By Anto Antony and Rakteem Katakey - Jan 13, 2012 10:50 AM GMT+0530
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Enlarge image India to Seek Higher Dividend From State-Owned Companies
Coal India Ltd. had 549.8 billion rupees of cash as of Sept. 30. It plans to use the money to increase output and pay more dividend, Chairman Nirmal Chandra Jha said on Sept. 22. Photographer: Dhiraj Singh/Bloomberg
India’s government asked state-run companies to pay higher dividends to help narrow the budget deficit as slowing growth threatens to erode revenue, a finance ministry official with direct knowledge of the matter said.
Ministry officials and the chiefs of state companies met in New Delhi yesterday to discuss investment plans and their ability to pay higher dividends, said the person, who asked not to be identified, citing government policy.
Failure to raise money from stake sales is forcing Finance Minister Pranab Mukherjee to explore other ways to fund the government’s spending on roads, hospitals, ports and power stations. He said Jan. 11 it will be “difficult” for the government to achieve its fiscal deficit target. India’s gross domestic product expanded 6.9 percent in the three months ended Sept. 30, the slowest pace in more than two years.
“The government is resorting to temporary measures to get control over the budget deficit,” said Dharmakirti Joshi, Mumbai-based chief economist at Crisil Ltd., the local unit of Standard & Poor’s. “What India needs to do is take durable and credible steps to cut the deficit.”
Joshi expects the budget deficit to widen to 5.5 percent of the gross domestic product in the current financial year compared with the budgeted target of 4.6 percent. India’s budget deficit reached 85.6 percent of the annual target in the eight months through November. The deficit was 3.53 trillion rupees ($69 billion) in the period, according to the Controller General of Accounts.
Stocks Gain
D.S. Malik, spokesman for the finance ministry, wasn’t available for comment in two calls made to his office.
“We plan to pay a higher dividend than last year after consultations with the board,” said B.L. Bagra, chairman of National Aluminium Co., who attended the meeting yesterday. The government owns 87.2 percent of the company.
The Bombay Stock Exchange’s BSE-PSU Index (BSETPSU) has climbed 11 percent this year on speculation of higher dividend payments, while the benchmark Sensitive Index has risen 4 percent. National Aluminium gained 3.8 percent to 59 rupees at 10:09 a.m. in Mumbai trading and Coal India (COAL) Ltd. rose 2.4 percent.
National Aluminium had 44.1 billion rupees ($857 million) of cash as of Sept. 30, according to data compiled by Bloomberg.
Coal India, the world’s biggest producer of the fuel, had 550 billion rupees of cash as of Sept. 30. It plans to use the money to increase output and pay more dividend, Chairman Nirmal Chandra Jha said on Sept. 22.
Slowing economic growth is hurting revenue. Tax receipts rose 48.2 percent in the April-November period, slower than the 55.5 percent gain a year earlier. The government on Dec. 30 increased its planned borrowings to a record 5.1 trillion rupees in the year ending March, compared with the budgeted target of 4.17 trillion rupees.
Sensex Drop
Oil India Ltd. (OINL), the second-biggest state-owned explorer, announced Dec. 21 it would pay a mid-year dividend of 25 rupees a share, its highest payout ever. NTPC Ltd., the nation’s biggest electricity generator, will consider payment of a mid- year dividend at a board meeting on Jan. 27, according to a regulatory statement yesterday.
A 25 percent drop in the benchmark Sensitive Index last year prompted Mukherjee to delay selling shares of Oil & Natural Gas Corp., the country’s biggest energy explorer, Steel Authority of India Ltd. and Hindustan Copper Ltd. (HCP) He has raised 11.44 billion rupees from asset sales this year, or 3 percent of the target, according to data provided by the Department of Disinvestment.
The government has also examined asking companies to buy back its shares and create a fund manager that will purchase the state’s shares in companies.
To contact the reporters on this story: Anto Antony in New Delhi at aantony1@bloomberg.net; Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
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Saturday, January 14, 2012
Friday, January 13, 2012
Bonds Beating Gold for Funds on Slowest Inflation Since ’09: India Credit By Madelene Pearson and Swansy Afonso - Jan 13, 2012
Investors in India are shunning gold while adding to holdings of government bonds, betting that policy makers will cut borrowing costs as inflation slows to the least in two years.
Assets managed by funds that buy bullion shrank 4.3 percent to 91.5 billion rupees ($1.8 billion) in December, while those that trade in rupee-denominated sovereign debt increased 17 percent to 31.2 billion rupees, according to the Mumbai-based Association of Mutual Funds in India. Gold imports by the world’s biggest buyer may slump 48 percent in the three months ending March from a year earlier, the Bombay Bullion Association said this month.
Government notes are rallying before data next week that economists predict will show wholesale prices rose 7.4 percent in December, compared with 9.11 percent in November, a sign that seven interest-rate increases last year are taming price pressures. The nation’s 10-year bonds yield 8.22 percent, 82 basis points more than the inflation forecast. China has so- called real interest rates of minus 70 basis points, while South Korea’s are minus 40.
“Indian investors’ sacred affinity toward gold will be tested by factors like real interest rates and investment opportunities in other assets,” Ritesh Jain, the Mumbai-based head of investment at Canara Robeco Asset Management Ltd. that oversees $1.3 billion, said in an interview yesterday. “Demand for gold in India may fall 25 percent to 30 percent in 2012.”
Borrowing Costs
The metal was being perceived as a hedge against inflation through last year, Jain said, as increases in wholesale prices held above 9 percent for 12 consecutive months through November. This was especially so in rural India, where banking facilities “continue to be dismal,” he said.
Funds that buy gold managed 2 percent of total assets invested by India’s investors in mutual funds at the end of December, compared with 20 percent overseen by those that trade in bonds due in less than 12 months. Debt securities with maturities longer than a year accounted for 49 percent, while equities made up 23 percent.
The nation’s interest-rate swap market suggests that borrowing costs will decline. The cost to lock in interest rates for 12 months dropped three basis points, or 0.03 percentage point, to 7.88 percent today. That’s 62 basis points below the Reserve Bank of India’s 8.5 percent repurchase rate. Goldman Sachs Group Inc. predicts policy makers will cut the repo rate by 1.5 percentage points this year, while Deutsche Bank AG estimates a one percentage point reduction.
Rupee Advances
Global funds are adding to holdings of the nation’s debt securities before the central bank reviews borrowing costs on Jan. 24. International investors bought more rupee-denominated notes than they sold for an eightth consecutive trading day on Jan. 11, boosting their ownership this month by $2 billion to $28.1 billion, according to exchange data.
The purchases are spurring a rally in government bonds and the rupee. Yields on the nation’s benchmark 8.79 percent notes due in November 2021 have slumped 35 basis points this year after increasing 65 basis points in 2011. The yield fell three basis points to 8.22 percent today, according to the central bank’s trading system.
The rupee, Asia’s worst-performing currency last year following a 16 percent slide, gained 0.4 percent today to 51.3760 per dollar, according to data compiled by Bloomberg. The currency has strengthened 3.5 percent in 2012, the best performance among the region’s 10 most-traded currencies.
Gold Slumps
Gold for immediate delivery, which gained 10 percent in 2011, has slid 14 percent after touching a record $1,921.15 an ounce on Sept. 6 and traded at $1,647.02 today.
Imports of the metal may decline to 150 metric tons in the three months through March, from 286 tons a year earlier, as the rupee’s 2011 decline boosts prices, Prithviraj Kothari, president of the Bombay Bullion Association, said in an interview.
“If gold were to correct, especially in the near term, and the rupee were to remain sideways, it wouldn’t augur very well for the investor,” Lakshmi Iyer, head of fixed income and products in Mumbai at Kotak Mahindra Asset Management Co. that oversees $5.7 billion, said in an interview on Jan. 11. “Sentiment is biased toward investing in fixed income over any other asset class for now.”
The cost of protecting the debt of State Bank of India, which some investors consider a proxy for the nation, is climbing as Europe’s debt crisis dims the allure of emerging- market assets.
Cultural Factors
Credit-default swaps on the lender cost 396 basis points today after touching a two-year high of 405 on Jan. 9, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.
With Europe’s sovereign-debt crisis spreading “like a plague,” gold will continue to attract investment in 2012 because of its appeal as a haven, according to Reliance Capital Asset Management Ltd.
Demand will also be supported by cultural factors as gold is an important part of family occasions in India such as weddings, Sundeep Sikka, the Mumbai-based chief executive officer at Reliance Capital, said in an interview on Jan. 6. Hindus, who account for about 80 percent of the nation’s population, also consider buying gold auspicious during religious festivals.
‘Extremely Bullish’
“Demand for physical gold has always been strong in India,” Sikka said. “The current global macroeconomic environment is very conducive for higher gold prices. The fundamental outlook for gold remains extremely bullish.”
Slowing growth in Asia’s third-biggest economy will damp demand for bullion, according to Canara Robeco’s Jain.
Sales of passenger cars in the nation fell almost 7 percent from November to 159,325 units last month, according to data from the Society of Indian Automobile Manufacturers. Gross domestic product will rise about 7 percent in the year ending March, Prime Minister Manmohan Singh said on Jan. 8, less than a prediction of 7.5 percent he made in December.
India’s bonds have returned 1.2 percent this month, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference in yields between rupee-denominated notes due in a decade and similar-maturity U.S. Treasuries has narrowed 32 basis points in January to 630.
“With easing of inflation, people aren’t thinking of buying gold,” Chirag Mehta, Mumbai-based fund manager at Quantum Asset Management Company, a unit of Quantum Advisors Pvt. that manages about $1.1 billion, said in an interview yesterday. “Investors are thinking that bond yields have peaked and it’s a good time to invest in government bonds.”
To contact the reporters on this story: Madelene Pearson in Melbourne at mpearson1@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Assets managed by funds that buy bullion shrank 4.3 percent to 91.5 billion rupees ($1.8 billion) in December, while those that trade in rupee-denominated sovereign debt increased 17 percent to 31.2 billion rupees, according to the Mumbai-based Association of Mutual Funds in India. Gold imports by the world’s biggest buyer may slump 48 percent in the three months ending March from a year earlier, the Bombay Bullion Association said this month.
Government notes are rallying before data next week that economists predict will show wholesale prices rose 7.4 percent in December, compared with 9.11 percent in November, a sign that seven interest-rate increases last year are taming price pressures. The nation’s 10-year bonds yield 8.22 percent, 82 basis points more than the inflation forecast. China has so- called real interest rates of minus 70 basis points, while South Korea’s are minus 40.
“Indian investors’ sacred affinity toward gold will be tested by factors like real interest rates and investment opportunities in other assets,” Ritesh Jain, the Mumbai-based head of investment at Canara Robeco Asset Management Ltd. that oversees $1.3 billion, said in an interview yesterday. “Demand for gold in India may fall 25 percent to 30 percent in 2012.”
Borrowing Costs
The metal was being perceived as a hedge against inflation through last year, Jain said, as increases in wholesale prices held above 9 percent for 12 consecutive months through November. This was especially so in rural India, where banking facilities “continue to be dismal,” he said.
Funds that buy gold managed 2 percent of total assets invested by India’s investors in mutual funds at the end of December, compared with 20 percent overseen by those that trade in bonds due in less than 12 months. Debt securities with maturities longer than a year accounted for 49 percent, while equities made up 23 percent.
The nation’s interest-rate swap market suggests that borrowing costs will decline. The cost to lock in interest rates for 12 months dropped three basis points, or 0.03 percentage point, to 7.88 percent today. That’s 62 basis points below the Reserve Bank of India’s 8.5 percent repurchase rate. Goldman Sachs Group Inc. predicts policy makers will cut the repo rate by 1.5 percentage points this year, while Deutsche Bank AG estimates a one percentage point reduction.
Rupee Advances
Global funds are adding to holdings of the nation’s debt securities before the central bank reviews borrowing costs on Jan. 24. International investors bought more rupee-denominated notes than they sold for an eightth consecutive trading day on Jan. 11, boosting their ownership this month by $2 billion to $28.1 billion, according to exchange data.
The purchases are spurring a rally in government bonds and the rupee. Yields on the nation’s benchmark 8.79 percent notes due in November 2021 have slumped 35 basis points this year after increasing 65 basis points in 2011. The yield fell three basis points to 8.22 percent today, according to the central bank’s trading system.
The rupee, Asia’s worst-performing currency last year following a 16 percent slide, gained 0.4 percent today to 51.3760 per dollar, according to data compiled by Bloomberg. The currency has strengthened 3.5 percent in 2012, the best performance among the region’s 10 most-traded currencies.
Gold Slumps
Gold for immediate delivery, which gained 10 percent in 2011, has slid 14 percent after touching a record $1,921.15 an ounce on Sept. 6 and traded at $1,647.02 today.
Imports of the metal may decline to 150 metric tons in the three months through March, from 286 tons a year earlier, as the rupee’s 2011 decline boosts prices, Prithviraj Kothari, president of the Bombay Bullion Association, said in an interview.
“If gold were to correct, especially in the near term, and the rupee were to remain sideways, it wouldn’t augur very well for the investor,” Lakshmi Iyer, head of fixed income and products in Mumbai at Kotak Mahindra Asset Management Co. that oversees $5.7 billion, said in an interview on Jan. 11. “Sentiment is biased toward investing in fixed income over any other asset class for now.”
The cost of protecting the debt of State Bank of India, which some investors consider a proxy for the nation, is climbing as Europe’s debt crisis dims the allure of emerging- market assets.
Cultural Factors
Credit-default swaps on the lender cost 396 basis points today after touching a two-year high of 405 on Jan. 9, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.
With Europe’s sovereign-debt crisis spreading “like a plague,” gold will continue to attract investment in 2012 because of its appeal as a haven, according to Reliance Capital Asset Management Ltd.
Demand will also be supported by cultural factors as gold is an important part of family occasions in India such as weddings, Sundeep Sikka, the Mumbai-based chief executive officer at Reliance Capital, said in an interview on Jan. 6. Hindus, who account for about 80 percent of the nation’s population, also consider buying gold auspicious during religious festivals.
‘Extremely Bullish’
“Demand for physical gold has always been strong in India,” Sikka said. “The current global macroeconomic environment is very conducive for higher gold prices. The fundamental outlook for gold remains extremely bullish.”
Slowing growth in Asia’s third-biggest economy will damp demand for bullion, according to Canara Robeco’s Jain.
Sales of passenger cars in the nation fell almost 7 percent from November to 159,325 units last month, according to data from the Society of Indian Automobile Manufacturers. Gross domestic product will rise about 7 percent in the year ending March, Prime Minister Manmohan Singh said on Jan. 8, less than a prediction of 7.5 percent he made in December.
India’s bonds have returned 1.2 percent this month, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference in yields between rupee-denominated notes due in a decade and similar-maturity U.S. Treasuries has narrowed 32 basis points in January to 630.
“With easing of inflation, people aren’t thinking of buying gold,” Chirag Mehta, Mumbai-based fund manager at Quantum Asset Management Company, a unit of Quantum Advisors Pvt. that manages about $1.1 billion, said in an interview yesterday. “Investors are thinking that bond yields have peaked and it’s a good time to invest in government bonds.”
To contact the reporters on this story: Madelene Pearson in Melbourne at mpearson1@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Thursday, January 12, 2012
Bonds Beating Gold for Funds on Slowest Inflation Since ’09: India Credit By Madelene Pearson and Swansy Afonso - Jan 12, 2012
Investors in India are shunning gold while adding to holdings of government bonds, betting that policy makers will cut borrowing costs as inflation slows to the least in two years.
Assets managed by funds that buy bullion shrank 4.3 percent to 91.5 billion rupees ($1.8 billion) in December, while those that trade in rupee-denominated sovereign debt increased 17 percent to 31.2 billion rupees, according to the Mumbai-based Association of Mutual Funds in India. Gold imports by the world’s biggest buyer may slump 48 percent in the three months ending March from a year earlier, the Bombay Bullion Association said this month.
Government notes are rallying before data next week that economists predict will show wholesale prices rose 7.4 percent in December, compared with 9.11 percent in November, a sign that seven interest-rate increases last year are taming price pressures. The nation’s 10-year bonds yield 8.23 percent, 83 basis points more than the inflation forecast. China has so- called real interest rates of minus 70 basis points, while South Korea’s are minus 41.
“Indian investors’ sacred affinity toward gold will be tested by factors like real interest rates and investment opportunities in other assets,” Ritesh Jain, the Mumbai-based head of investment at Canara Robeco Asset Management Ltd. that oversees $1.3 billion, said in an interview yesterday. “Demand for gold in India may fall 25 percent to 30 percent in 2012.”
Borrowing Costs
The metal was being perceived as a hedge against inflation through last year, Jain said, as increases in wholesale prices held above 9 percent for 12 consecutive months through November. This was especially so in rural India, where banking facilities “continue to be dismal,” he said.
Funds that buy gold managed 2 percent of total assets invested by India’s investors in mutual funds at the end of December, compared with 20 percent overseen by those that trade in bonds due in less than 12 months. Debt securities with maturities longer than a year accounted for 49 percent, while equities made up 23 percent.
The nation’s interest-rate swap market suggests that borrowing costs will decline. The cost to lock in interest rates for 12 months dropped one basis point, or 0.01 percentage point, to 7.9 percent yesterday. That’s 60 basis points below the Reserve Bank of India’s 8.5 percent repurchase rate. Goldman Sachs Group Inc. predicts policy makers will cut the repo rate by 1.5 percentage points this year, while Deutsche Bank AG estimates a one percentage point reduction.
Rupee Advances
Global funds are adding to holdings of the nation’s debt securities before the central bank reviews borrowing costs on Jan. 24. International investors bought more rupee-denominated notes than they sold for a seventh consecutive trading day on Jan. 10, boosting their ownership this month by $1.8 billion to $27.8 billion, according to exchange data.
The purchases are spurring a rally in government bonds and the rupee. Yields on the nation’s benchmark 8.79 percent notes due in November 2021 have slumped 32 basis points this year after increasing 65 basis points in 2011. The yield rose two basis points to 8.25 percent yesterday, according to the central bank’s trading system.
The rupee, Asia’s worst-performing currency last year following a 16 percent slide, gained 0.6 percent yesterday to 51.585 per dollar, according to data compiled by Bloomberg. The currency has strengthened 2.9 percent in 2012, the best performance among the region’s 10 most-traded currencies.
Gold Slumps
Gold for immediate delivery, which gained 10 percent in 2011, has slid 14 percent after touching a record $1,921.15 an ounce on Sept. 6 and traded at $1,656.88 in Mumbai yesterday.
Imports of the metal may decline to 150 metric tons in the three months through March, from 286 tons a year earlier, as the rupee’s 2011 decline boosts prices, Prithviraj Kothari, president of the Bombay Bullion Association, said in an interview.
“If gold were to correct, especially in the near term, and the rupee were to remain sideways, it wouldn’t augur very well for the investor,” Lakshmi Iyer, head of fixed income and products in Mumbai at Kotak Mahindra Asset Management Co. that oversees $5.7 billion, said in an interview on Jan. 11. “Sentiment is biased toward investing in fixed income over any other asset class for now.”
The cost of protecting the debt of State Bank of India, which some investors consider a proxy for the nation, is climbing as Europe’s debt crisis dims the allure of emerging- market assets.
Cultural Factors
Credit-default swaps on the lender cost 392 basis points yesterday after touching a two-year high of 405 on Jan. 9, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.
With Europe’s sovereign-debt crisis spreading “like a plague,” gold will continue to attract investment in 2012 because of its appeal as a haven, according to Reliance Capital Asset Management Ltd.
Demand will also be supported by cultural factors as gold is an important part of family occasions in India such as weddings, Sundeep Sikka, the Mumbai-based chief executive officer at Reliance Capital, said in an interview on Jan. 6. Hindus, who account for about 80 percent of the nation’s population, also consider buying gold auspicious during religious festivals.
‘Extremely Bullish’
“Demand for physical gold has always been strong in India,” Sikka said. “The current global macroeconomic environment is very conducive for higher gold prices. The fundamental outlook for gold remains extremely bullish.”
Slowing growth in Asia’s third-biggest economy will damp demand for bullion, according to Canara Robeco’s Jain.
Sales of passenger cars in the nation fell almost 7 percent from November to 159,325 units last month, according to data from the Society of Indian Automobile Manufacturers. Gross domestic product will rise about 7 percent in the year ending March, Prime Minister Manmohan Singh said on Jan. 8, less than a prediction of 7.5 percent he made in December.
India’s bonds have returned 1.2 percent this month, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference in yields between rupee-denominated notes due in a decade and similar-maturity U.S. Treasuries has narrowed 31 basis points in January to 631.
“With easing of inflation, people aren’t thinking of buying gold,” Chirag Mehta, Mumbai-based fund manager at Quantum Asset Management Company, a unit of Quantum Advisors Pvt. that manages about $1.1 billion, said in an interview yesterday. “Investors are thinking that bond yields have peaked and it’s a good time to invest in government bonds.”
To contact the reporters on this story: Madelene Pearson in Melbourne at mpearson1@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Assets managed by funds that buy bullion shrank 4.3 percent to 91.5 billion rupees ($1.8 billion) in December, while those that trade in rupee-denominated sovereign debt increased 17 percent to 31.2 billion rupees, according to the Mumbai-based Association of Mutual Funds in India. Gold imports by the world’s biggest buyer may slump 48 percent in the three months ending March from a year earlier, the Bombay Bullion Association said this month.
Government notes are rallying before data next week that economists predict will show wholesale prices rose 7.4 percent in December, compared with 9.11 percent in November, a sign that seven interest-rate increases last year are taming price pressures. The nation’s 10-year bonds yield 8.23 percent, 83 basis points more than the inflation forecast. China has so- called real interest rates of minus 70 basis points, while South Korea’s are minus 41.
“Indian investors’ sacred affinity toward gold will be tested by factors like real interest rates and investment opportunities in other assets,” Ritesh Jain, the Mumbai-based head of investment at Canara Robeco Asset Management Ltd. that oversees $1.3 billion, said in an interview yesterday. “Demand for gold in India may fall 25 percent to 30 percent in 2012.”
Borrowing Costs
The metal was being perceived as a hedge against inflation through last year, Jain said, as increases in wholesale prices held above 9 percent for 12 consecutive months through November. This was especially so in rural India, where banking facilities “continue to be dismal,” he said.
Funds that buy gold managed 2 percent of total assets invested by India’s investors in mutual funds at the end of December, compared with 20 percent overseen by those that trade in bonds due in less than 12 months. Debt securities with maturities longer than a year accounted for 49 percent, while equities made up 23 percent.
The nation’s interest-rate swap market suggests that borrowing costs will decline. The cost to lock in interest rates for 12 months dropped one basis point, or 0.01 percentage point, to 7.9 percent yesterday. That’s 60 basis points below the Reserve Bank of India’s 8.5 percent repurchase rate. Goldman Sachs Group Inc. predicts policy makers will cut the repo rate by 1.5 percentage points this year, while Deutsche Bank AG estimates a one percentage point reduction.
Rupee Advances
Global funds are adding to holdings of the nation’s debt securities before the central bank reviews borrowing costs on Jan. 24. International investors bought more rupee-denominated notes than they sold for a seventh consecutive trading day on Jan. 10, boosting their ownership this month by $1.8 billion to $27.8 billion, according to exchange data.
The purchases are spurring a rally in government bonds and the rupee. Yields on the nation’s benchmark 8.79 percent notes due in November 2021 have slumped 32 basis points this year after increasing 65 basis points in 2011. The yield rose two basis points to 8.25 percent yesterday, according to the central bank’s trading system.
The rupee, Asia’s worst-performing currency last year following a 16 percent slide, gained 0.6 percent yesterday to 51.585 per dollar, according to data compiled by Bloomberg. The currency has strengthened 2.9 percent in 2012, the best performance among the region’s 10 most-traded currencies.
Gold Slumps
Gold for immediate delivery, which gained 10 percent in 2011, has slid 14 percent after touching a record $1,921.15 an ounce on Sept. 6 and traded at $1,656.88 in Mumbai yesterday.
Imports of the metal may decline to 150 metric tons in the three months through March, from 286 tons a year earlier, as the rupee’s 2011 decline boosts prices, Prithviraj Kothari, president of the Bombay Bullion Association, said in an interview.
“If gold were to correct, especially in the near term, and the rupee were to remain sideways, it wouldn’t augur very well for the investor,” Lakshmi Iyer, head of fixed income and products in Mumbai at Kotak Mahindra Asset Management Co. that oversees $5.7 billion, said in an interview on Jan. 11. “Sentiment is biased toward investing in fixed income over any other asset class for now.”
The cost of protecting the debt of State Bank of India, which some investors consider a proxy for the nation, is climbing as Europe’s debt crisis dims the allure of emerging- market assets.
Cultural Factors
Credit-default swaps on the lender cost 392 basis points yesterday after touching a two-year high of 405 on Jan. 9, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.
With Europe’s sovereign-debt crisis spreading “like a plague,” gold will continue to attract investment in 2012 because of its appeal as a haven, according to Reliance Capital Asset Management Ltd.
Demand will also be supported by cultural factors as gold is an important part of family occasions in India such as weddings, Sundeep Sikka, the Mumbai-based chief executive officer at Reliance Capital, said in an interview on Jan. 6. Hindus, who account for about 80 percent of the nation’s population, also consider buying gold auspicious during religious festivals.
‘Extremely Bullish’
“Demand for physical gold has always been strong in India,” Sikka said. “The current global macroeconomic environment is very conducive for higher gold prices. The fundamental outlook for gold remains extremely bullish.”
Slowing growth in Asia’s third-biggest economy will damp demand for bullion, according to Canara Robeco’s Jain.
Sales of passenger cars in the nation fell almost 7 percent from November to 159,325 units last month, according to data from the Society of Indian Automobile Manufacturers. Gross domestic product will rise about 7 percent in the year ending March, Prime Minister Manmohan Singh said on Jan. 8, less than a prediction of 7.5 percent he made in December.
India’s bonds have returned 1.2 percent this month, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference in yields between rupee-denominated notes due in a decade and similar-maturity U.S. Treasuries has narrowed 31 basis points in January to 631.
“With easing of inflation, people aren’t thinking of buying gold,” Chirag Mehta, Mumbai-based fund manager at Quantum Asset Management Company, a unit of Quantum Advisors Pvt. that manages about $1.1 billion, said in an interview yesterday. “Investors are thinking that bond yields have peaked and it’s a good time to invest in government bonds.”
To contact the reporters on this story: Madelene Pearson in Melbourne at mpearson1@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, January 11, 2012
Iran Oil Risk Sends Refiners’ Bond Yields to One-Year High: India Credit By Pratish Narayanan - Jan 11, 2012
Borrowing costs for India’s biggest refiners are surging to the highest level in at least a year as the prospect of tighter sanctions against Iran threatens supplies to the world’s fourth-largest oil consumer.
Yields on the 4.75 percent dollar-denominated debt of Indian Oil (IOCL) Corp., the nation’s largest refiner, rose 26 basis points in the past month to 4.40 percent, according to data compiled by Bloomberg. Yields on the 2016 dollar convertible bonds of Indian refiner and power plant operator Essar Energy Plc (ESSR) jumped 228 basis points to 19.60 percent. At the same time, yields on London-based BP Plc’s 2019 notes dropped 22 basis points to 2.88 percent.
Disruption to shipments from Iran, India’s second-biggest oil supplier, may deepen losses for oil companies that are required by the government to sell fuels below cost. Costlier energy imports would also stymie central bank efforts to rein in inflation of more than 9 percent and worsen an economic slump that fueled a 16 percent tumble in the rupee in 2011.
“The oil companies will have to bear higher costs if they have to buy oil from elsewhere,” Raj Kothari, a bond trader in London at Sun Global Investments Ltd., said in an interview on Jan. 10. “The bonds that are related to this issue, like those of Indian Oil, are definitely going to get affected negatively.”
U.S. Law
U.S. President Barack Obama signed into law on Dec. 31 measures that block foreign lenders that conduct business with the central bank of Iran from accessing the U.S. financial system. The European Union will also consider restrictions on Iran, including a ban on crude imports, in response to the country’s nuclear program when the bloc’s foreign ministers meet on Jan. 23.
Indian Oil and Essar Energy may struggle to find banks willing to handle payments to Iran because of sanctions against the Gulf state’s lenders. Mangalore Refinery & Petrochemicals Ltd. (MRPL), a unit of India’s largest energy explorer, is the biggest local buyer of Iranian crude.
Turkiye Halk Bankasi AS, which has been routing India’s payments for Iranian crude, told the refiners it may no longer be able to do so, four people with knowledge of the matter said this week, asking not to be identified because the information is confidential.
“This is a serious issue,” Praveen Kumar, an oil and gas analyst at Facts Global Energy in Singapore, said in an interview on Jan. 10. “India doesn’t seem to have a plan B at the moment. The refiners will be worried about what they are going to do.”
Exploring Options
India, which got 11 percent of its crude imports from Iran last year, is exploring the option of making payments to the Gulf state through Russia’s OAO Gazprombank (GZPR), though no deal has been reached, according to three of the people.
“Essar is not being impacted by the Iranian situation,” the company, which operates the nation’s second-largest private refinery at Vadinar in western India, said in an e-mail on Jan. 9. “At our Vadinar refinery, we continue to be able to source the crude we require from Iran, while our Stanlow refinery does not process Iranian crude.”
Two calls made yesterday to Ajit Pathak, a New Delhi-based spokesman for Indian Oil, weren’t answered.
Rising Oil
The risk of supply disruptions threatens to further boost energy costs and fuel inflation in Asia’s third-largest economy, which imports almost 80 percent of the oil it uses. The value of India’s oil imports averaged above $11 billion during the first 11 months of 2011, 34 percent more than a year earlier, as international crude prices gained and the rupee fell, government data show. The Reserve Bank of India raised interest rates by a record 3.75 percentage points in the last two years to moderate wholesale-price gains that averaged 9.6 percent in 2011.
Crude oil in New York climbed 8 percent in 2011, completing a third annual advance, and touched an eight-month high of $103.74 per barrel on Jan. 4, according to data compiled by Bloomberg. India’s rupee lost 16 percent last year in the worst performance among Asian currencies and touched a record low of 54.305 per dollar on Dec. 15. It dropped 0.4 percent to 51.895 yesterday.
“India is much more vulnerable to the price of oil than similar developing economies,” Taina Erajuuri, a money manager in Helsinki at FIM Asset Management Ltd., overseeing about 1 billion euros ($1.3 billion) of emerging-market assets, said in an interview on Jan. 10. “I worry that soon India will have to import 90 percent of its oil needs and it will always be an inflation threat. You can’t get rid of that kind of inflation by raising interest rates.”
Record Losses
A sliding rupee and higher borrowing costs worsened losses at state-controlled oil companies, which are required to sell fuels at a discount under a government plan to cap consumer prices. The firms may lose as much as 1.3 trillion rupees ($25 billion) from such sales in the financial year ending March 31, Oil Secretary G.C. Chaturvedi said on Nov. 22. Every one-rupee drop in the currency against the dollar boosts annual revenue losses for government-owned refiners by 80 billion rupees, Oil Minister S. Jaipal Reddy said on Oct. 10.
Indian Oil, Hindustan Petroleum Corp. (HPCL) and Bharat Petroleum Corp. (BPCL), the three biggest state refiners, reported a combined loss of 141 billion rupees for the three months ended Sept. 30, the most on record, data compiled by Bloomberg show. Total interest expenses at the companies climbed to an all-time high of 22.4 billion rupees last quarter. Combined net debt, or liabilities minus cash, jumped 34 percent in the first half of the financial year to 1.27 trillion rupees.
Dollar Bonds
Oil companies in India are favoring dollar-denominated debt to shield earnings from the rupee’s decline and the surge in local interest rates. They raised at least $1.17 billion last year from overseas loans and bond sales, according to data compiled by Bloomberg. Indian Oil plans to market a $250 million five-year loan next month, a person with direct knowledge of the matter said this week, asking not to be identified as details of the transaction are private.
Benchmark five-year bond yields for AAA rated borrowers in India rose 35 basis points, or 0.35 percentage point, in the past 12 months to 9.36 percent, data compiled by Bloomberg show. Yields on 7.7 percent rupee-denominated debt due April 2013 of Hindustan Petroleum jumped 67 basis points to 9.47 percent, according to prices from the Fixed Income Money Market and Derivatives Association of India.
Default Swaps
Ten-year sovereign yields added seven basis points in the same period to 8.26 percent. They were little changed yesterday, according to the central bank’s trading system. The extra yield demanded by investors to hold the notes over similar-dated U.S. Treasuries widened 148 basis points to 630. India’s sovereign notes earned 7.7 percent in the past 12 months, while Indonesian securities returned 24.6 percent in the biggest gain among 10 Asian fixed-income markets tracked by HSBC Holdings Plc.
The cost to protect the debt of State Bank of India, a proxy for the nation, against non-payment for five years using credit-default swaps jumped 226 basis points in the past year to 403 basis points, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
‘Adds to Costs’
Indian refiners’ debts to Iran for purchases rose to as much as $5 billion in July, said Central Bank Governor Mahmoud Bahmani, according to the Islamic Republic News Agency. The outstanding payments threatened to jeopardize about $9.5 billion in annual trade between the nations, with Iran telling customers that they wouldn’t receive August shipments unless the bills were paid, according to the Fars news agency. The refiners started clearing the outstanding payments in August after Turkey’s Halk Bank agreed to make transfers.
“Refineries are calibrated to process particular kinds of oil,” Hemant Dharnidharka, head of credit research in Hong Kong at SJS Markets Ltd., said in an interview on Jan. 10. “Even if the companies were to get replacements from elsewhere, the price may be higher and they may need to recalibrate their plants, all of which adds to their costs.”
To contact the reporter on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net
To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Yields on the 4.75 percent dollar-denominated debt of Indian Oil (IOCL) Corp., the nation’s largest refiner, rose 26 basis points in the past month to 4.40 percent, according to data compiled by Bloomberg. Yields on the 2016 dollar convertible bonds of Indian refiner and power plant operator Essar Energy Plc (ESSR) jumped 228 basis points to 19.60 percent. At the same time, yields on London-based BP Plc’s 2019 notes dropped 22 basis points to 2.88 percent.
Disruption to shipments from Iran, India’s second-biggest oil supplier, may deepen losses for oil companies that are required by the government to sell fuels below cost. Costlier energy imports would also stymie central bank efforts to rein in inflation of more than 9 percent and worsen an economic slump that fueled a 16 percent tumble in the rupee in 2011.
“The oil companies will have to bear higher costs if they have to buy oil from elsewhere,” Raj Kothari, a bond trader in London at Sun Global Investments Ltd., said in an interview on Jan. 10. “The bonds that are related to this issue, like those of Indian Oil, are definitely going to get affected negatively.”
U.S. Law
U.S. President Barack Obama signed into law on Dec. 31 measures that block foreign lenders that conduct business with the central bank of Iran from accessing the U.S. financial system. The European Union will also consider restrictions on Iran, including a ban on crude imports, in response to the country’s nuclear program when the bloc’s foreign ministers meet on Jan. 23.
Indian Oil and Essar Energy may struggle to find banks willing to handle payments to Iran because of sanctions against the Gulf state’s lenders. Mangalore Refinery & Petrochemicals Ltd. (MRPL), a unit of India’s largest energy explorer, is the biggest local buyer of Iranian crude.
Turkiye Halk Bankasi AS, which has been routing India’s payments for Iranian crude, told the refiners it may no longer be able to do so, four people with knowledge of the matter said this week, asking not to be identified because the information is confidential.
“This is a serious issue,” Praveen Kumar, an oil and gas analyst at Facts Global Energy in Singapore, said in an interview on Jan. 10. “India doesn’t seem to have a plan B at the moment. The refiners will be worried about what they are going to do.”
Exploring Options
India, which got 11 percent of its crude imports from Iran last year, is exploring the option of making payments to the Gulf state through Russia’s OAO Gazprombank (GZPR), though no deal has been reached, according to three of the people.
“Essar is not being impacted by the Iranian situation,” the company, which operates the nation’s second-largest private refinery at Vadinar in western India, said in an e-mail on Jan. 9. “At our Vadinar refinery, we continue to be able to source the crude we require from Iran, while our Stanlow refinery does not process Iranian crude.”
Two calls made yesterday to Ajit Pathak, a New Delhi-based spokesman for Indian Oil, weren’t answered.
Rising Oil
The risk of supply disruptions threatens to further boost energy costs and fuel inflation in Asia’s third-largest economy, which imports almost 80 percent of the oil it uses. The value of India’s oil imports averaged above $11 billion during the first 11 months of 2011, 34 percent more than a year earlier, as international crude prices gained and the rupee fell, government data show. The Reserve Bank of India raised interest rates by a record 3.75 percentage points in the last two years to moderate wholesale-price gains that averaged 9.6 percent in 2011.
Crude oil in New York climbed 8 percent in 2011, completing a third annual advance, and touched an eight-month high of $103.74 per barrel on Jan. 4, according to data compiled by Bloomberg. India’s rupee lost 16 percent last year in the worst performance among Asian currencies and touched a record low of 54.305 per dollar on Dec. 15. It dropped 0.4 percent to 51.895 yesterday.
“India is much more vulnerable to the price of oil than similar developing economies,” Taina Erajuuri, a money manager in Helsinki at FIM Asset Management Ltd., overseeing about 1 billion euros ($1.3 billion) of emerging-market assets, said in an interview on Jan. 10. “I worry that soon India will have to import 90 percent of its oil needs and it will always be an inflation threat. You can’t get rid of that kind of inflation by raising interest rates.”
Record Losses
A sliding rupee and higher borrowing costs worsened losses at state-controlled oil companies, which are required to sell fuels at a discount under a government plan to cap consumer prices. The firms may lose as much as 1.3 trillion rupees ($25 billion) from such sales in the financial year ending March 31, Oil Secretary G.C. Chaturvedi said on Nov. 22. Every one-rupee drop in the currency against the dollar boosts annual revenue losses for government-owned refiners by 80 billion rupees, Oil Minister S. Jaipal Reddy said on Oct. 10.
Indian Oil, Hindustan Petroleum Corp. (HPCL) and Bharat Petroleum Corp. (BPCL), the three biggest state refiners, reported a combined loss of 141 billion rupees for the three months ended Sept. 30, the most on record, data compiled by Bloomberg show. Total interest expenses at the companies climbed to an all-time high of 22.4 billion rupees last quarter. Combined net debt, or liabilities minus cash, jumped 34 percent in the first half of the financial year to 1.27 trillion rupees.
Dollar Bonds
Oil companies in India are favoring dollar-denominated debt to shield earnings from the rupee’s decline and the surge in local interest rates. They raised at least $1.17 billion last year from overseas loans and bond sales, according to data compiled by Bloomberg. Indian Oil plans to market a $250 million five-year loan next month, a person with direct knowledge of the matter said this week, asking not to be identified as details of the transaction are private.
Benchmark five-year bond yields for AAA rated borrowers in India rose 35 basis points, or 0.35 percentage point, in the past 12 months to 9.36 percent, data compiled by Bloomberg show. Yields on 7.7 percent rupee-denominated debt due April 2013 of Hindustan Petroleum jumped 67 basis points to 9.47 percent, according to prices from the Fixed Income Money Market and Derivatives Association of India.
Default Swaps
Ten-year sovereign yields added seven basis points in the same period to 8.26 percent. They were little changed yesterday, according to the central bank’s trading system. The extra yield demanded by investors to hold the notes over similar-dated U.S. Treasuries widened 148 basis points to 630. India’s sovereign notes earned 7.7 percent in the past 12 months, while Indonesian securities returned 24.6 percent in the biggest gain among 10 Asian fixed-income markets tracked by HSBC Holdings Plc.
The cost to protect the debt of State Bank of India, a proxy for the nation, against non-payment for five years using credit-default swaps jumped 226 basis points in the past year to 403 basis points, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
‘Adds to Costs’
Indian refiners’ debts to Iran for purchases rose to as much as $5 billion in July, said Central Bank Governor Mahmoud Bahmani, according to the Islamic Republic News Agency. The outstanding payments threatened to jeopardize about $9.5 billion in annual trade between the nations, with Iran telling customers that they wouldn’t receive August shipments unless the bills were paid, according to the Fars news agency. The refiners started clearing the outstanding payments in August after Turkey’s Halk Bank agreed to make transfers.
“Refineries are calibrated to process particular kinds of oil,” Hemant Dharnidharka, head of credit research in Hong Kong at SJS Markets Ltd., said in an interview on Jan. 10. “Even if the companies were to get replacements from elsewhere, the price may be higher and they may need to recalibrate their plants, all of which adds to their costs.”
To contact the reporter on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net
To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, January 10, 2012
India Lets Starbucks, Ikea Open Stores By Malavika Sharma - Jan 10, 2012
India allowed foreign single-brand retailers to open stores in the world’s second-most populous nation, paving the way for Starbucks Corp. (SBUX) and Ikea to start outlets without local partners.
The government yesterday ratified a Nov. 24 cabinet decision to raise the ownership limit to 100 percent from 51 percent, Trade Minister Anand Sharma said in a statement. The companies will need to buy 30 percent of the value of products sold from domestic small and cottage industries, he said.
The move underscores Prime Minister Manmohan Singh’s pledge to sustain his market-opening campaign for India even after he reversed a decision to let multi-brand companies such as Wal- Mart Stores Inc. and Carrefour SA (CA) open supermarkets in India’s $400 billion retail market. Singh’s administration has struggled to advance its initiatives, slowed down by opposition from its own allies and a corruption scandal that paralyzed parliament.
“This is a welcome move with a clear potential to lift the general mood in the economy,” Rajan Bharti Mittal, managing director at Bharti Enterprises, Wal-Mart’s Indian partner, said in an e-mailed statement. “We hope the initiative is a precursor to further liberalization in the sector in the days to come.”
Nivedeeta Moirangthem, Ikea’s India spokeswoman, didn’t immediately reply to an e-mail seeking comment. A call and an e- mail to Starbucks’s public-relations team in Seattle weren’t immediately answered. Starbucks signed an agreement with India’s Tata Coffee Ltd. in January 2011 to source beans and consider opening stores.
Suspended Opening
Singh’s allies and other parties opposed the multi-brand retail opening unveiled in late November, saying it would hurt local mom-and-pop type stores. The government suspended the decision Dec. 7.
The prime minister said in a Dec. 14 interview that “India remains committed to a system of regulation that is supportive of enterprise and we will do everything to encourage foreign investment.” He said he would renew the multi-brand retail initiative after regional elections early in 2012.
Allegations of corruption against Singh’s cabinet colleagues have stalled economic policies, leading to a 25 percent drop in the benchmark BSE Sensitive Index and a 16 percent decline in the rupee last year.
To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net
To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The government yesterday ratified a Nov. 24 cabinet decision to raise the ownership limit to 100 percent from 51 percent, Trade Minister Anand Sharma said in a statement. The companies will need to buy 30 percent of the value of products sold from domestic small and cottage industries, he said.
The move underscores Prime Minister Manmohan Singh’s pledge to sustain his market-opening campaign for India even after he reversed a decision to let multi-brand companies such as Wal- Mart Stores Inc. and Carrefour SA (CA) open supermarkets in India’s $400 billion retail market. Singh’s administration has struggled to advance its initiatives, slowed down by opposition from its own allies and a corruption scandal that paralyzed parliament.
“This is a welcome move with a clear potential to lift the general mood in the economy,” Rajan Bharti Mittal, managing director at Bharti Enterprises, Wal-Mart’s Indian partner, said in an e-mailed statement. “We hope the initiative is a precursor to further liberalization in the sector in the days to come.”
Nivedeeta Moirangthem, Ikea’s India spokeswoman, didn’t immediately reply to an e-mail seeking comment. A call and an e- mail to Starbucks’s public-relations team in Seattle weren’t immediately answered. Starbucks signed an agreement with India’s Tata Coffee Ltd. in January 2011 to source beans and consider opening stores.
Suspended Opening
Singh’s allies and other parties opposed the multi-brand retail opening unveiled in late November, saying it would hurt local mom-and-pop type stores. The government suspended the decision Dec. 7.
The prime minister said in a Dec. 14 interview that “India remains committed to a system of regulation that is supportive of enterprise and we will do everything to encourage foreign investment.” He said he would renew the multi-brand retail initiative after regional elections early in 2012.
Allegations of corruption against Singh’s cabinet colleagues have stalled economic policies, leading to a 25 percent drop in the benchmark BSE Sensitive Index and a 16 percent decline in the rupee last year.
To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net
To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, January 9, 2012
Top Rupee Forecasters See Rebound on Bond Inflows After Rout: India Credit By Yumi Teso and Jeanette Rodrigues - Jan 9, 2012
International investment in India’s bonds will rise this year as policy makers rein in inflation, boosting the rupee after 2011’s 16 percent slump, according to the most-accurate forecasters for the currency.
The rupee will strengthen 4 percent to 51 per dollar by the end of 2012, according to ING Vysya Bank Ltd., the local unit of the biggest Dutch financial services company and the most- accurate forecaster as measured by Bloomberg Rankings in the six quarters through December. The currency will gain 5.1 percent to 50.50, according to Oversea-Chinese Banking Corp., which ranked second.
International investors boosted their ownership (FIINDEBT) of rupee- denominated notes by $1.2 billion this month to $27.3 billion after government data showed food prices fell for the first time on record in the week ended Dec. 24. The 8.20 percent yield on the nation’s 10-year securities is more than four times that on U.S. Treasuries (USGG10YR) and almost five percentage points more than similar-maturity Chinese debt.
“There will be a revival in sentiment and that should bring in money,” Upasna Bhardwaj, a Mumbai-based economist at ING Vysya Bank, said in an interview on Jan. 6. “We continue to see investments on the debt side as inflation slows, and Indians living overseas should also contribute to inflows to benefit from higher interest rates.”
Global funds bolstered holdings of India’s bonds by $3.9 billion last month, the biggest increase on record, as the central bank said in a statement on Dec. 16 that policy makers “are likely to reverse the monetary policy cycle” to support growth after seven interest-rate increases in 2011. The inflows have contributed to a 1 percent advance in the rupee this month, the best performance among Asia’s 10 most-traded currencies, according to data compiled by Bloomberg.
Estimated Returns
The rupee, which gained 0.4 percent to 52.5150 per dollar yesterday, will end 2012 at 50, according to the median of 21 estimates compiled by Bloomberg. The currency will return 15.2 percent, including interest, the strategists predict. That compares with estimated total returns of 18.9 percent on Brazil’s real, 10.2 percent on Russia’s ruble and 3.95 percent for China’s yuan.
India’s benchmark government bonds have rallied this year, after slumping in 2011, on speculation inflation (INFINFY) is slowing in Asia’s third-biggest economy. Wholesale prices probably rose 7.40 percent in December from a year earlier, the least in two years, according to the median forecast of 15 economists in a Bloomberg survey before government data due on Jan. 16.
Bonds Rally
Prices of food articles fell 3.36 percent from a year earlier in the week through Dec. 24, the first drop since Bloomberg started compiling the data in April 2006. Food prices have a weighting of about 14 percent in the nation’s inflation basket.
The yield on India’s benchmark 8.79 percent notes due in November 2021 dropped three basis points, or 0.03 percentage point, to 8.20 percent yesterday, according to the central bank’s trading system. The yield (GIND10YR) on 10-year notes, which rose 65 basis points last year, has slid 38 basis points in 2012.
India’s bonds have outperformed their regional peers this month following the slump in yields. Rupee-denominated notes have returned 1.27 percent in January, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference (USGG10YR) in yields between India’s securities due in a decade and similar-maturity U.S. Treasuries was 622 basis points yesterday, compared with a record-high 697 basis points reached on Nov. 9.
Current Account
There are signs inflation will slow to 6 percent or 7 percent “in the coming months,” Finance Minister Pranab Mukherjee said in a speech in Mumbai on Jan. 7. Price increases will moderate to around 7 percent by March, in line with the Reserve Bank of India’s estimate, according to ING Vysya Bank’s Bhardwaj.
“Inflation will be contained into 2012,” supporting fund flows into the nation’s bonds, Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp., said in an interview on Jan. 5. “So once we have an improvement in risk appetite, the rupee will respond fairly well as inflows improve.”
The margin of error on Oversea-Chinese Banking Corp.’s rupee forecast was 2.26 percent, while ING’s was 2.17 percent, according to data compiled by Bloomberg.
India’s current-account deficit and rising oil prices will weigh on the rupee, according to Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest lender by market value.
‘Unfavorable’ Factors
The shortfall (INBQCUR) in the broadest measure of trade was $16.89 billion in the three months through September, compared with $16.90 billion touched in the year-earlier period. Crude-oil prices have climbed 2.4 percent in 2012 after rising 8.2 percent in 2011, data compiled by Bloomberg show. Both factors helped contribute to the rupee’s 2011 slide, the worst of the 10 Asian currencies tracked by Bloomberg.
“In India’s case, they face both unfavorable cyclical and structural factors,” Leong Sook Mei, the Singapore-based regional head of global currency research at Bank of Tokyo- Mitsubishi UFJ, said in an interview yesterday. “That’s why we have been bearish on the rupee. Oil prices have stayed relatively resilient, pressuring the current account even further.”
Bank of Tokyo-Mitsubishi predicts the rupee will weaken to 53.50 per dollar by the end of the year.
The cost (CSBII1U5) of protecting the debt of State Bank of India, the nation’s biggest bank that some investors consider a proxy for the sovereign, is rising as Europe’s credit crisis dims the allure of emerging-market assets.
Default Swaps
Five-year credit-default swaps on the lender cost 405 basis points on Jan. 6, the most since March 2009, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps, which were unchanged at 405 yesterday, pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.
India’s benchmark Sensitive Index (SENSEX) of shares has gained this year on speculation policy makers will reduce borrowing costs. The index, which slid 25 percent in 2011, has rallied 2.3 percent in 2012. The Reserve Bank will cut its 8.5 percent benchmark repurchase rate (INRPYLD) by 150 basis points in 2012, according to Goldman Sachs Group Inc.
Barclays Capital, the third-most accurate rupee forecaster tracked by Bloomberg, predicts the currency will climb 11 percent to 48 by year-end. The rupee will advance 3.2 percent to 51.4 this year, according to Westpac Banking Corp., ranked at the same level as Barclays among Bloomberg’s most-accurate rupee forecasters.
“We think inflation will come down this year, which should give the RBI some room to cut rates in the second half of the year and that should support investment,” Nick Verdi, a currency analyst at Barclays in Singapore, said in an interview on Jan. 6. “These factors should serve to stem some of the rupee’s weakness we have seen recently.”
To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The rupee will strengthen 4 percent to 51 per dollar by the end of 2012, according to ING Vysya Bank Ltd., the local unit of the biggest Dutch financial services company and the most- accurate forecaster as measured by Bloomberg Rankings in the six quarters through December. The currency will gain 5.1 percent to 50.50, according to Oversea-Chinese Banking Corp., which ranked second.
International investors boosted their ownership (FIINDEBT) of rupee- denominated notes by $1.2 billion this month to $27.3 billion after government data showed food prices fell for the first time on record in the week ended Dec. 24. The 8.20 percent yield on the nation’s 10-year securities is more than four times that on U.S. Treasuries (USGG10YR) and almost five percentage points more than similar-maturity Chinese debt.
“There will be a revival in sentiment and that should bring in money,” Upasna Bhardwaj, a Mumbai-based economist at ING Vysya Bank, said in an interview on Jan. 6. “We continue to see investments on the debt side as inflation slows, and Indians living overseas should also contribute to inflows to benefit from higher interest rates.”
Global funds bolstered holdings of India’s bonds by $3.9 billion last month, the biggest increase on record, as the central bank said in a statement on Dec. 16 that policy makers “are likely to reverse the monetary policy cycle” to support growth after seven interest-rate increases in 2011. The inflows have contributed to a 1 percent advance in the rupee this month, the best performance among Asia’s 10 most-traded currencies, according to data compiled by Bloomberg.
Estimated Returns
The rupee, which gained 0.4 percent to 52.5150 per dollar yesterday, will end 2012 at 50, according to the median of 21 estimates compiled by Bloomberg. The currency will return 15.2 percent, including interest, the strategists predict. That compares with estimated total returns of 18.9 percent on Brazil’s real, 10.2 percent on Russia’s ruble and 3.95 percent for China’s yuan.
India’s benchmark government bonds have rallied this year, after slumping in 2011, on speculation inflation (INFINFY) is slowing in Asia’s third-biggest economy. Wholesale prices probably rose 7.40 percent in December from a year earlier, the least in two years, according to the median forecast of 15 economists in a Bloomberg survey before government data due on Jan. 16.
Bonds Rally
Prices of food articles fell 3.36 percent from a year earlier in the week through Dec. 24, the first drop since Bloomberg started compiling the data in April 2006. Food prices have a weighting of about 14 percent in the nation’s inflation basket.
The yield on India’s benchmark 8.79 percent notes due in November 2021 dropped three basis points, or 0.03 percentage point, to 8.20 percent yesterday, according to the central bank’s trading system. The yield (GIND10YR) on 10-year notes, which rose 65 basis points last year, has slid 38 basis points in 2012.
India’s bonds have outperformed their regional peers this month following the slump in yields. Rupee-denominated notes have returned 1.27 percent in January, the best performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. The difference (USGG10YR) in yields between India’s securities due in a decade and similar-maturity U.S. Treasuries was 622 basis points yesterday, compared with a record-high 697 basis points reached on Nov. 9.
Current Account
There are signs inflation will slow to 6 percent or 7 percent “in the coming months,” Finance Minister Pranab Mukherjee said in a speech in Mumbai on Jan. 7. Price increases will moderate to around 7 percent by March, in line with the Reserve Bank of India’s estimate, according to ING Vysya Bank’s Bhardwaj.
“Inflation will be contained into 2012,” supporting fund flows into the nation’s bonds, Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp., said in an interview on Jan. 5. “So once we have an improvement in risk appetite, the rupee will respond fairly well as inflows improve.”
The margin of error on Oversea-Chinese Banking Corp.’s rupee forecast was 2.26 percent, while ING’s was 2.17 percent, according to data compiled by Bloomberg.
India’s current-account deficit and rising oil prices will weigh on the rupee, according to Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest lender by market value.
‘Unfavorable’ Factors
The shortfall (INBQCUR) in the broadest measure of trade was $16.89 billion in the three months through September, compared with $16.90 billion touched in the year-earlier period. Crude-oil prices have climbed 2.4 percent in 2012 after rising 8.2 percent in 2011, data compiled by Bloomberg show. Both factors helped contribute to the rupee’s 2011 slide, the worst of the 10 Asian currencies tracked by Bloomberg.
“In India’s case, they face both unfavorable cyclical and structural factors,” Leong Sook Mei, the Singapore-based regional head of global currency research at Bank of Tokyo- Mitsubishi UFJ, said in an interview yesterday. “That’s why we have been bearish on the rupee. Oil prices have stayed relatively resilient, pressuring the current account even further.”
Bank of Tokyo-Mitsubishi predicts the rupee will weaken to 53.50 per dollar by the end of the year.
The cost (CSBII1U5) of protecting the debt of State Bank of India, the nation’s biggest bank that some investors consider a proxy for the sovereign, is rising as Europe’s credit crisis dims the allure of emerging-market assets.
Default Swaps
Five-year credit-default swaps on the lender cost 405 basis points on Jan. 6, the most since March 2009, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps, which were unchanged at 405 yesterday, pay the buyer face value for the underlying securities should a company fail to adhere to its debt agreements.
India’s benchmark Sensitive Index (SENSEX) of shares has gained this year on speculation policy makers will reduce borrowing costs. The index, which slid 25 percent in 2011, has rallied 2.3 percent in 2012. The Reserve Bank will cut its 8.5 percent benchmark repurchase rate (INRPYLD) by 150 basis points in 2012, according to Goldman Sachs Group Inc.
Barclays Capital, the third-most accurate rupee forecaster tracked by Bloomberg, predicts the currency will climb 11 percent to 48 by year-end. The rupee will advance 3.2 percent to 51.4 this year, according to Westpac Banking Corp., ranked at the same level as Barclays among Bloomberg’s most-accurate rupee forecasters.
“We think inflation will come down this year, which should give the RBI some room to cut rates in the second half of the year and that should support investment,” Nick Verdi, a currency analyst at Barclays in Singapore, said in an interview on Jan. 6. “These factors should serve to stem some of the rupee’s weakness we have seen recently.”
To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, January 8, 2012
Asian Stocks Decline a Third Day as Bullard Says New Fed Buying Unlikely By Jonathan Burgos - Jan 8, 2012
Asian stocks (MXAPJ) outside of Japan dropped for a third day after Federal Bank of St. Louis President James Bullard said the Fed probably won’t begin a new round of bond purchases amid “encouraging” U.S. economic data.
Samsung Electronics Co. (005930), the world’s second-biggest maker of mobile phones by sales, decreased 2.2 percent in Seoul. Hutchison Whampoa Ltd., the utilities company and port operator that gets more than half of revenue from Europe, fell 1.5 percent in Hong Kong after European economic confidence and German factory orders plunged. HTC Corp. dropped 2.7 percent in Taipei as the maker of smartphones posted its first drop in quarterly profit in two years.
“An improving U.S. economy doesn’t necessarily mean we’re firmly in a recovery,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees about $326 billion of assets globally. “The question is how sustainable that will be. Europe remains a risk. We’ll probably see more pain before we see a resolution.”
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) declined 1.2 percent to 391.57 as of 10:13 a.m. in Hong Kong, with more than four stocks falling for each that rose. The measure gained 0.9 percent last week as manufacturing growth from the U.S., Australia, China and India added to signs the global economy may withstand Europe’s debt crisis.
Australia’s S&P/ASX 200 Index (AS51) lost 0.4 percent after the country’s retail sales unexpectedly stalled, while South Korea’s Kospi Index declined 1.4 percent. Hong Kong’s Hang Seng Index dropped 1.3 percent. Japanese markets are closed today for a holiday.
‘Wait and See’
Futures on the Standard & Poor’s 500 Index (SPH2) slid 0.3 percent today. The gauge fell 0.3 percent in New York on Jan. 6 as a drop in the U.S. unemployment rate to 8.5 percent, the lowest since February 2009, failed to extend a weekly rally.
Exporters to the U.S. declined after Bullard said the Federal Reserve “probably could wait and see for now” before deciding whether there is a need for more accomodative policies.
Companies that get revenue from Europe also dropped after European economic confidence fell to the lowest in more than two years and German factory orders plunged by the most in almost three years, according to reports on Jan. 6. Separate reports showed euro-area unemployment remained at a 13-year high of 10.3 percent in November, while retail sales slipped 0.8 percent.
The MSCI Asia Pacific Index (MXAP) lost 17 percent in 2011 as China took steps to cool its property market and Europe struggled to resolve its debt crisis. The S&P 500 Index broke even for the year and the Stoxx Europe 600 Index dropped 11 percent. Stocks in the Asian gauge were valued at 12 times estimated earnings on average as of Jan. 6, compared with 12.1 times for the S&P 500 and 9.9 times for the Stoxx 600.
To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Samsung Electronics Co. (005930), the world’s second-biggest maker of mobile phones by sales, decreased 2.2 percent in Seoul. Hutchison Whampoa Ltd., the utilities company and port operator that gets more than half of revenue from Europe, fell 1.5 percent in Hong Kong after European economic confidence and German factory orders plunged. HTC Corp. dropped 2.7 percent in Taipei as the maker of smartphones posted its first drop in quarterly profit in two years.
“An improving U.S. economy doesn’t necessarily mean we’re firmly in a recovery,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees about $326 billion of assets globally. “The question is how sustainable that will be. Europe remains a risk. We’ll probably see more pain before we see a resolution.”
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) declined 1.2 percent to 391.57 as of 10:13 a.m. in Hong Kong, with more than four stocks falling for each that rose. The measure gained 0.9 percent last week as manufacturing growth from the U.S., Australia, China and India added to signs the global economy may withstand Europe’s debt crisis.
Australia’s S&P/ASX 200 Index (AS51) lost 0.4 percent after the country’s retail sales unexpectedly stalled, while South Korea’s Kospi Index declined 1.4 percent. Hong Kong’s Hang Seng Index dropped 1.3 percent. Japanese markets are closed today for a holiday.
‘Wait and See’
Futures on the Standard & Poor’s 500 Index (SPH2) slid 0.3 percent today. The gauge fell 0.3 percent in New York on Jan. 6 as a drop in the U.S. unemployment rate to 8.5 percent, the lowest since February 2009, failed to extend a weekly rally.
Exporters to the U.S. declined after Bullard said the Federal Reserve “probably could wait and see for now” before deciding whether there is a need for more accomodative policies.
Companies that get revenue from Europe also dropped after European economic confidence fell to the lowest in more than two years and German factory orders plunged by the most in almost three years, according to reports on Jan. 6. Separate reports showed euro-area unemployment remained at a 13-year high of 10.3 percent in November, while retail sales slipped 0.8 percent.
The MSCI Asia Pacific Index (MXAP) lost 17 percent in 2011 as China took steps to cool its property market and Europe struggled to resolve its debt crisis. The S&P 500 Index broke even for the year and the Stoxx Europe 600 Index dropped 11 percent. Stocks in the Asian gauge were valued at 12 times estimated earnings on average as of Jan. 6, compared with 12.1 times for the S&P 500 and 9.9 times for the Stoxx 600.
To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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