BACK in the early ’80s, when the Zagat Survey was still just a single sheet of legal-size paper that Nina and Tim Zagat gave to friends and colleagues, they learned that their list of the best restaurants in New York had been reproduced — en masse — inside Citibank.
“I had a friend there who called me and said he’d just gotten one of these things on his desk,” Mr. Zagat recalls. “Printed across the top, it said, ‘To all officers of the bank.’ And when I asked how many officers there were, he told me there were 3,000.”
For the Zagats, this was one of the first signs that their hobby of tabulating restaurant ratings might have wide appeal. In fairly short order, the New York survey, and the narrow maroon books for other major cities that the couple assembled in its wake, became indispensable for gourmands on the go in the late 1980s and throughout the 1990s.
And up until a few years ago, the release of the coming year’s Zagat (pronounced zuh-GAT) ratings was a hotly anticipated event among the status conscious and the merely hungry — with results that would often go viral. When a humble Brooklyn establishment called the Grocery scored an almost perfect Zagat score of 28 — on a zero-to-30 scale — for its food in 2003, for example, it made the front page of this newspaper.
Today, however, “viral” is hardly the first word that pops off of people’s tongues when you ask about Zagat Survey, the company’s official name. They talk about the power of the Zagat brand; that maroon color is now trademarked, for instance. And they give the Zagats credit for having invented, or at least popularized, user-generated content.
But in the next breath, most of them wonder why Zagat hasn’t won on the Web. The review site Yelp, for example, which made its debut in 2004, draws much more traffic.
In early 2008, at a time of high valuations for many emerging Web companies, the Zagats tried and failed to sell their company, to the disappointment of some of the venture capitalists who had invested in Zagat in 2000.
“We’ve now been at it for 10 years, so of course we’d like to have an exit,” says Bill Ford, the C.E.O. of the venture capital firm General Atlantic, which has invested in Zagat. “It’s my belief that the brand has not been fully leveraged.”
Mr. Ford, who was once a Zagat board member, is quick to note that the things that attracted General Atlantic to Zagat in 2000 are still there today. “They had outstanding and differentiated content, and the opportunity to migrate it from offline to online, both on the Web and on mobile,” he says.
Yet that migration has been neither as dexterous nor as profitable as Zagat backers had hoped. Perhaps the biggest reason is that the Zagats have kept their ratings and their reviews behind a pay wall on their Web site.
The cost was high in terms of lost traffic, for just as the Zagats were digging in their heels, Google was rapidly gaining market share among Web users. Google penalizes sites that keep content behind a pay wall. As a result, Zagat listings usually didn’t appear on the first page of a Google search result for specific restaurants. Because of that, fewer people came to Zagat.com, which meant that it didn’t have the opportunity to convert them to paid subscribers.
While online traffic comparisons are never exact, Zagat.com had 570,000 unique domestic Web visitors in September, according to the Nielsen Company, versus 9.4 million for Yelp. The Zagats say they actually have more than 1.2 million unique users worldwide.
None of this means Zagat is in any immediate financial danger. While the Zagats refused to provide much specific financial information for this article, they did say their company is still profitable.
They are also quick to point out that it’s not at all clear that Yelp’s strategy of having dozens of salespeople selling local ads is superior to their approach of asking Web and mobile users to pay for listings. Zagat, meanwhile, still sells its paper books and operates what the couple describe as an extremely profitable unit that creates custom guides for corporate clients.
The digital wheel has also turned in a new direction, with more consumers using smartphones and other mobile devices to find content and services through apps. While Zagat.com has met resistance from desktop computer users when it comes time to whip out their credit cards, mobile customers have shown more willingness to pay for apps.
So now Zagat is racing to prove that it’s worth paying $9.99 a year for its smartphone app — and that it can persuade enough customers to fund its existence for another three decades — even while Yelp and other competitors are offering their apps free.
Even after the failed sale in 2008, the Zagats profess no regrets about their Web strategy. In fact, they think the world is finally catching up to them.
“When I think back on the business model, with our books designed to fit in a pocketbook, there we were at the beginning with all three things that we’re all talking about today,” Ms. Zagat says. “Mobile, social and local. That is in the D.N.A. of Zagat.”
TIM ZAGAT and Nina Safronoff got to know one another in 1963, in a study group they joined as first-year students at Yale Law School.
“I liked her for plenty of reasons, in part because she took such great notes but also because she knew how to cook,” Mr. Zagat says.
Saturday, November 13, 2010
Monsoon-Sown Oilseeds Output May Jump 12.4% as Area Increases, Group Says
India, the world’s second-largest buyer of vegetable oils, may harvest 12.4 percent more monsoon- sown oilseeds from a year ago because of an increase in area planted to soybeans and peanuts, a processors’ group said.
Output of oilseeds, including sunflower and sesame seeds, may climb to 15.4 million metric tons in the year to June 30, 2011, from 13.7 million tons, the Central Organization for Oil Industry & Trade said today. The forecast compares with 17.3 million tons estimated by the farm ministry.
Imports of vegetable oils by India probably totaled 9.2 million metric tons in the year ended Oct. 31, Sushil Goenka, president of the Solvent Extractors’ Association of India, said in an interview yesterday.
Farmers planted oilseeds on 17.55 million hectares (43.4 million acres), up from 17.44 million hectares a year earlier, according to the farm ministry.
The monsoon crop is sown in June and harvested starting middle of September.
Output of oilseeds, including sunflower and sesame seeds, may climb to 15.4 million metric tons in the year to June 30, 2011, from 13.7 million tons, the Central Organization for Oil Industry & Trade said today. The forecast compares with 17.3 million tons estimated by the farm ministry.
Imports of vegetable oils by India probably totaled 9.2 million metric tons in the year ended Oct. 31, Sushil Goenka, president of the Solvent Extractors’ Association of India, said in an interview yesterday.
Farmers planted oilseeds on 17.55 million hectares (43.4 million acres), up from 17.44 million hectares a year earlier, according to the farm ministry.
The monsoon crop is sown in June and harvested starting middle of September.
Indian Oil Profit Surges, Surpassing Estimates, After Subsidy Compensation
Indian Oil Corp., the nation’s biggest refiner, posted a more than 18-fold increase in second- quarter profit, beating analysts’ estimates, after the government compensated it for selling fuels below cost.
Net income rose to 52.9 billion rupees ($1.18 billion) for the three months ended Sept. 30, from 2.8 billion rupees a year earlier, the state-run refiner said in a statement to the Bombay Stock Exchange today. That compares with the average 10.6 billion rupee estimate of 16 analysts surveyed by Bloomberg.
The profit gain may bolster efforts by Prime Minister Manmohan Singh’s administration and the company to sell shares in the first quarter of next year as record overseas investments pushed the benchmark Sensitive Index to a record this month. The government freed gasoline prices from state control in June while continuing to set rates for other fuels, including diesel.
“State-run refiners depend too heavily on government support,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi in southern India, said before the earnings were announced. “The government supported them this quarter and we don’t know what will happen in the next.”
Shares of the refiner have gained 32 percent this year, outpacing the 15 percent increase in the benchmark Sensitive Index. The stock fell 1.3 percent to 402.55 rupees in Mumbai trading yesterday. The stock market is closed in India today.
Below Cost
Indian Oil, based in New Delhi, sells diesel, kerosene and cooking gas below cost to help the government curb inflation. State refiners are partly compensated by the government and oil producers including Oil & Natural Gas Corp. and Oil India Ltd.
The government gave Indian Oil 72.2 billion rupees as compensation in the quarter, according to today’s statement. The refiner didn’t account for any payment a year earlier.
Gasoline prices were increased four times since the price controls were removed on June 25, according to the company’s website.
“This is a step in the right direction as it helps reduce the refiners’ dependence on subsidies,” Mathews said.
Crude oil in New York gained 12 percent to an average $76.20 a barrel in the quarter, boosted by demand from India and China, Asia’s two fastest-growing major economies. Oil rose to this year’s high of $88.63 a barrel on Nov. 11. The December contract fell $2.93 to settle at $84.88 a barrel on the New York Mercantile Exchange yesterday.
Refining Margins
Indian Oil’s average gross refining margin for the quarter was $6.63 a barrel compared with $3.62 a year earlier, the company said. Sales rose 15 percent to 693.4 billion rupees.
Hindustan Petroleum Corp. reported second-quarter profit of 20.9 billion rupees and Bharat Petroleum Corp. posted net income of 21.4 billion rupees. Both state refiners had losses a year earlier.
The government plans to sell a 10 percent stake in Indian Oil in the three months ending March 31 as part of an asset-sale program aimed at cutting the budget deficit. The refiner will simultaneously offer fresh shares equivalent to a similar stake to reduce debt as it builds a new refinery and looks for possible ventures overseas.
Indian Oil operates about 33 percent of the nation’s refining capacity and is building a new 15 million metric ton-a- year plant in the eastern state of Orissa. The company added 3 million tons of capacity at its Panipat refinery this month. Before the expansion, Indian Oil and its unit had a combined capacity of 61.7 million tons a year, according to its website.
The government holds a 79 percent stake in Indian Oil.
Net income rose to 52.9 billion rupees ($1.18 billion) for the three months ended Sept. 30, from 2.8 billion rupees a year earlier, the state-run refiner said in a statement to the Bombay Stock Exchange today. That compares with the average 10.6 billion rupee estimate of 16 analysts surveyed by Bloomberg.
The profit gain may bolster efforts by Prime Minister Manmohan Singh’s administration and the company to sell shares in the first quarter of next year as record overseas investments pushed the benchmark Sensitive Index to a record this month. The government freed gasoline prices from state control in June while continuing to set rates for other fuels, including diesel.
“State-run refiners depend too heavily on government support,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi in southern India, said before the earnings were announced. “The government supported them this quarter and we don’t know what will happen in the next.”
Shares of the refiner have gained 32 percent this year, outpacing the 15 percent increase in the benchmark Sensitive Index. The stock fell 1.3 percent to 402.55 rupees in Mumbai trading yesterday. The stock market is closed in India today.
Below Cost
Indian Oil, based in New Delhi, sells diesel, kerosene and cooking gas below cost to help the government curb inflation. State refiners are partly compensated by the government and oil producers including Oil & Natural Gas Corp. and Oil India Ltd.
The government gave Indian Oil 72.2 billion rupees as compensation in the quarter, according to today’s statement. The refiner didn’t account for any payment a year earlier.
Gasoline prices were increased four times since the price controls were removed on June 25, according to the company’s website.
“This is a step in the right direction as it helps reduce the refiners’ dependence on subsidies,” Mathews said.
Crude oil in New York gained 12 percent to an average $76.20 a barrel in the quarter, boosted by demand from India and China, Asia’s two fastest-growing major economies. Oil rose to this year’s high of $88.63 a barrel on Nov. 11. The December contract fell $2.93 to settle at $84.88 a barrel on the New York Mercantile Exchange yesterday.
Refining Margins
Indian Oil’s average gross refining margin for the quarter was $6.63 a barrel compared with $3.62 a year earlier, the company said. Sales rose 15 percent to 693.4 billion rupees.
Hindustan Petroleum Corp. reported second-quarter profit of 20.9 billion rupees and Bharat Petroleum Corp. posted net income of 21.4 billion rupees. Both state refiners had losses a year earlier.
The government plans to sell a 10 percent stake in Indian Oil in the three months ending March 31 as part of an asset-sale program aimed at cutting the budget deficit. The refiner will simultaneously offer fresh shares equivalent to a similar stake to reduce debt as it builds a new refinery and looks for possible ventures overseas.
Indian Oil operates about 33 percent of the nation’s refining capacity and is building a new 15 million metric ton-a- year plant in the eastern state of Orissa. The company added 3 million tons of capacity at its Panipat refinery this month. Before the expansion, Indian Oil and its unit had a combined capacity of 61.7 million tons a year, according to its website.
The government holds a 79 percent stake in Indian Oil.
Friday, November 12, 2010
‘Smart’ Meters Draw Complaints of Inaccuracy
NOLANVILLE, Tex. — Sgt. John Robertson 2nd, an Army mechanic at nearby Fort Hood, is fuming about the so-called smart electric meter his local utility has installed on the side of his tidy, 1,800-square-foot home.
Like thousands of consumers with the new meters around the country, Sergeant Robertson suspects the device is not as smart as advertised.
In his case, he says it is inaccurately measuring his family’s power use and driving up his bills — some months by as much as 50 percent, to as high as $320 — since it was installed in December. This, he said, is despite his efforts to cut back on energy use.
“I’ve done two tours in Iraq, and when I come home I’m getting ripped off by my electric meter,” said Sergeant Robertson, who with his wife, Kim, is raising four children on a tight budget.
Whether he and others are indeed getting ripped off is now a matter of national debate.
Over the last year, as utilities around the country have installed an estimated two million of the new digital meters, power companies have received plenty of complaints — and in some states have been hit by class-action lawsuits — most of them from consumers saying the smart meters are overstating their electrical usage.
This is not the smooth rollout envisioned last year, when the Obama administration included money for utilities to install smart meters as part of a $3.4 billion injection of federal stimulus spending to modernize the nation’s power grid. By 2020, there could be as many as 65 million smart meters, by various makers, installed in this country, according to one estimate.
Using digital technology and computer networking, smart meters can transmit real-time data that is supposed to enable utilities to conserve electricity and better allocate power during parts of the day when overall demand is high. Utilities can also then vary the price for power, by time of day or time of year, based on when it is being used; some are already offering this option to customers.
Meanwhile, for customers with the right training and additional equipment, the meters can give households a much more detailed picture of the amount of electricity they are using, down to individual appliances. That, in theory, can help people reduce their electric bills and become greener citizens.
But because of faulty technology in some cases, and more often through general shortcomings in consumer education and customer-service support by many utilities, smart meters are leaving many customers dumbfounded.
In Maryland earlier this year, state regulators, aware of the discontent around the country, temporarily blocked a utility’s smart-meter proposal, citing inadequate planning and the potential cost to consumers.
In California, Michael Kelly, a lawyer handling a class-action suit against the state’s dominant utility, Pacific Gas and Electric, over billing disputes, said the problems probably had less to do with faulty devices and more to do with a hasty rollout. Old billing systems were merged with the new smart-meter technology, he said, too frequently resulting in erroneous charges.
“We’re just saying we want an evaluation done and that we want anyone who was overcharged to get their money back,” Mr. Kelly said.
A state-ordered analysis by the independent research firm Structure Consulting Group, released in September, agreed with the utility’s assertion that its new meters were accurate for the most part. The study also supported its conclusion that most of the complaints could be traced to a heat wave, changes in personal behavior or old meters that were actually malfunctioning and undercharging before the new ones were installed.
But the Structure report also said the utility had done a poor job of educating consumers and addressing their concerns. In basic terms, the smart digital meters are simply replacing the old analog meters, with their inscrutable dials and counters, found on the sides of homes all over America. But unlike those “dumb” devices, which are often read once a month by utility employees going house to house on foot, the digital meters can provide utilities with remote, real-time measurements of kilowatt-hours being used.
A recent analysis by the nonprofit Electric Power Research Institute, a utility-financed research organization based in Palo Alto, Calif., estimated that creating an intelligent electricity grid of this sort in the United States could reduce electricity use by more than 4 percent annually by 2030. Nationally, that could mean annual savings of roughly $20.4 billion for utilities and their customers, according to the institute.
Like thousands of consumers with the new meters around the country, Sergeant Robertson suspects the device is not as smart as advertised.
In his case, he says it is inaccurately measuring his family’s power use and driving up his bills — some months by as much as 50 percent, to as high as $320 — since it was installed in December. This, he said, is despite his efforts to cut back on energy use.
“I’ve done two tours in Iraq, and when I come home I’m getting ripped off by my electric meter,” said Sergeant Robertson, who with his wife, Kim, is raising four children on a tight budget.
Whether he and others are indeed getting ripped off is now a matter of national debate.
Over the last year, as utilities around the country have installed an estimated two million of the new digital meters, power companies have received plenty of complaints — and in some states have been hit by class-action lawsuits — most of them from consumers saying the smart meters are overstating their electrical usage.
This is not the smooth rollout envisioned last year, when the Obama administration included money for utilities to install smart meters as part of a $3.4 billion injection of federal stimulus spending to modernize the nation’s power grid. By 2020, there could be as many as 65 million smart meters, by various makers, installed in this country, according to one estimate.
Using digital technology and computer networking, smart meters can transmit real-time data that is supposed to enable utilities to conserve electricity and better allocate power during parts of the day when overall demand is high. Utilities can also then vary the price for power, by time of day or time of year, based on when it is being used; some are already offering this option to customers.
Meanwhile, for customers with the right training and additional equipment, the meters can give households a much more detailed picture of the amount of electricity they are using, down to individual appliances. That, in theory, can help people reduce their electric bills and become greener citizens.
But because of faulty technology in some cases, and more often through general shortcomings in consumer education and customer-service support by many utilities, smart meters are leaving many customers dumbfounded.
In Maryland earlier this year, state regulators, aware of the discontent around the country, temporarily blocked a utility’s smart-meter proposal, citing inadequate planning and the potential cost to consumers.
In California, Michael Kelly, a lawyer handling a class-action suit against the state’s dominant utility, Pacific Gas and Electric, over billing disputes, said the problems probably had less to do with faulty devices and more to do with a hasty rollout. Old billing systems were merged with the new smart-meter technology, he said, too frequently resulting in erroneous charges.
“We’re just saying we want an evaluation done and that we want anyone who was overcharged to get their money back,” Mr. Kelly said.
A state-ordered analysis by the independent research firm Structure Consulting Group, released in September, agreed with the utility’s assertion that its new meters were accurate for the most part. The study also supported its conclusion that most of the complaints could be traced to a heat wave, changes in personal behavior or old meters that were actually malfunctioning and undercharging before the new ones were installed.
But the Structure report also said the utility had done a poor job of educating consumers and addressing their concerns. In basic terms, the smart digital meters are simply replacing the old analog meters, with their inscrutable dials and counters, found on the sides of homes all over America. But unlike those “dumb” devices, which are often read once a month by utility employees going house to house on foot, the digital meters can provide utilities with remote, real-time measurements of kilowatt-hours being used.
A recent analysis by the nonprofit Electric Power Research Institute, a utility-financed research organization based in Palo Alto, Calif., estimated that creating an intelligent electricity grid of this sort in the United States could reduce electricity use by more than 4 percent annually by 2030. Nationally, that could mean annual savings of roughly $20.4 billion for utilities and their customers, according to the institute.
Sensitive Index Slides As Factory Output Slows; Hindalco, Mahindra Drop
India’s benchmark stock index dropped the most in five months as growth in the nation’s industrial production unexpectedly slowed to a 16-month low.
Mahindra & Mahindra Ltd., the largest maker of sport- utility vehicles and tractors, declined the most since May. Output at factories, utilities and mines rose 4.4 percent in September after a revised 6.9 percent increase a month earlier, the statistics office said today. The median estimate of 27 economists in a Bloomberg News survey was for a 6.4 percent gain. Hindalco Industries Ltd., the biggest aluminum producer, slid as metal prices slumped on speculation China, the biggest consumer, may attempt to rein in inflation by raising interest rates.
“The numbers have clearly disappointed,” said Aneesh Srivastava, the Mumbai-based chief investment officer at IDBI Federal Life Insurance Co., who manages about $325 million. “We will be a little conservative and cautious in our investing. We will not increase our exposure to the capital goods sector.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, lost 432.20, or 2.1 percent, to 20,156.89, as of the 3:30 p.m. close in Mumbai, completing its steepest one-day slide since June 1. The gauge declined 4 percent this week, the most since the five-days ended May 7. The S&P CNX Nifty Index on the National Stock Exchange dropped 2 percent to 6,071.65. The BSE 200 Index retreated 2.1 percent to 2,562.61.
Mahindra, Hindalco
Stocks on the Sensex are valued at 19.2 times earnings after jumping 15 percent this year. The gauge is the best performer and the most expensive among the ten biggest markets in the world.
Mahindra & Mahindra plunged 5 percent to 773.15 rupees, its biggest drop since May 19. Tata Motors Ltd., the biggest truckmaker and owner of Jaguar Land Rover, fell 2.3 percent to 1,246.25 rupees, its lowest close since Nov. 5.
Hindalco sank 4.6 percent to 223.1 rupees, its steepest drop since June 8. Sterlite Industries (India) Ltd., the No. 1 copper and zinc producer, slumped 2.3 percent to 181.95 rupees. Tata Steel Ltd., the biggest producer of the alloy, slid 3.8 percent to 606.95 rupees.
Commodities tumbled today, with copper falling from a record and oil slipping from a two-year high, on speculation China may attempt to rein in inflation by raising interest rates, curbing demand in the world’s biggest consumer of metals and energy.
DLF, Bharti
The MSCI Asia Pacific Index dropped the most in more than two months and completing its biggest weekly loss in three months.
DLF Ltd., the biggest developer, plunged 5.6 percent to 327.2 rupees, its biggest drop since June 7. The shares were cut to “underperform” from “neutral” by Anand Agarwal and Abhishek Bansal, analysts at Credit Suisse Group AG, who said “disappointment” on volumes and cash flow will continue after “weak” second-quarter results.
Bharti Airtel Ltd., the largest mobile-phone operator, retreated for a third day after profit dropped, slumping 3.5 percent to 305.55 rupees, its lowest close since July 22. Reliance Communications Ltd., the second-largest mobile-phone operator, fell 3.5 percent to 169.9 rupees.
‘Weak Sentiment’
State Bank of India sank 4.7 percent to 3,026.8 rupees, its sharpest drop since Jan. 27. The nation’s largest lender’s rating was lowered by the Reserve Bank of India after the regulator inspected accounts for the year through March 2009, the Mint reported, without saying where it got the information. S. S. Ranjan, chief financial officer of State Bank, didn’t immediately respond to calls to his cell phone.
“Investor sentiment is weak,” said Kishor Ostwal, managing director of CNI Research (India) Ltd., a publicly traded equities research provider in Mumbai. “Some of the results have disappointed. Cues from other Asian markets have not helped either.”
Overseas investors bought a net 1.08 billion rupees of Indian stocks on Nov. 10, taking this year’s record flows to 1.3 trillion rupees, according to data on the website of the Securities and Exchange Board of India.
Mahindra & Mahindra Ltd., the largest maker of sport- utility vehicles and tractors, declined the most since May. Output at factories, utilities and mines rose 4.4 percent in September after a revised 6.9 percent increase a month earlier, the statistics office said today. The median estimate of 27 economists in a Bloomberg News survey was for a 6.4 percent gain. Hindalco Industries Ltd., the biggest aluminum producer, slid as metal prices slumped on speculation China, the biggest consumer, may attempt to rein in inflation by raising interest rates.
“The numbers have clearly disappointed,” said Aneesh Srivastava, the Mumbai-based chief investment officer at IDBI Federal Life Insurance Co., who manages about $325 million. “We will be a little conservative and cautious in our investing. We will not increase our exposure to the capital goods sector.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, lost 432.20, or 2.1 percent, to 20,156.89, as of the 3:30 p.m. close in Mumbai, completing its steepest one-day slide since June 1. The gauge declined 4 percent this week, the most since the five-days ended May 7. The S&P CNX Nifty Index on the National Stock Exchange dropped 2 percent to 6,071.65. The BSE 200 Index retreated 2.1 percent to 2,562.61.
Mahindra, Hindalco
Stocks on the Sensex are valued at 19.2 times earnings after jumping 15 percent this year. The gauge is the best performer and the most expensive among the ten biggest markets in the world.
Mahindra & Mahindra plunged 5 percent to 773.15 rupees, its biggest drop since May 19. Tata Motors Ltd., the biggest truckmaker and owner of Jaguar Land Rover, fell 2.3 percent to 1,246.25 rupees, its lowest close since Nov. 5.
Hindalco sank 4.6 percent to 223.1 rupees, its steepest drop since June 8. Sterlite Industries (India) Ltd., the No. 1 copper and zinc producer, slumped 2.3 percent to 181.95 rupees. Tata Steel Ltd., the biggest producer of the alloy, slid 3.8 percent to 606.95 rupees.
Commodities tumbled today, with copper falling from a record and oil slipping from a two-year high, on speculation China may attempt to rein in inflation by raising interest rates, curbing demand in the world’s biggest consumer of metals and energy.
DLF, Bharti
The MSCI Asia Pacific Index dropped the most in more than two months and completing its biggest weekly loss in three months.
DLF Ltd., the biggest developer, plunged 5.6 percent to 327.2 rupees, its biggest drop since June 7. The shares were cut to “underperform” from “neutral” by Anand Agarwal and Abhishek Bansal, analysts at Credit Suisse Group AG, who said “disappointment” on volumes and cash flow will continue after “weak” second-quarter results.
Bharti Airtel Ltd., the largest mobile-phone operator, retreated for a third day after profit dropped, slumping 3.5 percent to 305.55 rupees, its lowest close since July 22. Reliance Communications Ltd., the second-largest mobile-phone operator, fell 3.5 percent to 169.9 rupees.
‘Weak Sentiment’
State Bank of India sank 4.7 percent to 3,026.8 rupees, its sharpest drop since Jan. 27. The nation’s largest lender’s rating was lowered by the Reserve Bank of India after the regulator inspected accounts for the year through March 2009, the Mint reported, without saying where it got the information. S. S. Ranjan, chief financial officer of State Bank, didn’t immediately respond to calls to his cell phone.
“Investor sentiment is weak,” said Kishor Ostwal, managing director of CNI Research (India) Ltd., a publicly traded equities research provider in Mumbai. “Some of the results have disappointed. Cues from other Asian markets have not helped either.”
Overseas investors bought a net 1.08 billion rupees of Indian stocks on Nov. 10, taking this year’s record flows to 1.3 trillion rupees, according to data on the website of the Securities and Exchange Board of India.
India's Industrial Output Growth Unexpectedly Slows to Least in 16 Months
India’s industrial production growth unexpectedly slowed to a 16-month low in September, signaling consumer demand is waning after Asia’s fastest round of monetary policy tightening this year. Stocks and bond yields fell.
Output at factories, utilities and mines rose 4.4 percent after a revised 6.9 percent increase in August, the statistics office said in a statement in New Delhi today. The median estimate of 27 economists in a Bloomberg News survey was for a 6.4 percent gain.
Consumption may find support from the Indian central bank’s statement on Nov. 2 that it may refrain from raising interest rates in the next three months after boosting them six times in 2010. Part of the reason for the pause is to reduce the risk of an inflation-stoking capital influx from the U.S. and Japan, countries that are injecting additional monetary stimulus.
“This data strengthens our view that the central bank may hold rates at current levels in the near future,” said Sujan Hajra, chief economist at Anand Rathi Financial Services Ltd. in Mumbai. “It may assess the impact of previous rate hikes on growth and inflation, and keep an eye on capital inflows.”
The Bombay Stock Exchange’s Sensitive Index extended declines, falling 0.8 percent to 20,423.28 as of 12 p.m. in Mumbai. The yield on the 12-year government bond slid two basis points from the day’s high of 8.07 percent, while the rupee declined 0.8 percent to 44.64 against the dollar.
Manufacturing Growth
Industrial production was dragged lower by manufacturing, which grew 4.5 percent in September after gaining 7.5 percent in August, today’s report showed. Mining output rose 5.3 percent, while electricity production expanded 1.7 percent. Production of capital goods such as turbines and machinery fell 4.2 percent, according to the report.
Reserve Bank of India Governor Duvvuri Subbarao has room to pause the rate-increase cycle as manufacturing inflation slowed to a nine-month low of 4.59 percent in September.
The benchmark wholesale-price inflation rate may have dropped to 8.5 percent in October from 8.62 percent in the previous month, the median forecast of 21 economists in a Bloomberg News survey showed. The commerce ministry will announce the inflation data on Nov. 15 in New Delhi.
Rate Differential
The Reserve Bank’s benchmark repurchase rate is 6.25 percent. By comparison, the U.S. Federal Reserve’s target for overnight interbank loans is zero to 0.25 percent, where it has been since December 2008. The Fed Nov. 3 left unchanged its pledge to keep rates low for an “extended period” and said it will buy an additional $600 billion of Treasuries through June.
The Bank of Japan last month unveiled a 5 trillion-yen ($61 billion) fund that will buy government and corporate debt, as well as invest in real-estate investment trusts and exchange- traded funds to spur growth.
In China, where industrial output grew 13.1 percent last month, officials are grappling with inflows of money from bets on yuan gains and a surging trade surplus. Consumer prices rose 4.4 percent in October in China, the most in two years, building the case for the central bank to add to last month’s rate increase.
The interest-rate differential between India and the advanced countries spurred an unprecedented $10 billion inflow into rupee debt this year, strengthening the currency by 5.2 percent to 44.3 against the dollar since Sept. 1. Overseas funds also invested a record $28 billion into Indian stocks on prospects of faster economic expansion in the South Asian nation, driving the stock index to near a record.
The Sensitive Index has gained almost 20 percent since Jan. 1, making it the best performer among the world’s 10 biggest stock markets.
Consumer Demand
Industrial output may benefit through the rest of the year from consumers buying cars and new housing.
Companies including the local unit of Ford Motor Co. and Maruti Suzuki India Ltd. sold a record 182,992 cars in October, up 38 percent from the same month a year earlier, the Society of Indian Automobile Manufacturers said Nov. 10.
Cement production by companies such as Ambuja Cements Ltd., a subsidiary of Holcim Ltd., the world’s second-largest maker of the building material, rose 5.2 percent in September from a year earlier after a 1.6 percent gain in August, according to government data.
“There is no compelling evidence to suggest that industrial production is capitulating in a big way,” said Vishnu Varathan, an economist at Capital Economics Ltd. in Singapore. “There is no reason to be overly pessimistic.”
Output at factories, utilities and mines rose 4.4 percent after a revised 6.9 percent increase in August, the statistics office said in a statement in New Delhi today. The median estimate of 27 economists in a Bloomberg News survey was for a 6.4 percent gain.
Consumption may find support from the Indian central bank’s statement on Nov. 2 that it may refrain from raising interest rates in the next three months after boosting them six times in 2010. Part of the reason for the pause is to reduce the risk of an inflation-stoking capital influx from the U.S. and Japan, countries that are injecting additional monetary stimulus.
“This data strengthens our view that the central bank may hold rates at current levels in the near future,” said Sujan Hajra, chief economist at Anand Rathi Financial Services Ltd. in Mumbai. “It may assess the impact of previous rate hikes on growth and inflation, and keep an eye on capital inflows.”
The Bombay Stock Exchange’s Sensitive Index extended declines, falling 0.8 percent to 20,423.28 as of 12 p.m. in Mumbai. The yield on the 12-year government bond slid two basis points from the day’s high of 8.07 percent, while the rupee declined 0.8 percent to 44.64 against the dollar.
Manufacturing Growth
Industrial production was dragged lower by manufacturing, which grew 4.5 percent in September after gaining 7.5 percent in August, today’s report showed. Mining output rose 5.3 percent, while electricity production expanded 1.7 percent. Production of capital goods such as turbines and machinery fell 4.2 percent, according to the report.
Reserve Bank of India Governor Duvvuri Subbarao has room to pause the rate-increase cycle as manufacturing inflation slowed to a nine-month low of 4.59 percent in September.
The benchmark wholesale-price inflation rate may have dropped to 8.5 percent in October from 8.62 percent in the previous month, the median forecast of 21 economists in a Bloomberg News survey showed. The commerce ministry will announce the inflation data on Nov. 15 in New Delhi.
Rate Differential
The Reserve Bank’s benchmark repurchase rate is 6.25 percent. By comparison, the U.S. Federal Reserve’s target for overnight interbank loans is zero to 0.25 percent, where it has been since December 2008. The Fed Nov. 3 left unchanged its pledge to keep rates low for an “extended period” and said it will buy an additional $600 billion of Treasuries through June.
The Bank of Japan last month unveiled a 5 trillion-yen ($61 billion) fund that will buy government and corporate debt, as well as invest in real-estate investment trusts and exchange- traded funds to spur growth.
In China, where industrial output grew 13.1 percent last month, officials are grappling with inflows of money from bets on yuan gains and a surging trade surplus. Consumer prices rose 4.4 percent in October in China, the most in two years, building the case for the central bank to add to last month’s rate increase.
The interest-rate differential between India and the advanced countries spurred an unprecedented $10 billion inflow into rupee debt this year, strengthening the currency by 5.2 percent to 44.3 against the dollar since Sept. 1. Overseas funds also invested a record $28 billion into Indian stocks on prospects of faster economic expansion in the South Asian nation, driving the stock index to near a record.
The Sensitive Index has gained almost 20 percent since Jan. 1, making it the best performer among the world’s 10 biggest stock markets.
Consumer Demand
Industrial output may benefit through the rest of the year from consumers buying cars and new housing.
Companies including the local unit of Ford Motor Co. and Maruti Suzuki India Ltd. sold a record 182,992 cars in October, up 38 percent from the same month a year earlier, the Society of Indian Automobile Manufacturers said Nov. 10.
Cement production by companies such as Ambuja Cements Ltd., a subsidiary of Holcim Ltd., the world’s second-largest maker of the building material, rose 5.2 percent in September from a year earlier after a 1.6 percent gain in August, according to government data.
“There is no compelling evidence to suggest that industrial production is capitulating in a big way,” said Vishnu Varathan, an economist at Capital Economics Ltd. in Singapore. “There is no reason to be overly pessimistic.”
Wednesday, November 10, 2010
Drug Lawsuits Raise Questions for Doctors, and Juries
Judith Graves, a 67-year-old retired investigator for the United States Army, developed a rare medical condition called jawbone death after taking Fosamax, a drug used by millions of American women with thinning bones.
In a civil trial now under way in Manhattan, Mrs. Graves is suing Merck, the maker of Fosamax. Her lawyer, Timothy M. O’Brien, told the jury that Fosamax had caused such debilitating jawbone deterioration that Mrs. Graves required five major operations, including a lengthy surgery to replace her broken jaw with bone from her left arm.
Merck has argued that Fosamax is not the culprit. In its defense, Merck contends that Mrs. Graves took other prescriptions — like steroids to treat rheumatoid arthritis — that weakened her immune system, leading to her jaw infection and healing problems, said Paul F. Strain, outside counsel for the company.
The lawsuit is one of a handful of bellwether cases against Merck representing litigation involving about 1,400 people across the country who say they developed jawbone ailments after taking Fosamax, Mr. O’Brien said. Merck won an earlier case; but in another, a judge proposed to reduce a plaintiff’s jury award to $1.5 million from $8 million (both sides plan to appeal).
In Mrs. Graves’s case, the trial is providing a palpable backdrop for a broadening debate among many doctors and researchers who are rethinking Fosamax and similar bone medications known as oral bisphosphonates, particularly as a treatment for women who have not yet developed osteoporosis.
An advisory issued last month by the Food and Drug Administration, which first approved Fosamax in the 1990s to treat and prevent osteoporosis, along with reports in medical journals linking bisphosphonates with some rare medical problems including unusual thigh fractures, has heightened scrutiny of the long-term use of these medications.
While the F.D.A. cautioned that it was not clear that oral bisphosphonates had caused the rare thigh breaks, it said these kinds of bone fractures might be related to lengthy treatments with the drugs. The agency will now require the labels on Fosamax, Actonel, Boniva, Reclast and Atelvia and generic alternatives to state that the optimal period for using the drugs is unknown.
That uncertainty has shadowed the debate over how and when to prescribe these bone drugs, especially because they have been successful, by most accounts, in significantly reducing fractures over several years in postmenopausal women with osteoporosis. From 1999 to 2009, Fosamax and a newer drug, Fosamax Plus D, had worldwide sales of more than $23.8 billion, according to IMS Health, a health information company that tracks drug sales.
But the drugs’ popularity and effectiveness for generally healthy women without osteoporosis or broken bones have become a source of increasing argument in doctors’ offices and in courtrooms.
Doctors had already started to review the unlimited use of oral bisphosphonates, said Dr. Elizabeth Shane, a professor of medicine at Columbia University College of Physicians and Surgeons. Fifteen years ago, she said, the medical community hoped that if women took the drugs before they developed osteoporosis, they would be protected from breaking bones later in life. But doctors have begun waiting longer before prescribing the drugs, she added.
“We are moving much more to targeting people later in the development of osteoporosis when they are at high risk of fracture, since we’re not entirely clear yet how long is the most appropriate length of time to treat a person,” said Dr. Shane, who has received research grants from Merck, Eli Lilly and Novartis.
Adults generally lose bone mass as they age. But the process accelerates in menopause when cells called osteoclasts start breaking down a larger amount of older bone than can be replaced by other cells, called osteoblasts. Bisphosphonates work by inhibiting that breakdown, thereby conserving bone density.
In one arm of a study called the Fracture Intervention Trial, or FIT, sponsored by Merck and involving about 2,000 women ages 55 to 81 with an existing vertebral fracture, Fosamax cut the risk of a new vertebral fracture by about half compared with a placebo.
“Before these drugs came on the market, we really had nothing,” said Dr. Margaret Seton, a rheumatologist at the Massachusetts General Hospital in Boston. “When you have no drug and you’ve seen a patient and watched their spine crumble, that’s heartbreaking.”
But for those whose bones have not thinned enough to be classified as having osteoporosis, potential treatments are in real flux.
In the FIT trial, for example, Fosamax significantly reduced the risk of clinical fractures in women with osteoporosis but not among those with higher bone mineral density, according to an analysis published in 1998. In a separate analysis of the FIT data that year, Anthony Mucci, a statistical reviewer at the F.D.A. wrote that, for women without osteoporosis, there was no measurable benefit shown “for any category of fracture.”
Karen Riley, a spokeswoman for the F.D.A., said that the subgroup of women without osteoporosis in the FIT trial was too small to produce significant results, and that the Mucci report was one document in a much larger effort by the agency to assess the drug. She added that the F.D.A. approved Fosamax to prevent osteoporosis because it proved to conserve bone mineral density and had previously shown it could avert breaks.
Dr. Michael Rosenblatt, the chief medical officer at Merck and a former dean of Tufts University School of Medicine, pointed to the real goal: preventing osteoporosis, which carries a high risk of serious fractures, among people with thinning bones and stopping their progression from pre-osteoporosis, also known as osteopenia.
Dr. Shane of Columbia disputed the blanket use among patients without osteoporosis.
In a civil trial now under way in Manhattan, Mrs. Graves is suing Merck, the maker of Fosamax. Her lawyer, Timothy M. O’Brien, told the jury that Fosamax had caused such debilitating jawbone deterioration that Mrs. Graves required five major operations, including a lengthy surgery to replace her broken jaw with bone from her left arm.
Merck has argued that Fosamax is not the culprit. In its defense, Merck contends that Mrs. Graves took other prescriptions — like steroids to treat rheumatoid arthritis — that weakened her immune system, leading to her jaw infection and healing problems, said Paul F. Strain, outside counsel for the company.
The lawsuit is one of a handful of bellwether cases against Merck representing litigation involving about 1,400 people across the country who say they developed jawbone ailments after taking Fosamax, Mr. O’Brien said. Merck won an earlier case; but in another, a judge proposed to reduce a plaintiff’s jury award to $1.5 million from $8 million (both sides plan to appeal).
In Mrs. Graves’s case, the trial is providing a palpable backdrop for a broadening debate among many doctors and researchers who are rethinking Fosamax and similar bone medications known as oral bisphosphonates, particularly as a treatment for women who have not yet developed osteoporosis.
An advisory issued last month by the Food and Drug Administration, which first approved Fosamax in the 1990s to treat and prevent osteoporosis, along with reports in medical journals linking bisphosphonates with some rare medical problems including unusual thigh fractures, has heightened scrutiny of the long-term use of these medications.
While the F.D.A. cautioned that it was not clear that oral bisphosphonates had caused the rare thigh breaks, it said these kinds of bone fractures might be related to lengthy treatments with the drugs. The agency will now require the labels on Fosamax, Actonel, Boniva, Reclast and Atelvia and generic alternatives to state that the optimal period for using the drugs is unknown.
That uncertainty has shadowed the debate over how and when to prescribe these bone drugs, especially because they have been successful, by most accounts, in significantly reducing fractures over several years in postmenopausal women with osteoporosis. From 1999 to 2009, Fosamax and a newer drug, Fosamax Plus D, had worldwide sales of more than $23.8 billion, according to IMS Health, a health information company that tracks drug sales.
But the drugs’ popularity and effectiveness for generally healthy women without osteoporosis or broken bones have become a source of increasing argument in doctors’ offices and in courtrooms.
Doctors had already started to review the unlimited use of oral bisphosphonates, said Dr. Elizabeth Shane, a professor of medicine at Columbia University College of Physicians and Surgeons. Fifteen years ago, she said, the medical community hoped that if women took the drugs before they developed osteoporosis, they would be protected from breaking bones later in life. But doctors have begun waiting longer before prescribing the drugs, she added.
“We are moving much more to targeting people later in the development of osteoporosis when they are at high risk of fracture, since we’re not entirely clear yet how long is the most appropriate length of time to treat a person,” said Dr. Shane, who has received research grants from Merck, Eli Lilly and Novartis.
Adults generally lose bone mass as they age. But the process accelerates in menopause when cells called osteoclasts start breaking down a larger amount of older bone than can be replaced by other cells, called osteoblasts. Bisphosphonates work by inhibiting that breakdown, thereby conserving bone density.
In one arm of a study called the Fracture Intervention Trial, or FIT, sponsored by Merck and involving about 2,000 women ages 55 to 81 with an existing vertebral fracture, Fosamax cut the risk of a new vertebral fracture by about half compared with a placebo.
“Before these drugs came on the market, we really had nothing,” said Dr. Margaret Seton, a rheumatologist at the Massachusetts General Hospital in Boston. “When you have no drug and you’ve seen a patient and watched their spine crumble, that’s heartbreaking.”
But for those whose bones have not thinned enough to be classified as having osteoporosis, potential treatments are in real flux.
In the FIT trial, for example, Fosamax significantly reduced the risk of clinical fractures in women with osteoporosis but not among those with higher bone mineral density, according to an analysis published in 1998. In a separate analysis of the FIT data that year, Anthony Mucci, a statistical reviewer at the F.D.A. wrote that, for women without osteoporosis, there was no measurable benefit shown “for any category of fracture.”
Karen Riley, a spokeswoman for the F.D.A., said that the subgroup of women without osteoporosis in the FIT trial was too small to produce significant results, and that the Mucci report was one document in a much larger effort by the agency to assess the drug. She added that the F.D.A. approved Fosamax to prevent osteoporosis because it proved to conserve bone mineral density and had previously shown it could avert breaks.
Dr. Michael Rosenblatt, the chief medical officer at Merck and a former dean of Tufts University School of Medicine, pointed to the real goal: preventing osteoporosis, which carries a high risk of serious fractures, among people with thinning bones and stopping their progression from pre-osteoporosis, also known as osteopenia.
Dr. Shane of Columbia disputed the blanket use among patients without osteoporosis.
Asian Stocks Rise as Japanese Banks Increase, Exporters Climb on Yen Slide
Asian stocks climbed, with the regional benchmark index increasing for the first day in three, as Japanese banks rose on a brokerage upgrade and BHP Billiton Ltd. edged higher on speculation it may bid for a stake in Woodside Petroleum Ltd.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, rose 2 percent after Deutsche Bank AG boosted its rating on Japanese banks. Toyota Motor Corp., the world’s biggest carmaker, advanced 2 percent in Tokyo after the dollar rose against the yen. BHP Billiton Ltd. climbed 0.6 percent in Sydney. Kia Motors Corp. rose 2.1 percent in Seoul after Edaily said the carmaker’s market share will climb to a record, along with Hyundai Motor Co.
The MSCI Asia Pacific Index rose 0.8 percent to 135.14 at 10:24 a.m. in Tokyo, with about two stocks advancing for each that declined. All 10 industry groups on the gauge rose.
Japan’s Nikkei 225 Stock Average gained 0.5 percent, while Australia’s S&P/ASX 200 Index climbed 0.6 percent. South Korea’s Kospi Index was little changed.
Futures on the Standard & Poor’s 500 Index dropped 0.4 percent today after Cisco Systems Inc. projected less profit than analysts estimated. The index increased 0.4 percent yesterday as the rally in oil buoyed energy producers and concern eased that Europe’s debt crisis will worsen.
Japanese banks led gains on the MSCI Asia Pacific Index for a second day, after Deutsche Bank raised their outlook on the sector to “overweight” from “market-weight.”
Mitsubishi UFJ rose 2 percent to 401 yen, the second- biggest support to the MSCI Asia Pacific Index. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, gained 2.1 percent to 2,564 yen. Mizuho Financial Group Inc., the No. 3, climbed 3.2 percent to 130 yen.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, rose 2 percent after Deutsche Bank AG boosted its rating on Japanese banks. Toyota Motor Corp., the world’s biggest carmaker, advanced 2 percent in Tokyo after the dollar rose against the yen. BHP Billiton Ltd. climbed 0.6 percent in Sydney. Kia Motors Corp. rose 2.1 percent in Seoul after Edaily said the carmaker’s market share will climb to a record, along with Hyundai Motor Co.
The MSCI Asia Pacific Index rose 0.8 percent to 135.14 at 10:24 a.m. in Tokyo, with about two stocks advancing for each that declined. All 10 industry groups on the gauge rose.
Japan’s Nikkei 225 Stock Average gained 0.5 percent, while Australia’s S&P/ASX 200 Index climbed 0.6 percent. South Korea’s Kospi Index was little changed.
Futures on the Standard & Poor’s 500 Index dropped 0.4 percent today after Cisco Systems Inc. projected less profit than analysts estimated. The index increased 0.4 percent yesterday as the rally in oil buoyed energy producers and concern eased that Europe’s debt crisis will worsen.
Japanese banks led gains on the MSCI Asia Pacific Index for a second day, after Deutsche Bank raised their outlook on the sector to “overweight” from “market-weight.”
Mitsubishi UFJ rose 2 percent to 401 yen, the second- biggest support to the MSCI Asia Pacific Index. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, gained 2.1 percent to 2,564 yen. Mizuho Financial Group Inc., the No. 3, climbed 3.2 percent to 130 yen.
Gujarat Yields Retreat From Nine-Year High as RBI Pumps Cash: India Credit
Indian state debt yields are showing signs of peaking after the central bank signaled it would freeze borrowing costs in the world’s second-fastest growing major economy.
Gujarat sold bonds due in 10 years at 8.42 percent on Nov. 9, down from a nine-year high of 8.51 percent at an Oct. 26 sale, Reserve Bank of India data show. That was the biggest decline since May for the state, home to the world’s biggest oil refinery. Yields for Punjab, India’s second-biggest producer of food grains, fell 4 basis points to 8.44 percent.
Capping debt costs for Gujarat and Punjab will help fund highways, ports and schools in an economy forecast by the International Monetary Fund to expand 9.7 percent this year, almost four times the pace predicted for the U.S. Central bank Governor Duvvuri Subbarao said last week interest rates may remain unchanged after six increases this year, prompting Nomura Holdings Inc. and Barclays Plc to say policy makers will hold borrowing costs in check until at least April.
“Rates are peaking, and yields at this week’s state debt auction support that outlook,” Pradeep Madhav, managing director at Securities Trading Corp. of India, a Mumbai-based primary dealer partly owned by State Bank of India, said in an interview yesterday. “The pressure on policy makers to increase borrowing costs is going away as inflation eases.”
Raising Rates
Subbarao last raised the benchmark repurchase rate on Nov. 2 by 0.25 percentage point to 6.25 percent. Higher borrowing costs slowed increases in the nation’s consumer prices, the fastest in Asia except Pakistan, to 9.8 percent from a record 16.2 percent in January, government data show.
States have issued $14.5 billion of debt since April, 20 percent of the amount the federal government borrowed.
Borrowing costs for the western state of Gujarat, whose economy grew 10.5 percent in the year ended March 31, climbed in all but two of the seven debt auctions this fiscal year that began in April. Reliance Industries Ltd., India’s biggest company by market value, runs a 1.24 million barrel-a-day refining operating at Jamnagar in the state.
The northern state of Punjab raised 37 billion rupees ($835 million) since April by selling 10-year debt.
Five Indian states sold a combined 36.5 billion rupees of notes due in 2020 on Nov. 9. Along with Gujarat and Punjab, the southern states of Karnataka, Kerala and Puducherry issued debt at yields of 8.42 percent, 8.43 percent and 8.41 percent.
Cash Crunch
State debt yields eased as Subbarao extended measures to alleviate the nation’s worst cash crunch on record.
Banks, the biggest buyers of government debt, have depended on the central bank for daily funds since Sept. 9. They borrowed nearly 1.2 trillion rupees every day this week, compared with an average 629 billion rupees last week, Bloomberg data show.
The Reserve Bank said Nov. 9 it will hold additional daily money-market auctions up to Dec. 16 to inject funds into banks. It also allowed lenders to raise cash by temporarily lowering bond holdings below a regulatory limit. Local banks are required by law to invest at least 25 percent of deposits in government debt or other low-risk securities.
“Even though a liquidity deficit is consistent with an anti-inflation stance, an excessive deficit can be disruptive to both financial markets and credit growth,” Subbarao, who has been at the helm of the central bank since September 2008, said in a statement on Nov. 9.
Deficit Plan
Finance Minister Pranab Mukherjee plans to cut the federal government’s budget deficit to 5.5 percent of gross domestic product this fiscal year from an estimated 6.9 percent in the previous 12 months.
The 10-year federal bond yield climbed 5 basis points yesterday to 8.07 percent. The sovereign yield is the highest among the major emerging economies except Brazil, where similar- maturity notes pay 12.3 percent. Comparable bonds in China offer 3.9 percent and 2.64 percent in the U.S., Bloomberg data show.
India’s government bonds returned 4 percent this year, the third-worst performance among 10 Asian local-currency debt markets outside Japan, according to indexes compiled by HSBC Holdings Plc.
“Yields are attractive at current levels on state as well as central government debt,” Navneet Munot, who oversees $8.5 billion as chief investment officer at Mumbai-based SBI Funds Management Pvt., a unit of the nation’s biggest lender, said in an interview yesterday. “But the pressure on liquidity may still be holding investors back.”
Fixing Rates
The cost of fixing rates on money for three months surged 276 basis points this year to 6.7 percent in India’s interest- rate swaps market, data compiled by Bloomberg show. The government sold 40 billion rupees of 91-day bills yesterday at 6.85 percent and auctioned 20 billion rupees of 182-day debt at 7.17 percent.
India’s rupee has appreciated 5 percent against the dollar this year as higher debt yields have attracted inflows of $10 billion into its debt markets during the period, Securities & Exchange Board of India data show. That was more than the combined inflows in the previous eight years. The currency rose 0.1 percent yesterday, according to data compiled by Bloomberg.
A slide in the cost of protecting the debt of government- owned State Bank of India, which some investors perceive as a proxy for the nation, signaled rising confidence in the ability of the government to achieve its deficit target. The cost of credit-default swaps on the lender has decreased 78 basis points to 161 points from a one-year high reached in May, according to data provider CMA.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
“A substantial amount of monetary tightening has already been done through both policy rate increases as well as the extended money-market crunch,” Sonal Varma, a Mumbai-based economist at Nomura, said in an interview yesterday. “Given the monetary policy typically takes effect with a lag, the RBI is likely to pause rate increases for now.”
The IMF predicted China would be the world’s fastest- growing major economy this year, at 10.5 percent.
Gujarat sold bonds due in 10 years at 8.42 percent on Nov. 9, down from a nine-year high of 8.51 percent at an Oct. 26 sale, Reserve Bank of India data show. That was the biggest decline since May for the state, home to the world’s biggest oil refinery. Yields for Punjab, India’s second-biggest producer of food grains, fell 4 basis points to 8.44 percent.
Capping debt costs for Gujarat and Punjab will help fund highways, ports and schools in an economy forecast by the International Monetary Fund to expand 9.7 percent this year, almost four times the pace predicted for the U.S. Central bank Governor Duvvuri Subbarao said last week interest rates may remain unchanged after six increases this year, prompting Nomura Holdings Inc. and Barclays Plc to say policy makers will hold borrowing costs in check until at least April.
“Rates are peaking, and yields at this week’s state debt auction support that outlook,” Pradeep Madhav, managing director at Securities Trading Corp. of India, a Mumbai-based primary dealer partly owned by State Bank of India, said in an interview yesterday. “The pressure on policy makers to increase borrowing costs is going away as inflation eases.”
Raising Rates
Subbarao last raised the benchmark repurchase rate on Nov. 2 by 0.25 percentage point to 6.25 percent. Higher borrowing costs slowed increases in the nation’s consumer prices, the fastest in Asia except Pakistan, to 9.8 percent from a record 16.2 percent in January, government data show.
States have issued $14.5 billion of debt since April, 20 percent of the amount the federal government borrowed.
Borrowing costs for the western state of Gujarat, whose economy grew 10.5 percent in the year ended March 31, climbed in all but two of the seven debt auctions this fiscal year that began in April. Reliance Industries Ltd., India’s biggest company by market value, runs a 1.24 million barrel-a-day refining operating at Jamnagar in the state.
The northern state of Punjab raised 37 billion rupees ($835 million) since April by selling 10-year debt.
Five Indian states sold a combined 36.5 billion rupees of notes due in 2020 on Nov. 9. Along with Gujarat and Punjab, the southern states of Karnataka, Kerala and Puducherry issued debt at yields of 8.42 percent, 8.43 percent and 8.41 percent.
Cash Crunch
State debt yields eased as Subbarao extended measures to alleviate the nation’s worst cash crunch on record.
Banks, the biggest buyers of government debt, have depended on the central bank for daily funds since Sept. 9. They borrowed nearly 1.2 trillion rupees every day this week, compared with an average 629 billion rupees last week, Bloomberg data show.
The Reserve Bank said Nov. 9 it will hold additional daily money-market auctions up to Dec. 16 to inject funds into banks. It also allowed lenders to raise cash by temporarily lowering bond holdings below a regulatory limit. Local banks are required by law to invest at least 25 percent of deposits in government debt or other low-risk securities.
“Even though a liquidity deficit is consistent with an anti-inflation stance, an excessive deficit can be disruptive to both financial markets and credit growth,” Subbarao, who has been at the helm of the central bank since September 2008, said in a statement on Nov. 9.
Deficit Plan
Finance Minister Pranab Mukherjee plans to cut the federal government’s budget deficit to 5.5 percent of gross domestic product this fiscal year from an estimated 6.9 percent in the previous 12 months.
The 10-year federal bond yield climbed 5 basis points yesterday to 8.07 percent. The sovereign yield is the highest among the major emerging economies except Brazil, where similar- maturity notes pay 12.3 percent. Comparable bonds in China offer 3.9 percent and 2.64 percent in the U.S., Bloomberg data show.
India’s government bonds returned 4 percent this year, the third-worst performance among 10 Asian local-currency debt markets outside Japan, according to indexes compiled by HSBC Holdings Plc.
“Yields are attractive at current levels on state as well as central government debt,” Navneet Munot, who oversees $8.5 billion as chief investment officer at Mumbai-based SBI Funds Management Pvt., a unit of the nation’s biggest lender, said in an interview yesterday. “But the pressure on liquidity may still be holding investors back.”
Fixing Rates
The cost of fixing rates on money for three months surged 276 basis points this year to 6.7 percent in India’s interest- rate swaps market, data compiled by Bloomberg show. The government sold 40 billion rupees of 91-day bills yesterday at 6.85 percent and auctioned 20 billion rupees of 182-day debt at 7.17 percent.
India’s rupee has appreciated 5 percent against the dollar this year as higher debt yields have attracted inflows of $10 billion into its debt markets during the period, Securities & Exchange Board of India data show. That was more than the combined inflows in the previous eight years. The currency rose 0.1 percent yesterday, according to data compiled by Bloomberg.
A slide in the cost of protecting the debt of government- owned State Bank of India, which some investors perceive as a proxy for the nation, signaled rising confidence in the ability of the government to achieve its deficit target. The cost of credit-default swaps on the lender has decreased 78 basis points to 161 points from a one-year high reached in May, according to data provider CMA.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
“A substantial amount of monetary tightening has already been done through both policy rate increases as well as the extended money-market crunch,” Sonal Varma, a Mumbai-based economist at Nomura, said in an interview yesterday. “Given the monetary policy typically takes effect with a lag, the RBI is likely to pause rate increases for now.”
The IMF predicted China would be the world’s fastest- growing major economy this year, at 10.5 percent.
Monday, November 8, 2010
Asian Stocks Fall as Oil, Metal Prices Decline; Woodside Petroleum Drops
Asian stocks fell, dragging the regional benchmark index from a more than two-year high, as oil and metal prices retreated.
Woodside Petroleum Ltd. declined 5.3 percent in Australia after Royal Dutch Shell Plc sold a 10 percent stake and as crude oil prices slipped for a second day. BHP Billiton Ltd., the world’s No. 1 mining company, lost 1.2 percent after oil and metal prices slid. Canon Inc., the world’s largest camera maker which climbed 7.4 percent in the past four days, lost 0.8 percent in Tokyo on concerns a stronger yen versus the dollar with weigh on exporters.
The MSCI Asia Pacific Index slipped 0.2 percent to 134.99 as of 9:34 a.m. in Tokyo. About three stocks fell for every two that advanced on the nearly 1,000 member gauge. The measure rose 4.6 percent in the six days through yesterday where it reached its highest level since July 2008.
Futures on the Standard & Poor’s 500 Index lost 0.4 percent today. The index slid 0.2 percent yesterday, as a five-week rally left the gauge at the highest valuation since May and concerns over Irish debt curbed demand for riskier assets. U.S. stocks rallied last week as the Federal Reserve announced a $600 billion bond-purchase plan, employment increased more than forecast and midterm elections produced a divided Congress.
Woodside Petroleum Ltd. declined 5.3 percent in Australia after Royal Dutch Shell Plc sold a 10 percent stake and as crude oil prices slipped for a second day. BHP Billiton Ltd., the world’s No. 1 mining company, lost 1.2 percent after oil and metal prices slid. Canon Inc., the world’s largest camera maker which climbed 7.4 percent in the past four days, lost 0.8 percent in Tokyo on concerns a stronger yen versus the dollar with weigh on exporters.
The MSCI Asia Pacific Index slipped 0.2 percent to 134.99 as of 9:34 a.m. in Tokyo. About three stocks fell for every two that advanced on the nearly 1,000 member gauge. The measure rose 4.6 percent in the six days through yesterday where it reached its highest level since July 2008.
Futures on the Standard & Poor’s 500 Index lost 0.4 percent today. The index slid 0.2 percent yesterday, as a five-week rally left the gauge at the highest valuation since May and concerns over Irish debt curbed demand for riskier assets. U.S. stocks rallied last week as the Federal Reserve announced a $600 billion bond-purchase plan, employment increased more than forecast and midterm elections produced a divided Congress.
ICICI Taps Bernanke's Rates as Local Borrowing Costs Surge: India Credit
India banks are selling the most dollar-denominated debt in at least a decade, taking advantage of near-zero U.S. benchmark rates after Reserve Bank of India Governor Duvvuri Subarrao raised borrowing costs six times.
ICICI Bank Ltd., the nation’s second-largest lender by assets, sold $1 billion of 5.75 percent, 10-year bonds yesterday that yield 325 basis points more than similar-maturity Treasuries, data compiled by Bloomberg show. The spread on its last sale of 2016 debt was 320 basis points. The offering adds to $6.6 billion raised overseas in 2010 by the nation’s banks, topping the $4.6 billion issued by Chinese lenders.
Subbarao’s rate increases have pushed government 10-year yields up 42 basis points to 8.01 percent this year, compared with 2.52 percent for Treasuries. India’s overseas bond-rush helped sustain a 21 percent increase in bank lending in the year through Oct. 22, even as the RBI sought to slow the fastest inflation after Argentina in the Group of 20 nations.
“India’s economic growth is high and this increases the financing needs for Indian banks and corporates,” Cornel Bruhin, a fund manager in Zurich at Clariden Leu AG, which manages $3.5 billion of emerging-market debt including that of Axis Bank Ltd. and ICICI, said in an interview yesterday. “The level of indebtedness is still relatively low and general investor demand for India debt is still very high.”
Widening Gap
The yield on India’s government notes due in 2020 rose 3 basis points yesterday, widening the gap to 548 basis points over Treasuries of similar maturity. The spread reached 567, or 5.67 percentage points, on Oct. 20, the widest since 2001, according to Bloomberg data. India’s wholesale-price index climbed 8.6 percent in September, while consumer prices rose 11.1 percent in Argentina and 1.1 percent in the U.S.
India’s government bonds returned 4.2 percent this year, the third-worst performance among 10 local-currency debt markets outside Japan, indexes compiled by HSBC Holdings Plc show. India plans to sell 110 billion rupees ($2.48 billion) of bonds due in 2017, 2020 and 2040 through an auction on Nov. 12, according to an e-mailed statement from the finance ministry yesterday.
India’s rupee weakened 0.4 percent to 44.385 per dollar yesterday, trimming its appreciation this year to 5 percent, according to data compiled by Bloomberg.
‘Concerted’ Actions
Subbarao said Nov. 2 that “concerted” policy actions by the central bank will help slow the inflation rate to 5.5 percent by March 31. He forecast India’s $1.3 trillion economy may expand 8.5 percent in the 12 months ending March 31, the fastest pace in three years.
India’s banks faced their worst cash crunch on record in the past month, prompting the RBI to buy back 83.5 billion rupees of government bonds on Nov. 4, the first such move since September 2009.
Lenders borrowed 1.2 trillion rupees of overnight loans from the central bank on Oct. 29, an all-time high, to meet cash shortages after investors pulled deposits to buy shares being issued by Coal India Ltd. in an initial public offering last month. Such borrowing averaged 532 billion rupees a day between Oct. 1 and Nov. 5, more than twice the amount in September, RBI data show.
Rates on three-month commercial paper sold by Indian companies almost doubled this year to 8.16 percent, following an 88 basis-point surge in October, according to Bloomberg data. U.S. three-month Treasury bills yielded 0.127 percent.
State Bank of India
Sales by ICICI’s larger competitor, State Bank of India, climbed to $3.2 billion from $897 million in 2009, Bloomberg data show. The Bank of Baroda Ltd. raised $1.28 billion over the same period, up from $61 million in 2009.
“This is an opportunistic move because of the tight liquidity onshore and relatively high cost of deposits onshore,” Christopher Leow, a fund manager in Singapore at CIMB-Principal Asset Management Ltd., which overseas more than $6 billion globally including Axis Bank and HDFC Bank Ltd, said in an interview yesterday. “This reflects a growing demand for dollar loans from Indian corporates.”
The cost to protect against losses on debt of State Bank of India, a government-controlled lender that is the nearest measure for sovereign debt, declined 3 basis points to 156.2 basis points on Nov. 5, the lowest since April 27, according to New York-based CMA’s data on credit-default swaps.
ICICI Swaps
Those tied to the debt of ICICI fell 10 basis points last week to 189, the lowest since Oct. 15, CMA data show. That compared with 42 for U.S. government debt.
The swaps typically rise as investor confidence deteriorates and fall as it improves. Credit-default contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
The Fed and Chairman Ben S. Bernanke announced on Nov. 3 a plan to buy an additional $600 billion of Treasuries through June, expanding record stimulus in a bid to reduce unemployment and avert deflation. It spent $1.7 trillion through March 2010 in the first round of so-called quantitative easing.
“The Fed’s plan to purchase government bonds means investors in the U.S. have much less to buy,” Tetsuo Ishihara, a senior credit analyst in Tokyo at Mizuho Securities Co., an arm of Japan’s third-largest bank by market value, said in an interview yesterday. “At the same time, Indian banks need to raise funds as their economy is strong.”
U.S. President Barack Obama told business leaders in Mumbai on Nov. 6 that increased trade between India and the U.S. is a “win-win” proposition that would create jobs in both the countries. As part of Obama’s visit, Reliance Power Ltd. won a $5 billion line of credit from the U.S. Export-Import Bank to fund renewable energy and gas plants.
ICICI Bank Ltd., the nation’s second-largest lender by assets, sold $1 billion of 5.75 percent, 10-year bonds yesterday that yield 325 basis points more than similar-maturity Treasuries, data compiled by Bloomberg show. The spread on its last sale of 2016 debt was 320 basis points. The offering adds to $6.6 billion raised overseas in 2010 by the nation’s banks, topping the $4.6 billion issued by Chinese lenders.
Subbarao’s rate increases have pushed government 10-year yields up 42 basis points to 8.01 percent this year, compared with 2.52 percent for Treasuries. India’s overseas bond-rush helped sustain a 21 percent increase in bank lending in the year through Oct. 22, even as the RBI sought to slow the fastest inflation after Argentina in the Group of 20 nations.
“India’s economic growth is high and this increases the financing needs for Indian banks and corporates,” Cornel Bruhin, a fund manager in Zurich at Clariden Leu AG, which manages $3.5 billion of emerging-market debt including that of Axis Bank Ltd. and ICICI, said in an interview yesterday. “The level of indebtedness is still relatively low and general investor demand for India debt is still very high.”
Widening Gap
The yield on India’s government notes due in 2020 rose 3 basis points yesterday, widening the gap to 548 basis points over Treasuries of similar maturity. The spread reached 567, or 5.67 percentage points, on Oct. 20, the widest since 2001, according to Bloomberg data. India’s wholesale-price index climbed 8.6 percent in September, while consumer prices rose 11.1 percent in Argentina and 1.1 percent in the U.S.
India’s government bonds returned 4.2 percent this year, the third-worst performance among 10 local-currency debt markets outside Japan, indexes compiled by HSBC Holdings Plc show. India plans to sell 110 billion rupees ($2.48 billion) of bonds due in 2017, 2020 and 2040 through an auction on Nov. 12, according to an e-mailed statement from the finance ministry yesterday.
India’s rupee weakened 0.4 percent to 44.385 per dollar yesterday, trimming its appreciation this year to 5 percent, according to data compiled by Bloomberg.
‘Concerted’ Actions
Subbarao said Nov. 2 that “concerted” policy actions by the central bank will help slow the inflation rate to 5.5 percent by March 31. He forecast India’s $1.3 trillion economy may expand 8.5 percent in the 12 months ending March 31, the fastest pace in three years.
India’s banks faced their worst cash crunch on record in the past month, prompting the RBI to buy back 83.5 billion rupees of government bonds on Nov. 4, the first such move since September 2009.
Lenders borrowed 1.2 trillion rupees of overnight loans from the central bank on Oct. 29, an all-time high, to meet cash shortages after investors pulled deposits to buy shares being issued by Coal India Ltd. in an initial public offering last month. Such borrowing averaged 532 billion rupees a day between Oct. 1 and Nov. 5, more than twice the amount in September, RBI data show.
Rates on three-month commercial paper sold by Indian companies almost doubled this year to 8.16 percent, following an 88 basis-point surge in October, according to Bloomberg data. U.S. three-month Treasury bills yielded 0.127 percent.
State Bank of India
Sales by ICICI’s larger competitor, State Bank of India, climbed to $3.2 billion from $897 million in 2009, Bloomberg data show. The Bank of Baroda Ltd. raised $1.28 billion over the same period, up from $61 million in 2009.
“This is an opportunistic move because of the tight liquidity onshore and relatively high cost of deposits onshore,” Christopher Leow, a fund manager in Singapore at CIMB-Principal Asset Management Ltd., which overseas more than $6 billion globally including Axis Bank and HDFC Bank Ltd, said in an interview yesterday. “This reflects a growing demand for dollar loans from Indian corporates.”
The cost to protect against losses on debt of State Bank of India, a government-controlled lender that is the nearest measure for sovereign debt, declined 3 basis points to 156.2 basis points on Nov. 5, the lowest since April 27, according to New York-based CMA’s data on credit-default swaps.
ICICI Swaps
Those tied to the debt of ICICI fell 10 basis points last week to 189, the lowest since Oct. 15, CMA data show. That compared with 42 for U.S. government debt.
The swaps typically rise as investor confidence deteriorates and fall as it improves. Credit-default contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
The Fed and Chairman Ben S. Bernanke announced on Nov. 3 a plan to buy an additional $600 billion of Treasuries through June, expanding record stimulus in a bid to reduce unemployment and avert deflation. It spent $1.7 trillion through March 2010 in the first round of so-called quantitative easing.
“The Fed’s plan to purchase government bonds means investors in the U.S. have much less to buy,” Tetsuo Ishihara, a senior credit analyst in Tokyo at Mizuho Securities Co., an arm of Japan’s third-largest bank by market value, said in an interview yesterday. “At the same time, Indian banks need to raise funds as their economy is strong.”
U.S. President Barack Obama told business leaders in Mumbai on Nov. 6 that increased trade between India and the U.S. is a “win-win” proposition that would create jobs in both the countries. As part of Obama’s visit, Reliance Power Ltd. won a $5 billion line of credit from the U.S. Export-Import Bank to fund renewable energy and gas plants.
Obama calls for top India role at UN
Barack Obama, US president, has backed India for a permanent seat on the UN Security Council in a diplomatic finale to his three-day visit that highlighted the tightening relationship between the world’s two largest democracies.
India’s leaders have campaigned for permanent Security Council membership for years, seeking an endorsement of a stronger role in multilateral forums, such as the UN, that reflects their claim to be a responsible global power.
EDITOR’S CHOICE
Opinion: Why India needs an Obama plan for Pakistan - Nov-08
Global Insight: Deft diplomacy sets Obama on right course - Nov-08
Obama swipes critics of Fed’s $600bn stimulus - Nov-08
beyondbrics: Obama in India - Nov-05
Obama to push greater US ties with Indonesia - Nov-08
Obama charm push focuses on ‘risen’ India - Nov-08
“The just and sustainable international order that America seeks includes a United Nations that is efficient, effective, credible and legitimate,” Mr Obama said in an address to India’s parliament.
“That is why I can say today, in the years ahead, I look forward to a reformed UN Security Council that includes India as a permanent member.” Mr Obama had previously supported Japan for a permanent security council seat.
Recognising he would struggle to match the US-India civil nuclear deal promoted by his predecessor, George W. Bush, Indian officials had lowered expectations for Mr Obama’s visit. They identified support for the permanent security council seat and the relaxation of export controls on US technology as the best they could hope for, and held out for strong criticism of neighbouring Pakistan for harbouring terror networks.
Mr Obama delivered on all counts, saying India had arrived as a global power that could stand “shoulder to shoulder” with the US.
During his first visit to India, Mr Obama rolled out a carefully calibrated message that was widely welcomed across India’s political spectrum. He emphasised the economic benefits of a closer relationship and urged India to step up its dialogue with Pakistan to secure peace in the region. Finally, he signalled support for India to rise to the top table of world affairs.
In spite of their warming ties, the US and India have frequently taken different sides at the UN. Analysts had also questioned the significance of Washington’s support for multilateral reform that will take place years in the future.
But Ashley Tellis, of the Washington-based Carnegie Endowment for International Peace, said Mr Obama’s support for India was more unequivocal than it had been to Japan. “This is truly the strongest endorsement that the US has tabled so far. I did not detect any hesitation at all,” he said.
Jaswant Singh, an Indian opposition leader and former foreign minister, said: “It’s a welcome endorsement but it’s accompanied by a baggage of expectations. It’s important for us to be more realistic about this.”
India’s leaders have campaigned for permanent Security Council membership for years, seeking an endorsement of a stronger role in multilateral forums, such as the UN, that reflects their claim to be a responsible global power.
EDITOR’S CHOICE
Opinion: Why India needs an Obama plan for Pakistan - Nov-08
Global Insight: Deft diplomacy sets Obama on right course - Nov-08
Obama swipes critics of Fed’s $600bn stimulus - Nov-08
beyondbrics: Obama in India - Nov-05
Obama to push greater US ties with Indonesia - Nov-08
Obama charm push focuses on ‘risen’ India - Nov-08
“The just and sustainable international order that America seeks includes a United Nations that is efficient, effective, credible and legitimate,” Mr Obama said in an address to India’s parliament.
“That is why I can say today, in the years ahead, I look forward to a reformed UN Security Council that includes India as a permanent member.” Mr Obama had previously supported Japan for a permanent security council seat.
Recognising he would struggle to match the US-India civil nuclear deal promoted by his predecessor, George W. Bush, Indian officials had lowered expectations for Mr Obama’s visit. They identified support for the permanent security council seat and the relaxation of export controls on US technology as the best they could hope for, and held out for strong criticism of neighbouring Pakistan for harbouring terror networks.
Mr Obama delivered on all counts, saying India had arrived as a global power that could stand “shoulder to shoulder” with the US.
During his first visit to India, Mr Obama rolled out a carefully calibrated message that was widely welcomed across India’s political spectrum. He emphasised the economic benefits of a closer relationship and urged India to step up its dialogue with Pakistan to secure peace in the region. Finally, he signalled support for India to rise to the top table of world affairs.
In spite of their warming ties, the US and India have frequently taken different sides at the UN. Analysts had also questioned the significance of Washington’s support for multilateral reform that will take place years in the future.
But Ashley Tellis, of the Washington-based Carnegie Endowment for International Peace, said Mr Obama’s support for India was more unequivocal than it had been to Japan. “This is truly the strongest endorsement that the US has tabled so far. I did not detect any hesitation at all,” he said.
Jaswant Singh, an Indian opposition leader and former foreign minister, said: “It’s a welcome endorsement but it’s accompanied by a baggage of expectations. It’s important for us to be more realistic about this.”
The Flash Crash, in Miniature
BlackBerrys were buzzing inside Progress Energy in Raleigh, N.C.: in a blink, the 102-year-old utility had been virtually wiped out on Wall Street.
For no apparent reason, Progress’s share price had plunged almost 90 percent. In a matter of seconds, a company with 3.1 million customers and 11,000 employees had all but vanished on the nation’s stock market, and Progress executives had no idea why.
In the anxious hours that followed, the answers began to come clear: the harrowing plunge in the early afternoon of Sept. 27 had been a mini flash crash — a small-time version of the stock market’s wild day last spring.
Since the Dow Jones industrial average fell about 700 points then largely recovered on May 6, setting the financial world on edge, similar flash crashes have occurred with alarming frequency in more than a dozen individual stocks.
Citigroup, Core Molding, the Washington Post Company — all have soared, plunged, and often both, in wild, seemingly inexplicable trading. An exchange-traded fund, a popular investment that is basically an index fund that trades like stocks, has also been given the flash treatment, although that was attributed to a software error.
To some analysts, these mini flash crashes are a sign that another big one is possible, if not probable. Others say these abrupt reversals are simply the way modern, lightning-quick markets work, and that investors had better get used to it.
The crashes continue even as Washington regulators investigate the structure of modern markets and as a report traced the main trigger of May’s big crash to a poorly timed trade by a mutual fund in Kansas. Regulators have put in place circuit breakers to halt trading and reset prices in case stocks plunge. But some analysts fear that one day, these mechanisms could be overwhelmed.
And to corporate executives caught in the middle, it is all just plain hair-raising — and still puzzling.
That September afternoon, with fearful investors on the phone from New York, Mark F. Mulhern, Progress Energy’s chief financial officer, was told by the exchanges that it was all a mistake. A wayward keystroke by a trader somewhere had unleashed a powerful computer algorithm that had devoured Progress Energy’s stock in moments.
Progress Energy stock was trading at about $44.57 a share, and a dealer at an unidentified brokerage firm had entered a mistaken sell order into a computer that instantly drove the price to $4.57. Dozens of trades were declared void, and after a five-minute halt, normal trading resumed.
Mr. Mulhern says he still does not really know what caused the sell-off — and worries what mini flash crashes like this one are doing to investors’ confidence in the stock market.
“It is a little disconcerting when a trade like this could cause this kind of havoc,” he said. “It has got implications for the confidence in our markets. I don’t know what caused it, to tell the truth. The one hesitation all investors have about the market is the drift to so much electronic trading. It is so fast and real time, you have to wonder a little bit how these things happen, and can the regulatory procedures, the stop measures, can they really keep up with the technology?”
Robert F. Drennan Jr., the vice president for investor relations at Progress Energy, said he had reviewed the trading records and had noticed unusual trading activity in the run-up to the plunge. He said Progress Energy was not a heavily traded stock; it may go for several seconds without a trade. But before the price fell, “There was a big ramp-up in the trades, hundreds of trades a second,” he said.
Mr. Mulhern said he received calls from worried investors, including hedge funds: “When the hedge funds call up and start to complain, you know you have a problem.”
The fall set off circuit breakers the exchanges had put in place after May 6. The circuit breakers are intended to halt trading of a stock for five minutes if its price changes by 10 percent within a five-minute period, and thus to stop panic from spreading.
In the case of Progress Energy, the circuit breaker worked on the New York Exchange, Mr. Mulhern said, but trading happens so fast that before other exchanges could also halt trading, the company’s stock price continued to fall on the Nasdaq, all the way down to $4.57.
For no apparent reason, Progress’s share price had plunged almost 90 percent. In a matter of seconds, a company with 3.1 million customers and 11,000 employees had all but vanished on the nation’s stock market, and Progress executives had no idea why.
In the anxious hours that followed, the answers began to come clear: the harrowing plunge in the early afternoon of Sept. 27 had been a mini flash crash — a small-time version of the stock market’s wild day last spring.
Since the Dow Jones industrial average fell about 700 points then largely recovered on May 6, setting the financial world on edge, similar flash crashes have occurred with alarming frequency in more than a dozen individual stocks.
Citigroup, Core Molding, the Washington Post Company — all have soared, plunged, and often both, in wild, seemingly inexplicable trading. An exchange-traded fund, a popular investment that is basically an index fund that trades like stocks, has also been given the flash treatment, although that was attributed to a software error.
To some analysts, these mini flash crashes are a sign that another big one is possible, if not probable. Others say these abrupt reversals are simply the way modern, lightning-quick markets work, and that investors had better get used to it.
The crashes continue even as Washington regulators investigate the structure of modern markets and as a report traced the main trigger of May’s big crash to a poorly timed trade by a mutual fund in Kansas. Regulators have put in place circuit breakers to halt trading and reset prices in case stocks plunge. But some analysts fear that one day, these mechanisms could be overwhelmed.
And to corporate executives caught in the middle, it is all just plain hair-raising — and still puzzling.
That September afternoon, with fearful investors on the phone from New York, Mark F. Mulhern, Progress Energy’s chief financial officer, was told by the exchanges that it was all a mistake. A wayward keystroke by a trader somewhere had unleashed a powerful computer algorithm that had devoured Progress Energy’s stock in moments.
Progress Energy stock was trading at about $44.57 a share, and a dealer at an unidentified brokerage firm had entered a mistaken sell order into a computer that instantly drove the price to $4.57. Dozens of trades were declared void, and after a five-minute halt, normal trading resumed.
Mr. Mulhern says he still does not really know what caused the sell-off — and worries what mini flash crashes like this one are doing to investors’ confidence in the stock market.
“It is a little disconcerting when a trade like this could cause this kind of havoc,” he said. “It has got implications for the confidence in our markets. I don’t know what caused it, to tell the truth. The one hesitation all investors have about the market is the drift to so much electronic trading. It is so fast and real time, you have to wonder a little bit how these things happen, and can the regulatory procedures, the stop measures, can they really keep up with the technology?”
Robert F. Drennan Jr., the vice president for investor relations at Progress Energy, said he had reviewed the trading records and had noticed unusual trading activity in the run-up to the plunge. He said Progress Energy was not a heavily traded stock; it may go for several seconds without a trade. But before the price fell, “There was a big ramp-up in the trades, hundreds of trades a second,” he said.
Mr. Mulhern said he received calls from worried investors, including hedge funds: “When the hedge funds call up and start to complain, you know you have a problem.”
The fall set off circuit breakers the exchanges had put in place after May 6. The circuit breakers are intended to halt trading of a stock for five minutes if its price changes by 10 percent within a five-minute period, and thus to stop panic from spreading.
In the case of Progress Energy, the circuit breaker worked on the New York Exchange, Mr. Mulhern said, but trading happens so fast that before other exchanges could also halt trading, the company’s stock price continued to fall on the Nasdaq, all the way down to $4.57.
Sunday, November 7, 2010
Obama’s quest for an Indian pay-off
When Barack Obama arrives in Mumbai on Saturday he will see large red and yellow billboards telling him that foreign direct investment from the US in India’s retail sector is not welcome.
But with a midterm election “shellacking” behind him, the US president can ill-afford to return short-changed after a three-day stop in India accompanied by the likes of Walmart, the world’s largest retailer, large power companies GE and Westinghouse and aircraft manufacturers Boeing and Lockheed.
The billboards in south Mumbai are a reminder that fast-growing India, where local companies are fiercely competitive and regulation often opaque, is not a market easily conquered. Maharashtra’s retailers, as in many other parts of the economy, are not about to embrace foreign participation.
A nuclear liability law, recently passed by the Indian parliament, has served as a caution to Washington that a political breakthrough along the lines of the 2008 US-India civil nuclear deal does not necessarily clear the way for US investment.
Now Washington is eager to garner what some officials bluntly call “pay-offs” for former president George W. Bush’s bold initiative to legitimise India’s nuclear programme and put the relationship between the two capitals on a new footing. About $10bn worth of deals are expected to be signed.
Before leaving Washington on Friday, Mr Obama said that a four-nation tour of Asia taking him to India, Indonesia, South Korea and Japan would open new markets for US companies and create jobs at home.
“The primary purpose is to take a bunch of US companies and open up markets so that we can sell in Asia, in some of the fastest-growing markets in the world,” the president said.
Time out: Barack Obama is expected to visit Humayun’s Tomb, a world heritage site in New Delhi, during his trip
Mr Obama is bringing to India’s financial capital the biggest presidential business mission ever to leave US shores. It numbers about 200 chief executives and the delegation is holding business summits in both Mumbai and Delhi that will seek opportunities to boost bilateral trade estimated at $50bn this year.
Among Mr Obama’s key goals will be pushing for a contract to supply the Indian air force with 126 fighter jets made by Boeing and Lockheed, worth $11bn. The contract is to be decided early next year, and is part of a bigger rearmament estimated to be worth $100bn over 10 years.
In spite of political will to buy American, the Indian defence establishment is unwilling to sign agreements with the US that would allow the bigger partner any after-sale claim on the technology it has sold.
Others US goals include reducing tariff barriers in sectors where its exporters are strong, including agriculture and engineering.
Emerging markets blog
Follow Barack Obama’s visit to India
One message that Mr Obama will bear is that, if India wishes to access the global economy, it must open up its own.
What is at stake is India’s IT outsourcing industry, which has been built up over the past 20 years by servicing US multinationals. Its executives, many based in Bangalore, are anxious about protectionist measures against their companies as the US faces an unemployment crisis.
Already the US has increased the price of temporary work visas which are essential for Indian professionals working there.
Ahead of Mr Obama’s arrival, New Delhi was defensively stressing India’s foreign direct investment in the US.
“This investment from India is creating, saving or supporting tens of thousands of jobs in the US,” said Nirupama Rao, India’s foreign secretary. “India’s defence acquisitions and major purchases in the energy and aviation sectos ... are contributing in a substantive manner to the US economy.”
Agreements are expected in joint space launches, a global disease centre and a big education summit next year. Yet the US’s private sector will want more. India’s greater claims to the US’s support for its permanent seat in the UN Security Council and access to US technology will depend on that.
But with a midterm election “shellacking” behind him, the US president can ill-afford to return short-changed after a three-day stop in India accompanied by the likes of Walmart, the world’s largest retailer, large power companies GE and Westinghouse and aircraft manufacturers Boeing and Lockheed.
The billboards in south Mumbai are a reminder that fast-growing India, where local companies are fiercely competitive and regulation often opaque, is not a market easily conquered. Maharashtra’s retailers, as in many other parts of the economy, are not about to embrace foreign participation.
A nuclear liability law, recently passed by the Indian parliament, has served as a caution to Washington that a political breakthrough along the lines of the 2008 US-India civil nuclear deal does not necessarily clear the way for US investment.
Now Washington is eager to garner what some officials bluntly call “pay-offs” for former president George W. Bush’s bold initiative to legitimise India’s nuclear programme and put the relationship between the two capitals on a new footing. About $10bn worth of deals are expected to be signed.
Before leaving Washington on Friday, Mr Obama said that a four-nation tour of Asia taking him to India, Indonesia, South Korea and Japan would open new markets for US companies and create jobs at home.
“The primary purpose is to take a bunch of US companies and open up markets so that we can sell in Asia, in some of the fastest-growing markets in the world,” the president said.
Time out: Barack Obama is expected to visit Humayun’s Tomb, a world heritage site in New Delhi, during his trip
Mr Obama is bringing to India’s financial capital the biggest presidential business mission ever to leave US shores. It numbers about 200 chief executives and the delegation is holding business summits in both Mumbai and Delhi that will seek opportunities to boost bilateral trade estimated at $50bn this year.
Among Mr Obama’s key goals will be pushing for a contract to supply the Indian air force with 126 fighter jets made by Boeing and Lockheed, worth $11bn. The contract is to be decided early next year, and is part of a bigger rearmament estimated to be worth $100bn over 10 years.
In spite of political will to buy American, the Indian defence establishment is unwilling to sign agreements with the US that would allow the bigger partner any after-sale claim on the technology it has sold.
Others US goals include reducing tariff barriers in sectors where its exporters are strong, including agriculture and engineering.
Emerging markets blog
Follow Barack Obama’s visit to India
One message that Mr Obama will bear is that, if India wishes to access the global economy, it must open up its own.
What is at stake is India’s IT outsourcing industry, which has been built up over the past 20 years by servicing US multinationals. Its executives, many based in Bangalore, are anxious about protectionist measures against their companies as the US faces an unemployment crisis.
Already the US has increased the price of temporary work visas which are essential for Indian professionals working there.
Ahead of Mr Obama’s arrival, New Delhi was defensively stressing India’s foreign direct investment in the US.
“This investment from India is creating, saving or supporting tens of thousands of jobs in the US,” said Nirupama Rao, India’s foreign secretary. “India’s defence acquisitions and major purchases in the energy and aviation sectos ... are contributing in a substantive manner to the US economy.”
Agreements are expected in joint space launches, a global disease centre and a big education summit next year. Yet the US’s private sector will want more. India’s greater claims to the US’s support for its permanent seat in the UN Security Council and access to US technology will depend on that.
Asian Stocks Rise as U.S. Jobs Data Boosts Confidence; Honda, Samsung Jump
Asian stocks rose, driving the benchmark index to its longest winning streak since June, after a report last week showed the U.S. added more jobs than forecast, boosting confidence in the world’s largest economy.
Honda Motor Co., a Japanese carmaker that gets about 42 percent of its revenue from North America, climbed 2.9 percent. Komatsu Ltd., the world’s second-largest maker of construction machinery, advanced 2.4 percent. Rio Tinto Ltd., the world’s No. 3 mining company, gained 1 percent as oil and metal prices increased. JX Holdings Inc., Japan’s biggest oil refiner, jumped 5.7 percent after raising its full-year profit forecast.
The MSCI Asia Pacific Index rose 0.2 percent to 135.09 as of 10:45 a.m. in Tokyo, on course for a sixth consecutive increase. The gauge advanced 4.2 percent last week on optimism the U.S. Federal Reserve will succeed in stoking growth in the world’s biggest economy.
“It appears the U.S. economy is in better shape than when the Fed first announced its new quantitative-easing measures,” said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney. “The solid payroll numbers may be another indication that it’s coming out of its soft patch. A strong U.S. economy is immensely helpful in supporting growth around the world, mostly to Asia’s export- dominant countries.”
Japan’s Nikkei 225 Stock Average gained 0.9 percent. China’s Shanghai Composite Index increased 0.4 percent. South Korea’s Kospi Index slipped 0.1 percent. Australia’s S&P/ASX 200 Index lost 0.2 percent.
Downside Risks Reduced
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The index climbed 0.4 percent on Nov. 5 after U.S. Labor Department figures showed payrolls climbed by 151,000, exceeding the median estimate of economists surveyed by Bloomberg News. Private payrolls that exclude government agencies also gained more than forecast, and the jobless rate held at 9.6 percent.
The MSCI Asia Pacific Index has increased about 3 percent since the Federal Reserve unveiled on Nov. 3 plans to buy an additional $600 billion of Treasuries to bolster economic growth. Stocks in the gauge are valued at 14.7 times estimated earnings on average, compared with about 22.7 times at the start of the year, according to data compiled by Bloomberg.
Goldman Sachs Group Inc., which warned a month ago that the U.S. economic outlook was “fairly bad” at best, said the Fed’s decision to increase bond purchases will spur growth.
‘Risks Have Declined’
“Downside risks to the economic outlook have declined significantly,” Jan Hatzius, the New York-based chief U.S. economist at the company, wrote in an e-mail to clients.
Gauges of industrial and raw-material companies increased the most among the 10 industry groups in the MSCI Asia Pacific index. Honda climbed 2.9 percent to 2,963 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, rose 1.3 percent to 2,746 yen. Komatsu advanced 2.4 percent to 2,225 yen. Samsung Electronics Co., the world’s biggest maker of televisions, memory chips and flat screens, gained 0.8 percent to 782,000 won in Seoul.
“The jobs report indicates the U.S. real economy is heading toward restoration,” said Tomochika Kitaoka, a senior strategist in Tokyo at Mizuho Securities Co.
Rio Tinto gained 1 percent to A$88.07. Woodside Petroleum Ltd., Australia’s second-biggest oil producer, increased 1 percent to A$46.20. Mitsui & Co., which gets about 19 percent of sales from commodities, climbed 2.8 percent to 1,356 yen.
Crude oil for December delivery rose 0.4 percent in New York on Nov. 5 to $86.85 a barrel, the highest settlement price since Oct. 8, 2008. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum gained 0.3 percent, and gold futures surged to a record.
JX Holdings surged 6.3 percent to 527 yen. The company raised its full-year profit forecast by 19 percent to 320 billion yen ($3.9 billion) as margins for selling oil products improved after the company was formed out of a merger.
Honda Motor Co., a Japanese carmaker that gets about 42 percent of its revenue from North America, climbed 2.9 percent. Komatsu Ltd., the world’s second-largest maker of construction machinery, advanced 2.4 percent. Rio Tinto Ltd., the world’s No. 3 mining company, gained 1 percent as oil and metal prices increased. JX Holdings Inc., Japan’s biggest oil refiner, jumped 5.7 percent after raising its full-year profit forecast.
The MSCI Asia Pacific Index rose 0.2 percent to 135.09 as of 10:45 a.m. in Tokyo, on course for a sixth consecutive increase. The gauge advanced 4.2 percent last week on optimism the U.S. Federal Reserve will succeed in stoking growth in the world’s biggest economy.
“It appears the U.S. economy is in better shape than when the Fed first announced its new quantitative-easing measures,” said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney. “The solid payroll numbers may be another indication that it’s coming out of its soft patch. A strong U.S. economy is immensely helpful in supporting growth around the world, mostly to Asia’s export- dominant countries.”
Japan’s Nikkei 225 Stock Average gained 0.9 percent. China’s Shanghai Composite Index increased 0.4 percent. South Korea’s Kospi Index slipped 0.1 percent. Australia’s S&P/ASX 200 Index lost 0.2 percent.
Downside Risks Reduced
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The index climbed 0.4 percent on Nov. 5 after U.S. Labor Department figures showed payrolls climbed by 151,000, exceeding the median estimate of economists surveyed by Bloomberg News. Private payrolls that exclude government agencies also gained more than forecast, and the jobless rate held at 9.6 percent.
The MSCI Asia Pacific Index has increased about 3 percent since the Federal Reserve unveiled on Nov. 3 plans to buy an additional $600 billion of Treasuries to bolster economic growth. Stocks in the gauge are valued at 14.7 times estimated earnings on average, compared with about 22.7 times at the start of the year, according to data compiled by Bloomberg.
Goldman Sachs Group Inc., which warned a month ago that the U.S. economic outlook was “fairly bad” at best, said the Fed’s decision to increase bond purchases will spur growth.
‘Risks Have Declined’
“Downside risks to the economic outlook have declined significantly,” Jan Hatzius, the New York-based chief U.S. economist at the company, wrote in an e-mail to clients.
Gauges of industrial and raw-material companies increased the most among the 10 industry groups in the MSCI Asia Pacific index. Honda climbed 2.9 percent to 2,963 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, rose 1.3 percent to 2,746 yen. Komatsu advanced 2.4 percent to 2,225 yen. Samsung Electronics Co., the world’s biggest maker of televisions, memory chips and flat screens, gained 0.8 percent to 782,000 won in Seoul.
“The jobs report indicates the U.S. real economy is heading toward restoration,” said Tomochika Kitaoka, a senior strategist in Tokyo at Mizuho Securities Co.
Rio Tinto gained 1 percent to A$88.07. Woodside Petroleum Ltd., Australia’s second-biggest oil producer, increased 1 percent to A$46.20. Mitsui & Co., which gets about 19 percent of sales from commodities, climbed 2.8 percent to 1,356 yen.
Crude oil for December delivery rose 0.4 percent in New York on Nov. 5 to $86.85 a barrel, the highest settlement price since Oct. 8, 2008. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum gained 0.3 percent, and gold futures surged to a record.
JX Holdings surged 6.3 percent to 527 yen. The company raised its full-year profit forecast by 19 percent to 320 billion yen ($3.9 billion) as margins for selling oil products improved after the company was formed out of a merger.
Indian Stocks to Extend Record Rally on Earnings, Franklin Templeton Says
India’s more than 20 percent growth in earnings and slowing inflation will spur further gains in the nation’s equities after the benchmark stock index surged to a record, according to Franklin Templeton Investments.
HDFC Bank Ltd. and Axis Bank Ltd. are among the country’s most “high quality” bank investments as loan growth reaches as much as 25 percent a year, said Sukumar Rajah, who oversees $4 billion as Franklin Templeton’s chief investment officer of Asian equities. Inflation is “under control” after the Reserve Bank of India raised its benchmark interest rates last week for the sixth time this year, he said.
The Bombay Stock Exchange Sensitive Index has jumped 20 percent since December and hit an all-time high Nov. 4, the last full day of trading, as foreign investors bought Indian equities at a record pace this year on speculation economic growth will boost corporate profits. The 30-stock gauge is valued at 17.9 times analysts’ 12-month earnings estimates, the highest level among the world’s 30 biggest markets, according to data compiled by Bloomberg.
“The markets generally will continue to go up,” Rajah said in a Nov. 3 interview in Warsaw. Indian stocks will move in line with other emerging markets, he said. “We are looking at some high-quality banks.”
HDFC, India’s third-largest bank by market value, reported profit jumped 33 percent in its fiscal second quarter, according to a company statement dated Oct. 19 on its website. The shares have rallied 40 percent this year, and trade at 35 times reported earnings. Axis, which is valued at 24 times profit, posted a 38 percent jump in earnings. The fourth-biggest lender has surged 56 percent this year. The MSCI Emerging Markets Financials Index, a global gauge for the industry, trades at 16 times earnings.
GDP Expansion
India’s gross domestic product expanded 8.8 percent in the three months through June, the most among major economies in Asia after China. The Reserve Bank of India probably won’t raise interest rates in the next three months, Governor Duvvuri Subbarao said on Nov. 2 after increasing the repurchase rate by a quarter-point to 6.25 percent. Consumer prices for industrial workers in India rose 9.8 percent, down from a 16 percent increase January.
“It is quite unlikely the central bank will raise rates more,” Rajah said. “We are quite close to the peak right now -- inflation is under control.”
IPOs
India’s expanding economy has helped companies to raise $7.7 billion in initial public offerings for businesses ranging from consumer manufacturing to jewelry retailers this year, according to data compiled by Bloomberg. That’s almost double the $4 billion raised in 2009 and the most in three years.
Coal India Ltd., the world’s No. 1 producer of the fuel, surged 40 percent to 342 rupees in its first day of trading on Nov. 4 after selling 152 billion rupees ($3.4 billion) of shares at the top of the price range in the country’s biggest IPO in at least a decade, according to data compiled by Bloomberg. The offering attracted bids worth at least $48.7 billion.
“The supply of new stocks is good for the market at the current juncture because it’s keeping the lid on prices,” Rajah said. “Right now the market is not overvalued but if a lot of money keeps coming in and there is no supply it can get overvalued.”
Even after this year’s gains, the benchmark Sensex index is still 15 percent cheaper than in January 2008, when it traded for 21 times earnings estimates, according to data compiled by Bloomberg. The Sensex’s price-to-book ratio of 3.7 compares with its earlier peak level of 6.2, the data show.
Franklin Templeton’s Franklin India Prima Plus Fund has returned 24 percent as of Nov. 4 since the start of 2010 compared with the Sensex’s 20 percent gain.
HDFC Bank Ltd. and Axis Bank Ltd. are among the country’s most “high quality” bank investments as loan growth reaches as much as 25 percent a year, said Sukumar Rajah, who oversees $4 billion as Franklin Templeton’s chief investment officer of Asian equities. Inflation is “under control” after the Reserve Bank of India raised its benchmark interest rates last week for the sixth time this year, he said.
The Bombay Stock Exchange Sensitive Index has jumped 20 percent since December and hit an all-time high Nov. 4, the last full day of trading, as foreign investors bought Indian equities at a record pace this year on speculation economic growth will boost corporate profits. The 30-stock gauge is valued at 17.9 times analysts’ 12-month earnings estimates, the highest level among the world’s 30 biggest markets, according to data compiled by Bloomberg.
“The markets generally will continue to go up,” Rajah said in a Nov. 3 interview in Warsaw. Indian stocks will move in line with other emerging markets, he said. “We are looking at some high-quality banks.”
HDFC, India’s third-largest bank by market value, reported profit jumped 33 percent in its fiscal second quarter, according to a company statement dated Oct. 19 on its website. The shares have rallied 40 percent this year, and trade at 35 times reported earnings. Axis, which is valued at 24 times profit, posted a 38 percent jump in earnings. The fourth-biggest lender has surged 56 percent this year. The MSCI Emerging Markets Financials Index, a global gauge for the industry, trades at 16 times earnings.
GDP Expansion
India’s gross domestic product expanded 8.8 percent in the three months through June, the most among major economies in Asia after China. The Reserve Bank of India probably won’t raise interest rates in the next three months, Governor Duvvuri Subbarao said on Nov. 2 after increasing the repurchase rate by a quarter-point to 6.25 percent. Consumer prices for industrial workers in India rose 9.8 percent, down from a 16 percent increase January.
“It is quite unlikely the central bank will raise rates more,” Rajah said. “We are quite close to the peak right now -- inflation is under control.”
IPOs
India’s expanding economy has helped companies to raise $7.7 billion in initial public offerings for businesses ranging from consumer manufacturing to jewelry retailers this year, according to data compiled by Bloomberg. That’s almost double the $4 billion raised in 2009 and the most in three years.
Coal India Ltd., the world’s No. 1 producer of the fuel, surged 40 percent to 342 rupees in its first day of trading on Nov. 4 after selling 152 billion rupees ($3.4 billion) of shares at the top of the price range in the country’s biggest IPO in at least a decade, according to data compiled by Bloomberg. The offering attracted bids worth at least $48.7 billion.
“The supply of new stocks is good for the market at the current juncture because it’s keeping the lid on prices,” Rajah said. “Right now the market is not overvalued but if a lot of money keeps coming in and there is no supply it can get overvalued.”
Even after this year’s gains, the benchmark Sensex index is still 15 percent cheaper than in January 2008, when it traded for 21 times earnings estimates, according to data compiled by Bloomberg. The Sensex’s price-to-book ratio of 3.7 compares with its earlier peak level of 6.2, the data show.
Franklin Templeton’s Franklin India Prima Plus Fund has returned 24 percent as of Nov. 4 since the start of 2010 compared with the Sensex’s 20 percent gain.
Web Browsing Takes a Social Turn
MOUNTAIN VIEW, Calif. — Silicon Valley is awash in tales of the “PayPal Mafia,” the tight-knit group of PayPal alumni who have helped one another start and finance a crop of new companies.
But William V. Campbell, who is something of a godfather figure in the Valley, said, in a rare interview, “There is a ‘Netscape Mafia,’ too.”
And as Mafia families sometimes do, the Netscape Mafia is coming together for a reunion.
On Monday, RockMelt, a company founded and financed by a group of Netscape alumni, will release a new Web browser, 16 years after Netscape introduced the first commercial Internet browser, and 12 years after the company was sold to AOL after its defeat by Microsoft in the so-called browser wars.
“We think it is a fantastic time to build a company around a browser,” said Marc Andreessen, who co-founded Netscape, and whose venture capital firm, Andreessen Horowitz, is the principal financial backer of RockMelt.
Although most people spend more time using their Web browser than any other program on their computers, most browsers have not kept up with the evolution of the Web into a social media hub, Mr. Andreessen said. He and Mr. Campbell, a former Netscape board member who is advising the new company as well as investing in it, say RockMelt is a browser for the Facebook era.
At first glance, RockMelt looks like an ordinary browser, a digital windowpane onto the Web. But along the side of its main window are two thin rails with icons, one showing a user’s friends on the left, and another displaying a user’s favorite social sites, including Twitter and Facebook, on the right.
A “share” button makes it easy to post a Web page, a YouTube video or any other items, to Facebook, Twitter or other sites. Similarly, users can update their status or keep tabs on their friends’ activities on any social network right on their main browser window. They can also easily add and remove friends, or chat with them, on the left-side rail.
When a user searches the Web using Google, RockMelt not only delivers the Google search results, but also fetches the pages associated with those results, so a user can preview those pages quickly and decide which to click to.
“Had we known about Facebook and Twitter and Google back in ’92 or ’93, we would have built them into the browser,” Mr. Andreessen said, referring to Netscape. “This is an opportunity to go back and do it right.”
Like other browsers, RockMelt will be free, and like the popular open-source browser Firefox, it plans to make money by earning a share of the revenue from Web searches conducted by its users.
For all its modern features, the challenges facing RockMelt, which is inviting users to try a test version on Monday, are enormous. The browser market has become intensely competitive in recent years and is dominated by giants like Microsoft, Apple and Google, as well as Mozilla, which makes Firefox.
“Getting heard above the noise is going to be hard,” said David B. Yoffie, a professor at the Harvard Business School and the co-author of “Competing on Internet Time,” a book that chronicled the battle between Netscape and Microsoft.
Consider the fate of Chrome, the latest major competitor in the browser market, which Google introduced two years ago. Despite good reviews and being heavily promoted by Google — through ads and links on the company’s home page, the most visited page on the Web — Chrome has captured just 8 percent of the browser market, according to NetApplications, which tracks browser usage.
Even Microsoft, considered a laggard in innovation for much of the last decade, has revamped Internet Explorer in recent years and is expected to release a new and improved version soon. A test version of the product was downloaded 10 million times in just six weeks, Microsoft said.
“There is no reason to suggest that the momentum that we have seen in the past six weeks is going to slow,” said Ryan Gavin, senior director for Internet Explorer at Microsoft.
RockMelt’s ties to Netscape run deep. The company was co-founded by Tim Howes, 47, and Eric Vishria, 31. Mr. Howes, the chief technology officer, is a former Netscape executive who developed some of the most widely used Internet technologies. Mr. Vishria did not work at Netscape but was a senior executive at Opsware, the company Mr. Andreessen, Mr. Howes and Ben Horowitz, Mr. Andreessen’s venture capital partner, founded after they left Netscape.
Then there is Mr. Campbell, a former chief executive of companies like Intuit; Go, a renowned but failed maker of a pen computer; and Claris, which made software for Macintosh computers. He is known in Silicon Valley as the coach. Mr. Campbell once coached Columbia’s football team, but he earned the moniker more recently for his role as a behind-the-scenes adviser to a long list of young entrepreneurs and veteran executives, including Steven P. Jobs of Apple, on whose board he currently serves, and Eric E. Schmidt of Google.
Mr. Campbell is now helping Mr. Vishria and Mr. Howes with recruitment, organization and management.
Mr. Howes and Mr. Vishria built RockMelt using Chromium, the same open source browser technology that Google used for Chrome. But unlike Chrome and other major browsers that run entirely on a user’s PC, RockMelt will manage users’ interactions with sites like Facebook and Twitter in its data center. To make that possible, users will be required to log into RockMelt.
“This is the beginning of what we think browsers will look like in the next decade,” Mr. Vishria said.
RockMelt is not the first browser built around social networking features. Three years ago, Flock introduced a browser that also makes it easy to share items with sites like Facebook and Twitter. While Flock gained a loyal following, it never broke into the big leagues of the browser market, though it has recently released a well-reviewed upgrade.
Industry insiders say that Flock may have been ahead of its time, since it was developed before social networks became mainstream. RockMelt’s timing may give it a better chance at success.
“If they build a browser that matches the way people work, it will get some adoption,” said John Lilly, the former chief executive of Mozilla. “But it is hard to make people change their habits.”
RockMelt’s backers acknowledge that getting the browser into users’ hands will be a big challenge, but they say that if the product is good enough, it will spread through recommendations.
“You hope it is going to happen by word of mouth,” said Mr. Cambpell. Noting his ties to Apple, which makes the Safari browser, and Google, which he advised for many years, Mr. Campbell added, “I don’t want to be poking at Chrome and Safari, but this is unique.”
But William V. Campbell, who is something of a godfather figure in the Valley, said, in a rare interview, “There is a ‘Netscape Mafia,’ too.”
And as Mafia families sometimes do, the Netscape Mafia is coming together for a reunion.
On Monday, RockMelt, a company founded and financed by a group of Netscape alumni, will release a new Web browser, 16 years after Netscape introduced the first commercial Internet browser, and 12 years after the company was sold to AOL after its defeat by Microsoft in the so-called browser wars.
“We think it is a fantastic time to build a company around a browser,” said Marc Andreessen, who co-founded Netscape, and whose venture capital firm, Andreessen Horowitz, is the principal financial backer of RockMelt.
Although most people spend more time using their Web browser than any other program on their computers, most browsers have not kept up with the evolution of the Web into a social media hub, Mr. Andreessen said. He and Mr. Campbell, a former Netscape board member who is advising the new company as well as investing in it, say RockMelt is a browser for the Facebook era.
At first glance, RockMelt looks like an ordinary browser, a digital windowpane onto the Web. But along the side of its main window are two thin rails with icons, one showing a user’s friends on the left, and another displaying a user’s favorite social sites, including Twitter and Facebook, on the right.
A “share” button makes it easy to post a Web page, a YouTube video or any other items, to Facebook, Twitter or other sites. Similarly, users can update their status or keep tabs on their friends’ activities on any social network right on their main browser window. They can also easily add and remove friends, or chat with them, on the left-side rail.
When a user searches the Web using Google, RockMelt not only delivers the Google search results, but also fetches the pages associated with those results, so a user can preview those pages quickly and decide which to click to.
“Had we known about Facebook and Twitter and Google back in ’92 or ’93, we would have built them into the browser,” Mr. Andreessen said, referring to Netscape. “This is an opportunity to go back and do it right.”
Like other browsers, RockMelt will be free, and like the popular open-source browser Firefox, it plans to make money by earning a share of the revenue from Web searches conducted by its users.
For all its modern features, the challenges facing RockMelt, which is inviting users to try a test version on Monday, are enormous. The browser market has become intensely competitive in recent years and is dominated by giants like Microsoft, Apple and Google, as well as Mozilla, which makes Firefox.
“Getting heard above the noise is going to be hard,” said David B. Yoffie, a professor at the Harvard Business School and the co-author of “Competing on Internet Time,” a book that chronicled the battle between Netscape and Microsoft.
Consider the fate of Chrome, the latest major competitor in the browser market, which Google introduced two years ago. Despite good reviews and being heavily promoted by Google — through ads and links on the company’s home page, the most visited page on the Web — Chrome has captured just 8 percent of the browser market, according to NetApplications, which tracks browser usage.
Even Microsoft, considered a laggard in innovation for much of the last decade, has revamped Internet Explorer in recent years and is expected to release a new and improved version soon. A test version of the product was downloaded 10 million times in just six weeks, Microsoft said.
“There is no reason to suggest that the momentum that we have seen in the past six weeks is going to slow,” said Ryan Gavin, senior director for Internet Explorer at Microsoft.
RockMelt’s ties to Netscape run deep. The company was co-founded by Tim Howes, 47, and Eric Vishria, 31. Mr. Howes, the chief technology officer, is a former Netscape executive who developed some of the most widely used Internet technologies. Mr. Vishria did not work at Netscape but was a senior executive at Opsware, the company Mr. Andreessen, Mr. Howes and Ben Horowitz, Mr. Andreessen’s venture capital partner, founded after they left Netscape.
Then there is Mr. Campbell, a former chief executive of companies like Intuit; Go, a renowned but failed maker of a pen computer; and Claris, which made software for Macintosh computers. He is known in Silicon Valley as the coach. Mr. Campbell once coached Columbia’s football team, but he earned the moniker more recently for his role as a behind-the-scenes adviser to a long list of young entrepreneurs and veteran executives, including Steven P. Jobs of Apple, on whose board he currently serves, and Eric E. Schmidt of Google.
Mr. Campbell is now helping Mr. Vishria and Mr. Howes with recruitment, organization and management.
Mr. Howes and Mr. Vishria built RockMelt using Chromium, the same open source browser technology that Google used for Chrome. But unlike Chrome and other major browsers that run entirely on a user’s PC, RockMelt will manage users’ interactions with sites like Facebook and Twitter in its data center. To make that possible, users will be required to log into RockMelt.
“This is the beginning of what we think browsers will look like in the next decade,” Mr. Vishria said.
RockMelt is not the first browser built around social networking features. Three years ago, Flock introduced a browser that also makes it easy to share items with sites like Facebook and Twitter. While Flock gained a loyal following, it never broke into the big leagues of the browser market, though it has recently released a well-reviewed upgrade.
Industry insiders say that Flock may have been ahead of its time, since it was developed before social networks became mainstream. RockMelt’s timing may give it a better chance at success.
“If they build a browser that matches the way people work, it will get some adoption,” said John Lilly, the former chief executive of Mozilla. “But it is hard to make people change their habits.”
RockMelt’s backers acknowledge that getting the browser into users’ hands will be a big challenge, but they say that if the product is good enough, it will spread through recommendations.
“You hope it is going to happen by word of mouth,” said Mr. Cambpell. Noting his ties to Apple, which makes the Safari browser, and Google, which he advised for many years, Mr. Campbell added, “I don’t want to be poking at Chrome and Safari, but this is unique.”
Subscribe to:
Posts (Atom)
Posts
