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.
Global - Economy and Market
Gasoline pushes inflation up in January
WASHINGTON - Gasoline prices jumped in January, leading overall consumer prices higher and offering a reminder of the risks energy costs pose to the economic recovery.
Bernanke says recovery slow but small banks climbing back
WASHINGTON - The weak economic recovery has made it harder for banks to make money from loans but the financial conditions of smaller institutions appear to be solidifying, Federal Reserve Chairman Ben Bernanke said on Thursday.
Manufacturing, housing data flag underlying strength
WASHINGTON - U.S. manufacturing output rose in January and a gauge of factory activity in New York state hit a 1-1/2-year high in February, showing a solid underpinning for the economic recovery. Housing starts rose more than expected in January as groundbreaking on rental property surged, boosting hopes the still-weak housing sector could help economic growth this year.
Fed is open to boosting economy if recovery falters
The Federal Reserve appears willing to stimulate the U.S. economy more if necessary, according to minutes of the central bank's January meeting. Officials are worried that recent signs of a strengthening economy are short-lived, the minutes show.
Europe posts economic shrinkage for Q4
The EU and eurozone economies each contracted 0.3% in the fourth quarter, sending Belgium, Italy, the Netherlands and Portugal into recession. The gross domestic product of Germany, Europe's biggest economy, declined 0.2%. France, the second-largest, saw GDP grow 0.2%.
Greek cabinet tackles austerity, rescue hopes rise
ATHENS - Greece's cabinet tackled on Saturday how to implement austerity demanded by the EU and IMF as a 130-billion-eurorescue seemed within reach, while the euro zone considered modifying a deal with private creditors to help Athens reduce its huge debts.
China says it will invest in Europe's bailout funds
People's Bank of China Governor Zhou Xiaochuan said China will invest in the EU's rescue funds and maintain its euro investments. "China will always adhere to the principle of holding assets of EU sovereign debt," he said. "We would participate in resolving the euro debt crisis." Premier Wen Jiabao made a similar statement.
China cuts banks' reserve ratios for second time
SHANGHAI - China's central bank cut the amount of cash that commercial lenders must hold as reserves on Saturday for the second time in nearly three months, the latest step to shore up the slowing economy. The government is reluctant to give the green light to another bout of big bank lending, with inflation risks lingering and, more importantly, policymakers are determined to cool down the property sector to ward off a speculative bubble. Few analysts believe the central bank will cut interest rate cuts this year, with annual inflation staying stubbornly higher than the one-year deposit rate of 3.5 percent.
China: January New Loans
• Banks lent out Rmb738.1bn in new loans in January, less than the market's expectation of a Rmb1tn rise, although we believe this was influenced by the fewer working days in January this year due to the Chinese new year festival.
• This coincides with the government's measured easing approach, but we need to take into account the amount of new loans in February to view the whole picture. M2 growth also decelerated further to 12.4% yoy in January.
• We suspect lending must have been very slow after the robust activities during the first week after the calendar new year. Banks granted a large sum of credit to local governments and local investment vehicles in the first week of January, but that momentum might have quickly cooled off.
• We think the current credit easing is selective, with property developers being excluded. Demand from businesses for real investments is also weak. The liquidity situation has improved, however, especially among the SMEs. We think growth prospects remains biased on the weak side.
Japan slowly wakes up to doomsday debt risk
TOKYO - Capital flight, soaring borrowing costs, tanking currency and stocks and a central bank forced to pump vast amounts of cash into local banks -- that is what Japan may have to contend with if it fails to tackle its snowballing debt.
India - Economy and Market
Industrial production provided a modest downside surprise relative both to consensus and our own forecast – coming in at 1.8% yoy. This was down from 5.9% in the previous month, while we estimate that output fell 1.6% on a seasonally adjusted month-on-month basis.
What's the underlying trend? In truth, production has been even more volatile than normal in the last few months, falling very heavily in October, before bouncing back even more strongly in November and then partially correcting in December. The best guide to the underlying trend is probably given by the three month-on-three month seasonally adjusted annualized rate. This has moved up from a low of -13% in October to 3.3% in December. As such, it is beginning to look as though production has bottomed in underlying terms – a view supported by the strong improvement we have seen in India's manufacturing PMI.
India's January wholesale price inflation came in at 6.6% yoy, slightly below the market's and our expectations, and the lowest inflation rate since 2009. We estimate that WPI rose only 0.1% on a seasonally adjusted basis from the previous month.
Another piece of good news is that the RBI's measure of core inflation, the manufacturing WPI ex-food, also moderated to 6.7% yoy from 7.7% in December, and the lowest level since January 2011.
These developments further support our rate cut call. We recently changed our interest rate view, and are now expecting the first repo rate cut to come in March (rather than April), with reductions totaling 175bps by January 2013.
Although recent developments in oil prices pose some upside risk to inflation, we believe our sub-consensus 5.8% 2012-13 year average WPI forecast leaves some room for the impact of higher commodity prices.
India consumer spending set to soar by 2020: study
MUMBAI: India's consumer spending is likely to expand nearly four times to $3.6 trillion by 2020, fuelled by economic growth and rising household incomes, a new study said on Thursday.
Consumer expenditure in India is set to increase 3.6 times from $991 billion in 2010, at an annual rate of 14 per cent, the Boston Consulting Group and Confederation of Indian Industry (CII) report said.
MNREGS hinders micro enterprises in villages, says ISB study
High agricultural wages due to the success of MNREGS has hindered the development of micro enterprises in the hinterlands, says a paper by ISB.
Industrial production to grow by 7.4% in FY 13: CMIE
Production of MUVs, two-wheelers and three-wheelers is also expected to grow by around 10 per cent. This will lead to higher demand and production
Technology News (IT, Software, Hardware and Telecom)
Fresh 2G auction: Consumer may be spared large hike
The Indian mobile consumer could be spared a large tariff hike due to the mandated auction of 2G telecom spectrum.
DoT for one-time fee on excess spectrum on prospective basis
The move is expected to offer relief to the tune of Rs 10,00 crore to BSNL, while Bharti Airtel may save around Rs 8,000 crore.
2G auctions to take over 13 months to be completed: DoT
The telecom department (DoT) has told PM Manmohan Singh that the process of completing the Supreme Court-ordered 2G auctions will take over 13 months.
Telenor seeks split, alimony from Unitech
Telenor said it no longer believed that its partnership with Unitech had a future & would start the process of looking for a new Indian partner.
2G: Telcos can buy more spectrum; Vodafone, Airtel welcome move
Sibal said telcos operating in the same region will be allowed to share 2G spectrum, and all future allocation of airwaves will only be through auctions.
New Telecom Policy: Telcos allowed to share spectrum; 3G services left out, Spectrum limit enhanced up to 10MHz; licence fee uniform at 8%, M&A to be allowed under simple process, says Kapil Sibal
Sharing of spectrum would not only ease pressure on operators, but also generate additional revenues for the Govt by way of increasing subscribers. The government said all service providers would be allowed to hold higher spectrum of up to 10 MHz, a move that would help them offer quality services. A new telecoms policy will be announced in April. The sector regulator has proposed a relaxation of rules for M&A in the telecoms sector.
TDSAT to telcos: Explain ways to cover Government loss on 3G roaming
TDSAT asked private operators, who are opposing the DoT directive to scrap their 3G roaming pacts, to explain how they would compensate the govt if they lose the case.
Infosys to expand India footprint with focus on tier-II cities
The company, which has been planning a centre in Gujarat, said at present only the issues related to availability of land at fair price are being considered.
HCL Technologies to provide IT services to US insurance group GAIG
The insurance practice of the $3.9-bn HCL has been built on domain expertise with application and process optimisation capabilities across the quote-to-claim cycle.
Tata Consultancy Services sees rise in 'discretionary spending'
Discretionary spending refers to technology programmes and applications that are desirable for global companies but not critical for businesses to carry on.
HCL Technologies bags infrastructure management contract with Statoil
Norwegian government-owned energy major Statoil on Monday announced a multi-million dollar deal with India's fourth-largest technology major HCL Technologies.
TCS pips CSC for multi-year deal from Danish Telco TDC
The exact value of the deal is not known, it is likely to be worth over $100 million. TDC is one of CSC's largest private sector clients.
Cisco eyes $400 mn IT opportunity outside top six metros
These cities are Chandigarh, Lucknow, Gawahati, Jaipur, Bhopal, Indore, Ahmedabad, Vododhara, Bhubaneswar, Vizag, Coimbatore, Kochi, Kanpur and Patna.
Nasscom pegs 11-14% growth in infotech, ITeS exports in FY13
Export revenues from the infotech and IT-enabled services sector are expected to grow between 11 and 14%in US $ terms.
Eurozone crisis an opportunity for Indian IT: Expert
India's IT sector is well placed to take advantage of the current Eurozone crisis as an increasing number of companies will look at "offshoring" as a way to cut their costs, says an expert with a leading consultancy.
Cognizant bags 5 year multi-million dollar IT outsourcing deal from Future Group
Cognizant will support more than 1,000 Future Group stores-including Pantaloons, Big Bazaar, Food Bazaar, Central, Home Town.
Outsourcing revenues: TCS closing in on Accenture
In recent quarters, the revenue differential has narrowed down to about $300-400 million from about $800-900 mn three years ago.
Cognizant Technology stuns all with a 23% growth guidance for 2012
Cognizant added more incremental business than India's top three software exporters and said it expected to grow 23% to $7.53 billion in 2012.
Mahindra Satyam to buy 15% in Dion Global Solution
In the first phase, Satyam will pick up 15% stake, which may be increased depending on the achievement of some milestones, said a person involved in the deal.
Oracle to buy Taleo for $1.9 bn; cloud war brews
Taleo was to be woven into Oracle Internet "cloud" services and pitched as a tool for company's to manage human resources and employee careers.
Value for money: 5 smartphones available below Rs 10,000
As new technology hots up the competition in the mobile phone market, the older phones become more affordable.
PC market in India dips 6.5% to 2.5 mn units in Q4 2011: Gartner
Combined desk-based and mobile PC market in India totalled nearly 2.5 million units in the fourth quarter of 2011, a 6.5 per cent decline from the same period in 2010.
Chinese retailers stop Apple iPad sales as Proview dispute intensifies
Chinese retailers have stopped sales of Apple's iPad as the trademark dispute between Apple and the China-based tech company Proview intensified.
Amazon sells 3.9 million tablets in Q4 2011
Amazon.com shipped nearly 3.9 million Kindle Fire tablets in the last three months of 2011.
Apple's iPhone market share to slip from Q1: Gartner
Apple, which became the world's largest smartphone vendor in the fourth quarter, will see its iPhone market share slipping for a couple of quarters
Samsung India targets 60% of smartphone market in 2012: Source
Samsung India is targetting to capture 60 per cent of the mobile smartphone market in the country this year, a company official said.
Samsung unveils dual SIM smartphones in India
They come in three models -- Galaxy Ace Duos, the Galaxy Y Pro Duos and Galaxy Y Duos -- and are priced at Rs 16,900, Rs 11,090 and Rs 10,490 respectively.
