Here are the 10 important facts about the block deal:
1) Citigroup Inc. sold its 9.85% stake in HDFC. A total of 145.3 million shares were sold.
2) The average price for one share was Rs 657.56.
3) Citi will get $1.9 billion from the transaction at the current exchange rate, resulting in a pre-tax gain of $1.1 billion (Rs 5,490 crore), and an after-tax gain of approximately $722 million (Rs 3,550 crore).
4) Citi had earlier sold 1.6% stake in HDFC in June 2011.
5) Citi sold its stake because it needed additional capital under Basel 3 norms. Basel 3 is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk. It was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis.
6) Other foreign banks like HSBC and Goldman have also been exiting assets not seen as "core". Citi's investment in HDFC was largely financial and the ability to convert HDFC investment to a strategic investment was limited.
7) The book was oversubscribed 2-2.5 times indicating the strong demand for HDFC, which is India's top mortgage lender.
8) Foreign investors like Aberdeen Asset, Capital International, Fidelity, JPMorgan, Ontario VC Fund and Temasek bought shares from Citi. Domestic investors like ICICI Prudential also bought shares.
9) "Citi selling its stake has nothing to do with the company. The capital requirement of American banks has been increased and because Citi needs to shore up their capital, they have sold their stake. The good thing is the entire stake has been sold in one go, so there is no overhang and the other good thing is the demand for such a large issue was high," Keki Mistry, Vice Chairman & MD of HDFC
10) "We are pleased with the results of our investment in HDFC and will continue to value our long-standing relationship with the company. Citi remains deeply committed to India and we continue to focus on growth opportunities for our franchise in this very important market," said Pramit Jhaveri, Chief Executive Officer of Citi India.
1) Citigroup Inc. sold its 9.85% stake in HDFC. A total of 145.3 million shares were sold.
2) The average price for one share was Rs 657.56.
3) Citi will get $1.9 billion from the transaction at the current exchange rate, resulting in a pre-tax gain of $1.1 billion (Rs 5,490 crore), and an after-tax gain of approximately $722 million (Rs 3,550 crore).
4) Citi had earlier sold 1.6% stake in HDFC in June 2011.
5) Citi sold its stake because it needed additional capital under Basel 3 norms. Basel 3 is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk. It was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis.
6) Other foreign banks like HSBC and Goldman have also been exiting assets not seen as "core". Citi's investment in HDFC was largely financial and the ability to convert HDFC investment to a strategic investment was limited.
7) The book was oversubscribed 2-2.5 times indicating the strong demand for HDFC, which is India's top mortgage lender.
8) Foreign investors like Aberdeen Asset, Capital International, Fidelity, JPMorgan, Ontario VC Fund and Temasek bought shares from Citi. Domestic investors like ICICI Prudential also bought shares.
9) "Citi selling its stake has nothing to do with the company. The capital requirement of American banks has been increased and because Citi needs to shore up their capital, they have sold their stake. The good thing is the entire stake has been sold in one go, so there is no overhang and the other good thing is the demand for such a large issue was high," Keki Mistry, Vice Chairman & MD of HDFC
10) "We are pleased with the results of our investment in HDFC and will continue to value our long-standing relationship with the company. Citi remains deeply committed to India and we continue to focus on growth opportunities for our franchise in this very important market," said Pramit Jhaveri, Chief Executive Officer of Citi India.
If history is any guide (and it usually is!), the recent successful completion of the Greek Bond Swap following the announcement of the third bailout package , is likely to provide only temporary relief before another debt crisis engulfs the Eurozone down the road. Scott Minerd, the CIO of Guggenheim Partners (and an ex-colleague from my Morgan Stanley days!) , draws parallels between the current debt crisis and financial crises which dominated the financial landscape in Europe during the interwar periods – with poster child of current European woes – Greece - being replaced then by Germany. To summarise:
-During the period 1918 to 1939, European nations were also saddled with huge debts without the means to repay them, and lurched from one crisis to another, with a series of bailout plans providing only temporary relief but not solving the fundamental problem.
-After the ending of WW1 in 1918, punitive war reparations were imposed on Germany amounting to 300% of its GDP. Other nations were also heavily indebted as a result of financing the War – UK (154% of GDP), France (258% of GDP) and Italy (153% of GDP).
-Then, as now, there were strict demands for austerity plans, refusals to accept losses on certain debts, missed deadlines and bailout plans which ultimately failed, only to be replaced by another bailout plan.
-Germany lacked the ability to repay its enormous debt, and spent the next 14 years on multiple restructurings, occasional payments and numerous defaults. War devastated countries like France demanded full payment on the debt, and Germany responded by printing more and more money leading to hyperinflation (with eventually 1 US$ being equal to 4 trillion marks!).
-The first restructuring of Germany's war debt occurred in 1924 with the Dawes plan –which focused on financial reforms and involved massive lending by American banks to stimulate growth to help repay the debt.
-The second restructuring took place in 1929 with the Young plan – which reduced Germany's debt by 50% and a 58 year repayment period. However, the stock market crash of 1929 and the onset of the Great Depression put a hold on all repayments.
-Another restructuring was attempted in 1932, with a proposal made to eliminate Germany's debt (to Europe) contingent on the US writing of all debt owed to it by other European nations – this was rejected by the US congress (and eerily similar to the ECB refusing to take losses on Greek debt).
-Eventually currency debasement emerged as the only viable economic strategy, as nations abandoned the gold standard in an attempt to inflate away their debt and kick start their economies. Countries which left the gold standard recovered faster from the Great Depression than countries which remained.
-Ben Bernanke, in his well known 1991 paper, concluded that "a mismanaged interwar gold standard was responsible for the worldwide deflation of the late 1920s and early 1930s". He noted that countries which held onto the gold standard the longest (i.e. the US) suffered most from the Great Depression.
-The period of the 1920s was one of very easy monetary policy and robust economic expansion, despite Europe being mired in excessive debt and deep structural problems.
-The strategy of currency debasement is prevalent today, with the aggressive monetary easing by the Fed, the ECB, the BOE and the BOJ. And this is unlikely to end anytime soon.
-Based on Assets-to-GDP ratios the ECB is now the largest quantitative easer in the world (32%) followed closely by the BOJ (which is projected to be at 33% after completion of its programme) , the BOE (24%) and finally the Fed (19%).
-However, austerity programmes are simultaneously being imposed by governments – making it akin to "pushing on the accelerator while standing down on the brake". It is just a matter of time before serial restructuring sagas resume.
-To put it into a time perspective – Germany finally repaid its war debt with a $94 million payment on October 3, 2010 – 98 years after the end of WW1!
Investment outlook:
-The US has now entered a period of self-sustaining economic expansion, driven primarily by the Fed's (and now supported by the ECB) monetary policies making the US the economic locomotive of the global economy. This is bullish for all US risk assets-equities, high-yield bonds and bank loans.
-The situation is similar to the aftermath of the LTCM crisis in 1998, when the Fed eased aggressively leading to a major bull market in equities from 1998 until 2000.
-The Fed is unlikely to change its stance on monetary easing given the three risks facing the global economy – continuation of the European debt problem, a slowdown in emerging markets and a potential hard landing in China. Despite strong job growth numbers in recent months, Bernanke told the Senate Committee on February 7 that the job market is a "long way" from returning to normal, signalling that Fed policy will remain aggressive.
-With the Fed pleading to keep rates low until 2014, the Taylor rule suggests that rates will remain too low for too long. The improving US economy should upward pressure on interest rates over the next 6 to 12 months. Treasuries are exceptionally overvalued and are likely to yield a total negative return in 2012 – something which has only happened 3 times (1994, 1999, 2009) over the last 38 years .
-There are consequences to these actions as we set the stage for another crash in a few years – but risk assets should produce healthy returns in the interim.
-Europe is on the brink of falling into a recession following a negative GDP number for the fourth quarter of 2011 – a significant debasement of the Euro is on the horizon and the slowdown will put pressure on emerging markets and China as their export markets suffer.
A fascinating perspective – and the parallels between Germany in the 1920s and Greece today are rather illuminating. One would have thought that Germany would have learnt its lessons and therefore handled the current crisis differently – but that would have taken tremendous political will which is sorely lacking today! I agree with his view that risk assets are likely to perform well over the next few years – but do not expect a significant uptrend in interest rates until 2014 as further QE policies are likely to keep a lid on rates (and any significant sell-off should be viewed as a temporary buying opportunity) . In addition, while emerging markets growth is likely to slow down, EM equity markets are likely to perform well as the tightening monetary policies undertaken over the last year are reversed.
The significant factor over the next few years is the competitive currency debasement in the developed world, as each country aggressively pursues that objective de facto via further QE programmes. There are different ways to look at the relative scale of QE policies – assets-to-GDP ratios as described above is one method – another is looking at the increase in the monetary base from pre-crisis levels (as espoused by Nomura's Richard Koo) – on this basis the Fed is the most aggressive having increased its monetary base by 3.21 times, the BOE by 2.97, the BOJ by 3.13 (but over a longer period) and the ECB by a relatively smaller 1.96. So it seems that the ECB still has a lot of catching-up to do (about 1 trillion Euro!).
A yet another way to look at this is to take a simple ratio of the central bank assets – and the ratio between the assets of the Fed and the ECB have tracked the Eur/Usd exchange rate closely over the last few years as the graph below illustrates (via Zero Hedge). Recently, a large gap has opened up between the two implying either a rather large fall in the Euro (and a sharp fall in risk assets) or QE3 ($650-700BN) by the Fed. I suspect it is the latter or even perhaps the first quickly followed by the latter (as what happened in 2010 and 2011).
To follow-up on last week's newsletter on the unprecedented size of balance sheet expansions (i.e. QE) undertaken by the 8 major central banks, I now focus on looking at the impact of QE on asset markets and the economy. There is considerable debate on this issue, much of it clouded by ideological biases and pre-(mis)conceptions (as seems to be the norm nowadays in an increasingly polarised world!), so it is helpful to consider research which relies on data analysis to draw conclusions (i.e. a deductive rather than an inductive approach). With that aim in mind, I summarise below an insightful note by the economist and financial advisor Gavyn Davies in his FT blog (http://blogs.ft.com/gavyndavies/2012/01/25/asset-market-returns-in-a-liquidity-trap/#axzz1lbDioV8Z ):
-The weight of empirical evidence since QE started in 2008 supports the current view that QE has a positive impact on reducing long term bond yields, increasing real GDP growth and asset prices.
-Estimates on the reduction in long-term bond yields vary, with the BIS on one end estimating the impact to be a reduction of 0.25%, while the BOE and several studies in the US conclude that the reduction is 1.0% or more. The graphs below illustrate this relationship clearly and demonstrate that yield curves have flattened substantially since QE began, supporting the latter view.
-This empirical evidence refutes the traditional view that under a zero interest rate environment, investors should be indifferent to holding cash or bonds – with bond prices moving substantially higher it is clear that investors have a strong preference for holding longer term bonds which provide some return.
-However, there is a lower limit to bond yields, as suggested by the Keynesian liquidity trap. Japanese experience suggest this to be 1.3%, in which case US treasury bonds with maturities up to 5 years have already reached their lower limit- leaving the longer maturities for the Fed to focus its efforts on. In addition, the Fed could purchase mortgages and private securities to push down their spreads.
-In a QE environment, with the central bank balance sheets taking on more risk, the private sector attempts to restore its asset portfolio risk levels to those prevailing prior to the start of the crisis by purchasing riskier assets like equities. The BOE study suggests that equity prices have moved up by 20% in response to QE in the UK.
-Various studies (by the Bank of Italy and others) also suggests that QE has had a positive impact on the real economy – boosting GDP growth by 1.5% in the UK and 0.6-3.0% in the US. In addition, inflation rose (as desired by central banks) by 1.0%.
-However, the evidence also seems to indicate that the initial bout of QE had the maximum impact on bond yields, and subsequent doses produced smaller declines. This is likely to continue being the case going forward. In addition, the long-term positive correlation between central bank balance sheets and inflation is worrisome.
-In conclusion, central bankers are in general agreement that their experiment with QE has worked so far, providing a far better result than what might have been the alternative.
An interesting note, which provides ample evidence that QE does work. Martin Feldstein (not quite a supporter of Keynesian policies I might add!) had also written a note which analysed clearly the specific positive impact of QE on the fourth quarter GDP growth in 2010 (http://www.project-syndicate.org/commentary/feldstein33/English ). Yes, there are likely to be unintended consequences (higher commodity prices, currency wars to name a few) but it is clearly the lesser of the evils once the alternative scenario ( a depression) is considered. As the noted economist Irving Fisher noted in his classic study of "Debt-Deflation Theory of Depressions " in 1933 (an analysis of various depressions over the previous century ) to make a point on why a reflationary policy should be pursued in the face of a severe economic downturn: "it is silly and immoral to let nature take her course as it is for a physician to ignore a case of pneumonia". To extend that thought further – a new drug to treat a patient suffering from a serious illness, is preferable (despite its potential side-effects) than letting nature takes its course and risking far more serious consequences!
So what size of further QEs can we expect from the Fed over the next few years? – I came across an interesting chart (from Casey Research) which totals the QE to date which has been required to keep short-term rates at zero, and extrapolates that number to estimate that $2 trillion of further QE could be required to keep them at zero until 2014 (which is the current stated goal of the Fed).
A very early Stock market indicator? (from Tom McClellan market report via Pragmatic Capitalist):
An intriguing chart below which looks at the Commitment of Traders (COT) data on eurodollar (interest rate deposit) futures to predict stock market movements a year in advance. Sceptical?! Read the following quotes from two reports – Feb 8, 2012 and May, 2011:
Feb 8, 2012:
-"For almost a year, we have known that a top was due to arrive in February 2012".
- "The next 3 months show a sideways to downward structure in the eurodollar COT data, and the implication is that the steep price advance that we have been seeing should transition to a more sideways market".
-" The next major inflection point is due in early June, when this leading indication says that a big multi-month rally is due to begin. By then, all of the bullishness that investors are expressing now in the various sentiment indications should have turned to frustration and pessimism, creating the right setup for a big new uptrend. The hard task will be to remain patient until then, waiting for conditions to be right again".
May 27, 2011:
-"The reason I picked this chart to show this week is that it is shouting to us now that something big is coming up for the stock market between June and October. In June 2010, the commercial eurodollar futures traders had gotten all the way up to a neutral position overall. Then between June and October 2010, they moved back to a big net short position."
-"The good news for the bullish case is that once that October low is put in, this eurodollar leading indication says we should see a really strong rally into the end of the year."
-"Commercial eurodollar traders seem to "know" a year in advance what the stock market is going to do. It is not a perfect correlation, but it is a darned good one. I'm not sure what makes this work, but I have seen that it has worked great since about 1997. It may help to understand that the commercial traders of eurodollar futures are typically the big banks, who are using these futures contracts to manage their assets and fund flows. So what we are seeing in their futures trading are responses to immediate banking liquidity conditions, and those actions give us a glimpse of future liquidity conditions for the stock market. These liquidity conditions are revealed first in the banking system, and then the liquidity waves travel through the stock market a year later."
-The weight of empirical evidence since QE started in 2008 supports the current view that QE has a positive impact on reducing long term bond yields, increasing real GDP growth and asset prices.
-Estimates on the reduction in long-term bond yields vary, with the BIS on one end estimating the impact to be a reduction of 0.25%, while the BOE and several studies in the US conclude that the reduction is 1.0% or more. The graphs below illustrate this relationship clearly and demonstrate that yield curves have flattened substantially since QE began, supporting the latter view.
-This empirical evidence refutes the traditional view that under a zero interest rate environment, investors should be indifferent to holding cash or bonds – with bond prices moving substantially higher it is clear that investors have a strong preference for holding longer term bonds which provide some return.
-However, there is a lower limit to bond yields, as suggested by the Keynesian liquidity trap. Japanese experience suggest this to be 1.3%, in which case US treasury bonds with maturities up to 5 years have already reached their lower limit- leaving the longer maturities for the Fed to focus its efforts on. In addition, the Fed could purchase mortgages and private securities to push down their spreads.
-In a QE environment, with the central bank balance sheets taking on more risk, the private sector attempts to restore its asset portfolio risk levels to those prevailing prior to the start of the crisis by purchasing riskier assets like equities. The BOE study suggests that equity prices have moved up by 20% in response to QE in the UK.
-Various studies (by the Bank of Italy and others) also suggests that QE has had a positive impact on the real economy – boosting GDP growth by 1.5% in the UK and 0.6-3.0% in the US. In addition, inflation rose (as desired by central banks) by 1.0%.
-However, the evidence also seems to indicate that the initial bout of QE had the maximum impact on bond yields, and subsequent doses produced smaller declines. This is likely to continue being the case going forward. In addition, the long-term positive correlation between central bank balance sheets and inflation is worrisome.
-In conclusion, central bankers are in general agreement that their experiment with QE has worked so far, providing a far better result than what might have been the alternative.
An interesting note, which provides ample evidence that QE does work. Martin Feldstein (not quite a supporter of Keynesian policies I might add!) had also written a note which analysed clearly the specific positive impact of QE on the fourth quarter GDP growth in 2010 (http://www.project-syndicate.org/commentary/feldstein33/English ). Yes, there are likely to be unintended consequences (higher commodity prices, currency wars to name a few) but it is clearly the lesser of the evils once the alternative scenario ( a depression) is considered. As the noted economist Irving Fisher noted in his classic study of "Debt-Deflation Theory of Depressions " in 1933 (an analysis of various depressions over the previous century ) to make a point on why a reflationary policy should be pursued in the face of a severe economic downturn: "it is silly and immoral to let nature take her course as it is for a physician to ignore a case of pneumonia". To extend that thought further – a new drug to treat a patient suffering from a serious illness, is preferable (despite its potential side-effects) than letting nature takes its course and risking far more serious consequences!
So what size of further QEs can we expect from the Fed over the next few years? – I came across an interesting chart (from Casey Research) which totals the QE to date which has been required to keep short-term rates at zero, and extrapolates that number to estimate that $2 trillion of further QE could be required to keep them at zero until 2014 (which is the current stated goal of the Fed).
A very early Stock market indicator? (from Tom McClellan market report via Pragmatic Capitalist):
An intriguing chart below which looks at the Commitment of Traders (COT) data on eurodollar (interest rate deposit) futures to predict stock market movements a year in advance. Sceptical?! Read the following quotes from two reports – Feb 8, 2012 and May, 2011:
Feb 8, 2012:
-"For almost a year, we have known that a top was due to arrive in February 2012".
- "The next 3 months show a sideways to downward structure in the eurodollar COT data, and the implication is that the steep price advance that we have been seeing should transition to a more sideways market".
-" The next major inflection point is due in early June, when this leading indication says that a big multi-month rally is due to begin. By then, all of the bullishness that investors are expressing now in the various sentiment indications should have turned to frustration and pessimism, creating the right setup for a big new uptrend. The hard task will be to remain patient until then, waiting for conditions to be right again".
May 27, 2011:
-"The reason I picked this chart to show this week is that it is shouting to us now that something big is coming up for the stock market between June and October. In June 2010, the commercial eurodollar futures traders had gotten all the way up to a neutral position overall. Then between June and October 2010, they moved back to a big net short position."
-"The good news for the bullish case is that once that October low is put in, this eurodollar leading indication says we should see a really strong rally into the end of the year."
-"Commercial eurodollar traders seem to "know" a year in advance what the stock market is going to do. It is not a perfect correlation, but it is a darned good one. I'm not sure what makes this work, but I have seen that it has worked great since about 1997. It may help to understand that the commercial traders of eurodollar futures are typically the big banks, who are using these futures contracts to manage their assets and fund flows. So what we are seeing in their futures trading are responses to immediate banking liquidity conditions, and those actions give us a glimpse of future liquidity conditions for the stock market. These liquidity conditions are revealed first in the banking system, and then the liquidity waves travel through the stock market a year later."
ICICI Direct reports weakening of Bajaj Auto owing to serious threats in domestic & export market
ICICIdirect has maintained `Hold` on Bajaj Auto (BAL) with a price
target of Rs 1,460 as against the current market price (CMP) of Rs
1,561 in its report dated Jan. 23, 2012. The broking house gave the
following rationale:
Not thrilled! Core growth remains fragile:
Bajaj Auto (BAL) reported its Q3FY12 numbers with sales coming in
above our estimate at Rs 50.63 billion (I-direct estimate: Rs 48.68
billion) a 21.2% YoY jump. It was driven by a mix of volume growth (up
13.6% YoY) at 1.07 million units and higher realization/ unit (up 5.0%
YoY) to Rs 47,276. BAL had hiked prices 3.5% to offset the DEPB impact
coupled with benefits arising from a depreciating rupee as average USD
rate for the quarter was higher 3.3% QoQ at Rs 49.4. RM cost as
proportion to sales declined 103 bps QoQ as EBITDA margins got
enhanced to 21.0% (up 90 bps QoQ). Reported PAT was ahead of our
estimates at Rs 7.95 billion (I-direct estimate: Rs7.88 billion), a
jump of 19.2% YoY. However, we will analyze beyond these numbers
further in the report.
Highlights of the quarter:
Bajaj Auto`s overall volume growth of 13.6% YoY was led by three
wheeler growth of 18.8% YoY and motorcycle volume growth of 12.9% YoY.
Although the export volume growth is robust at 28.4% YoY, we remain
cautious on the domestic growth front as early signs of an industry
wide slowdown have started creeping in. The weak domestic market
performance is reflected in a QoQ dip of 7.6% with overall domestic
sales in December sliding below the 2 lakh unit mark for the first
time in FY12. Bajaj Auto (Q,N,C,F)* had previously undertaken a price
hike across its export segment to cover the impact of DEPB. The
recently launched Boxer-150 cc has not met expectations with BAL
looking at repositioning the same. The management expects Q4FY12
industry growth to slide down to 5-6% and does not expect a ``V-
shaped` rebound for the same in FY13 in line with our bearish stance
for the segment.
Valuation:
We believe BAL`s domestic volume growth is under serious threat as
witnessed in the last couple of months and exports have been the only
shining light. On exports also, we believe competition from Honda and
Hero MotoCorp would be stiff. Any appreciation of the rupee could
impact our estimates negatively. At the CMP of Rs 1,561, the stock is
trading at 13.7x FY13E EPS. We have valued the stock at 13.9x FY13E
EPS to arrive at a target price Rs 1,460. We maintain our HOLD rating
on BAL.
Key Themes of the report include: Varying levels of optimism, Cyclical headwinds interrupt the shift towards discretionary spending, The Appetite for Technology and The Role of Brands
Access the report here:
https://www.credit-suisse.com/investment_banking/doc/emerging_consumer_survey_2012.pdf
Access the report here:
https://www.credit-suisse.com/investment_banking/doc/emerging_consumer_survey_2012.pdf
What is this?
Will it be the next BIG thing?
Tata Motors of India thinks so. What will the Oil Companies do to stop it?
It is an auto engine that runs on air. That's right; air not gas or diesel or electric but just the air around us. Take a look.
Tata Motors of India has scheduled the Air Car to hit Indian streets by August 2012
The Air Car, developed by ex-Formula One engineer Guy N. For Luxembourg-based MDI, uses compressed air to push its engine's pistons and make the car go.
The Air Car, called the "Mini CAT" could cost around 365,757 rupees in India or $8,177 US.
The Mini CAT which is a simple, light urban car, with a tubular chassis, a body of fiberglass that is glued not welded and powered by compressed air. A Microprocessor is used to control all electrical functions of the car. One tiny radio transmitter sends instructions to the lights, turn signals and every other electrical device on the car. Which are not many.
The temperature of the clean air expelled by the exhaust pipe is between 0-15 degrees below zero, which makes it suitable for use by the internal air conditioning system with no need for gases or loss of power.
There are no keys, just an access card which can be read by the car from your pocket. According to the designers, it costs less than 50 rupees per 100 KM, that's about a tenth the cost of a car running on gas. It's mileage is about double that of the most advanced electric car, a factor which makes it a perfect choice for city motorists. The car has a top speed of 105 KM per hour or 60 mph and would have a range of around 300 km or 185 miles between refuels. Refilling the car will take place at adapted gas stations with special air compressors. A fill up will only take two to three minutes and costs approximately 100 rupees and the car will be ready to go another 300 kilometers.
This car can also be filled at home with it's on board compressor. It will take 3-4 hours to refill the tank, but it can be done while you sleep.
Because there is no combustion engine, changing the 1 liter of vegetable oil is only necessary every 50,000 KM or 30,000 miles. Due to its simplicity, there is very little maintenance to be done on this car.
This Air Car almost sounds too good to be true. We'll see in August. 2012
Global - Economy and Market
The euro area experienced a considerable, negative, monetary shock in Q4 last year, with broad money contracting at an annualized rate of over 4% in the last three months of the year. On the asset side of banks' balance sheets, deleveraging was acute in December, with a steep fall in bank lending to the private sector– far more severe than anything seen in 2008/09 – especially to non-financial corporates.
Greek troika sees second bailout up to 145 bln euros - report
BERLIN - Greece's international lenders think the indebted country will need 145 billion euros of public money from the euro zone for its second bailout rather than the planned 130 billion euros, German news magazine Der Spiegel reported on Saturday.
Greece's economy is deteriorating so fast that there are doubts whether it can ever recover without defaulting on its bonds, according to an analysis by the International Monetary Fund. The analysis suggests that even after spending cuts and tax increases, Greece's debt in 2020 won't be significantly lower than it is now.
Fitch cuts Italy, Spain, other euro zone ratings
Fitch cut Italy's rating to A-minus from A-plus; Spain to A from AA-minus; Belgium to AA from AA-plus; Slovenia to A from AA-minus and Cyprus to BBB-minus from BBB, leaving the small island nation just one notch above junk status, indicating there was a 1-in-2 chance of further cuts in the next two years.
Italy bill sale success boosts mood ahead of Monday test
MILAN - Italy's six-month funding costs fell sharply on Friday to levels last seen before the country came to the fore of the euro zone debt crisis last summer, helping power a rally in its bonds ahead of Monday's more challenging sale of longer-dated debt.
U.K. retailers report poor sales this month
Britain's retail stores are suffering their worst month since March 2009, the Confederation of British Industry reported. Earlier, the government estimated that the U.K. economy contracted 0.2% in the fourth quarter.
U.S. growth quickens, but speed bumps ahead
WASHINGTON - The U.S. economy grew at its fastest pace in 1-1/2 years in the fourth quarter, but a rebuilding of stocks by businesses and slower business spending warned of weaker growth in early 2012.
Credit Suisse - Recent data make us more secure in our belief that the expansion will persist unimpeded in 2012. We remain skeptical that a new phase of sustained faster growth is upon us. We still expect 2012 GDP growth at 2.2% on a Q4/Q4 basis (2.3% annual average).
Fed appears open to another round of stimulus
Federal Reserve Chairman Ben Bernanke left the door open for more bond purchases to boost the struggling U.S. economy. "The framework makes very clear that we need to be thinking about ways to provide further stimulus if we don't get improvement in the pace of recovery and a normalization of inflation," he said.
Swiss urge U.S. tax deal to shield other banks
The break-up of Switzerland's oldest bank Wegelin on Friday shows the need to settle a dispute with U.S. authorities over tax cheats hiding cash in secret Swiss accounts, the finance minister said on Saturday.
The U.S. Department of Justice is probing 11 Swiss banks, including Credit Suisse (CSGN.VX), Julius Baer (BAER.VX) and Basler Kantonalbank (BSKP.S).
"I don't know whether other banks are in a similar or same situation...but what I know is that various banks are being threatened by the United States with prosecution and we will try to do everything...to come to a solution," Widmer-Schlumpf said.
U.S. public pension plans boost investment in private equity
Major public-employee pension plans in the U.S. are significantly increasing their investment in private-equity funds, according to data from Wilshire Trust Universe Comparison Service. A decade ago, public pensions had less than $1 billion, or 3% of their assets, in private equity. By September, such investment was worth $220 billion, 11% of the total.
U.S. military spending is set to fall for first time since 1998
To reduce the budget deficit, the U.S. next year will make its first reduction in military spending since 1998, Defense Secretary Leon Panetta said. The Obama administration will downsize the Army and the Marine Corps, cut the number of warships and fighter aircraft and ask Congress to approve base closures.
U.S. led world's oil-production growth for past 3 years, report says
A report by the U.S. Energy Information Administration reportedly will confirm that the country has been the world's fastest-growing oil producer for the past three years.
Japan logs first trade deficit since 1980
TOKYO - Japan logged its first annual trade deficit in more than 30 years in 2011, calling into question how much longer the country can fund its huge public debt without relying on fickle foreign investors.
China's manufacturing sector sees third month of decline
For the third consecutive month, China's manufacturing activity is declining, according to a survey by HSBC Holdings. The January "flash" reading of the purchasing managers' index is 48.8; anything less than 50 indicates contraction.
Slowing growth in China is emerging as a concern in some of this quarter's earnings reports from U.S. multinationals that have long relied on strong growth in China and other emerging markets to drive their profits.
India - Economy and Market
India surprises markets by cutting cash-reserve ratio
The Reserve Bank of India unexpectedly lowered banks' cash-reserve ratio for the first time since 2009. The central bank reduced the share of deposits that banks must hold in reserve to 5.5%, from 6%. It left the repurchase rate unchanged at 8.5%.
India reportedly will pay for Iranian oil with gold
India plans to circumvent U.S. economic sanctions on Iran by paying for oil with gold, according to a website reportedly associated
with Israeli intelligence. Indian Economic Affairs Secretary R. Gopalan, who has been working on how to pay for oil from Iran, did not comment when contacted by The Times of India.
Food price index down 1.03 pct y/y on Jan 14
NEW DELHI - India's food price index declined 1.03 percent in the year to January 14 government data on Friday showed, compared with an annual drop of 0.42 percent in the previous week.
India's foreign exchange reserves rise by $731.8 million: RBI
After the sixth straight weekly decline, India's foreign exchange reserves rose by $731.8 million to $293.25 billion for the week ended Jan 20.
IMF lowers India's growth projections to 7% as global recovery stalls
Growth in emerging and developing economies is expected to slow because of worsening external environment and weakening of internal demand.
Indian factories fail to move up on competition ladder
Smaller economies such as Thailand, Mexico and the Philippines once again outperformed India in a global industrial competitiveness index.
Govt to scrap weekly inflation data release
NEW DELHI - The government will discontinue weekly release of food and fuel inflation data based on wholesale price index (WPI) and instead shift to monthly reporting, a government official said on Wednesday, without citing a reason.
Government approves 10 pc disinvestment in RINL, may get Rs 2,500 crore
The government has approved disinvestment of 10 per cent of its stake in Rashtriya Ispat Nigam Ltd (RINL) through an initial public offer.
Govt gives nod to Oman Investment Fund to buy 5% stake in UCX
The govt has given nod to the Oman Investment Fund (OIF) to buy five per cent stake in the UCX, a national level commodity exchange in the country.
Government to rope in person from India Inc for NHAI CEO post
Govt has permitted CEOs pvt & public sector infra cos with a net worth of Rs 2,000 crore or more to submit their applications.
Sugar production till mid-January up by 17%
Sugar industry has produced 104.5 lakh tons of sugar upto January 15, 2012 in the current sugar season, which is around 17 lakh tons more than previous year.
Analysis: India's chronic electricity shortage cripples growth
Despite having the world's fifth-largest coal reserves and some oil and gas, India's economic growth is stifled by the nation's inability to generate enough electricity, according to The Economist. "If the test is avoiding a national catastrophe, India's power
sector will pass it," the magazine noted. "But if it is delivering the infrastructure that can allow the economy to grow at close to a double-digit pace and industrialize rapidly, India is failing." http://www.economist.com/node/21543138
Technology News –
Apple's fiscal Q1 profit shot up 118%
Apple's profit in its fiscal first quarter surged to a record $13.06 billion, or $13.87 a share, a 118% increase compared with the same period the previous year. Analysts surveyed by Thomson Reuters expected earnings of $10.07 a share. The iPhone once again drove sales. Apple Inc again surpasses Exxon to become most valuable company. Apple CEO Tim Cook has a problem, a $98 billion problem.
Internet penetration can help raise GDP: ICRIER report
NEW DELHI: A 10 per cent increase in internet penetration in India can increase the gross domestic product (GDP) by 1.08 per cent, says a report released Thursday by the Indian Council for Research on International Economic Relations (ICRIER).
Facebook to file IPO documents as soon as Wednesday - WSJ
REUTERS - Facebook plans to file documents as early as Wednesday for a highly anticipated IPO that will value the world's largest social network at between $75 billion and $100 billion, the Wall Street Journal cited unidentified sources as saying on Friday.
Apple overtakes Samsung in Q4 smartphone sales - report
SEOUL - Apple Inc overtook Samsung Electronics Co Ltd as the world's top smartphone maker in the fourth quarter of last year, with the South Korean company selling about half a million fewer smartphones than its rival, research firm Strategy Analytics said on Friday.
Smartphones drive record Samsung profit; capex raised to $22 bln
SEOUL - Samsung Electronics Co posted a record $4.7 billion quarterly operating profit, driven by booming smartphone sales, and will spend $22 billion this year to boost its production of chips and flat screens to further pull ahead of smaller rivals.
World Economic Forum Davos 2012: Mahindra Satyam, Tech Mahindra merger by 2012-end
Mahindra group's two technology ventures, Tech Mahindra and Mahindra Satyam, would be merged by the end of this year, a senior group official said here.
iGate Patni to invest $120 mn for expanding India facilities
IT company iGate Patni said it has got approval for expanding its facilities in Pune, Mumbai and Bangalore at an investment of $120 million.
BPO business gives IT majors Infosys, Wipro and HCL tough time in Q3
This slowdown reflected in the third quarter BPO numbers of IT majors, which saw revenues slacken due to project delays, fewer deal signings.
Indian enterprise IT spending will grow 10.3% in 2012: Gartner
Indian enterprise IT spending across all industry markets is forecast to surpass $ 39 billion in 2012, a 10.3% increase from the previous calendar year figure of $ 36 billion, says Gartner Inc.
Wipro ties up with Oracle to offer cloud-based HCM modules
Wipro Technologies announced the launch of 'Wipro SprintHR', a cloud-based platform offering Oracle Fusion Human Capital Management modules.
Europe opening up to Indian IT services
Infosys added 14 new clients in Europe of which two were in the $500-mn bracket and these were the largest deals the company won in the quarter.
Japan's NTT Communications buys 74% in Netmagic for Rs 900 crore
NTT Communications, a part of the Nippon Telegraph and Telephone group, will pay 10 billion yen for a 74% stake in Netmagic
Nomura acquires Indian software firm Anshin Software
Nomura Research Institute has acquired IT consultant Anshin Software (Anshinsoft) as part of efforts to expand global sales of its computer systems for financial transactions.
Amazon spending spree may extend well into 2012
SAN FRANCISCO - Amazon.com Inc is expected to barely make a profit in the crucial fourth quarter and 2012 might not be much better as the largest Internet retailer keeps spending on new ventures, testing the patience of investors.
Aakash tablet: Mumbai University recieves 25k bookings
The University of Mumbai has so far received around 25,000 requests for the low-cost computing device Aakash tablets.
Zynga looking to build viable business outside of Facebook for more profitability
With Facebook imposing a 30% tax on money made on its site, it is imperative for David Ko to drive Zynga's users to other platforms.
