2. SBI’s results have been noted and HSBC Global has already put out a buy on the stock, raising its target to 2600(ET)

2b. Citibank is restarting its unsecured lending business in the country while HSBC continues to be careful in retail assets given large NPAs(BS) India’s Private Banks hope to restart the competition in the space with Axis Bank going after existing customers and HDFC Bank increasing the share of new customers to 25%

3. Emerging market funds see most outflow again for the third week and Paulson got out of more than 50% of his BofA and Citi holdings in June according to his 13F filings. All hedge funds filed their 13F and see idf we have the right analysis in quick time at advantages.us

4. Of the $3.2 bln leaving Emrg Market Funds $2.9 bln came from Asia ex Japan funds. Also in the first half of August FIIs have sold INR 53 bln in Indian equities Emrg Funds saw outflows of $14 bln  in total in 2011(DNA)

5. StanChart PE is investing a good $250 mln in MSM, 60% owners of Sony, SET MAX and SAB channels. StanChart PE is buyin g stakes of opvt investors including Jackie Shroff, Sudesh Iyer and Rakesh Aggarwal – and infuse fresh capital into the company. (TOI)StanChart profits in India fell 39 %in the first half

6. StanChart Economic Research  in general has committed to using the Dollar forty rule from the looks oof it committing rupee to an appreciation cycle till 2013(Kudos to me-self at the the Banking Intiiative). Equating Dollar to Forty rupees is uplifting, simpler and generally true for all investments spanning till 2014 and more

7. The New Private and Wealth head, Ananth Narayana at Standard Chartered confirmed his faith in the Indian Economy’s restrained performance being in a select band as repeated by many network commentators throughout the day today

8. He and other commentators also mentioned a pause in RBI September 16th policy, quite some noise on that. I would not mind another two rate increases. Been there India. And we will never outperform anything anyway, might as well not stay a lossmaking enterprise

9. ING Vysya raised rates a day after RBI announcement and HDFC Bank upped policy rates by 50 bps today in response to the RBI hike

10. SBI and ICICI Bank also upped rates by 50 basis points today, ICICI Bank’s base rate now a round 10%. While ICICI Bank improved profits year on year, SBI managed to increase margins, with NIMs improving to a never before 3.89% on a Rs 8 tln book

11. Indian Mid Cap Bank, Axis Bank is raising equity & debt from Foreign investors, with IFC chipping in a $100 mln

12. Citi India is ramping up its FICC and equities trading teams in India according to CEO Pankaj Vaish last week(IBN)

The key appointments include those of Rohit Dusad, who joins from JP Morgan as director of origination in credit markets trading; Aditya Bagree, who joins from Nomura as director of credit structuring; and Chintan Shah from Morgan Stanley, who joins as Vice-President for credit trading. In the past three years, Citi has helped raise close to USD 60 billion from capital markets for its Indian clients and advised on nearly USD 25 billion of India-related mergers and acquisitions, the American banking giant said.

13. Indian M&A scene has lit up Asia pacific, with Asia ex Japan reporting a renewed $270 bln in deals year to date (only M&A) out of which India has reported more than 10% at $26.9 bln

14. India’s foreign debt? India owes INR 4.17 tln ($105 bln) of which $66bln is interest. Look at this piece on delusions and economic fallacies

While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

 

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