Rupee Leads Monthly Gain in Asia Currencies; Baht Slumps on Coup

By Liau Y-Sing - May 30, 2014

India’s rupee led the biggest monthly gain in Asian currencies since October on optimism the new administration will implement reforms to spur growth in the region’s third-largest economy. The Thai baht slumped.
The rupee rose to a one-year high in May as global funds added to holdings of the nation’s assets after the Bharatiya Janata Party won with the biggest majority in 30 years. The baht headed for its worst month of 2014 after a military coup left the country without an elected prime minister. Overseas investors bought $3.2 billion more bonds than they sold in India and South Korea in May, while they sold $1 billion of Thai debt, the latest exchange data show.
“Asian currencies have been largely supported by renewed capital inflows,” said Callum Henderson, global head of foreign-exchange research at Standard Chartered Plc in Singapore. “The Indian rupee is the ongoing story of the election win and the prospects for reform.”
The Bloomberg-JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.4 percent in May to 115.79 and touched the highest level in five months on May 21. The Bloomberg Emerging Market Local Sovereign Index gained 2.5 percent in its best monthly performance since September.
The rupee appreciated 2.1 percent for the month to 59.1025 per dollar, according to data compiled by Bloomberg. The Philippine peso strengthened 2 percent to 43.750, Malaysia’s ringgit climbed 1.6 percent to 3.2130 and South Korea’s won rose 1.3 percent to 1,020.20.

Thai Politics

Barclays Plc boosted its one-month forecast for India’s rupee to 58 per dollar from 60 earlier to reflect the voting result and said central bank intervention will merely “limit the pace of rupee appreciation,” Singapore-based strategist Hamish Pepper wrote in a May 28 client note.
The peso posted its biggest monthly gain since September after Standard & Poor’s raised the nation’s long-term investment-grade rating by one level to BBB from BBB-. The economy grew 5.7 percent from a year earlier in the first quarter, exceeding the median 6.4 percent forecast of economists in a Bloomberg News survey, data showed May 29.
Thailand’s baht retreated 1.5 percent in May to 32.849 per dollar after the military seized power on May 22 following months of political unrest that caused the ouster of then-Prime Minister Yingluck Shinawatra. A return of civilian rule soon is “impossible” because the threat of further violence means it can’t guarantee an election would be free and fair, Lt. Gen. Chatchalerm Chalermsukh said May 29 at a briefing in Bangkok.

Indonesia Elections

The baht fell to 32.844 yesterday, the weakest level since February, and was the third-worst performing emerging-market currency in May among the 24 tracked by Bloomberg.
“We still don’t know when elections will be held and there remains concern about how the situation will develop,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “That will weigh on the baht.”
Indonesia’s rupiah declined for a second month amid approaching national elections scheduled for July. The Golkar party, which came second in April’s parliamentary vote, joined a coalition headed by presidential candidate Prabowo Subianto of Gerindra. The move could complicate the task for frontrunner Joko Widodo who tapped former vice president Jusuf Kalla as his running mate for the presidential ballot on July 9.
The currency fell 1 percent to 11,675 per dollar for the month, according to data compiled by Bloomberg. Elsewhere in Asia, Taiwan’s dollar climbed 0.7 percent to NT$30.050 and China’s yuan strengthened 0.2 percent to 6.2473. The Vietnamese dong retreated 0.3 percent to 21,158.
To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Amit Prakash

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Tata Motors Profit Trails Estimates as India Sales Slump

By Siddharth Philip - May 29, 2014

Tata Motors Ltd. (TTMT), India’s biggest automaker, posted profit that missed analyst estimates as a wider loss at the local business eroded gains from its Jaguar Land Rover unit.
Net income declined to 39.2 billion rupees ($664 million) in the fiscal fourth quarter ended March 31, the Mumbai-based company said yesterday. That lagged behind the 46.1 billion-rupee median of 30 analyst estimates compiled by Bloomberg. Jaguar Land Rover profit increased to 449 million pounds ($750 million) from 377 million pounds, it said.
The luxury unit is helping buoy the company, which is struggling to revive profitability at its Indian business. Domestic deliveries of cars, trucks and buses declined 36 percent in the quarter, while sales gained 8 percent at Jaguar Land Rover, spurred by demand in China.
“I’m not expecting any miracles from the domestic business of Tata Motors,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said before the earnings announcement. “The domestic business has slipped a lot and will continue to underperform for the next one or two quarters.”
The loss at the standalone level widened to 8.17 billion rupees from 3.12 billion rupees a year earlier.
Tata Motors fell 1 percent to 424.30 rupees at the close in Mumbai trading, before the earnings were announced. The stock has climbed 13 percent this year, compared with a 14 percent advance for the benchmark S&P BSE Sensex Index.
The company’s ADRs (TTM) fell 1.5 percent to $38.15 at 1:50 p.m. in New York trading, after the release of the results.

Vehicle Sales

Sales at Jaguar Land Rover, the automaker’s main profit contributor, climbed 16 percent to 434,311 vehicles in the 12 months ended March.
Annual deliveries of trucks, cars and buses at the parent, including exports, fell 30 percent, according to the company.
Jaguar Land Rover began test production in China yesterday, Chief Executive Officer Ralf Speth said in Mumbai yesterday. The luxury carmaker plans to start making cars in the country by the end of this year to avoid the nation’s 25 percent import tariff.
Local production will help the carmaker reduce prices by about 15 percent, Bob Grace, the company’s China president said last month. The plant will have an initial annual output capacity of 130,000 vehicles, he said.
The automaker is also building a mid-size sports sedan called the XE that will go on sale in 2015. The Jaguar XE will compete against Bayerische Motoren Werke AG’s 3 series and Daimler AG’s Mercedes-Benz C Class cars. The model will be the first Jaguar to be built on an all-aluminum platform, the company said in a statement in March.

XE Model

The XE model will feature four cylinder, 2 liter gasoline and diesel engines built at the company’s new engine factory, the company said at the time.
“While the local business is still weak, Jaguar Land Rover is doing very well, especially on the Jaguar side,” said Juergen Maier, a fund manager in Vienna at Raiffeisen Capital Management, which oversees about $1.1 billion in emerging-market assets. “China and Europe are still looking good and with new models coming in at the end of the year, Jaguar Land Rover should continue to do well. The local business will still take some time to stabilize.”
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Subramaniam Sharma, Dick Schumacher

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Amway India Unit CEO Remanded on Consumer-Protection Law Charges

By Adi Narayan and Sharang Limaye - May 28, 2014

Amway Corp.’s Indian unit chief executive William Pinckney had a bail application rejected after he was arrested for the second time in a year on charges of violating laws protecting consumers from investment fraud and ponzi schemes.
Pinckney was remanded into police custody by the Kurnool district court in India’s southern Andhra Pradesh state, Raghurami Reddy, the Kurnool superintendent of police, said in a text message yesterday. The remand will start today and run until June 2. Pinckney was arrested on May 26 in Gurgaon near New Delhi.
Amway, which delivers goods directly to consumers without going through a retailer, had combined sales in India of about 21.9 billion rupees ($371 million) in 2012, according to the company’s website. Pinckney also faces charges of cheating and extortion, Reddy said.
The allegations are “frivolous and give a misleading impression” about Amway’s business, the Ada, Michigan-based direct seller of vitamins, air purifiers and cosmetics said in an e-mail May 27.
Pinckney’s detention comes a year after he was arrested in neighboring Kerala state on similar charges.
The complaint against Pinckney is “more detailed and elaborate” compared with the case last year, Chavi Hemanth, secretary general of the Indian Direct Selling Association, said by phone.

Law

The latest arrest is the result of a consumer complaint and could have been “easily addressed as a consumer redressal since there was no criminality involved,” the Federation of Indian Chambers of Commerce and Industry, said in an e-mailed statement dated May 27.
The government needs to clarify the law to “facilitate a clear distinction between fly-by-night operators and legitimate business runners,” it said.
Officials from three companies including Amway were arrested in Kerala state on similar charges last year, Hemanth said.
Amway began operations in India 18 years ago and has invested $100 million in a manufacturing plant in the country, the company said in its statement.
Amway rival Nu Skin Enterprises Inc. (NUS), a seller of skin-care products, plunged in New York trading earlier this year after China’s government announced an investigation of the company. The probe announcement followed a report in the Communist Party’s official People’s Daily newspaper saying that the maker of skin-care and nutritional products was operating a “suspected illegal pyramid scheme.”
To contact the reporters on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net; Sharang Limaye in Hyderabad at slimaye@bloomberg.net
To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Dick Schumacher

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RBI Growing $315 Billion Reserves Floods India With Cash

By Shikhar Balwani - May 27, 2014

India’s move to rein in rupee gains and rebuild foreign-exchange reserves is flooding the financial system with cash, driving bank funding costs to a 10-month low.
The three-month interbank lending rate fell 87 basis points this quarter to 8.90 percent on May 26, exchange data show. A similar gauge in China is at 5.02 percent. The currency stockpile jumped $40 billion from a three-year low in September to $315 billion, and Nomura Holdings Inc. estimates the central bank’s dollar purchases pumped about 800 billion rupees ($13.6 billion) into markets in the four months through April.
Reserve Bank of India Governor Raghuram Rajan is boosting reserves as U.S. stimulus cuts threaten to spur fund outflows from emerging markets. Falling funding costs may help new Prime Minister Narendra Modi revive growth in Asia’s third-largest economy from close to a decade-low and improve public finances.
“The central bank’s dollar buying should be an important source of liquidity creation in the banking system from here on, exerting downward pressure on swap rates and bond yields,” Vivek Rajpal, a Singapore-based rates strategist at Nomura Holdings, said in an e-mail interview yesterday.
The three-month interbank rate has retreated 266 basis points, or 2.66 percentage points, from a five-year high of 11.59 percent reached in September, when the RBI had tightened cash supply to arrest a rupee plunge. The currency, which fell to a record 68.845 per dollar in August, has since rebounded 17 percent, touching an 11-month high of 58.3350 on May 23 after national elections delivered the clearest verdict in 30 years.

Capital Inflows

Increased confidence in the rupee has attracted $14.6 billion of inflows into local stocks and bonds this year, allowing the central bank to step up dollar purchases and lift reserves above $300 billion for the first time since 2011. As cash supply increased, lenders’ overnight borrowings from the RBI to meet shortages declined to an average of 89 billion rupees so far in May from 123 billion rupees in April.
“Intervention is significant to the extent that you don’t have any funding concerns and there’s no liquidity premium being built at the short-end of the yield curve,” Rajeev Radhakrishnan, head of fixed income in Mumbai at SBI Funds Management Pvt., which manages about 663 billion rupees, said in a May 26 phone interview. “The central bank’s thrust would be to ensure that the overnight rate remains closer to the 8 percent repo rate. That would keep the short-end rates lower.”

Falling Yields

The overnight interbank borrowing rate has dropped to 7.95 percent yesterday from 11 percent at the end of the last quarter, according to data compiled by Bloomberg.
Increased cash supply has bolstered demand for government bonds, driving the yield on the benchmark 8.83 percent notes due 2023 to a four-month low of 8.64 percent last week. The rate was little changed at 8.67 percent yesterday, while the rupee weakened 0.6 percent to 59.0425 per dollar. Holdings of sovereign bonds at local banks rose 3.5 percent in 2014 to 22.9 trillion rupees as of May 2, the latest RBI data show.
The drop in the government’s borrowing costs would help its efforts to cut the budget deficit. The shortfall likely narrowed to 4.6 percent of gross domestic product in the year ended March 31 from 4.9 percent in the prior 12 months, former Finance Minister Palaniappan Chidambaram estimated in February. He forecast the gap for the current period at 4.1 percent.
Arun Jaitley, who took charge at the finance ministry yesterday as part of the Modi government, told reporters in New Delhi that his priorities include restoring economic growth, containing inflation and fiscal consolidation.

‘Restore Confidence’

Bond risk in India is falling. Credit-default swaps insuring the notes of State Bank of India, a proxy for the sovereign, against non-payment for five years fell 64 basis points this month to a one-year low of 188, according to data provider CMA.
Sustained currency-market intervention by the RBI may end cash shortages at banks, prompting lenders to halt overnight borrowings from the central bank, according to Barclays Plc.
“Net dollar purchases by the RBI could move banking-system liquidity from deficit into surplus,” Barclays analysts Rohit Arora and James Lee wrote in a note dated May 21. Lower funding costs “should restore confidence in the fixed-income markets,” they wrote.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net; James Regan at jregan19@bloomberg.net Anil Varma

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Billionaire Uday Kotak Ordered to Cut Stake in His Bank to 40%

By Anto Antony - May 27, 2014

Billionaire Uday Suresh Kotak was ordered by India’s central bank to reduce his stake in Kotak Mahindra (KMB) Bank Ltd. to 40 percent by the end of September from his current holding of 43.58 percent.
Kotak, 55, will then have until the end of 2016 to cut his ownership in the Mumbai-based lender that he founded in 2003 to 30 percent, the company said in an exchange filing today.
Kotak Mahindra shares fell 0.6 percent to 855.670 rupees as of 9:25 a.m. in Mumbai, while the 12-company Bankex Index lost 0.9 percent. The stock climbed 18 percent this year, valuing Kotak’s current stake at about 287 billion rupees ($4.9 billion).
To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net
To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net Darren Boey, Russell Ward

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Sun Pharma Climbs After Court Removes Stay on Ranbaxy Buy

By Ketaki Gokhale - May 25, 2014

Sun Pharmaceutical Industries Ltd. (SUNP) gained the most in a month as an Indian court removed the stay on its $3.2 billion purchase of Ranbaxy Laboratories Ltd. (RBXY) after putting it on hold to study a petition alleging insider trading.
Sun shares climbed as much as 3.9 percent, headed for the biggest gain since April 9, to 607.25 rupees before trading at 599 rupees at 9:19 a.m Mumbai time. Ranbaxy gained as much as 4.5 percent.
The Andhra Pradesh High Court disposed of the stay because India’s capital market regulator is investigating the insider trading allegations, Vivek Reddy, the lawyer for the petitioners, said on May 24. The court in April admitted a writ petition filed by a group of investors seeking a probe by the Securities and Exchange Board of India into any insider trading in Ranbaxy shares before the deal was announced.
The court at that time ordered an “interim status quo” on the deal, according to a copy of the order obtained by Bloomberg News. Ranbaxy shares surged 24 percent in the three trading days before the deal was announced and the stock’s daily average trading volume in that period jumped, according to data compiled by Bloomberg.
India’s biggest broker group in April said it would ask regulators to probe the trades that occurred before the deal was made public. A two-judge Supreme Court panel on May 21 observed that the Andhra Pradesh High Court doesn’t have jurisdiction to hear the case and asked the lower court to decide on it in two days.

Emerging Markets

In the deal announced on April 7, the companies said Ranbaxy investors will get 0.8 share in Sun for every one of their shares. Ranbaxy is a unit of Japan’s Daiichi Sankyo Co., which owns 63.5 percent of the Indian generics maker.
Dilip Shanghvi started Sun Pharma in 1983, selling drugs to treat psychiatric illnesses and the company now has brands in areas including psychiatry, neurology, cardiology and nephrology.
Buying Ranbaxy will help Sun Pharma grow in markets such as Russia, Romania, South Africa, Brazil and Malaysia, according to an investor presentation. The company in its annual report has said its “focus markets for the future” would include Latin America, Russia, China and South Africa. Four of Ranbaxy’s plants in India are banned from exporting to the U.S.
The deal will be completed by around the end of December, after regulatory approvals and shareholder meetings, according to an April 11 statement from Daiichi.
To contact the reporters on this story: Sharang Limaye in Hyderabad at slimaye@bloomberg.net; Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net
To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net Sam Nagarajan

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