Vidya Prasarak Mandal

Oil Rises to One-Month High as Greek Approval of Austerity Plan By Mark Shenk - Feb 13, 2012

2012-02-13T18:34:00.000-08:00

Oil rose to a one-month high after the Greek parliament approved an austerity plan, easing Europe’s debt crisis, and sanctions tightened on Iran. Technical issues halted electronic trading late in the session.

Futures climbed 2.3 percent and global equities advanced after passage of the package needed for 130 billion euros ($172 billion) in aid. Companies controlling more than 100 supertankers said they would stop loading cargoes from Iran, the second-biggest crude producer in the Organization of Petroleum Exporting Countries.

“We popped overnight on the Greek austerity measures and have maintained the gains,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Crude is aping the equity market. If equities continue to move higher, crude will follow.”

Crude oil for March delivery rose $2.24 to $100.91 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 10. Prices are up 18 percent from a year ago.

CME Group Inc.’s Globex crude and products markets were halted by technical issues, the company said on its website. Trading resumed at 3:15 p.m. New York time.

Brent oil for March settlement rose 62 cents, or 0.5 percent, to end the session at $117.93 a barrel on the London- based ICE Futures Europe exchange.

European Union finance ministers are scheduled to meet on Feb. 15 in Brussels to decide whether to approve the aid package. Resolution of the negotiations would help contain the threat that speculators will target debt-saddled countries, including Italy and Portugal.
‘Won’t Fix Greece’

“This won’t fix Greece but it does buy time,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “This time should be used to come up with an exit strategy for countries to leave the euro zone in a controlled fashion.”

The 27 EU member states accounted for about 16 percent of global oil demand in 2010, according to BP Plc’s annual Statistical Review of World Energy.

“The approval of the Greek austerity measures gave the euro a boost and sent equities higher,” said Chris Dillman, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The news that shippers will stop loading Iranian cargoes is also driving the market higher.”
Stopping Shipments

Overseas Shipholding Group (OSG) said Feb. 10 the pool of 45 supertankers from seven owners in which its carriers trade will no longer call at Iran. Nova Tankers A/S and Frontline Ltd., with a combined 93 vessels, said Feb. 9 and Feb. 11 they won’t ship crude from the Persian Gulf nation.

The EU’s Jan. 23 agreement to embargo Iran’s oil starting in July because of its nuclear program extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, fewer vessels will be able to load in Iran.

“Iran is what’s really pushing crude up,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “If Iranian exports are choked off because of the insurance issue, we will see higher prices.”

Iranian President Mahmoud Ahmadinejad said Feb. 11 he will unveil “major nuclear accomplishments” in coming days, state- run Press TV reported. Iran has threatened to block shipments through the Strait of Hormuz, a transit route for about 20 percent of the world’s globally traded oil.
Blaming Iran

Israeli Prime Minister Benjamin Netanyahu blamed Iran for two attacks on Israeli embassy personnel in India and Georgia. The Persian Gulf nation has blamed Israel for a series of deadly attacks on scientists involved in its nuclear program. Iran’s Supreme Leader Ayatollah Ali Khamenei pledged Feb. 3 to help “any nation or group that confronts the Zionist regime.”

Hedge funds and other large speculators increased bullish bets on oil by 4,440 contracts, or 2.2 percent, to 205,709 in the week ended Feb. 7, the U.S. Commodity Futures Trading Commission said in a weekly report Feb. 10.

Oil volume in electronic trading on the Nymex was 484,686 contracts as of 3:26 p.m. in New York. Volume totaled 653,655 on Feb. 10. Open interest was 1.49 million contracts, the highest level since Sept. 9.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

SingTel Q3 Earnings Fall 9.6% on Costs, Bharti By Robert Fenner - Feb 12, 2012

2012-02-12T18:37:00.001-08:00

Singapore Telecommunications Ltd. (ST), Southeast Asia’s biggest phone company, posted a 9.6 percent fall in third-quarter earnings on costs to retain domestic customers and a slump at its Bharti Airtel Ltd. (BHARTI) unit in India.

Net income fell to S$902 million ($717 million), or 5.7 Singapore cents a share, in the three months ended Dec. 31 from S$998 million, or 6.3 cents a year earlier, SingTel, as the Singapore-based company is known, said in a statement today. The result missed the S$951.5 million average of four analysts’ estimates compiled by Bloomberg.

SingTel’s margin, which measures profit as a proportion of sales, shrank 1.3 percentage points to 26 percent as selling and administrative expenses in Singapore surged 22 percent on higher costs to add and retain customers. Competition in Australia is curbing growth for its Optus unit and sliding earnings at part- owned Bharti are crimping profitability.

“The big disappointment here is the change in the cost structure and the decline in its margin,” said Theo Maas, who holds SingTel among the $5 billion he helps manage at Arnhem Investment Management Pty. in Sydney. “They have been quite aggressive in terms of handset subsidies.”

SingTel’s Australian traded shares fell 1.8 percent to A$2.25 at 11:03 a.m. in Sydney, extending this year’s decline to 4.6 percent.
Singapore, Australia

Third-quarter earnings before interest, tax, depreciation and amortization from Singapore operations fell 7 percent to S$547 million. Revenue rose 3 percent.

Mobile revenue rose 6 percent to S$491 million after the company added 61,000 customers and increased its market share to 46 percent.

Sydney-based Optus, which trails only Telstra Corp. (TLS) in Australia, posted a 2 percent rise in earnings to A$562 million ($601 million) as it added 182,000 customers.

Full-year forecasts were affirmed, with the company expecting “stable” earnings in Singapore and growth in Australia at “low single digit levels.”

“They have affirmed things are sound with the guidance,” said Arnhem’s Maas.
Regional Units

SingTel owns all of its Singapore and Australian phone businesses in addition to minority stakes in six other mobile operators with 434 million customers in more than 20 countries in Asia and Africa.

Third-quarter earnings from associates, such as Bharti, PT Telekomunikasi Selular in Indonesia and Advanced Info Service Pcl (ADVANC) in Thailand, fell 7.9 percent to S$449 million.

New Delhi-based Bharti, India’s largest wireless operator, last week posted a 22 percent decline in profit as customers curbed mobile-phone use amid rising call rates and it incurred costs for the for the expansion of 3G services. The contribution to SingTel fell 30 percent to S$128 million.

The earnings contribution to SingTel from Indonesia’s PT Telekomunikasi (TLKM) rose 5.6 percent to S$226 million and profit from Advanced Info, Thailand’s largest mobile-phone operator, advanced 23 percent.

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Reliance Communications Net Misses Estimates on Debt Costs

2012-02-11T21:41:00.001-08:00

By Ketaki Gokhale - Feb 10, 2012 6:52 PM GMT+0530

Tweet
inShare4
More
Print
Email

Enlarge image Reliance Communications Profit Misses Estimates on Debt Cost

Pedestrians walk past a Reliance Communications Ltd. retail store in Mumbai. Photographer: Dhiraj Singh/Bloomberg

Reliance Communications Ltd. (RCOM), India’s second-largest mobile phone operator by subscribers, reported quarterly profit that missed analyst estimates on higher debt costs.

Third-quarter net income declined 61 percent to 1.86 billion rupees ($37.6 million) in the three months ended Dec. 31, from 4.8 billion rupees a year earlier, the Mumbai-based company said in a statement today. That compares with the 2.21 billion-rupee median of 20 analysts’ estimates compiled by Bloomberg.

Billionaire Anil Ambani’s flagship company follows bigger rival Bharti Airtel Ltd. (BHARTI) in reporting earnings that fell short of expectations after phone usage slowed and costs increased. Reliance, which spent 85.9 billion rupees in 2010 at auctions to buy airwaves for third-generation services, is refinancing foreign-currency loans to extend their maturity.

“Net income is down year-on-year because of costs related to 3G spectrum and the rollout of services,” Unmesh Sharma, an analyst at Macquarie Capital Securities in Mumbai, said before the announcement. “In the near term, this is going to continue to be a pressure across the sector.”

Reliance, India’s largest mobile-phone operator after Bharti, had 150 million connections at the end of December, according to the nation’s telecommunications regulator.

Net sales fell to 48.24 billion rupees from 48.65 billion rupees a year earlier, according to the statement. That’s lower than the 52.1 billion-rupee median of 21 analysts’ estimates.
Refinancing Debt

Financial charges at the company almost tripled to 3.78 billion rupees in the third quarter, according to the statement.

Reliance said it will refinance about $1.18 billion of foreign-currency debt due March 1, according to a company press release today. China Development Bank Corp., Export-Import Bank of China and Industrial & Commercial Bank of China will help the Indian operator extend the maturity of the loans by seven years at an interest rate of about 5 percent.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, fell to 16.1 billion rupees from 16.7 billion rupees a year earlier, while the Ebitda margin declined to 31.9 percent from 33.3 percent a year earlier.
Stock Performance

Reliance fell 1.2 percent to 94 rupees at close in Mumbai, before the earnings were announced. The stock has gained 34 percent this year, compared with the 15 percent jump in the benchmark Sensitive Index (SENSEX), or Sensex. Bharti has risen 1.9 percent.

Bharti this week reported third-quarter profit fell 22 percent to 10.1 billion rupees. The company’s Indian customers cut phone usage 7 percent in the quarter, after it raised call rates.

India’s highest court on Feb. 2 canceled 122 second- generation mobile-phone licenses, including all the permits used by the local units of Emirates Telecommunications Corp., or Etisalat, and Norway’s Telenor ASA. (TEL)

Etisalat and Telenor had purchased stakes in Indian companies that won the permits. The court scrapped the licenses, sold in 2008, saying they were acquired through an arbitrary and “unconstitutional exercise.”

Reliance won 3G wireless permits in 13 of India’s 22 telecommunication zones in May 2010.

Reliance plans to raise as much as $1.5 billion through a Singapore listing of its submarine cable assets, a person familiar with the matter said last month. It may sell 75 percent of the FLAG Telecom unit of Reliance Globalcom, a subsidiary of Reliance Communications, in an initial public offering, according to the person.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

Tweet
inShare4
More
Print
Email

Sponsored links
Videos you may like:
Buffett Says Bonds Among `Most Dangerous of Assets'
India, China Economy, Markets, Europe, Strategy
Gopinath on Kingfisher Airlines' Outlook
by Taboola
Related News

India & Pakistan ·
Technology

Sponsored Links
Give a Gift of Bloomberg Markets Magazine and Get Great Savings!
More Stories

Greek Bailout at Risk as Party Pushes Back Against German Demand for Cuts
Q
Greek Cabinet Approves Second Rescue Package Pact, Official Says
Q
Weekend Storm Looms for U.S. Northeast
Q
U.S. Stock Futures Retreat as Euro Area Ministers Withhold Aid to Greece
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

Soros: Greek Bailout Won’t Rid Europe of ‘Danger’
Q
Updated 34 minutes ago
Nissan $98K GT-R Stomps Ferrari, Porsche
Q

Ferraris Out of Fashion in Italy as Police Nab Tax Evaders
Q

Singer Whitney Houston Dies at 48, AP Reports
Q
Updated 4 hours ago
Gingrich Group Looks for New Money as Big Donor Checks Stop
Q

More Most Popular Stories »
Sponsored Links
Job Search
Post a Job »
IT SPECIALIST (PLCYPLN)
Department of the Army - Walla Walla, WA
IT Specialist II
Jefferson County Kansas - Oskaloosa, KS
IT Specialist
Behavioral Centers of America - Detroit, MI
IT Director
Oracle - Belmont, CA
IT Specialist
I.T. & Communications - New Jersey
Search All Jobs jobs by Indeed job search
Advertisement
Advertisements
Click here to find out more!
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law
Bloomberg BNA

Bloomberg Link
Bloomberg Markets Magazine
BMART
Bloomberg New Energy Finance
Bloomberg Open
Bloomberg Press
Bloomberg Sports
Jobs by Indeed
Bloomberg Blog Bloomberg Blog RSS

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC
Q
What is the queue?
More »Items In Your queue
This is your Bloomberg Queue

The queue will help you find news, save stories for later and take them with you
Learn MoreClose
More » New Suggestions

Reliance Communications Net Misses Estimates on Debt Costs By Ketaki Gokhale - Feb 10, 2012

2012-02-10T18:31:00.000-08:00

Reliance Communications Ltd. (RCOM), India’s second-largest mobile phone operator by subscribers, reported quarterly profit that missed analyst estimates on higher debt costs.

Third-quarter net income declined 61 percent to 1.86 billion rupees ($37.6 million) in the three months ended Dec. 31, from 4.8 billion rupees a year earlier, the Mumbai-based company said in a statement today. That compares with the 2.21 billion-rupee median of 20 analysts’ estimates compiled by Bloomberg.

Billionaire Anil Ambani’s flagship company follows bigger rival Bharti Airtel Ltd. (BHARTI) in reporting earnings that fell short of expectations after phone usage slowed and costs increased. Reliance, which spent 85.9 billion rupees in 2010 at auctions to buy airwaves for third-generation services, is refinancing foreign-currency loans to extend their maturity.

“Net income is down year-on-year because of costs related to 3G spectrum and the rollout of services,” Unmesh Sharma, an analyst at Macquarie Capital Securities in Mumbai, said before the announcement. “In the near term, this is going to continue to be a pressure across the sector.”

Reliance, India’s largest mobile-phone operator after Bharti, had 150 million connections at the end of December, according to the nation’s telecommunications regulator.

Net sales fell to 48.24 billion rupees from 48.65 billion rupees a year earlier, according to the statement. That’s lower than the 52.1 billion-rupee median of 21 analysts’ estimates.
Refinancing Debt

Financial charges at the company almost tripled to 3.78 billion rupees in the third quarter, according to the statement.

Reliance said it will refinance about $1.18 billion of foreign-currency debt due March 1, according to a company press release today. China Development Bank Corp., Export-Import Bank of China and Industrial & Commercial Bank of China will help the Indian operator extend the maturity of the loans by seven years at an interest rate of about 5 percent.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, fell to 16.1 billion rupees from 16.7 billion rupees a year earlier, while the Ebitda margin declined to 31.9 percent from 33.3 percent a year earlier.
Stock Performance

Reliance fell 1.2 percent to 94 rupees at close in Mumbai, before the earnings were announced. The stock has gained 34 percent this year, compared with the 15 percent jump in the benchmark Sensitive Index (SENSEX), or Sensex. Bharti has risen 1.9 percent.

Bharti this week reported third-quarter profit fell 22 percent to 10.1 billion rupees. The company’s Indian customers cut phone usage 7 percent in the quarter, after it raised call rates.

India’s highest court on Feb. 2 canceled 122 second- generation mobile-phone licenses, including all the permits used by the local units of Emirates Telecommunications Corp., or Etisalat, and Norway’s Telenor ASA. (TEL)

Etisalat and Telenor had purchased stakes in Indian companies that won the permits. The court scrapped the licenses, sold in 2008, saying they were acquired through an arbitrary and “unconstitutional exercise.”

Reliance won 3G wireless permits in 13 of India’s 22 telecommunication zones in May 2010.

Reliance plans to raise as much as $1.5 billion through a Singapore listing of its submarine cable assets, a person familiar with the matter said last month. It may sell 75 percent of the FLAG Telecom unit of Reliance Globalcom, a subsidiary of Reliance Communications, in an initial public offering, according to the person.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Tata Steel Unexpectedly Turns to Loss By Abhishek Shanker - Feb 9, 2012

2012-02-09T18:28:00.000-08:00

Tata Steel Ltd. (TATA), India’s biggest producer, swung to an unexpected loss in its third quarter after raw material costs gained and demand and prices fell in Europe, its largest market.

The loss, including that of unit Tata Steel Europe Ltd., was 6.03 billion rupees ($122 million) in the three months ended Dec. 31, compared with a profit of 10 billion rupees a year earlier, the Mumbai-based company said yesterday in a statement. The median profit estimate of 28 analysts in a Bloomberg survey was 2.57 billion rupees. Sales gained 15 percent to 329.6 billion rupees.

The debt crisis in Europe, which contributes about two- thirds of Tata’s production, has cut steel demand and prices. Global use of the alloy will rise 4.5 percent in 2012, the slowest in three years, according to the median estimate of 14 steelmakers, analysts and traders surveyed by Bloomberg.

Total costs rose 22 percent to 325.5 billion rupees, while raw material expenses climbed 21 percent to 126.2 billion rupees in the quarter. Tata Steel, which had a net debt of $9.52 billion rupees as of Dec. 31, earned 1.38 billion rupees from sources other than its main business, the company said.

Tata Steel Europe Chief Executive Officer Karl-Ulrich Koehler in November predicted a “difficult” third quarter. The European unit, which buys all the raw material it needs from outside suppliers, faced a 17 percent increase in coking coal prices, compared with a 3.5 percent increase in the price of steel hot-rolled coils in the last quarter.
India Demand

Demand for the alloy is expected to improve should India’s central bank lower interest rates, Managing Director H.M. Nerurkar told reporters yesterday in Mumbai. The Reserve Bank of India increased interest rates 13 times since the start of 2010 to curb inflation. Subir Gokarn, the deputy governor of the bank, said last month the monetary cycle has peaked.

Tata Steel plans to add 2.9 million tons of annual capacity at its Jamshedpur facility this quarter, taking total production to 10 million tons, Nerurkar said.

The company on Dec. 2 said it mothballed the Llanwern hot strip mill in Newport, U.K., cutting 115 jobs. The mill will remain shut until the U.K. economy and steel demand justify a restart, it said then.

Rival ArcelorMittal (MT), the world’s largest steel producer, reported on Feb. 7 fourth-quarter earnings before interest, tax, depreciation and amortization fell to $1.71 billion from $1.85 billion a year earlier. That compared with the $1.68 billion median estimate of 16 analysts surveyed by Bloomberg. First-half Ebitda is likely to exceed results in the prior six months, while still being lower than a year earlier, the company said in a statement.

Tata Steel shares gained 0.3 percent to 452.15 rupees in Mumbai yesterday. The earnings were announced after the market closed. The benchmark Sensitive Index gained 0.7 percent.

To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Oil Trades Near One-Week High as U.S. Stockpiles Counter Europe Concern By Ben Sharples - Feb 8, 2012

2012-02-08T18:47:00.001-08:00

Oil traded near the highest price in more than a week after U.S. crude stockpiles increased less than forecast, countering concern that Europe’s debt crisis will worsen as Greece struggles to agree on terms for a bailout.

Futures were little changed after advancing for a second day yesterday. Crude inventories rose 304,000 barrels last week, according to the Department of Energy, compared with an estimated 2.5 million barrel gain in a Bloomberg News survey. Greek Prime Minister Lucas Papademos summoned the country’s international lenders for further discussions today after failing to get full agreement from his coalition supporters on economic measures needed for a second aid package.

“Demand, particularly in the U.S., is still there,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney. “We’ve been side-swiped by Europe in terms of its slowdown.”

Oil for March delivery was at $98.74 a barrel, up 3 cents, in electronic trading on the New York Mercantile Exchange at 12:03 p.m. Sydney time. The contract yesterday increased 30 cents, or 0.3 percent, to $98.71, the highest settlement since Jan. 30. Prices are 14 percent higher the past year.

Brent oil for March settlement rose 32 cents to $117.52 a barrel on the ICE Futures Europe exchange. The benchmark contract’s premium to New York-traded West Texas Intermediate widened for a second day to $18.78, compared with a record $27.88 on Oct. 14.
Refinery Utilization

U.S. refineries operated at 82.8 percent of capacity last week, up 1 percentage point from the week before, and gasoline production climbed 0.7 percent to 8.63 million barrels a day, according to the Energy Department report yesterday.

Gasoline prices surged to the highest level in more than five months on speculation that refinery shutdowns in Europe and the U.S. will trigger a supply crunch. Gasoline for March delivery climbed 0.61 cents to $2.9813 a gallon on the New York Mercantile Exchange today. It rose 4.77 cents to $2.9752 a gallon yesterday, the highest settlement since Aug. 31 and the largest gain since Jan. 27.

Imports of the motor fuel dropped 32 percent last week, according to the Energy Department. Stockpiles rose 1.6 million barrels, compared with a forecast for an 875,000 barrel gain. Distillate inventories, a category that includes heating oil and diesel, increased 1.2 million barrels, compared with a projection for an 875,000 barrel decline.

Greece’s government is struggling to arrange financing to meet a 14.5 billion-euro ($19.2 billion) bond payment on March 20, risking a collapse of the economy and a new round of contagion in the euro area. Political leaders have agreed on all the measures needed for a second international aid package except cuts to pensions, Panos Beglitis, a spokesman for the Pasok socialist party, told reporters in Athens.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

DBS Expands in Asia as CEO Chases Returns By Sanat Vallikappen - Feb 7, 2012

2012-02-07T18:36:00.000-08:00

Piyush Gupta, chief executive officer of DBS Group Holdings Ltd., Southeast Asia’s largest bank, picked banking over a passion for bird-watching three decades ago. Now his plans for regional expansion are taking flight.

Gupta, who joined the Singapore-based lender in 2009 after a 27-year career at Citigroup Inc., is positioning DBS to take advantage of rising wealth in Asia and to reduce reliance on its home market.

The shift in strategy has delivered profit of more than S$700 million ($560 million) in four of the last five quarters, a level last reached in mid-2004. Fourth-quarter and full-year results will be announced Feb. 10.

“Over the past year and a half, you can see that DBS has become a much more dynamic organization,” said Yasmin Krishan, a client director who specializes in the financial industry at EMA Partners, a London-based executive search firm. “Before, they were regarded as a clumsy giant. You never thought of DBS as this exciting place.”

Gupta, 52, has focused on building DBS’s wealth-management business to reach rich Asians, particularly in China, India and Indonesia. He has hired new management, introduced products including Chinese yuan-denominated investments and pledged to spend S$250 million to expand over the next five years. He also set a 2013 target for the bank of 12 percent return on equity, which was 10.8 percent in the third quarter of last year.
Paying Off

The effort is paying off. Revenue in China for the first nine months of 2011 rose 47 percent from a year earlier, helped by the purchase of Royal Bank of Scotland Group Plc’s retail-and commercial-banking business in the country. It was up 35 percent in Indonesia, 34 percent in India and 18 percent in Taiwan. Fee revenue from wealth management jumped 58 percent.

Gupta also spent the last two years “putting the basics into place,” he told the Foreign Correspondents’ Association in Singapore in November. That meant standardizing management processes and strengthening technology and infrastructure. It included improving operations at its Hong Kong unit, the former Dao Heng Bank Group Ltd. acquired in 2001 for $5.4 billion.

“When I took a deep look at the business, it appeared to me that we had never put in place the plumbing or the architecture required to run a multinational company,” he said.
Uniform Practices

Before Gupta took over at DBS, managers didn’t know whether a branch or a customer was profitable, and they lacked uniform practices, Gupta said. He cited an example of an employee who, to prove a point, ran a credit application through the systems in Hong Kong and Singapore. It was approved in Hong Kong and declined in Singapore.

Gupta said he found striking differences from the procedures, customer focus and information systems at Citigroup, notwithstanding the New York-based bank’s $45 billion government bailout in 2008. Gupta, who grew up in New Delhi and earned a Master’s of Business Administration from the Indian Institute of Management in Ahmedabad, joined Citigroup in 1982, rising to head its Southeast Asia, Australia and New Zealand operations.

“There’s no question that a large part of what I learned at Citi is what we’re trying to implement at DBS,” Gupta said in an interview in November.

He set about cutting turnaround time for credit applications and new accounts, shortening wait times at the DBS call center and making branches and ATMs more efficient.

“He’s been a sharp executor,” said Sachin Nikhare, a Singapore-based banking analyst at IIFL Capital Pte.
Corporate Banking

Gupta said he wants DBS to be seen as a strong player in corporate banking in Asia, including in trade financing, cash management and treasury services.

“We want to move from being a loan house, and we were heavily a loan house, to being a diversified corporate bank,” Gupta said.

Gupta is seeking to lower Singapore’s contribution to the bank’s total revenue to 40 percent from 60 percent in five years by growing faster abroad than at home. Greater China and south and Southeast Asia would each account for 30 percent, DBS said. For the first nine months of 2011, revenue from Singapore accounted for 62 percent of the total, unchanged from a year earlier.

At a media event in October, Gupta said the bank will continue to build the Singapore consumer franchise, which it inherited when it bought Singapore’s Post Office Savings Bank and its subsidiary Credit POSB Pte in 1998.
Government Stake

DBS was established in 1968 as a government-controlled development bank to spur Singapore’s industrialization three years after the country’s founding. Temasek Holdings Pte, the state-owned investment company, controls 27 percent of the bank. Peter Seah Lim Huat, chairman of DBS, is a member of Temasek’s advisory panel. Temasek Deputy Chairman Kwa Chong Seng sits on the board of DBS.

Gupta said DBS was a local commercial bank until the end of the 1990s, run mostly by people seconded from the government. DBS then departed from this by hiring CEOs with deal-making experience or investment-banking backgrounds, he said.

From the early 2000s, DBS was run “almost more as an investment bank than a commercial bank,” said Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte.

When DBS hired Gupta’s predecessor, Richard Stanley, who ran Citigroup in China, the bank touted his deal-making skills. Stanley, who died in April 2009 after being diagnosed with leukemia, had replaced Jackson Tai, who joined from New York- based JPMorgan Chase & Co., where he was a managing director in the investment-banking division.

Gupta was appointed for his “strategic, yet detail- oriented” approach, according to a release announcing his appointment in September 2009.
Lack of Boundaries

Gupta has kept revenue from investment banking at the same level as his predecessors -- it was 2.7 percent in the first nine months of 2011, the same as in 2007 -- even as deal-making and capital-raising has declined since its 2007 peak.

A lack of “boundaries” under his predecessors meant the bank ended up with a lot of “hobby businesses” in the Middle East, Britain and the U.S., Gupta said. DBS had to write down more than S$1 billion in 2009 for nonperforming corporate loans in these areas as it turned its attention to Asia operations.

Revenue from what DBS calls the rest of the world dropped to 3.6 percent for the first nine months of 2011 from 5.1 percent at the end of 2009.
Clear Vision

Like his predecessors, “Piyush also has ambitions of being a regional bank, but what he has done differently is that he has clearly articulated the vision, quantified it and has been a sharp executor,” said Nikhare of IIFL Securities. “While others would say, ‘We want to be a regional bank with a large Asia presence,’ he has firstly acknowledged, ‘We are a Singaporean bank with a regional presence.’”

DBS said in November 2010 it was aiming for “double- digit” percentage growth in the wealth-management business annually from emerging markets over the next few years, and to increase managed assets to $50 billion over three years. Managed assets grew $2 billion to $37 billion by the end of November, according to DBS.

To help reach the goal, DBS hired Su Shan Tan from Morgan Stanley to head the private banking unit in 2010 and started a special business unit last year for clients with investable assets of at least S$1.5 million, a separate tier from the bank’s services for people with more than S$5 million to invest. The lender also ran its first advertising campaign in Hong Kong and Singapore aimed at wealthy depositors last year.
Getting Aggressive

“The private bank is getting very aggressive,” said Krishan of EMA Partners. “They’re recruiting. They’re coming up with products. They’re doing a lot more in that space.”

DBS’s private bank ranked 10th by assets in Asia in 2010, according to a Private Banker International survey, ahead of Bank of Singapore, the private-banking arm of Oversea-Chinese Banking Corp. Asia’s top three wealth managers were UBS AG, Citigroup and HSBC Holdings Plc, according to the survey.

Asia-Pacific millionaires outnumbered those in Europe for the first time in 2010, according to a survey by Capgemini SA and Bank of America Corp.’s Merrill Lynch Global Wealth Management. Asia’s 3.3 million high-net-worth individuals had $10.8 trillion in assets compared with the $10.2 trillion accumulated by their 3.1 million counterparts in Europe, according to the report published last June.

DBS has risen 1 percent in Singapore trading since Gupta took over on Nov. 9, 2009, while the benchmark Straits Times Index has gained 11 percent. Rivals United Overseas Bank Ltd. and Oversea-Chinese Banking lost 1.3 percent and gained 10 percent, respectively. OCBC has a larger presence in more profitable loan markets such as Malaysia and Indonesia.
‘Extremely Energetic’

“One reason for the underperformance of DBS is where we are in the interest-rate cycle, and DBS’s larger presence in low-margin markets such as Singapore, Hong Kong and Taiwan,” said Macquarie’s Smith, who has a neutral rating on DBS. “If interest rates were to rise, DBS could be the biggest beneficiary, aided by their low-cost funding base in Singapore.”

People who know Gupta say he has what it takes to reach the goals he has set for the bank.

“Whatever he puts his mind to, he does it well,” said Krishan of EMA Partners, who has known Gupta since a 1986 picnic outing with a group of friends in Mumbai including her to-be husband who was a Citibank colleague of Gupta’s. “Even outside of the bank, he is an extremely energetic person, very creative. He writes poetry -- fun, humorous, witty stuff.”

While still pursuing his passions for poetry and bird- watching, Gupta advised the 2011 graduating class at the National University of Singapore to find a professional calling as well.

“Going through life with ‘bird-watcher’ on my visiting card,” he said, “just didn’t seem like a tenable option.”

To contact the reporter on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Pakistan Must Cut Budget Deficits to Shield ‘Vulnerable’ Economy, IMF Says By Sandrine Rastello and Haris Anwar - Feb 6, 2012

2012-02-06T18:32:00.000-08:00

Pakistan must stem risks to a “highly vulnerable” economy that include inflation projected at 12 percent, a widening budget deficit and declining currency reserves, the International Monetary Fund said.

The Washington-based IMF called on Pakistan to broaden the tax base, eliminate some subsidies and curtail central bank financing of a budget shortfall that may rise to 7 percent of gross domestic product this fiscal year.

Floods in August that forced more than 1 million people from their homes have added to the woes of the world’s second- largest majority-Muslim nation, a key U.S. partner in the battle against al-Qaeda. Economic growth estimated at 3.4 percent in the fiscal year ending in June 2012 will fall short of the 7 percent pace needed to provide work for the 2 million people who enter the labor force each year, the fund said in a report release yesterday.

“Two major floods, difficulties in implementing key policy reforms, and a more challenging global environment have combined to limit growth and employment creation and made the economy highly vulnerable, with few buffers to absorb shocks,” the fund said.

The government of Prime Minister Yousuf Raza Gilani has struggled to revive an economy hurt by political instability and militant attacks that have killed at least 35,000 people since 2006, according to estimates from the government. Gilani himself faces a contempt of court charge that threatens to force him from office.
Rupee Weakens

Pakistan’s rupee has declined 0.5 percent against the dollar in the past year and fell to a record on Jan. 9 on concern foreign reserves will shrink as international aid dwindles. Reserves have fallen by about $2 billion in the last six months and may weaken further, the IMF said.

The U.S., the country’s largest export market and aid provider, held back $800 million in military assistance in July out of $2 billion pledged for this fiscal year because of disputes over how to combat terrorism.

Relations between the U.S. and Pakistan are critical to the Obama administration’s battle with al-Qaeda’s leaders in Pakistan and its plans to end the American combat role in Afghanistan within two years. Ties have become strained since U.S. special operations forces killed Osama bin Laden in a compound in the Pakistani city of Abbottabad last May.
IMF Loan

An $11.3 billion IMF loan to Pakistan expired in September, with disbursements suspended in May 2010 after the country failed to meet conditions attached to it. The South Asian nation turned to the IMF for aid in 2008 after its foreign reserves shrank.

Pakistan needs to start repaying the loan this month, and authorities have not requested another one, IMF mission chief Adnan Mazarei said on a conference call yesterday.

“The way we recommended to the authorities to address these vulnerabilities is to recognize that we are all, including Pakistan, living in a more dangerous environment because of the deteriorating global environment and to build buffers,” Mazarei said.

The Washington-based IMF last month lowered its estimate for global growth this year and next and warned that the European debt crisis could plunge the world into another recession if it were to worsen.

The IMF report said Pakistan’s “Monetary policy is now too accommodative, and should be tightened if inflation or external pressures increase.” It added that “central bank financing of the budget needs to be curtailed, and greater operational independence of the central bank needs to be secured.”
Emerging Markets

Emerging markets from India to Thailand have eased policy as Europe’s debt crisis hampers the global economy. Pakistan’s central bank left the discount rate at 12 percent in November, pausing to gauge the impact of a 2 percentage-point reduction since the end of July. The next rate decision for the $175 billion economy is due Feb. 11.

Pakistan’s gross domestic product rose 2.4 percent in the year through June 2011, one of the smallest expansions in a decade.

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Haris Anwar in Islamabad at hanwar2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Court Rejects Petition Against Home Minister Chidambaram in Airwaves Case By Pratap Patnaik and Anurag Joshi - Feb 4, 2012

2012-02-05T18:15:00.001-08:00

An Indian court dismissed a petition asking that Home Minister Palaniappan Chidambaram be probed for corruption in a 2008 sale of phone licenses that were canceled by the nation’s judiciary this week.

The rejection comes as a relief to Prime Minister Manmohan Singh’s government, which has been assailed by allegations of graft and policy drift for more than a year after a former Cabinet minister and company executives were charged with conspiring to sell phone permits at below-market rates.

The court’s order followed a petition by regional politician Subramanian Swamy, who alleged that as finance minister the permits were awarded, Chidambaram was party to discussions on the pricing of airwaves. During arguments, Swamy has said the evidences he produced before the court is sufficient to establish Chidambaram is as culpable as Andimuthu Raja, a former telecommunications minister who is in jail while facing trial in the scam.

“This is a small relief for Chidambaram and the government,” N. Bhaskara Rao, New Delhi-based chairman of the Centre for Media Studies, said in a telephone interview. “Recent developments have negative implications not just for telecommunications but other sectors also. Foreign investors will be concerned and there will be a pause in investments.”

Swamy plans to challenge the dismissal of his petition in a higher court, he told reporters in New Delhi today.
Resignation Demanded

While hearing a separate plea from Swamy, the Supreme Court on Feb. 2 left it to the trial court to decide whether to probe the role of Chidambaram in the phone-permit case. In another order, Supreme Court Justices G.S. Singhvi and A.K. Ganguly canceled 122 permits to run cellular services that were awarded in 2008, saying the allocation was done in an arbitrary and unconstitutional manner.

The main opposition Bharatiya Janata Party has demanded the home minister’s resignation, while the ruling Congress party has rejected Swamy’s allegations.

Chidambaram, 66, a lawyer and Harvard Business School Graduate, is one of the most prominent members of the Congress- led government. He was finance minister from 2004 until 2008, and took over as home minister following the November 2008 Mumbai terrorist attacks. Chidambaram denies approving the pricing, saying last year he urged an auction of the permits instead of their issuance for fees fixed more than six years earlier.
Revenue Loss

India’s chief auditor said the first-come, first-serve sale four years ago may have lowered government revenue by $31 billion. The Central Bureau of Investigation put the loss to the government from the license awards at a lower $4.9 billion.

Raja and company executives face charges they conspired to grant permits to unqualified companies for personal benefit. All deny wrongdoing and are on trial.

Allegations of corruption weakened Singh’s government, stalling its legislative agenda for much of the last 14 months. Street protests and hunger strikes triggered appeals from business leaders to curb graft that has dented investor confidence in Asia’s third-largest economy.

To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Anurag Joshi in Mumbai at ajoshi53@bloomberg.net

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Prepared for Rate Cut as Central Bank Sees Inflation Easing: Economy

2012-02-04T20:52:00.000-08:00

By Kartik Goyal and Daniel Moss - Feb 3, 2012 9:29 AM GMT+0530

Enlarge image India Prepared for Rate Cut on Visible Easing Inflation

Shoppers browse handbags at a stall in the Colaba Causeway in Mumbai, India. Photographer: Kainaz Amaria/Bloomberg
Enlarge image Reserve Bank of India Deputy Governor Subir Gokarn

Reserve Bank of India Deputy Governor Subir Gokarn speaks during an interview in Mumbai. Photographer: Dhiraj Singh/Bloomberg

Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut interest rates once it’s confident inflation will keep slowing.

“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.

Emerging-markets have stepped up efforts to shield growth from the impact of Europe’s debt crisis, with Brazil, Russia and the Philippines cutting rates in recent months. The Indian government can help reduce borrowing costs by narrowing its budget deficit as the pace of price increases slows to 7 percent by March from 9.68 percent a year earlier, according to Gokarn.

Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”

Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.

“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
Asian Stocks Slip

Asian stocks fell as Greece and its creditors struggled to reach an agreement on a debt swap and companies from Mazda Corp. to Nippon Sheet Glass Co. forecast losses. The MSCI Asia Pacific Index declined 0.21 percent as of 12:23 p.m. in Tokyo.

Elsewhere in Asia, a gauge of China’s non-manufacturing industries expanded at a slower pace in January, a report showed today. The non-manufacturing purchasing managers’ index fell to 52.9 from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement in Beijing. A reading above 50 indicates an expansion.

Australia’s services industry expanded in January, snapping three straight months of declines, a report showed today. The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.
Sri Lanka Raises

The Central Bank of Sri Lanka unexpectedly boosted interest rates today for the first time since 2007 to curb credit growth and ensure inflation stays low. It raised the reverse repurchase rate to 9 percent from 8.5 percent and the repurchase rate to 7.5 percent from 7 percent. All seven economists in a Bloomberg News survey predicted rates would be unchanged.

In Indonesia, growth probably exceeded 6 percent for a fifth quarter, a Bloomberg survey showed ahead of a government report due Feb. 6. Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates.

In Europe, a rescue plan for Greece may be completed in coming days, European officials and creditors say. The plan may include a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table.
Fastest in BRIC

In the U.S., Federal Reserve Chairman Ben S. Bernanke said the central bank will seek to keep prices rising at a 2 percent rate and rejected suggestions that it would sacrifice its inflation goal to boost employment.

India’s benchmark inflation rate of 7.47 percent is the fastest among the so-called BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.

“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in his office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”

Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
Indian Bonds Climb

The yield on the 8.79 percent government bonds due November 2021 declined one basis point, or 0.01 percentage point, to 8.12 percent in Mumbai today, according to the central bank’s trading system.

The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. It rose 0.1 percent to 49.10 against the dollar today after gaining 7.3 percent in January.

The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.

“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”

Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Injection

To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.

The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.

In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.

To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.

Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.

“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”

To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Tweet
inShare3
More
Print
Email

Sponsored links
Videos you may like:
Fed Policy to Keep Dollar Weak, John Taylor Says
India's Economy, Central Bank Monetary Policy
Euro to Fall as Debt Crisis Peaks in 1st Quarter, Dec. 19
by Taboola
Related News

Economy ·
Asia ·
India & Pakistan ·
Currencies

Sponsored Links
Subscribe Now & Get Your Free Issue of Bloomberg Markets Magazine
More Stories

Greece Talks Enter ‘Final Phase’ on 2nd Bailout
Q
Italy Crippled by Winter Storm With Snow as Far South as Naples
Q
Russia’s UN Veto on Syria Measure Gives Assad ‘License to Kill’
Q
Job Gains From Factories to Stores Add Heft to U.S. Job Market Recovery
Q
Obama Promotes Homeowner Plan to Eliminate U.S.’s ’Biggest Drag’
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

Greece on ‘Razor’s Edge’ as Debt Talks Drag On
Q

Bachmann: GOP Primary Race May End Soon
Q

Israel, U.S. Divided Over Timing of Potential Military Strike Against Iran
Q

Italy Crippled by Winter Storm; Snow in Naples
Q

Zuckerberg May Sell $1.67B in Facebook Stock
Q

More Most Popular Stories »
Sponsored Links
Advertisement
JOB SEARCH
Post a Job »
Secretary/Receptionist
Provo Canyon Behavioral... - Orem, UT
Store Crew - Prescott, AZ
Trader Joe's - Prescott, AZ
Procurement Officer
Weatherford - Malaga, WA
Maintenance Worker
Department Of The Interior - Salt Lake City, UT
Search all jobs
jobs by job search
Advertisements
Click here to find out more!
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law
Bloomberg BNA

Bloomberg Link
Bloomberg Markets Magazine
BMART
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed
Bloomberg Blog Bloomberg Blog RSS

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC
Q
What is the queue?
More »Items In Your queue
This is your Bloomberg Queue

The queue will help you find news, save stories for later and take them with you
Learn MoreClose
More » New Suggestions

India Prepared for Rate Cut on Visible Easing Inflation: Economy By Kartik Goyal and Daniel Moss - Feb 2, 2012

2012-02-03T18:45:00.001-08:00

Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut interest rates once it’s confident inflation will keep slowing.

“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.

Emerging-markets have stepped up efforts to shield growth from the impact of Europe’s debt crisis, with Brazil, Russia and the Philippines cutting rates in recent months. The Indian government can help reduce borrowing costs by narrowing its budget deficit as the pace of price increases slows to 7 percent by March from 9.68 percent a year earlier, according to Gokarn.

Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”

Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.

“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
Asian Stocks Slip

Asian stocks fell as Greece and its creditors struggled to reach an agreement on a debt swap and companies from Mazda Corp. to Nippon Sheet Glass Co. forecast losses. The MSCI Asia Pacific Index declined 0.21 percent as of 12:23 p.m. in Tokyo.

Elsewhere in Asia, a gauge of China’s non-manufacturing industries expanded at a slower pace in January, a report showed today. The non-manufacturing purchasing managers’ index fell to 52.9 from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement in Beijing. A reading above 50 indicates an expansion.

Australia’s services industry expanded in January, snapping three straight months of declines, a report showed today. The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.
Sri Lanka Raises

The Central Bank of Sri Lanka unexpectedly boosted interest rates today for the first time since 2007 to curb credit growth and ensure inflation stays low. It raised the reverse repurchase rate to 9 percent from 8.5 percent and the repurchase rate to 7.5 percent from 7 percent. All seven economists in a Bloomberg News survey predicted rates would be unchanged.

In Indonesia, growth probably exceeded 6 percent for a fifth quarter, a Bloomberg survey showed ahead of a government report due Feb. 6. Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates.

In Europe, a rescue plan for Greece may be completed in coming days, European officials and creditors say. The plan may include a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table.
Fastest in BRIC

In the U.S., Federal Reserve Chairman Ben S. Bernanke said the central bank will seek to keep prices rising at a 2 percent rate and rejected suggestions that it would sacrifice its inflation goal to boost employment.

India’s benchmark inflation rate of 7.47 percent is the fastest among the so-called BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.

“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in his office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”

Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
Indian Bonds Climb

The yield on the 8.79 percent government bonds due November 2021 declined one basis point, or 0.01 percentage point, to 8.12 percent in Mumbai today, according to the central bank’s trading system.

The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. It rose 0.1 percent to 49.10 against the dollar today after gaining 7.3 percent in January.

The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.

“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”

Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Injection

To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.

The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.

In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.

To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.

Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.

“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”

To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Gokarn Says Visible Drop in Indian Prices Will Trigger Reduction in Rates By Kartik Goyal and Daniel Moss - Feb 2, 2012

2012-02-02T18:38:00.000-08:00

Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut borrowing costs once it’s confident inflation will keep slowing.

“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.

India’s central bank is under pressure to lower borrowing costs and protect the economy from the European debt crisis after counterparts in Brazil and Russia cut rates in recent months. The Indian government can help reduce rates by narrowing its budget gap as the fastest pace of price increases among the so-called BRIC nations slows to 7 percent in March from 9.68 percent a year earlier, according to Gokarn.

Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”

Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.

“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
‘Directionality’

India’s benchmark inflation rate of 7.47 percent is the fastest among the BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.

“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in the office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”

Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.

The yield on the 8.79 percent government bonds due November 2021 declined two basis points, or 0.02 percentage point, to 8.13 percent, a nine-month low, in Mumbai yesterday, according to the central bank’s trading system.
Encourage Hedging

The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. The measure rose 0.2 percent to 49.16 against the dollar yesterday after gaining 7.3 percent in January.

The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.

“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”

Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Shortage

To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.

The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.

In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.

To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.

Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.

“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”

To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asian Stocks’ Rally May Be Sustainable After Break Out: Technical Analysis By Jonathan Burgos - Feb 1, 2012

2012-02-01T18:31:00.000-08:00

Asian stocks may extend their longest rally in more than a year after regional indexes broke out of so-called triangle congestion patterns, according to Chart Partners Group Ltd.

The MSCI Asia Pacific Index surged 8 percent last month, its best such performance since September 2010 and the first time the gauge recorded consecutive monthly advances since October 2010. India’s BSE Sensitive Index and Hong Kong’s Hang Seng Index posted the biggest advances, each rising 11 percent.

“Many Asian indexes have broken to the upside of triangle congestion patterns,” Thomas Schroeder, managing director at Bangkok-based technical research company Chart Partners, said in a telephone interview. “It started in Hong Kong and we’ve seen similar breakouts in Japan and Korea. These are signs that this rally is sustainable.”

The Hang Seng Index broke above the triangle pattern on Jan. 17, Bloomberg data showed. South Korea’s Kospi Index, which has risen 7.3 percent this year, traded above the same pattern on Jan. 20, while Japan’s Nikkei 225 Stock Average breached the formation on Jan. 25.

The rally across Asia may last through March, especially if China’s Shanghai Composite Index (SHCOMP) can build on recent gains, Schroeder said. The Chinese benchmark index advanced 4.2 percent in January, snapping a two-month slump.

“We’ll find more buying opportunity should shares weaken in February,” said Schroeder. “If the Shanghai Composite Index extends its gains above 2,320, that will add more fuel to the rally. The Chinese benchmark index could rise to between 2,500 and 2,600.”

In technical analysis, investors and analysts study charts of trading patterns and prices to try and predict changes in a security, commodity, currency or index. A triangle is formed when upper and lower trend lines intersect.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net; John McCluskey at j.mccluskey@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Steel Demand Slowing With Europe in Setback to ArcelorMittal: Commodities By Abhishek Shanker - Jan 31, 2012

2012-01-31T18:20:00.000-08:00

Steel demand worldwide is growing slower than forecast, eroding profit at producers including ArcelorMittal and Tata Steel Ltd. (TATA) and forcing investors to revise their 2012 outlook for the $430 billion industry.

Global use of the alloy will rise 4.5 percent this year, less than the 5.4 percent forecast in October by the World Steel Association, according to the median estimate of 14 steelmakers, analysts and traders surveyed by Bloomberg. Growth may be as low as 1.2 percent, according to Bloomberg Industries analysts.

The gain, the lowest in three years, is tempered by cooling economies in China and Europe, where orders for steel products for houses, cars and machinery are stagnating and will keep the alloy’s prices and overseas shipments muted, analysts said.

“I’m bearish on Europe’s demand outlook in view of the negative impact from budget deficits and the debt crisis,” said Helen Lau, an analyst with Hong Kong-based brokerage UOB Kay Hian. “China is maintaining its tightening stance on the private property market and developers are still suffering from tight bank credit and high inventory” of homes.

ArcelorMittal may report a profit of $157.6 million in the three months ended Dec. 31, its worst quarterly earnings in a year, according to the mean of five analyst estimates compiled by Bloomberg. Tata Steel, including its European unit, is expected to report a 3.3 billion-rupee ($67 million) net income in the same period, the worst fiscal third-quarter numbers in at least five years, according to the average of 23 estimates.
Becoming Cheaper

Steel companies are forecast to become cheaper, with a price-to-earnings ratio forecast to decline to 8.5 times, from almost 13 times currently, according to data compiled by Bloomberg for the Iron/Steel index.

Prices of benchmark hot-rolled coils may average 5 percent lower at about $734 a ton in 2012, compared with about $772 last year, calculations based on Steel Business Briefing data show.

Steel production in China, which accounted for about 46 percent of the global total in 2011, fell in each of the six months through November before gaining in December, according to the World Steel Association, the Brussels-based trade group that promotes the steel industry.

The World Bank on Jan. 18 cut its global growth forecast by the most in three years, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico. The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, it said. The euro area may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain.
Furnace Closings

ArcelorMittal (MT), the world’s biggest producer, said in October it would idle plants in France, Germany, Poland, Spain and Luxembourg and permanently shut its blast furnaces in Liege, Belgium, as demand wanes.

“Global economic conditions remain a concern with the euro-zone facing difficult credit conditions and fiscal policy uncertainty,” Seshagiri Rao, group chief financial officer at JSW Steel Ltd. (JSTL), India’s third-largest producer, said in Mumbai. “Steel production last month fell below previous year’s levels, which means high cost capacities are being closed and there is a lower apparent steel demand.”

Chinese steel producers Angang Steel Co. (000898), the largest Hong Kong-listed Chinese steel mill, swung to a loss last year and Maanshan Iron & Steel Co., Nanjing Iron & Steel Co. and Aluminum Corp. of China Ltd. said on Jan. 30 that profit fell by more than half as China’s economy slowed.
Stock Performance

U.S.-based Steel Dynamics Inc. and Reliance Steel & Aluminum Co. (RS) are the best performers in the Bloomberg World Iron/Steel Index over the past three months. Australian steel mills BlueScope Steel Ltd. and Onesteel Ltd., battling a stronger local currency and rising costs, are the laggards.

ArcelorMittal missed analyst estimates with its third- quarter profit and said it faced volume and price pressures in the final three months of 2011. ThyssenKrupp AG (TKA), Germany’s largest steelmaker, will report “significantly lower” first- quarter earnings, Chief Executive Officer Heinrich Hiesinger said on Dec. 2.

“While Europe is trying to retrieve itself from the brink of a recession, China is aiming to cool demand,” said Niraj Shah, an analyst at Fortune Equity Brokers Ltd. in Mumbai. “China will be a wild card -- there are chances it may lower interest rates that may boost steel demand.”

Global demand climbed 15.4 percent in 2010, 6.5 percent last year and may grow 5.4 percent this year, the World Steel Association said in its Oct. 12 forecast. Consumption contracted in 2008 and 2009, according to the association’s 2011 Steel Statistical Yearbook.
Prices Falling

“It’s going to be a year of lower profits for most steel companies,” Peter Marcus, managing partner at World Steel Dynamics, said in an interview in New Delhi on Jan. 27, predicting demand may contract 2 percent this year. World Steel Dynamics, based in Englewood Cliffs, New Jersey, forecasts steel prices.

China’s economic growth may drop to 8.5 percent this year from 9.2 percent in 2011, according to the median of 15 economist estimates compiled by Bloomberg. Orders continue to remain weak in the world’s fastest growing major economy, according to a Macquarie Group Ltd. report last month.

“Unless China loosens its tightening on the private property sector, it will be hard for steel demand to grow at last year’s estimated growth rate of 8.5 percent,” Lau said.
China Growth

China’s gross domestic product grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace in 10 quarters. The fourth straight quarterly slowdown in the world’s second-largest economy is adding to concerns global expansion is faltering, with the International Monetary Fund warning of near- zero growth in Europe.

The financial crisis in Europe will prompt the region’s steelmakers to cut output and import less iron ore next year, London-based marine consultancy Drewry Shipping Consultants Ltd. said on Dec. 19. Mills have begun to cut production and the full impact of the reduction will be seen in 2012, it said.

Standard & Poor’s downgraded nine European nations on Jan. 13, saying recent policy steps may prove “insufficient” to contain the fiscal crisis.

The global steel trade may fall as much as 5 percent in 2012 after rising an estimated 6.2 percent to 410 million tons in 2011, Phil Hunt, operations manager at London-based International Steel Statistics Bureau, said in an e-mailed reply on Jan. 23. Shipments from India may rise as local producers add capacities, Marcus said.

To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net Andrew Hobbs at ahobbs4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Gillard ‘Angry’ as Australian Opposition Calls for Canberra Protest Probe By Phoebe Sedgman - Jan 29, 2012

2012-01-30T18:21:00.001-08:00

Australian Prime Minister Julia Gillard expressed anger at opposition demands for an inquiry over her government’s role in clashes between police and aboriginal protesters in Canberra on Australia Day.

A media aide to Gillard resigned Jan. 27 for disclosing opposition leader Tony Abbott’s location at a restaurant in the national capital, information that was passed on to protest organizers. Security officers rushed Gillard and Abbott from the venue, where they were attending a function, as dozens of demonstrators banged on the windows.

Gillard, who trails Abbott’s Liberal-National coalition in opinion polls, had her parliamentary majority reduced to one seat last week when an independent lawmaker withdrew his support saying she’d broken a pledge to tighten gambling laws. The ruling Labor Party, which faces a general election by 2013, received a boost when a Galaxy poll published today showed its support had climbed five percentage points from October.

The Australian Federal Police won’t investigate the disclosure of Abbott’s location as there is no evidence of a criminal act, it said in a statement today. That comes after Abbott yesterday told reporters the prime minister’s office “has done the wrong thing,” and “let’s give her a chance to do the right thing” with an inquiry. Gillard has said no other member of her office was involved in passing information.

Abbott’s calls typify “his tendency to go too far,” Gillard said Jan. 28 at a news conference in Melbourne. “For it to be insinuated that I would play some role in disrupting an event to recognize Australians who had performed miracles during a natural disaster is deeply offensive.”

The federal police “should automatically be reviewing their own processes and procedures,” the opposition coalition’s Christopher Pyne said in an interview broadcast on Sky News yesterday. “But also the prime minister should want to get to the bottom of who is responsible for what happened.”
Tent Embassy

The Canberra protest took place on Jan. 26, the Australia Day holiday marking the arrival of white settlers in the country. Demonstrators were responding to Abbott’s comment earlier in the day, when he replied it’s probably “time to move on” in the debate for the need to an Aboriginal Tent Embassy, which has been standing for 40 years in front of the nation’s former parliament house.

Gillard and Abbott were spirited away in government cars to cries of “racist” and “shame” from the protesters. As Gillard was taken from the building she stumbled and lost her shoe. Members of the Tent Embassy later found the footwear and returned it.
Indigenous Australians

Aboriginal people populated Australia at least 50,000 years before Europeans arrived. Aborigines remain the poorest and most disadvantaged group in Australian society more than 200 years after Europeans settled in 1788.

There are about 400,000 indigenous Australians, who make up 2 percent of the population. Australia Day marks the date in 1788 when Captain Arthur Phillip, commander of the first fleet of convict ships from Britain, landed in Sydney Cove, the site of the modern-day city. Many Aborigines and their supporters refer to the date as Invasion Day.

Gillard will concentrate on Australia’s economic performance when she addresses the Australia-Israel Chamber of Commerce this week, the Sydney Morning Herald newspaper reported yesterday, citing an unidentified official.

“We’re situated in the region of the world that continues to experience economic growth and will during the course of this century, and that gives us particular opportunities for the future,” Gillard said at a news conference in Melbourne yesterday with visiting New Zealand Prime Minister John Key.
Asia Growth

Australia is “looking how we can win in this Asian century of economic growth and so we can be prepared for that economic growth,” she said.

Australia’s economy will expand 3.7 percent in 2012, the fastest pace among Group of 10 nations, according to strategists surveyed by Bloomberg, as benchmark interest-rate cuts boost consumer confidence and a resources boom spurs record exports. China, Australia’s biggest trading partner, may have economic growth of 8.4 percent this year, compared with 2.5 percent globally and a 0.3 percent contraction in the euro area, the World Bank said Jan. 18.

“Our economy is now 7 percent larger than it was before the global financial crisis, while many other advanced economies are yet to make up the ground they lost,” Treasurer Wayne Swan said in his weekly note yesterday. “We’re uniquely placed to deal with the worst the world can throw at us.”

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Davos Tells EU to Fix Crisis for Good By Simon Kennedy and Jana Randow - Jan 29, 2012

2012-01-29T18:19:00.000-08:00

European leaders were told by policy makers, bankers and academics from around the world that it’s time to end the region’s debt crisis and measures aimed at simply containing it are no longer enough.

Five days of debating and partying at the World Economic Forum’s annual meeting ended yesterday, with the euro area under pressure to swiftly deliver a bigger bailout fund that could help build a firewall worth more than $1 trillion. Leaders were also told they need to finish crafting tougher budget rules, and finally make Greece’s debt burden manageable.

Failure to comply would threaten economic growth and financial markets, as well as deprive the region of more outside support, said delegates including billionaire investor George Soros and U.S. Treasury Secretary Timothy F. Geithner. How far Europe’s officials are willing to go in response may be revealed at a Brussels summit today.

“There’s a very strong view of get on with it, get this thing done,” Bank of Canada Governor Mark Carney told Bloomberg Television in Davos, Switzerland.

The caution against complacency came toward the end of a month in which signs of stabilization emerged in Europe as market lending rates eased, economic indicators showed some resilience and bond yields fell from Spain (GDBR10) to Italy (GDBR10). At the same time, banks are still cutting lending, Portuguese borrowing costs are surging and Greece faces a 14.5 billion ($19 billion) euro bond repayment in March.
Spillover

Carney estimated Europe’s woes will subtract 1 percentage point from global growth by the end of 2012 “and that’s in a world where this crisis is contained.”

“It’s not just a euro-zone crisis, it’s a crisis that could have spillover effects around the world,” International Monetary Fund Managing Director Christine Lagarde said. She came to Davos promoting her push for $500 billion in new crisis- fighting money for the Washington-based lender.

The main solution proposed was increasing the euro region’s own funds from the planned limit of 500 billion euros that will take effect in July. EU officials already plan to reassess that amount in March and have the option to push it even higher through leverage. That could swell it to a level triggering donations to the IMF from around the world and result in an overall warchest worth at least $1.1 trillion
Stronger Firewall

Both the French and Spanish finance ministers told Davos delegates they’d support increasing the rescue fund even in the face of German opposition.

“The only way Europe’s going to be successful in holding this together, making monetary union work, is to build a stronger firewall,” Geithner said. Soros said in an interview “not enough has been done to ringfence” the region from the risk of a Greek default.

Strengthening the defences was regarded as a pre-requisite by officials from the U.K. to Japan if they are to stump up emergency cash for the region and channel it through the IMF. European governments must show the “colour of their money,” said U.K. Chancellor of the Exchequer George Osborne.

There was unanimity that Greece (GRBD10) remains Europe’s weakest link as talks between the government and bond holders on a debt restructuring dragged on through the weekend. Failure to strike a deal could deprive the country of a second bailout package required to keep its finances afloat.
Greek Fallout

“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” Osborne said.

Bank chief executives in Davos disagreed over the fallout if Greece reneged on its debt. Deutsche Bank AG’s Josef Ackermann said in an interview that a default would be “playing with fire,” while JPMorgan Chase & Co.’s Jamie Dimon told CNBC it would not be a “disaster.”

For all the angst, conference-goers expressed optimism that European leaders may now be more aware of the risks of failure so more willing to act.

“There is evidence Europe is starting to turn a bit of a corner,” John Phizackerley, Nomura’s chief executive officer for Europe, Middle East and Africa, said in an interview.

While German Chancellor Angela Merkel used her keynote speech to rebuff calls for bigger bailout reserves, she is “absolutely convinced that we will be able to master this crisis.” Merkel meets other euro leaders in Brussels today to continue work on fortifying the region’s budget rules.
ECB Praise

If there was a hero of the week it was ECB President Mario Draghi, who won widespread praise for his decision last month to loan banks an unprecedented 489 billion euros for the next three years. Still, even his fans warned it only gave governments and banks breathing space to remedy their problems.

“I’m really glad the ECB took these actions, but let’s not be complacent,” World Bank President Robert Zoellick said. “This buys time, you still have to act.”

The mood was bleakest among economists and historians. Nouriel Roubini, co-founder of Roubini Global Economics LLC, described Europe as a “slow motion train wreck” and said Greece may be forced out of the euro within a year.

Harvard University professor Niall Ferguson said the crisis remained one of solvency. Only an agreement by Germany to transfer cash to indebted nations and issue joint debt would end it.

“Optimism is ill-advised,” said Ferguson, a Bloomberg News contributor. “As often happens, there is temporary respite and then markets wake up and everyone realises the crisis isn’t over.”

To contact the reporter on this story: Simon Kennedy in Davos at skennedy4@bloomberg.net Jana Randow in Davos at jrandow@bloomberg.net

To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Mumbai’s Home Sales Decline to Three-Year Low as Record Prices Dent Demand

2012-01-28T20:30:00.000-08:00

By Pooja Thakur - Jan 27, 2012 5:56 AM GMT+0530

Tweet
inShare7
More
Print
Email

Enlarge image Mumbai Home Sales Drop to 3-Year Low as Prices Climb

The Mumbai housing market faced the risk of a price decline last year. Photographer: Dhiraj Singh/Bloomberg

Mumbai’s residential home sales dropped to a three-year low in the quarter ended December as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.

Sales in Mumbai, India’s most expensive property market, fell 17 percent from the previous quarter to 7.59 million square feet, said Pankaj Kapoor, founder of Liases Foras. The city’s unsold inventory, or the number of months needed to clear stock at the existing absorption rate, climbed to 44 months. A “healthy market” normally maintains about eight months of inventory, according to Kapoor.

“The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” Kapoor said in a phone interview from Mumbai yesterday.

India’s central bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 to help curb inflation, hurting demand and investment. The Reserve Bank of India also cut the nation’s growth forecast three days ago to 7 percent in the year through March from the 7.6 percent predicted in October, after the economy expanded at the slowest pace in nine quarters, based on the most recent government data.

The city’s unsold inventory climbed to a record 119.85 million square feet, according to Liases Foras, a Mumbai real estate research company whose clients include Housing Development Finance Corp. (HDFC), India’s largest mortgage lender. The weighted average selling price in Mumbai climbed to a record 10,558 rupees ($210) a square foot, the data showed.
‘Sizeable Inventories’

The Mumbai housing market faced the risk of a price decline last year, said Om Ahuja, chief executive officer of residential services at the Indian unit of Jones Lang LaSalle Inc.

“Though developers are saddled with sizeable inventories of both ready and under-construction stock, they continue to be hesitant about announcing revised rates,” Ahuja said. Housing demand in the city has been showing signs of weakness for the last few quarters and this may continue, he said.

Bangalore and Chennai posted the largest sales increases last quarter. Sales in Bangalore climbed 54 percent from three months ended September to 14.16 million square feet, Kapoor said. Chennai (LIASCHSF) sold 91 percent more homes at 7.44 million square feet, he said, boosted by new projects and as buyers rushed to purchase homes ahead of higher registration charges levied by the state government. Both cities posted their highest quarterly sales in at least three years, while prices remained little changed from the earlier quarter.

Sales in the National Capital Region, which includes New Delhi and its surrounding areas, gained 27 percent to 22.77 million square feet in the quarter, the data showed. The weighted average selling price rose to 3,394.72 rupees a square foot, 5 percent higher than the September quarter.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at Apapuc1@bloomberg.net

Tweet
inShare7
More
Print
Email

Sponsored links
Videos you may like:
J.C. Penney CEO Johnson on Pricing, Store Overhaul
Crude Oil Prices May Fall Next Year, Tiscareno Says
Outlook for Oil Prices, Emerging-Market Demand
by Taboola
Related News

Asia ·
India & Pakistan ·
Real Estate ·
Retail

Sponsored Links
Subscribe Now & Get Your Free Issue of Bloomberg Markets Magazine
More Stories

Merkel to Discuss Iran Nuclear Program, Sanctions in China
Q
Russia Seeks to Resume North Korea Nuclear Talks, Interfax Says
Q
Euro Officials Discuss Greek Budget Veto Powers
Q
Wal-Mart to Pull Greeters From Store Lobbies
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

Greece, Bankers Expect Debt-Swap Deal Next Week
Q

Wal-Mart to Pull Greeters From Store Lobbies
Q

Facebook Plans IPO Filing as Early as Next Week
Q

Ackermann Says Greek Default Would Be ‘Playing With Fire’
Q

Obama Pushes ‘Buffett Rule’ to House Dems
Q

More Most Popular Stories »
Sponsored Links
Job Search
Post a Job »
Commercial Real Estate Investment Associate
Mid-America Real Estate Group - Milwaukee, WI
Commercial Real Estate Sales and Leasing...
TRG Real Estate Investment... - Century City, CA
Grandbridge Commercial Real Estate Analyst II
BB&T Human Systems - Minneapolis, MN
Regional Property Manager
Compass Commercial Real Estate - Bend, OR
Commercial Real Estate Finance Intern
The Real Estate Finance Group - Los Angeles, CA
Search All Jobs jobs by Indeed job search
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law
Bloomberg BNA

Bloomberg Link
Bloomberg Markets Magazine
BMART
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed
Bloomberg Blog Bloomberg Blog RSS

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Ranbaxy Falls Most Since March on Proposed Settlement Costs: Mumbai Mover By Adi Narayan - Jan 27, 2012

2012-01-27T18:20:00.001-08:00

Ranbaxy Laboratories Ltd. (RBXY), India’s biggest drugmaker, slumped the most in ten months in Mumbai trading because of costs of a proposed settlement with U.S. authorities over manufacturing violations.

Ranbaxy declined 6.5 percent to 443.90 rupees, the worst fall since March 21, at the close in Mumbai, making it the biggest loser on the 50-member S&P CNX Nifty (NIFTY) index. The company, based on the outskirts of New Delhi, may forgo at least $200 million in sales as a result of the settlement, Kotak Securities Ltd. said.

A decree signed last month and filed by the Department of Justice in federal court in Maryland on Jan. 25 requires Ranbaxy to relinquish 180-day marketing exclusivity for three pending generic drug applications. Court documents don’t identify the affected medicines, though probably include a version of Takeda Pharmaceutical Co. (4502)’s Actos diabetes pill, said Priti Arora, a pharmaceuticals analyst at Kotak in Mumbai.

“Losing 180-day exclusivity is very bad,” Arora said in an interview yesterday. Selling generic Actos in the U.S. with limited competition may have generated more than $200 million in revenue for Ranbaxy, she said. The drug, which had global sales of $4.7 billion in 2010, faces generic competition in August.

Ranbaxy set aside $500 million to resolve all potential civil and criminal liability related to the three-year-old dispute with the Justice Department and Food and Drug Administration, it said on Dec. 21. Before today, the stock had gained about 20 percent since then on optimism the company can press ahead with its applications to sell generic medicines in the U.S.

Details of the proposed settlement released this week “dispel any optimism,” Credit Suisse AG said in a report yesterday.
‘More Severe’

“We had expected the filing of this consent decree to show a way out of Ranbaxy’s difficulties and reopen its exports to the U.S., but the decree’s actual terms are more severe than we anticipated,” Tokyo-based health-care analysts Fumiyoshi Sakai and Toshiyuki Tateno said.

One of the three generic drug applications affected may include a version of Nexium, a heart-burn treatment sold by AstraZeneca Plc (AZN) that had global sales of $5 billion in 2010, according to Credit Suisse. Five other generic-drug applications are at risk if Ranbaxy doesn’t implement certain changes by a specified date, Mumbai-based analyst Anubhav Aggarwal said.

Chuck Caprariello, a spokesman for Ranbaxy in the U.S., declined to specify the drug applications affected.
‘Potentially Unsafe’

The Indian drugmaker made “adulterated, potentially unsafe” medicines that were illegal to sell, U.S. prosecutors said in the court documents. The company didn’t admit or deny the accusations detailed in the 58-page filing, which requires approval by a federal judge.

Ranbaxy consented to the proposed decree on Dec. 20 in an agreement signed by company officials including co-defendants Dale Adkisson, head of global quality; Managing Director Arun Sawhney; and Venkatachalam Krishnan, the company’s regional director for the Americas.

Drug manufacturing and testing defects led the FDA to block more than 30 generic drugs made at the Indian drugmaker’s Paonta Sahib and Dewas plants, the FDA said in September 2008, three months after Tokyo-based Daiichi Sankyo Co. (4568) agreed to buy a controlling stake in Ranbaxy for $4.6 billion.

Daiichi Sankyo closed down 2.3 percent in Tokyo trading at 1,422 yen, the lowest since Dec. 2.
Earnings Prospects

Earnings contributions from Ranbaxy “remain uncertain, weighing down shares in Daiichi Sankyo,” Sakai and Tateno said yesterday. They reiterated an “underperform” rating on the stock and expect it to fall to 1,200 yen in the next 12 months.

The proposed decree made it clear why Ranbaxy and Daiichi Sankyo took more than three years to reach an agreement with U.S. authorities, a Morgan Stanley analyst said.

“While the companies are making progress to resolve the issue, they still have many more hurdles to overcome,” said Mayo Mita, health-care analyst at Morgan Stanley in Tokyo by telephone today. “The timeframe of that is unclear. The process may require more staffing and investment, in addition to $500 million Ranbaxy set aside.”

Daiichi Sankyo declined to comment on the proposed settlement until the court approves the filing, spokesman Masaya Tamae said.

Ranbaxy has 66 generic-drug applications awaiting approval with the FDA. For 13 of these, the company was the first to challenge patents, according to a presentation on its website. Under a 1984 law, the first generic drugmaker to challenge U.S. patents gets six months of exclusive sales before competitors can enter the market.
Provigil, Diovan

Near-term exclusivities relate to versions of the sleep- disorder drug Provigil, which had $1.1 billion in sales in 2010; Actos; and Diovan, a blood-pressure pill made by Novartis AG (NOVN) that generated $1.5 billion in annual sales, Nomura Holdings Inc. said in a report yesterday.

The proposed settlement includes requirements that Ranbaxy remove false data contained in past drug applications; hire an outside expert to conduct a thorough internal review at the affected facilities and to audit applications containing data from those facilities; withdraw any applications found to contain false data; set up a separate office of data reliability within Ranbaxy; and hire an outside auditor to audit the affected facilities in the future, according to court documents.

“The detailed process, particularly product-by-product validation of data integrity, imply that complete resolution can take two to three years,” Nomura analysts Saion Mukherjee and Aditya Khemka said in a report yesterday. “As Ranbaxy works towards compliance with the help of external agencies, it will continue to incur high costs for resolution.”

To contact the reporter on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Mumbai’s Home Sales Decline to Three-Year Low as Record Prices Dent Demand By Pooja Thakur - Jan 26, 2012

2012-01-26T18:10:00.001-08:00

Mumbai’s residential home sales dropped to a three-year low in the quarter ended December as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.

Sales in Mumbai, India’s most expensive property market, fell 17 percent from the previous quarter to 7.59 million square feet, said Pankaj Kapoor, founder of Liases Foras. The city’s unsold inventory, or the number of months needed to clear stock at the existing absorption rate, climbed to 44 months. A “healthy market” normally maintains about eight months of inventory, according to Kapoor.

“The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” Kapoor said in a phone interview from Mumbai yesterday.

India’s central bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 to help curb inflation, hurting demand and investment. The Reserve Bank of India also cut the nation’s growth forecast three days ago to 7 percent in the year through March from the 7.6 percent predicted in October, after the economy expanded at the slowest pace in nine quarters, based on the most recent government data.

The city’s unsold inventory climbed to a record 119.85 million square feet, according to Liases Foras, a Mumbai real estate research company whose clients include Housing Development Finance Corp. (HDFC), India’s largest mortgage lender. The weighted average selling price in Mumbai climbed to a record 10,558 rupees ($210) a square foot, the data showed.
‘Sizeable Inventories’

The Mumbai housing market faced the risk of a price decline last year, said Om Ahuja, chief executive officer of residential services at the Indian unit of Jones Lang LaSalle Inc.

“Though developers are saddled with sizeable inventories of both ready and under-construction stock, they continue to be hesitant about announcing revised rates,” Ahuja said. Housing demand in the city has been showing signs of weakness for the last few quarters and this may continue, he said.

Bangalore and Chennai posted the largest sales increases last quarter. Sales in Bangalore climbed 54 percent from three months ended September to 14.16 million square feet, Kapoor said. Chennai (LIASCHSF) sold 91 percent more homes at 7.44 million square feet, he said, boosted by new projects and as buyers rushed to purchase homes ahead of higher registration charges levied by the state government. Both cities posted their highest quarterly sales in at least three years, while prices remained little changed from the earlier quarter.

Sales in the National Capital Region, which includes New Delhi and its surrounding areas, gained 27 percent to 22.77 million square feet in the quarter, the data showed. The weighted average selling price rose to 3,394.72 rupees a square foot, 5 percent higher than the September quarter.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at Apapuc1@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asia Stocks, U.S. Equity Futures Rise By Shiyin Chen - Jan 24, 2012

2012-01-24T18:38:00.001-08:00

Asian stocks and U.S. equity-index futures gained after Apple Inc.’s quarterly profit more than doubled, while the dollar was 0.2 percent from its lowest level in three weeks against the euro before the Federal Open Market Committee releases forecasts for its key interest rate.

The MSCI Asia Pacific Index climbed 0.6 percent as of 9:45 a.m. in Tokyo. Standard & Poor’s 500 Index futures rose 0.3 percent and contracts on the Nasdaq-100 Index jumped 1 percent. The dollar traded at $1.3032 against the euro, after yesterday reaching $1.3063, while Australia’s currency erased earlier losses after data on inflation. Oil added 0.4 percent to $99.33 a barrel in New York.

Apple shares soared as much as 12 percent in extended trading after its results. President Barack Obama will lay out what he calls a “blueprint” for revitalizing the economy in his third State of the Union address, while the Fed will release its interest-rate forecasts for the first time. The World Economic Forum’s annual meeting begins a day after the International Monetary Fund cut its forecast yesterday for global growth.

“The FOMC meeting could be negative for the U.S. dollar against other currencies, but positive against the yen,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “If they explicitly say they’re going to leave the Fed funds rate at a record low for a very long time, even though the market already knows that and expects it, it may be positive for risk markets.”
Stocks Climb

More than three shares gained for every one that declined on MSCI’s Asia Pacific Index. Japan’s Nikkei 225 Stock Average rose 0.9 percent, Australia’s S&P/ASX 200 Index rallied 0.7 percent and South Korea’s Kospi Index increased 0.8 percent. Financial markets in Hong Kong, Taiwan and China remain closed for public holidays.

S&P 500 futures expiring in March signal the stocks gauge may rebound from yesterday’s 0.1 percent loss. Apple, the maker of iPhones and iPads, said first-quarter profit surged to $13.1 billion, or $13.87 a share. Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share.

Boeing Co., Xerox Corp. and ConocoPhillips are among companies scheduled to release results today. Earnings-per-share topped estimates at about 65 percent of the 82 companies in the S&P 500 that released results from Jan. 9, data compiled by Bloomberg show.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editors responsible for this story: Rocky Swift at rswift5@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asia Stocks Gain a Sixth Day as New Zealand Dollar, Oil Advance on Europe By Lynn Thomasson and Norie Kuboyama - Jan 23, 2012

2012-01-23T18:31:00.001-08:00

Asian stocks rose for a sixth day, the longest winning streak in seven weeks, as the New Zealand dollar climbed on signs Europe is taking steps to tame the debt crisis. Oil extended yesterday’s rally after the European Union agreed to ban crude imports from Iran.

The MSCI Asia Pacific Index (MXAP) gained 0.2 percent as of 9:19 a.m. in Tokyo, bringing its advance since Jan. 16 to 4.9 percent. Standard & Poor’s 500 Index futures were little changed. The New Zealand currency strengthened 0.2 percent and the euro traded near the highest level in almost three weeks. Oil increased 0.4 percent to $99.88 a barrel, adding to a 1.3 percent jump yesterday.

Markets in China, Hong Kong, South Korea and Singapore are shut for the Lunar New Year holiday. Germany floated the idea of combining Europe’s two rescue funds yesterday, a concession to bolster the fight against the fiscal crisis as Greece bargained with bondholders over debt relief. India’s economic growth outlook has weakened and inflation remains elevated, the nation’s central bank said on Jan. 23, signaling it may leave interest rates unchanged.

“The worst scenario that Greece will break away from the euro region is gone, easing excessive worries about the European debt issues,” said Fumiyuki Nakanishi, a strategist at Tokyo- based SMBC Friend Securities Co. “Globally, a feeling of confidence to buy stocks is emerging.”

Apple Inc., McDonald’s Corp. and Johnson & Johnson are among U.S. companies scheduled to report quarterly results today. Earnings topped estimates at about 65 percent of the 52 companies in the S&P 500 that released results since Jan. 9, data compiled by Bloomberg show.

Elpida Memory Inc. (6665) rallied 4.8 percent for the biggest jump in the MSCI Asia Pacific Index. The Japanese chipmaker is in talks with Micron Technology Inc. and Nanya Technology Corp. for a three-way merger, the Yomiuri newspaper reported, without saying where it got the information.

To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asian Stocks Swing Between Gains, Losses on European Debt, U.S. Outlook By Jonathan Burgos - Jan 22, 2012

2012-01-22T19:18:00.001-08:00

Asian stocks swung between gains and losses as increasing home sales in the U.S. added to signs the world’s biggest economy is recovering, overshadowing uncertainties over continuing debt negotiations in Greece.

BHP Billiton Ltd. (BHP), the world’s biggest mining company and Australia’s largest oil producer, lost 0.9 percent in Sydney after crude and metal futures dropped. Canon Inc. (7751), the Japanese camera maker that gets one-third of sales from Europe, fell 0.7 percent in Tokyo. Olympus Corp., the world’s No. 1 maker of endoscopes, jumped 7.7 percent after it was allowed to keep its stock market listing following an accounting fraud that cut the company’s market value by about $4 billion.

“The market could come under short-term pressure as it’s had a strong run this year,” said Nader Naeimi, a Sydney-based senior strategist at AMP Capital Investors Ltd., which manages nearly $100 billion. “Any weakness is a good buying opportunity given improving economic data out of the U.S. Greece can go hot and cold very quickly. Greece defaulting is still a possibility.”

The MSCI Asia Pacific Index rose 0.1 percent to 120.81 as as of 11:06 a.m. in Tokyo, having swung between gains and losses at least seven times. About the same number of shares rose and fell in the measure. The gauge completed its longest streak of weekly gains last week as U.S. reports showed the world’s biggest economy is recovering and falling European borrowing costs signaled the debt crisis may be easing.

Japan’s Nikkei 225 Stock Average gained 0.2 percent, reversing losses of as much as 0.3 percent. Australia’s S&P/ASX 200 Index lost 0.3 percent. Markets in China, Hong Kong, Indonesia, Malaysia, Philippines, South Korea, Singapore and Taiwan are closed today for holidays.

U.S. Futures

Futures on the Standard & Poor’s 500 Index slipped 0.4 percent today. The gauge added 0.1 percent in New York on Jan. 20, erasing a loss in the final minutes of trading, as banks gained and results from International Business Machines Corp. and Intel Corp. boosted technology shares.

Raw-material producers dropped as crude oil fell for a fourth day ahead of a meeting of European leaders to discuss measures to tackle a debt crisis that may curb demand for commodities, and sanctions on Iran that may disrupt Middle East crude supplies. The London Metals Exchange Index, which tracks prices of commodities from aluminum to copper, fell for the first time in five days on Jan. 20.

Companies that receive revenue from Europe declined before a European Union meeting today aimed at crafting a long-term plan to tackle the region’s debt crisis as banking and government negotiators continue trying to reach an agreement that will lighten Greece’s debt burden.

U.S. Home Sales

Exporters to the U.S. advanced as sales of previously owned U.S. homes rose for a third month in December to the highest level since January 2011, a sign the housing market ended last year with momentum.

The MSCI Asia Pacific Index (MXAP) gained 6 percent this year through Jan. 20, compared with gains of 4.6 percent by the S&P 500 and 4.6 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 1.3 times book value. That compares with 2.1 times for the Standard & Poor’s 500 Index in the U.S. and 1.4 times for the Europe Stoxx 600 Index in Europe.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Temasek Agrees to Purchase 4.9% Stake in Godrej Consumer for $136 Million

2012-01-21T21:51:00.000-08:00

By Rajhkumar K Shaaw and Malavika Sharma - Jan 21, 2012 10:26 PM GMT+0530

Tweet
inShare2
More
Print
Email

Temasek Holdings Pte (TMSK), Singapore’s state-owned investment comapny, agreed to buy a 4.9 percent stake in India’s Godrej Consumer Products Ltd. (GCPL) for 6.85 billion rupees ($136 million).

Godrej will issue 16.7 million new preferential shares to Baytree Investments (Mauritius) Pte, a unit of Temasek, P. Ganesh, executive vice president of finance at Godrej Consumer, said in a phone interview today. Godrej will sell the shares at 410 rupees a share, the company said in an exchange filing. Godrej’s shares rose 0.7 percent to 402.8 rupees in Mumbai trading yesterday.

Temasek, which managed S$193 billion ($152 billion) as of March 2011, has transformed itself from a holder of stakes in companies controlled by Singapore’s government to an investor with more than two-thirds of its assets based abroad.

Temasek has invested more in emerging markets including China, India, Brazil and Mexico, as developing nations led the global economy’s recovery from its worst recession since World War II, according to its 2011 review. Godrej Consumer’s net income has more than quadrupled in the past three years amid rising consumer spending in the world’s second-most populous nation.

“The growth of the Indian consumer sector and good corporate governance of Godrej must have lured Temasek,” said Arun Kejriwal, a director at Mumbai-based Kejriwal Research & Investment Services. “Godrej wants to be a leader in India as well as be aggressive in smaller emerging markets to diversify its risk.”
Cosmetica Nacional Stake

Separately, Godrej will buy a 60 percent stake in Chile’s Cosmetica Nacional, it said in an exchange filing. Godrej’s Ganesh declined to comment on the value of the deal.

The company will fund the deal, which it will complete by April, using “low-cost overseas debt,” the company said in a statement. Godrej will increase its stake to 100 percent in the next three to five years. The acquisition will increase earnings per share within its first year, the company said. The Mumbai- based company is controlled by billionaire Adi Godrej.

Godrej has announced eight acquisitions since January 2010 as it seeks to increase its overseas sales. The BSE Fast Moving Consumer Goods Index rallied 9.5 percent last year, while the BSE India Sensitive Index, or Sensex, tumbled 25 percent.

Godrej’s profit in the three months ended December 31 increased 41 percent to 1.67 billion rupees from 1.19 billion rupees in the same period a year earlier, the company said in an exchange filing today.

To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Malavika Sharma in New Delhi at msharma52@bloomberg.net

To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net; Stephanie Wong at swong139@bloomberg.net
Want to save this for later? Add it to your Queue!

Tweet
inShare2
More
Print
Email

Sponsored links
Videos you may like:
Concordia Ship May Be at `High Risk' of Sinking
South East Asian Economies, India Inflation
China Counterfeit Parts in U.S. Military Aircraft
by Taboola
Related News

Asia ·
India & Pakistan ·
Funds

Sponsored Links
Give a Gift of Bloomberg Markets Magazine and Get Great Savings!
More Stories

India’s Essar Group Seeks $883 Million Refund From Vodafone, WSJ Reports
Q
Pakistan Eases Stock Market Tax Rules to Support Activity
Q
Vietnam Inflation Slows to 17.27%
Q
Man Who Led to Rajaratnam Gets Probation
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

U.S. Ends Chevy Volt Battery Fire Probe
Q

Jeb Bush Refrains From Endorsing Anyone
Q
Updated 47 minutes ago
Greek Debt-Swap Accord ‘Coming Into Place’
Q

Gingrich Upsets Romney to Win South Carolina Primary
Q
Updated 2 hours ago
Lebanese-British Al-Qaeda Chief Killed in Airstrike
Q

More Most Popular Stories »
Sponsored Links
Advertisement
Job Search
Post a Job »

Sales Executive jobs
Software Engineer jobs
Project Manager jobs
Portfolio Manager jobs
Financial Advisor jobs
Accountant jobs
Director of Communications jobs
Attorney jobs
Business Development Manager jobs
Account Manager jobs
Controller jobs

Search All Jobs jobs by Indeed job search
Advertisements
Click here to find out more!
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law
Bloomberg BNA

Bloomberg Link
Bloomberg Markets Magazine
BMART
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed
Bloomberg Blog Bloomberg Blog RSS

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC
Q
What is the queue?
More »Items In Your queue
This is your Bloomberg Queue

The queue will help you find news, save stories for later and take them with you
Learn MoreClose
More » New Suggestions

Vodafone’s India Tax Ruling Clears Way for $17.6 Billion IPO By Jonathan Browning and Ketaki Gokhale - Jan 20, 2012

2012-01-20T18:32:00.000-08:00

Vodafone Group Plc (VOD)’s court victory in a four-year-long tax dispute in India clears the way for an initial public offering that could value the local unit at as much as 11.3 billion pounds ($17.6 billion).

Yesterday’s decision by India’s top court to dismiss the government’s demand for $2.2 billion in taxes from Vodafone on its 2007 purchase of Hutchison Whampoa Ltd. (13)’s India operations removes a major obstacle for the planned IPO. Vodafone Chief Executive Officer Vittorio Colao said as recently as July that the company hadn’t been able to proceed with a listing as the tax dispute created an “uncertain” regulatory environment.

“It takes the IPO a step closer,” Robin Bienenstock, an analyst at Sanford C Bernstein in London, said in an interview. “This wasn’t a good moment for the Indian government to do something hostile.”

The ruling ends more than four years of uncertainty over whether investors based outside the country can use offshore holding companies to avoid paying Indian taxes. Vodafone, seeking to expand in the world’s second-largest wireless market, last year gained control of the local venture by paying $5.46 billion to buy out its partner Essar Group’s stake.

Vodafone Essar has 146 million customers and a 17 percent market share, making it India’s third-biggest wireless operator behind Bharti Airtel Ltd. (BHARTI) and Reliance Communications Ltd. (RCOM) in a market forecast by researcher Gartner to grow 28 percent to 872 million active subscribers by 2015.
‘Uncertainty’

“The judgment will boost capital investments into India as some tax uncertainty will go away,” said Harish Salve, counsel for Newbury, England-based Vodafone. Vodafone spokesman Simon Gordon declined to comment on the details of a potential Indian IPO.

An IPO may value Vodafone Essar at as much as 11.3 billion pounds, based on about 11 times earnings before interest, taxes, depreciation and amortization, Bienenstock said. Bharti Airtel is trading at about 10 times Ebitda, she said, adding that Vodafone’s local unit has better growth prospects.

Last year’s acquisition of a 33 percent stake in the Indian venture from Essar Group valued Vodafone Essar at $16.5 billion. The sale of a 5.5 percent stake in the local unit to Piramal Healthcare Ltd. (PIHC) last year, to reduce Vodafone’s holding to 74 percent and comply with local ownership rules limiting foreign ownership, valued India’s third-largest mobile-phone carrier at $11.6 billion.

Vodafone rose 1.5 percent to 177.05 pence in London trading yesterday. The stock has gained 2.5 percent in the last 12 months, while the 35-member Bloomberg Europe Telecommunications Index dropped 15 percent.
Keeping a Majority Stake

Colao last year said that an Indian IPO could be similar to the share sale of the company’s South African unit. Vodafone kept a 65 percent stake in Vodacom Group Ltd. after the business was listed in 2009.

Vodafone would raise as much as 3.4 billion pounds if it decided to sell a 30 percent stake of the Indian venture, according to Bienenstock.

“We are a committed long-term investor in India and we have made clear all along that we have faith in the Indian judicial system,” Colao said yesterday. “We welcome the Supreme Court’s decision, which underpins our confidence in India. We will continue to grow our Indian business.”
Investments

Vodafone spent 116 billion rupees ($2.3 billion) in 2010 buying licenses for third-generation services after the entry of Norway’s Telenor ASA (TEL) and Japan’s NTT DoCoMo Inc. (9437) pushed voice- call rates to as low as a penny a minute.

The ruling by a Supreme Court panel headed by Chief Justice S.H. Kapadia said that the government can’t seek capital gains tax from Vodafone’s purchase of Hutchison’s wireless assets because the transaction occurred between foreign companies. The court also directed the government to return a 25 billion-rupee deposit Vodafone made on the contested tax bill, plus 4 percent interest.

“This allows Vodafone to focus more on the Indian operations, focus more on getting more subscribers, being more profitable rather than fighting on the tax side of it,” Romal Shetty, executive director of the telecommunications division at KPMG’s Indian unit, told Bloomberg UTV. “It’s a shot in the arm. But even from an industry perspective, it’s a boost.”

The Supreme Court’s tax decision, with its close political links, may also help to ease further regulatory limits on Vodafone’s Indian operations, enabling future acquisitions, said Will Draper, an analyst at Espirito Santo in London.
‘Setting the Tone’

“The Indian government is setting the tone by saying we might need to play a little fairer with the mobile industry,” he said.

Vodafone, the world’s largest mobile-phone company, had fought to dismiss the tax claim from its $10.7 billion purchase of Hutchison Whampoa’s phone assets since 2007. The Indian tax department sought 112.2 billion rupees in capital gains tax on Vodafone International Holdings BV’s purchase of Hutchison’s wireless operations in the country.

The operator still opposes a government decision to terminate its roaming agreements with other carriers in the country after the telecommunications ministry stated the contracts are a “breach of rules.”

The roaming decision shows the contradictory nature of the regulators in India, Bienenstock said. “It’s not a linear path to good and transparent regulation,” she said. “But it’s certainly a step forward.”

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asia Stocks, Korean Won Gain on Stronger Economy By Lynn Thomasson - Jan 19, 2012

2012-01-19T18:39:00.000-08:00

Asian stocks rose, heading for a fifth weekly advance, and South Korea’s won strengthened after U.S. jobless claims fell to the lowest level in almost four years and Spanish and French borrowing costs declined.

The MSCI Asia Pacific Index (MXAP) increased 0.8 percent as of 9:46 a.m. in Tokyo, bringing its five-day advance to 2.8 percent. The Nikkei 225 Stock Average jumped 1.4 percent, while Standard & Poor’s 500 futures were little changed. The won climbed 0.3 percent to 1,133.78 per dollar for a fourth day of gains. Gold lost 0.2 percent and the greenback touched a two-week low versus the euro.

Asian stocks have rallied 12 percent since a two-year low in October and copper reached a 17-week high yesterday amid speculation that China may take steps to stimulate growth in the world’s second-largest economy. Google Inc. reported lower-than- estimated fourth-quarter revenue and profit, while American Express Co. said card spending reached a record and International Business Machines Corp.’s forecast for 2012 earnings exceeded analysts’ projections.

France sold 7.97 billion euros of notes with the average yield on the benchmark two-year notes sliding to 1.05 percent from 1.58 percent in October. Spain issued debt due 2022 at an average of 5.403 percent, down from 6.975 percent in November.

The S&P 500 added 0.5 percent to 1,314.5 yesterday, the highest closing level since July 26, and the Nasdaq-100 Index reached an almost 11-year high. Schlumberger Ltd., General Electric Co. and SunTrust Banks Inc. are among U.S. companies scheduled to report fourth-quarter results today.

Initial jobless claims fell by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed yesterday.

Google Inc. (GOOG) plunged as much as 10 percent in trading after the close of U.S. exchanges. The owner of the world’s most popular Internet search engine reported fourth-quarter revenue and profit that missed analysts’ estimates as an economic slowdown in Europe crimped international sales.

To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Sugar Traders Bet Biggest Glut in Five Years Ending: Commodities By Isis Almeida and Swansy Afonso - Jan 18, 2012

2012-01-18T18:37:00.001-08:00

Traders are betting that the biggest sugar glut since 2007 will shrink in the next harvest, reversing expectations from six months ago and ending the largest decline in prices in a decade.

Raw sugar for March 2013 is trading at a premium of 3.9 percent to the July 2012 contract on ICE Futures U.S. in New York, compared with a 6.6 percent discount six months ago. The switch is reflecting a change in outlook even before forecasts for the next season from the International Sugar Organization or U.S. Department of Agriculture. Prices may rise as much as 12 percent to 27 cents a pound by Dec. 31, according to the median of 21 analyst and trader estimates compiled by Bloomberg.

Futures fell 27 percent last year, the most since 2001, as a glut emerged after three consecutive annual shortages. Traders are now focused on the prospect for crops in India and Brazil, which account for 38 percent of output. The predicted rally may curb a drop in global food prices tracked by the United Nations that drove costs to a 14-month low in December.

“Sugar is moving from an expected surplus to concern about supply,” said Bruno Lima, a Campinas, Brazil-based senior risk management consultant at INTL FCStone, a trader and adviser to commodity producers and consumers. “There’s a lot of sugar now and this is reflected in the lower price for July, while March 2013 futures are higher because Brazilian producers are concerned about the crop and there’s speculation output could shrink in other countries like India.”
World Index

The sweetener rose 3.2 percent to 24.05 cents this year as of yesterday, versus a 3.6 percent drop in the Standard & Poor’s GSCI Agriculture Index (SPGSAG) of eight commodities. The MSCI All- Country World Index of equities rose 3.1 percent as Treasuries returned 0.3 percent, a Bank of America Corp. index shows.

Hedge funds and other large speculators raised their net- long position, or bets on higher prices, by 15 percent to 50,403 futures and options since wagers reached a four-year low at the end of last month, data from the Commodity Futures Trading Commission show.

The harvest in India, the second-biggest producer after Brazil, may drop as much as 4 million metric tons in the 12 months ending in September 2013, from 25 million to 26 million tons this season, if millers are unable to pay farmers for cane, said London-based ED&F Man Holdings Ltd., which trades sugar across 40 countries. The decline is more than the European Union imports in a year, USDA data show.
Three-Decade High

Decreasing output may require the country to be an importer of sugar, said Kona Haque, a commodities analyst at Macquarie Group Ltd. in London. Futures exceeded 30 cents in 2010, a three-decade high at the time, after shortages drove India to tap overseas markets. The nation was last a net importer in 2009-2010, according to the USDA.

The next cane harvest in the center-south of Brazil, the main growing region, will probably reach 480 million tons to 520 million tons, according to Datagro Ltd., a Sao Paulo-based research company. Production this season fell 11 percent to 492.23 million tons by Jan. 1, the first drop in a decade, according to data from industry association Unica.

While global supply will exceed demand by 6 million tons in the 12 months ending in September, combined shortages in the past three seasons reached about 20 million tons, said Keith Flury, an analyst at Rabobank International in London. Consumption rose every year since 1994, USDA data show.
Australian Crop

Less production from India and Brazil may be met by bigger crops elsewhere. Australia, the third-biggest exporter, may increase sugar output by 15 percent to 4.5 million tons in the harvest from June as cane acreage expands 5 percent, according to Sydney-based Commonwealth Bank of Australia.

Brazil’s crops could escape damage from La Nina, a phenomenon that causes heavier rainfall in Asia and drier weather in South America. La Nina may have peaked, bringing a return to normal rainfall, Bryce Anderson, an agricultural meteorologist with DTN Telvent in Omaha, Nebraska, said Jan. 11. An undamaged crop may mean a surplus of as much as 6 million tons, said Paul Deane, an agricultural economist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Hedge funds are less bullish than they have been for most of the past four years, when the average net-long position was more than twice as big as it is now.

India’s stockpiles should be large enough to prevent imports, said Jayantilal B. Patel, the president of the New Delhi-based National Federation of Cooperative Sugar Factories Ltd. Reserves may reach 5 million tons at the end of this season, said Kishor Shah, the chief financial officer of Kolkata-based Balrampur Chini Mills Ltd. (BRCM), the nation’s second-largest producer.

Uttar Pradesh

Cane prices set by Uttar Pradesh, the biggest cane-growing state, rose as much as 19 percent in the past year while the cost of refined sugar in Mumbai was little changed and global rates slumped. That’s left the country’s mills struggling to pay farmers, who in turn may choose to plant other crops next season, said G.S.C. Rao, president of the New Delhi-based Sugar Technologists’ Association of India, which advises the industry.

The anticipated rally in prices may raise costs for food companies. Nestle SA (NESN), whose brands include Smarties and Aero, spends about 1.5 billion Swiss francs ($1.6 billion) a year on sugar, according to Millicent Molete, a spokeswoman. Shares of the Vevey, Switzerland-based company fell 0.6 percent this year.

Production could stagnate in the 27-nation European Union because of the level of inventories carried over from this season, said Fabienne Pointier, an analyst at Kingsman SA, a Lausanne, Switzerland-based broker and researcher. The region consumes about 11 percent of the world’s sugar.
Dry Weather

Cane production in Thailand, the second-largest shipper, may decline from a record in the year starting in November because of dry weather, said Prasert Tapaneeyangkul, the secretary-general of the Office of the Cane & Sugar Board in Bangkok. He declined to provide a forecast.

China, the second-biggest consumer after India, will import the sweetener to replenish stockpiles that were diminished by state sales intended to curb inflation, the National Development and Reform Commission, the nation’s top economic planning agency, said in November. Purchases rose 48 percent to 2.4 million tons in the first 11 months of 2011, customs data show.

“There is growing speculation that over the next few months we will see the buildup of cane-payment arrears, which could be the precursor of a fall in next year’s Indian crop,” said Farideh Bromfield, the London-based head of commodities research at ED&F Man. “Brazil can’t be overlooked as the poor rate of investment there doesn’t bode well for continued growth in sugar production.”

To contact the reporters on this story: Isis Almeida in London at ialmeida3@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Tata Consultancy Net Beats Estimates on Orders By Anoop Agrawal and Ketaki Gokhale - Jan 17, 2012

2012-01-17T18:34:00.000-08:00

Tata Consultancy Services Ltd. (TCS), Asia’s largest software-services provider, reported profit that beat analysts’ estimates as businesses sought savings through outsourcing and the rupee’s decline boosted overseas earnings.

Net income rose 23 percent to 28.9 billion rupees ($570 million) in the quarter ended Dec. 31 from 23.5 billion rupees a year earlier, Mumbai-based Tata Consultancy said in a statement yesterday. Analysts predicted 28.3 billion rupees, the median of 35 estimates compiled by Bloomberg.

Chief Executive Officer N. Chandrasekaran said yesterday Tata Consultancy expects to win more orders as customers increase spending on optimism the “worst” may be over. The company, which won its second-biggest order from pension provider Friends Life in November, may get more deals from the U.S. where the economy is showing signs of “stability,” according to Manoj Singla of Religare Capital Markets Ltd.

“That along with a stable U.K. should help the order book,” said Singla, managing director and co-head of research at Religare. “Together, they would cover a significant portion of TCS’s revenue (WPRO) for the coming months.”

U.S. gross domestic product is projected to expand 2.3 percent this year from a 1.8 percent pace in 2011, according to the median of 70 economists surveyed by Bloomberg News from Jan. 6 to Jan. 11.

Revenue rose 37 percent to 132 billion rupees in the third quarter from 96.6 billion rupees a year earlier. The median of 45 analysts’ estimates was 132.1 billion rupees.
Currency’s Decline

The Indian rupee depreciated 7.7 percent in the quarter ended Dec. 31, the worst performance among major Asian currencies. A weaker rupee boosts the value of overseas earnings during repatriation.

Tata Consultancy dropped 0.5 percent to 1,103.95 rupees at the close of trading in Mumbai yesterday, compared with a 1.7 percent advance in the benchmark Sensitive Index. (SENSEX) The earnings were announced after the close of trading. Infosys, India’s second-largest software exporter, gained 0.8 percent.

“Our clients are increasing their spending budgets which gives us hope to be optimistic,” said Chandrasekaran. “We are expecting to close deals and the pipeline is very strong.”

Tata Consultancy, which provides computer services and back office support to clients including Citigroup Inc. (C) and Singapore Airlines Ltd., added 40 customers during the quarter, ending with a total of 1,003.
Volume Gains

The company, which derived 53.3 percent of its revenue from companies in North America, 15 percent from the U.K., and 10.5 percent from continental Europe in the third quarter, had a 3.2 percent increase in volume in the three months ended Dec. 31 from the previous period.

Information-technology services companies define volume as the number of man-months workers spend on projects for clients.

Volume at Infosys grew 3.1 percent over the quarter, Chief Executive Officer S.D. Shibulal said Jan. 12.

Infosys shares fell the most in nine months on Jan. 12 after the Bangalore-based software-services provider cut its full-year sales forecast in dollar terms for a second time because of weaker economic growth in markets including Europe.

Sales in the year ending March 31 will range from $7.029 billion to $7.033 billion, Infosys said last week, paring an earlier projection.
‘Pruning Business’

Software-service providers including Tata Consultancy may have weaker volume growth starting from the fourth quarter, Madhu Babu, an analyst at Sunidhi Consultancy Services Pvt. said.

“Banks are pruning some of their business,” said Babu. “So the immediate impact will be that volumes will get impacted in the banking and financial services vertical.”

Worldwide spending on information technology services will grow at a slower 3.1 percent pace after climbing 6.9 percent in 2011 to an estimated $874 billion, researcher Gartner Inc. said on Jan. 5.

Tata Consultancy added a net 11,981 employees during the quarter, for a total of 226,751, according to the statement.

Workers left Tata Consultancy at a rate of 12.8 percent in the quarter ended Dec. 31, down from 14.4 percent for the same period last year. Infosys reported employee attrition of 15.4 percent for the period.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Hari Govind at hgovind@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asian Stocks Rise on French Debt Sale, China’s Policy Outlook as GDP Slows By Yoshiaki Nohara - Jan 16, 2012

2012-01-16T18:50:00.001-08:00

Asian stocks rose after a report that showed China’s economy is slowing boosted speculation the government may take extra measures to spur growth amid concerns about Europe’s debt crisis.

Country Garden Holdings Co. (2007), a real estate developer, rose 4.5 percent in Hong Kong after China’s economy grew a faster- than-estimated 8.9 percent in the fourth quarter from a year earlier. Canon Inc. (7751), a Japanese camera maker that depends on Europe for about a third of its sales, rose 0.6 percent after France sold debt at a lower cost even after its credit rating was cut. Sumitomo Mitsui Financial Group Inc. (8316), Japan’s No. 2 publicly traded bank, rose 1.2 percent after it won a bid to buy Royal Bank of Scotland Group Plc’s aircraft-leasing unit.

The MSCI Asia Pacific Index gained 1 percent to 116.75 as of 11:16 a.m. in Tokyo, rebounding from a 1.1 percent decline yesterday, the biggest since Dec. 19. About five stocks rose for each that fell on the gauge. European Central Bank President Mario Draghi yesterday said loans offered last month to the region’s banks helped avoid “a major credit crunch.”

“It does seem like markets are taking a glass-half-full view of Europe and they seemed to be very impressed by the liquidity that’s coming out of” the ECB, said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages $150 billion. “Anecdotally, we are hearing China’s senior leadership is very, very concerned about the outlook in Europe, which tells you the bias is to ease policy more than they have already.”

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Upgrades Beating Downgrades by Narrowest Margin Since Crisis: India Credit By Anoop Agrawal - Jan 15, 2012

2012-01-15T18:46:00.000-08:00

Indian companies’ ability to repay debt is deteriorating the most since the financial crisis that tapered in 2009 as the economy slows and the highest borrowing costs in three years erode profits.

Crisil Ltd. (CRISIL), the Indian unit of Standard & Poor’s, raised credit ratings on 13 companies for every 10 that it downgraded last quarter, the smallest number of upgrades to downgrades since the last three months of 2009, according to data compiled by Bloomberg. Ratings for five companies were lowered this month, while one was raised.

Average bond risk for Indian borrowers more than doubled in the past year as Asia’s third-largest economy expanded at the slowest pace since 2009 and the central bank lifted interest rates seven times to slow inflation. Five-year bond yields for AAA-rated companies have jumped 40 basis points since October to yield 100 basis points more than government bonds, while a similar spread in China (GCNY5YR) shrank 21 basis points to 156.

“We have scaled back corporate debt investments because of growing concerns over asset quality and the volatile market conditions,” D.K. Mehrotra, Mumbai-based chairman of Life Insurance Corp. of India, the nation’s biggest fund manager, said in an interview on Jan. 12. “Given the weak domestic and global economic conditions, attractive investment opportunities are going to be difficult to come by.”

Indian Prime Minister Manmohan Singh said on Jan. 8 that India’s gross domestic product will rise about 7 percent in the year ending March 31, less than the 7.5 percent rate of expansion he predicted in December. Growth in the $1.7 trillion economy slowed to 6.9 percent in the three months ended Sept. 30, according to the most recent government data.
‘Further Hurt’

Indian companies’ ability to meet interest payments has fallen to a five-year low because of shrinking earnings, rising borrowing costs and losses in the rupee, Mumbai-based Crisil said in a report published this month.

The Reserve Bank of India boosted the repurchase rate by a record 225 basis points, or 2.25 percentage points, in 2011 to 8.5 percent, the highest level since 2008. The rupee slid 12 percent in the past 12 months versus the dollar in Asia’s worst currency performance. It gained 0.1 percent to 51.53 per dollar on Jan. 13.

“Companies with substantial debt on their balance sheets will be further hurt by rising interest costs and marked-to- market losses on foreign debt and derivatives due to the depreciation of the rupee,” said Prasad Koparkar, Mumbai-based head of industry research at Crisil.
DLF Downgraded

DLF Ltd. (DLFU), INDIA’s largest property developer, was downgraded by Crisil on Dec. 27 after the company’s liabilities minus cash climbed to an all-time high of 242.7 billion rupees in the three months ended Sept. 30, data compiled by Bloomberg show. Nagpur, India-based Bajaj Steel Industries Ltd. (BJST) and textile manufacturer Himatsingka Seide Ltd. (HSS) had their rankings lowered last quarter.

Debt downgrades by Mumbai-based CARE Ratings Ltd. jumped to 169 during the nine months through December, from 84 a year earlier, D.R. Dogra, Managing Director at CARE said in a Jan. 10 e-mail.

Demand for corporate bonds is falling as the credit quality of companies worsens and analysts cut earnings forecasts.

State-owned Life Insurance Corp. bought 300 billion rupees ($5.8 billion) in company debt in the eight months through November, compared with 400 billion rupees invested a year earlier, according to chairman Mehrotra. Bond sales by Indian companies shrank 9 percent to 1.76 trillion rupees in 2011, according to data compiled by Bloomberg.
‘Whirlpool of Pessimism’

“Profitability will be stretched across industries because of high input and borrowing costs,” Vinita Singhania, managing director at New Delhi-based JK Lakshmi Cement Ltd., said in an interview on Jan. 11. “We expect the situation to persist this year and the outcome of these difficulties will be reflected in the performances of companies.”

Profits at the 30 firms that make up the benchmark BSE India Sensitive Index will fall 8.7 percent to 1,150 rupees a share in the 12 months through March, the biggest drop in three years, according to analyst estimates compiled by Bloomberg.

“India today finds itself in the middle of a whirlpool of pessimism,” analysts at Nomura Holdings Inc., including Mumbai- based Prabhat Avasthi, wrote in a research note dated Jan. 12. “Growth would continue to face headwinds. The lagged effects of past tightening are likely to continue to play out in the first half of 2012. The trajectory for earnings through the year would likely slow.”
Bond Risk

Yields on benchmark 10-year government bonds have climbed 56 basis points in the past two years as the Reserve Bank boosted interest rates. The extra yield demanded by investors to hold the notes over similar-dated U.S. Treasuries widened 177 basis points in the period to 632. The yield on the 8.79 percent note due November 2021 fell three basis points last week at 8.19 percent, according to the central bank’s trading system.

The average cost of credit-default swaps insuring against debt defaults by seven Indian issuers climbed 242 basis points in the past year to 452 basis points, according to data provider 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 nation or company fail to adhere to its debt agreements.
Bad Loans

India’s sovereign notes earned 7.6 percent in the past 12 months, while Indonesian securities returned 25 percent in the biggest gain among Asia’s 10 biggest government debt markets outside Japan, according to HSBC Holdings Plc data.

The increasing risk of defaults by companies means bad loans in the nation’s banking system may more than double, according to the central bank.

Non-performing credits may climb to 5.8 percent of total advances in two years from 2.8 percent in September, in the worst-case scenario, the Reserve Bank of India said in a report released on Dec. 22. Bad debts could be as much as 3.5 percent of loans by March 2013 using a “baseline macroeconomic scenario” and between 4.7 percent and 5.8 percent under a “severe macroeconomic stress scenario,” according to the report.

“Steel and textiles are additions to the list of sectors that are under stress in the last quarter because of borrowing costs and tough financial market conditions,” M.D. Mallya, Mumbai-based chairman and managing director at state-owned Bank of Baroda, said in an interview on Jan. 9. “Corporate performances weakened in the last quarter. The situation may continue this quarter because funding costs aren’t easing.”

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Said to Seek Higher Dividend From State Companies to Narrow Deficit

2012-01-14T20:38:00.000-08:00

By Anto Antony and Rakteem Katakey - Jan 13, 2012 10:50 AM GMT+0530

inShare1
More
Print
Email

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
Want to save this for later? Add it to your Queue!

inShare1
More
Print
Email

Sponsored links
Videos you may like:
Hot Shots: 3-Year-Old Girl Stares Down Lion
EU’s Iran Oil Embargo May Be Delayed for Six Months
Infosys Says Rupee Volatility to Hurt Economy, Nov. 24
by Taboola
Related News

Asia ·
India & Pakistan

Sponsored Links
Give a Gift of Bloomberg Markets Magazine and Get Great Savings!
More Stories

Cruise Ship Runs Aground Near Italy
Q
Greece’s Venizelos Aims for Debt Swap Offer Feb. 6 - Feb. 10
Q
IIF Says Creditor Representatives May Return to Athens Mid-Week
Q
Mantega May Quit Finance Role Over Wife’s Health, Epoca Says
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

Italian Divers Look for Ship Survivors as Captain Arrested
Q
Updated 3 hours ago
Apple Said to Prepare March IPad 3 Debut With Sharper Screen, Faster Chip
Q

Evans Says Jobless Rate May Rise as Progress ‘Transitory’
Q

White House Won’t Back Internet Censorship
Q

Europe Crisis Rescue Begins With MIT Men as a Matter of Trust
Q

More Most Popular Stories »
Sponsored Links
Advertisement
Job Search
Post a Job »

Sales Executive jobs
Software Engineer jobs
Project Manager jobs
Portfolio Manager jobs
Financial Advisor jobs
Accountant jobs
Director of Communications jobs
Attorney jobs
Business Development Manager jobs
Account Manager jobs
Controller jobs

Search All Jobs jobs by Indeed job search
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law

Bloomberg Link
Bloomberg Markets Magazine
BMART
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC
Q
What is the queue?
More »Items In Your queue
This is your Bloomberg Queue

The queue will help you find news, save stories for later and take them with you
Learn MoreClose
More » New Suggestions

Bonds Beating Gold for Funds on Slowest Inflation Since ’09: India Credit By Madelene Pearson and Swansy Afonso - Jan 13, 2012

2012-01-13T20:24:00.000-08:00

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.

Bonds Beating Gold for Funds on Slowest Inflation Since ’09: India Credit By Madelene Pearson and Swansy Afonso - Jan 12, 2012

2012-01-12T18:34:00.001-08:00

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.

Iran Oil Risk Sends Refiners’ Bond Yields to One-Year High: India Credit By Pratish Narayanan - Jan 11, 2012

2012-01-11T18:32:00.000-08:00

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.

India Lets Starbucks, Ikea Open Stores By Malavika Sharma - Jan 10, 2012

2012-01-10T18:40:00.000-08:00

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.

Top Rupee Forecasters See Rebound on Bond Inflows After Rout: India Credit By Yumi Teso and Jeanette Rodrigues - Jan 9, 2012

2012-01-09T18:38:00.001-08:00

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.

Asian Stocks Decline a Third Day as Bullard Says New Fed Buying Unlikely By Jonathan Burgos - Jan 8, 2012

2012-01-08T18:32:00.001-08:00

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.

Air India Loan Guarantees by U.S. Export-Import Bank Unlawful, Groups Say

2012-01-07T21:39:00.000-08:00

By Tom Schoenberg - Jan 7, 2012 4:48 AM GMT+0530

inShare3
More
Print
Email

U.S. pilots and airlines asked a federal judge to stop the Export-Import Bank of the United States from giving Air India $1.3 billion in loan guarantees to buy Boeing Co. aircraft.

U.S. District Judge James Boasberg in Washington today heard arguments by trade associations for the largest U.S. airlines and pilots requesting that he block the guarantees while he considers their legal challenge. Boasberg said he would rule on the request by Jan. 13, three days before Boeing is scheduled to deliver one of its aircraft to Air India.

“It’s highly likely that Air India will put these airliners on routes in competition with American airlines and records show zero jobs would be created,” Robert Bailey, a lawyer for the Air Line Pilots Association, told the judge.

The Air Transport Association of America Inc., now called Airlines for America, filed the lawsuit in November claiming the bank didn’t seek public comments or consider the impact on the U.S. airline industry before approving $1.3 billion in loan guarantees and $2.1 billion in preliminary commitments to support the sale of 30 Boeing aircraft to Air India.

At least 27 of those aircraft are the 787 Dreamliner, which lawyers for the trade groups said are “dramatically efficient.”

Air India is getting “access to the very best planes in the world at a subsidized rate,” Michael Kellogg, a lawyer for the Air Transport Association, told the judge.
Potential Impact

The groups asked the court to find the loan-guarantee commitments unlawful, to prevent them from being issued and to require the Export-Import Bank to study the guarantee’s potential impact on U.S. industry and jobs.

The Export-Import Bank is a federal agency that provides loans, loan guarantees and insurance to foreign companies. According to the lawsuit, the bank’s loan portfolio is “overwhelmingly devoted” to financing the purchase of airplanes for export. In fiscal year 2010, air transportation loans accounted for 47 percent of the bank’s $75.2 billion in total outstanding loans, the lawsuit claims.

The Air Line Pilots Association intervened in the lawsuit in the airlines behalf.

The bank argued that the association lacks any legal basis to challenge the loan commitments and that blocking the commitments would be disastrous for the 77-year institution.
Market Signal

“It would send a signal to the market that it could no longer rely on Ex-Im as a guarantor,” Ian Gershengorn, deputy assistant attorney general in the Justice Department’s civil division, told the judge.

If the Export-Import Bank didn’t guarantee the Air India loans, the airline would have sought financing elsewhere and purchased aircraft from Airbus, the world’s largest passenger- jet maker, Gershengorn said.

“Boeing was awarded a contract of $5 billion with Air India in large part because of efforts by the bank,” he said.

Gershengorn argued that Congress gave the bank wide discretion to operate much like a commercial bank.

He also noted that several of the trade group’s largest members, such as United Air Lines Inc., Continental Airlines Inc., American Airlines Inc., Atlas Air Inc., Federal Express Corp. and United Parcel Service Inc., didn’t join the lawsuit.

Chicago-based Boeing isn’t a party in the case.

The case is Air Transport Association of America Inc. v. Export-Import Bank of the United States, 11-cv-2024, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
Want to save this for later? Add it to your Queue!

inShare3
More
Print
Email

Sponsored links
Videos You May Like
Google's Brain-Busting Job Interview
Boeing Sees New 787 Orders From China
Airbus Draws With Boeing at Dubai Air Show, 777
by Taboola
Related News

Law ·
Asia ·
India & Pakistan

Sponsored Links
Subscribe Now & Get Your Free Issue of Bloomberg Markets Magazine
More Stories

Olympus Panel Urges Suing Executives, Kyodo Says
Q
Saints, Texans Win Wild-Card Games to Advance to NFL’s Divisional Playoffs
Q
Majid Al Futtaim Sets Up $1 Billion Islamic Bond Program
Q
Bristol-Myers Agrees to Buy U.S. Drug Developer Inhibitex for $2.5 Billion
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

Musharraf Will Be Arrested on Arrival in Pakistan, PTI Reports
Q

CES: Vizio Aims Low-Price Wrecking Ball at PCs
Q

U.S. Economy Brightens as Data Belie Gloomy Investors
Q

Hormuz Bypass Oil Pipeline Delayed as Iranian Tensions Mount
Q

Apple’s Siri Feature Doubles IPhone Data Usage
Q

More Most Popular Stories »
Sponsored Links
Advertisement
Job Search
Post a Job »

Sales Executive jobs
Software Engineer jobs
Project Manager jobs
Portfolio Manager jobs
Financial Advisor jobs
Accountant jobs
Director of Communications jobs
Attorney jobs
Business Development Manager jobs
Account Manager jobs
Controller jobs

Search All Jobs jobs by Indeed job search
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law

Bloomberg Link
Bloomberg Markets Magazine
Bloomberg Mart
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC
Q
What is the queue?
More »Items In Your queue
This is your Bloomberg Queue

The queue will help you find news, save stories for later and take them with you
Learn MoreClose
More » New Suggestions

Bids Double Offers on Tax-Exempt Debt as RBI Says Rates Peak: India Credit By Jeanette Rodrigues - Jan 6, 2012

2012-01-06T18:46:00.000-08:00

India’s individual investors, lured by yields at about the highest since 2008, offered to buy more than twice the amount of tax-exempt bonds sold by state-run companies as a central banker said interest rates have “peaked.”

National Highways Authority of India and Power Finance Corp. received 335 billion rupees ($6 billion) of bids from private investors for the 140 billion rupees being sold to finance government improvements, underwriters said. The notes yield as much as 8.3 percent, compared with the 7.55 percent that Indian Railways Finance Corp. offered in October, when it sold the nation’s first public issue of tax-free debt.

“The hope that we are now at the top of the rate cycle adds to investor interest and tax-free and tax-deductible bonds offer better implied yields,” S.J. Balesh, a Mumbai-based senior director at Infrastructure Development Finance Co., or IDFC, said in an interview on Jan. 3. “There is more retail interest because of the high yields offered.”

Investors want to lock in yields as Deputy Governor Subir Gokarn signaled yesterday that the Reserve Bank of India’s benchmark (INRPYLD) rate won’t rise from the current 8.5 percent. India’s repurchase rate compares with 0.25 percent in the U.S. and 1 percent in the euro zone after policy makers sacrificed growth last year to rein in price increases in a nation where the average person lives on less than $2 a day. The inflation focus meant that 10-year government bond yields (GIND10YR) rose 65 basis points in 2011 while the Sensitive Index (SENSEX) of shares fell 25 percent.
Bond Bids

IDFC, based in Mumbai, plans to issue tax-deductible bonds “soon,” according to Balesh.

National Highways Authority, the road builder known as NHAI, got 245 billion rupees of bids for its 100-billion rupee debt issue that comprises 10- and 15-year maturities, G. Suresh, the company’s chief general manager for finance, said in an interview on Jan. 4.

Power Finance (POWF), which aims to raise 40 billion rupees from 10- and 15-year debt, has received bids for more than 90 billion rupees, according to Ashish Agarwal, executive director at A.K. Capital Services Ltd., one of the arrangers. Both the NHAI and Power Finance notes are rated AAA by Standard & Poor’s Indian unit, Crisil Ltd.
Rating, Returns

Indian Railway Finance Corp., the funding arm of the nation’s rail ministry, hired arrangers for a sale of tax-exempt bonds that may begin as soon as this month, according to a person with direct knowledge of the matter who declined to be identified because the terms weren’t set.

Trinath Behera, New Delhi-based general manager for bonds at Indian Railway Finance, said in an interview yesterday that a date for the issue hadn’t yet been decided.

The tax breaks on the bonds mean that investors may lock in returns of as much as 12 percent, 3.7 percentage points more than the yield on 10-year government debt, according to Mumbai- based Kotak Mahindra Bank Ltd., one of the arrangers of the NHAI issue.

“The bonds are also benefitting from their top rating, as they are issued by government-backed companies,” Paritosh Kashyap, a Mumbai-based executive vice president at Kotak Mahindra Bank, said in an interview on Jan. 4. The demand for the bonds shows that “the retail market is developing and investors are getting more educated about their investment options,” he said.
Economy Slows

Investors in the government debt market are betting that the central bank will cut borrowing costs in 2012 as the economy slows. Food prices fell 3.36 percent in the week ended Dec. 24 after increasing 0.42 percent the previous week, commerce ministry data showed yesterday. Industrial output (INPIINDY) shrank 5.1 percent in October from a year earlier, the first contraction since June 2009, government data showed last month.

The yield on the government’s benchmark 8.79 percent note due in November 2021 rose one basis point, or 0.01 percentage point, to 8.34 percent today, according to the central bank’s trading system. The yield has dropped 23 basis points this month.

The yield (BCOPAAA0) on 10-year bonds issued by top-rated Indian companies was 9.34 percent yesterday, after touching 9.8 percent in November, the highest level since 2008.

The difference (GIND10YR) in yields between Indian securities due in a decade and similar-maturity U.S. Treasuries has shrunk 9 basis points this month to 635 basis points. Rupee-denominated notes returned 6.7 percent in the past year, according to indexes compiled by HSBC Holdings Plc. Indonesian debt returned 19.2 percent, the most among Asian markets monitored by the lender.
No ‘Win-Win’

Allowing state-run companies to sell tax-free bonds isn’t a “win-win proposition” for the government, according to Mumbai- based A.K. Capital Services Ltd., one of the arrangers for the Power Finance sale.

“The bonds hurt the exchequer as the government is missing out on a heavy amount of taxes,” Ashish Agarwal, a New Delhi- based executive director at A.K. Capital, said in an interview on Jan. 4. This may make the finance ministry “circumspect” about allowing companies to sell more tax-free bonds in the financial year starting April, especially as the economy slows (INQGGDPY), he said.

The rupee advanced 0.4 percent to 52.7550 per dollar today after the RBI’s Gokarn said policy makers are “very concerned” about the currency’s 16 percent depreciation last year.
Default Swaps

The cost of protecting the debt of State Bank of India, considered a proxy for the nation, has surged to 393 basis points from 153 basis points a year earlier, according to data provider 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.

India’s benchmark Sensex stock index fell for a third day today, dropping 0.7 percent. The index’s slide last year was the worst since 2008.

Investor demand for tax-free bonds will continue to be “amazing,” according to Mumbai-based IDBI Federal Life Insurance Co. that oversees about $430 million.

“The yield is so attractive that eligible investors would not let go of this opportunity,” Aneesh Srivastava, the Mumbai- based chief investment officer at IDBI Federal, said yesterday.

To contact the reporter on this story: 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.

Bids Double Offers on Tax-Exempt Debt as RBI Says Rates Peak: India Credit By Jeanette Rodrigues - Jan 5, 2012

2012-01-05T18:31:00.001-08:00

India’s individual investors, lured by yields at about the highest since 2008, offered to buy more than twice the amount of tax-exempt bonds sold by state-run companies as a central banker said interest rates have “peaked.”

National Highways Authority of India and Power Finance Corp. received 335 billion rupees ($6 billion) of bids from private investors for the 140 billion rupees being sold to finance government improvements, underwriters said. The notes yield as much as 8.3 percent, compared with the 7.55 percent that Indian Railways Finance Corp. offered in October, when it sold the nation’s first public issue of tax-free debt.

“The hope that we are now at the top of the rate cycle adds to investor interest and tax-free and tax-deductible bonds offer better implied yields,” S.J. Balesh, a Mumbai-based senior director at Infrastructure Development Finance Co., or IDFC, said in an interview on Jan. 3. “There is more retail interest because of the high yields offered.”

Investors want to lock in yields as Deputy Governor Subir Gokarn signaled yesterday that the Reserve Bank of India’s benchmark (INRPYLD) rate won’t rise from the current 8.5 percent. India’s repurchase rate compares with 0.25 percent in the U.S. and 1 percent in the euro zone after policy makers sacrificed growth last year to rein in price increases in a nation where the average person lives on less than $2 a day. The inflation focus meant that 10-year government bond yields (GIND10YR) rose 65 basis points in 2011 while the Sensitive Index (SENSEX) of shares fell 25 percent.
Bond Bids

IDFC, based in Mumbai, plans to issue tax-deductible bonds “soon,” according to Balesh.

National Highways Authority, the road builder known as NHAI, got 245 billion rupees of bids for its 100-billion rupee debt issue that comprises 10- and 15-year maturities, G. Suresh, the company’s chief general manager for finance, said in an interview on Jan. 4.

Power Finance (POWF), which aims to raise 40 billion rupees from 10- and 15-year debt, has received bids for more than 90 billion rupees, according to Ashish Agarwal, executive director at A.K. Capital Services Ltd., one of the arrangers. Both the NHAI and Power Finance notes are rated AAA by Standard & Poor’s Indian unit, Crisil Ltd.
Rating, Returns

Indian Railway Finance Corp., the funding arm of the nation’s rail ministry, hired arrangers for a sale of tax-exempt bonds that may begin as soon as this month, according to a person with direct knowledge of the matter who declined to be identified because the terms weren’t set.

Trinath Behera, New Delhi-based general manager for bonds at Indian Railway Finance, said in an interview yesterday that a date for the issue hadn’t yet been decided.

The tax breaks on the bonds mean that investors may lock in returns of as much as 12 percent, 3.7 percentage points more than the yield on 10-year government debt, according to Mumbai- based Kotak Mahindra Bank Ltd., one of the arrangers of the NHAI issue.

“The bonds are also benefitting from their top rating, as they are issued by government-backed companies,” Paritosh Kashyap, a Mumbai-based executive vice president at Kotak Mahindra Bank, said in an interview on Jan. 4. The demand for the bonds shows that “the retail market is developing and investors are getting more educated about their investment options,” he said.
Economy Slows

Investors in the government debt market are betting that the central bank will cut borrowing costs in 2012 as the economy slows. Food prices fell 3.36 percent in the week ended Dec. 24 after increasing 0.42 percent the previous week, commerce ministry data showed yesterday. Industrial output (INPIINDY) shrank 5.1 percent in October from a year earlier, the first contraction since June 2009, government data showed last month.

The yield on the government’s benchmark 8.79 percent note due in November 2021 fell four basis points, or 0.04 percentage point, to 8.33 percent yesterday, according to the central bank’s trading system. The yield has dropped 24 basis points this month.

The yield (BCOPAAA0) on 10-year bonds issued by top-rated Indian companies was 9.34 percent yesterday, after touching 9.8 percent in November, the highest level since 2008.

The difference (GIND10YR) in yields between Indian securities due in a decade and similar-maturity U.S. Treasuries has shrunk 13 basis points this month to 639 basis points. Rupee-denominated notes returned 6.7 percent in the past year, according to indexes compiled by HSBC Holdings Plc. Indonesian debt returned 19.2 percent, the most among Asian markets monitored by the lender.
No ‘Win-Win’

Allowing state-run companies to sell tax-free bonds isn’t a “win-win proposition” for the government, according to Mumbai- based A.K. Capital Services Ltd., one of the arrangers for the Power Finance sale.

“The bonds hurt the exchequer as the government is missing out on a heavy amount of taxes,” Ashish Agarwal, a New Delhi- based executive director at A.K. Capital, said in an interview on Jan. 4. This may make the finance ministry “circumspect” about allowing companies to sell more tax-free bonds in the financial year starting April, especially as the economy slows (INQGGDPY), he said.

The rupee was little changed at 52.9850 per dollar yesterday after the RBI’s Gokarn said policy makers are “very concerned” about the currency’s 16 percent depreciation last year.
Default Swaps

The cost of protecting the debt of State Bank of India, considered a proxy for the nation, has surged to 392 basis points from 153 basis points a year earlier, according to data provider 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.

India’s benchmark Sensex stock index fell for a second day yesterday, dropping 0.2 percent. The index’s slide last year was the worst since 2008.

Investor demand for tax-free bonds will continue to be “amazing,” according to Mumbai-based IDBI Federal Life Insurance Co. that oversees about $430 million.

“The yield is so attractive that eligible investors would not let go of this opportunity,” Aneesh Srivastava, the Mumbai- based chief investment officer at IDBI Federal, said yesterday.

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg

Top Funds See Yields at One-Year Lows on Series of Rate Cuts: India Credit By V. Ramakrishnan - Jan 3, 2012

2012-01-03T18:43:00.000-08:00

Yields on India’s sovereign bonds will drop to a one-year low by March, the nation’s top- performing debt-fund managers predict, after the central bank signaled it would cut borrowing costs as inflation cools.

The yield on the government’s benchmark 10-year note will slide 36 basis points to 8 percent, according to Tata Mutual Fund and Peerless Mutual Fund, both based in Mumbai. Tata Mutual’s bond fund returned 13.04 percent in 2011, the most among 521 fixed-income plans tracked by Bloomberg and almost double the average gain of all funds. Investors in Peerless Mutual earned 12.96 percent, the second-best performance.

Reserve Bank of India Governor Duvvuri Subbarao, who raised borrowing costs (INRPYLD) seven times last year, said he expects a “reversal” of monetary tightening in 2012 as inflation and growth slow, according to an interview posted on the British Broadcasting Corp.’s website on Jan. 2. Rupee-denominated government notes gained 6.2 percent in the past year, compared with 6.4 percent in China, 5.8 percent in Russia and 17.6 percent in Brazil, JPMorgan Chase & Co. indexes show.

“The outlook for bonds will be good as inflation is coming down and investors expect a series of rate cuts,” Murthy Nagarajan, the Mumbai-based head of fixed income at Tata Mutual that oversees $4.2 billion, said in an interview on Jan. 2. “We are running long positions in all our funds.”
Wholesale Prices

The 521 debt funds tracked by Bloomberg returned 6.76 percent on average last year, compared with a loss of 22 percent in the nation’s 495 equity funds. Commodity funds earned 24 percent as gold prices gained for an 11th consecutive year.

Tata Mutual’s top performing Fixed Income Portfolio Fund Scheme C3 (TAFC3RG) bought securities maturing in less than 270 days on signs Asia’s third-biggest economy is slowing. Industrial output (INPIINDY) shrank 5.1 percent in October from a year earlier, the first contraction since June 2009, government data showed last month. Wholesale prices, which the central bank uses to guide monetary policy, rose 9.11 percent in November, the least in a year.

“We have acknowledged that growth is going to be a concern,” Subbarao told the BBC. “We could expect a reversal of monetary tightening, but it’s difficult to say when that will take place and in what shape it will roll out.”

Alpana Killawala, a Mumbai-based spokeswoman for the Reserve Bank, directed Bloomberg to a policy statement issued on Dec. 16, when Subbarao underlined risks to economic growth.
Bonds Rally

Yields on debt (GIND1YR) due in 12 months slid 30 basis points, or 0.30 percentage point, in December to 8.47 percent, while those on securities due in 10 years fell 17 basis points.

The yield on the 8.79 percent note due in November 2021 slipped three basis points to 8.36 percent yesterday on speculation the Reserve Bank will cut the benchmark repurchase rate when it meets on Jan. 24, according to the central bank’s trading system.

The outcome of this month’s policy review may be influenced by wholesale-price data for December due on Jan. 13, according to Peerless Mutual.

“If inflation decelerates below 8 percent in December, the central bank will have leeway to cut interest rates,” Ganti N. Murthy, the Mumbai-based head of fixed-income at Peerless Mutual that oversees about $1.1 billion, said in an interview on Jan. 2. “These are good levels to buy government notes as there can be rate cuts ahead.”
Debt Sales

Increases in wholesale (INFINFY) prices will be “close to” 6 percent by March, Murthy predicts, spurring the Reserve Bank to cut the repo rate by as much as 50 basis points in 2012.

The government’s announcement last week that it would sell 8.5 percent more debt than planned in the year ending March will weigh on bonds, according to Mumbai-based Canara Robeco Asset Management Ltd. The finance ministry will borrow a record 5.1 trillion rupees in the current financial year, the central bank said Dec. 30, raising the bond-sale target for a second time in three months.

“Yields will inch up as there will be no let-up in borrowings,” Ritesh Jain, the Mumbai-based head of investment at Canara Robeco, which oversees about $1.3 billion, said in an interview on Jan. 2. “In the current environment, it will be very difficult for the government to hold down its borrowings.”

Ten-year note yields may range from 8.40 percent to 8.80 percent in 2012, Jain said. Canara Robeco’s InDigo Fund, which wasn’t included in the ranking because it also invests in gold, returned 14.6 percent last year.
Fund Holdings

India’s higher yields are attracting global investors. International investors bought (FIINDEBT) $3.9 billion more of India’s bonds than they sold last month, taking their ownership to $26.1 billion, according to exchange data. They increased holdings by $8.4 billion in 2011 as a declining currency made the debt cheaper.

As their holdings rose, the difference (USGG10YR) in yields between the nation’s debt due in a decade and similar-maturity U.S. Treasuries shrank to 641 basis points yesterday from a record 697 basis points reached Nov. 9.

The rupee lost 16 percent last year, the worst performance among Asia’s most-traded currencies, according to data compiled by Bloomberg. It advanced 0.2 percent to 53.2250 per dollar yesterday.

The cost of credit protection on State Bank of India using credit-default swaps was 395 basis points on Jan. 2, seven basis points higher than a week earlier, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Some investors consider the lender a proxy for the nation.

The contracts 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.

State Bank of Bikaner & Jaipur, a unit of the nation’s largest commercial bank, forecasts the central bank will cut the repo rate by 25 basis points to 8.25 percent on Jan. 24.

“Cooling inflation and slowing growth may prompt the central bank to reverse its rate-tightening cycle soon,” R.S. Chauhan, the Mumbai-based chief dealer of treasury at State Bank of Bikaner & Jaipur, said in an interview yesterday. “That expectation will help bonds to rally further.”

The 10-year yield may drop to 8 percent by March, he said.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India, China Manufacturing Shows Resilience By Unni Krishnan - Jan 2, 2012

2012-01-02T18:30:00.001-08:00

Manufacturing in India and China improved in December, a sign the world’s fastest-growing major economies are withstanding Europe’s debt crisis.

The Purchasing Managers’ Index in India rose to 54.2, the most in six months, from 51 in November, HSBC Holdings Plc and Markit Economics said in an e-mailed statement yesterday. In China, the index was at 50.3 from 49 in November, the Beijing- based logistics federation said in a statement on Jan. 1. A number above 50 indicates expansion.

In another positive sign, a Chinese index for non- manufacturing industries rose today. Europe’s crisis may still cap demand for goods from Asia with an index for Chinese export orders indicating a third month of contraction in December. India’s economic growth will be constrained by higher borrowing costs and global economic weakness, HSBC and Markit said.

“Asian economies are holding up as of now despite the turmoil in overseas markets,” said Madan Sabnavis, chief economist at Mumbai-based Credit Analysis & Research Ltd. “Europe’s debt woes though will keep demand for Asian goods subdued in the coming months.”

A Chinese non-manufacturing PMI jumped to 56 in December from 49.7 in November, the logistics federation and statistics bureau said today.
Optimism in Asia

Asian stocks rose on optimism the region’s economies will withstand Europe’s crisis. The MSCI Asia Pacific Excluding Japan Index gained 1.3 percent as of 9:33 a.m. in Hong Kong.

In the euro area, where leaders return to work this week seeking to rescue the single currency from fragmentation, a contraction in the manufacturing sector eased from November as an indicator of output in Germany, the region’s largest economy, reached a two-month high.

A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region rose to 46.9 from 46.4 in November, London-based Markit Economics said yesterday.

In China, the “festival effects” of western and Chinese New Year celebrations helped to boost the manufacturing PMI, said the logistics federation, which releases the data with the statistics bureau. China has also unwound some tightening measures to spur growth, cutting banks’ reserve requirements in November for the first time since 2008.
Chinese Stocks

The Shanghai Composite Index (SHCOMP) tumbled 22 percent last year, the most since 2008, on concern that monetary tightening and efforts to rein in property prices in big cities will limit growth. The index’s 33 percent drop since 2009 makes it the worst performer among the world’s 15 biggest markets.

In the Chinese manufacturing PMI, an index of export orders was at 48.6 from 45.6 in November, still below 50, the dividing line between contraction and expansion. A measure of output jumped to 53.4 from 50.9.

A Chinese manufacturing index released by HSBC and Markit on Dec. 30 indicated that manufacturing contracted for a second month. At the same time, HSBC said that “the pace of China’s slowdown is starting to stabilize.”

India’s “manufacturing activity rebounded on the back of increases in output and new orders,” Leif Eskesen, a Singapore- based economist at HSBC, said in the statement yesterday. “Inflationary pressures remain firm leaving no room for the RBI to ease its tight monetary policy stance in the near term.”

In India’s PMI data, measures of output, employment, orders, and export orders all rose, HSBC said.

India’s central bank on Dec. 16 kept rates unchanged for the first time in eight meetings after the economy expanded in the three months through September at the weakest pace in more than two years.
Car Sales

The Society of Indian Automobile Manufacturers may cut its annual domestic passenger-car sales target as higher rates and fuel prices sap demand for Maruti Suzuki India Ltd. and Honda Motor Co. vehicles, Sugato Sen, a senior director for the group, said last month.

The Reserve Bank of India’s repurchase rate is 8.5 percent after 13 increases since mid-March 2010. The next policy decision is scheduled to be announced on Jan. 24.

India’s central bank may reverse its rate increases to boost growth as inflation is showing signs of easing, the British Broadcasting Corp. reported citing Governor Duvvuri Subbarao. The central bank’s approach to managing inflation and growth will be different in 2012, the BBC quoted Subbarao in an interview posted on its website yesterday.

India’s benchmark wholesale-price inflation slowed to a one-year low of 9.11 percent in November from 9.73 percent in October.

India’s inflation readings in December were “not encouraging,” according to the statement from HSBC and Markit. Input price increases remained “well above historical levels” and the index of output prices rose to 56.2 from 55.4 in November, the statement showed.

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Most Asian Stocks Fall, Euro Weakens By Shiyin Chen - Jan 1, 2012

2012-01-01T19:18:00.001-08:00

Most Asian stocks (MXAPJ) declined on the first trading day of 2012, while the South Korean won and the euro weakened on concern the global economic recovery will be hampered as Europe’s debt crisis enters a new year.

More than two shares retreated (MXAP) for every one that rose on the MSCI Asia Pacific excluding Japan Index, which retreated 0.1 percent at 9:17 a.m. in Hong Kong. Financial markets from Japan to Hong Kong and the U.S. are closed for a holiday. The won fell 0.2 percent to 1,154.75 per dollar and the euro retreated 0.1 percent to $1.2943. Silver advanced as much as 0.2 percent to $27.8875 per ounce, set for a third day of gains.

Indexes of stocks and commodities had the worst yearly returns since the financial crisis in 2008. South Korea said yesterday export growth will slow this year and Singapore’s government said its economy grew less than previously forecast in 2011. Data today may confirm European manufacturing shrank for a fifth straight month, as regional leaders return to work from the Christmas holidays seeking to buy time to rescue the single currency from fragmentation.

Taiwan’s Taiex Index (TWSE) slipped 0.4 percent, while South Korea’s Kospi Index gained 0.5 percent. India’s SGX S&P CNX Nifty Index futures climbed 0.3 percent after the government said yesterday it will allow overseas individual investors to directly buy local equities.

South Korea’s export growth will probably slow to 6.7 percent this year from 19.6 percent in 2011, the Ministry of Knowledge Economy said yesterday. Separately, Singapore’s Prime Minister Lee Hsien Loong said the island’s gross domestic product rose 4.8 percent in 2011, compared with the government’s earlier forecast of a 5 percent increase, and said the economy will expand 1 percent to 3 percent in 2012.

Data yesterday showed China’s purchasing managers’ index climbed to 50.3 in December from 49 in November, beating all forecasts in a Bloomberg News survey of 15 economists. A gauge of euro-region manufacturing was 46.9 in December from 46.4 the previous month, according to economists surveyed (PMITMEZ) by Bloomberg News before Markit Economics releases the data today. A reading below 50 indicates contraction.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India to Boost Record Borrowing by 8.5% as Slowing Growth Cuts Tax Revenue

2011-12-31T21:51:00.000-08:00

By Jeanette Rodrigues - Dec 30, 2011 7:05 PM GMT+0530

inShare2
More
Print
Email

India increased its record borrowing program for the year by 8.5 percent to narrow a budget shortfall as a slowing economy damps tax collections.

Prime Minister Manmohan Singh’s government will sell an additional 400 billion rupees ($7.5 billion) of bonds in the year ending March 31 raising an unprecedented total of 5.1 trillion rupees, the central bank said in a statement today.

Indian 10-year benchmark bond yields (GIND10YR) have jumped the most in Asia after Vietnam, as the government sold more debt to meet its target of keeping the budget gap to 4.6 percent of gross domestic product. The rate on the 8.79 percent note due November 2021 climbed two basis points today and 20 this week to 8.57 percent, according to the central bank’s trading system.

“The market is already burdened by supplies,” Debendra Kumar Dash, a fixed-income trader at Development Credit Bank Ltd. (DEVB) in Mumbai. “However this increase was expected, and so while we could see yields rising in early trades on Monday, they will settle down soon.”

The 10-year bond yield could rise as high as 8.70 percent, according to Development Credit Bank and IDBI Bank Ltd. (IDBI) following the increase in the bond-sale plan.

The Reserve Bank of India (RBI) has said the government must rein in borrowings to help check price gains and boost economic growth. The $1.7 trillion economy may miss the central bank’s growth estimate of 7.6 percent for the 12 months ending March 31, Governor Duvvuri Subbarao said Dec. 22.

The government increased its borrowing plan by 528.7 billion rupees in September.
Wider Spread

The nation’s indirect tax revenue rose 16.9 percent in the eight months through November from a year earlier, S.K. Goel, chairman of the Central Board of Excise and Customs, said Dec. 9. That compares with a target for a 17.3 percent increase this fiscal year.

The extra yield (GIND10YR) sought on the notes over similar maturity U.S. Treasuries surged 205 basis points in 2011 to 667 basis points. The spread reached a 12-year high of 697 basis points in November.

Rupee-denominated notes returned 5.9 percent this year compared with the region’s best performance of 22 percent for Indonesian securities, HSBC Holdings Plc indexes show. Overseas investors raised holdings (FIINDEBT) of Indian debt by $8.5 billion this year to a record $26.3 billion on Dec. 23, exchange data show.

“Government borrowing is pressuring the yields upward,” said Roy Paul, deputy general manager of treasury at Federal Bank Ltd. (FB) in Mumbai. “But the slowing economy will force an interest-rate cut next year and so yields should move downward in 2012.”

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
Want to save this for later? Add it to your Queue!

inShare2
More
Print
Email

Sponsored links
Videos You May Like
Gold Bubble Seen by Soros on Brink of Bear Market
Impact of Thailand's Floods on Hotel Industry
China Counterfeit Parts in U.S. Military Aircraft
by Taboola
Related News

Asia ·
India & Pakistan

Sponsored Links
Subscribe Now & Get Your Free Issue of Bloomberg Markets Magazine
More Stories

Chinese Manufacturing Index Rises to 50.3
Q
Updated 2 hours ago
N. Korea Vows ‘Human Shields’ for Jong Un
Q

Singapore Predicts ‘Difficult’ 2012 on Europe
Q

China to Balance Growth With Control of Inflation
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

N. Korea Vows ‘Human Shields’ for Jong Un
Q

Gaga, Bieber to Join Revelers in Times Square
Q

Exxon Awarded $750 Mln for Nationalized Venezuelan Assets
Q

Flurry of Trades in Final Seconds Snatched Away 2011 Advance in S&P Index
Q

Chile Hurries Help to Patagonia Park Fire
Q

More Most Popular Stories »
Sponsored Links
Advertisement
Advertisements
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law

Bloomberg Link
Bloomberg Markets Magazine
Bloomberg Mart
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC

India to Boost Record Borrowing by 8.5% as Slowing Growth Cuts Tax Revenue By Jeanette Rodrigues - Dec 30, 2011

2011-12-30T18:51:00.001-08:00

India increased its record borrowing program for the year by 8.5 percent to narrow a budget shortfall as a slowing economy damps tax collections.

Prime Minister Manmohan Singh’s government will sell an additional 400 billion rupees ($7.5 billion) of bonds in the year ending March 31 raising an unprecedented total of 5.1 trillion rupees, the central bank said in a statement today.

Indian 10-year benchmark bond yields (GIND10YR) have jumped the most in Asia after Vietnam, as the government sold more debt to meet its target of keeping the budget gap to 4.6 percent of gross domestic product. The rate on the 8.79 percent note due November 2021 climbed two basis points today and 20 this week to 8.57 percent, according to the central bank’s trading system.

“The market is already burdened by supplies,” Debendra Kumar Dash, a fixed-income trader at Development Credit Bank Ltd. (DEVB) in Mumbai. “However this increase was expected, and so while we could see yields rising in early trades on Monday, they will settle down soon.”

The 10-year bond yield could rise as high as 8.70 percent, according to Development Credit Bank and IDBI Bank Ltd. (IDBI) following the increase in the bond-sale plan.

The Reserve Bank of India (RBI) has said the government must rein in borrowings to help check price gains and boost economic growth. The $1.7 trillion economy may miss the central bank’s growth estimate of 7.6 percent for the 12 months ending March 31, Governor Duvvuri Subbarao said Dec. 22.

The government increased its borrowing plan by 528.7 billion rupees in September.
Wider Spread

The nation’s indirect tax revenue rose 16.9 percent in the eight months through November from a year earlier, S.K. Goel, chairman of the Central Board of Excise and Customs, said Dec. 9. That compares with a target for a 17.3 percent increase this fiscal year.

The extra yield (GIND10YR) sought on the notes over similar maturity U.S. Treasuries surged 205 basis points in 2011 to 667 basis points. The spread reached a 12-year high of 697 basis points in November.

Rupee-denominated notes returned 5.9 percent this year compared with the region’s best performance of 22 percent for Indonesian securities, HSBC Holdings Plc indexes show. Overseas investors raised holdings (FIINDEBT) of Indian debt by $8.5 billion this year to a record $26.3 billion on Dec. 23, exchange data show.

“Government borrowing is pressuring the yields upward,” said Roy Paul, deputy general manager of treasury at Federal Bank Ltd. (FB) in Mumbai. “But the slowing economy will force an interest-rate cut next year and so yields should move downward in 2012.”

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Food Inflation Rate in India Falls to Lowest Level in at Least Five Years By Tushar Dhara - Dec 29, 2011

2011-12-29T18:31:00.000-08:00

India’s food inflation rate fell to the lowest level in at least five-and-a-half years, increasing the scope for the central bank to cut interest rates after it halted a record pace of monetary tightening.

An index measuring wholesale prices of agricultural products, including rice, wheat and vegetables, rose 0.42 percent in the week ended Dec. 17 from a year earlier, the commerce ministry said in a statement in New Delhi today. The increase compares with a 1.81 percent gain the previous week, and is the smallest gain since at least April 2006, according to the earliest available data compiled by Bloomberg.

The Reserve Bank of India refrained from raising rates this month for the first time in eight meetings as inflation eases and the fallout from Europe’s debt crisis threatens growth in Asia’s third-largest economy. Slowing expansion in the region has prompted policy makers to cut or hold borrowing costs in recent months to counter faltering global demand.

“Food inflation is coming off rapidly,” Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd., said before the report. “We expect the RBI may cut the repurchase rate by 50 basis points in March to support growth.”

India’s benchmark inflation gauge, the wholesale-price index, rose 9.11 percent in November from a year earlier, the smallest gain in a year.

To contact the reporter on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Billionaire Ambanis Dance, Pray at Family Home, Signaling Thaw By Siddharth Philip, Ketaki Gokhale and Rakteem Katakey - Dec 28, 2011

2011-12-28T18:23:00.000-08:00

Billionaires Mukesh and Anil Ambani danced and prayed in their ancestral village on the eve of their father’s 80th birth anniversary in the strongest display of bonhomie since ending a feud that split the Reliance empire.

The brothers, who have a combined wealth of $28.5 billion and control the world’s biggest oil refining complex and India’s second-largest phone company, were seen together on Dec. 27 for the first time since they pledged harmony in May 2010. Yesterday, they inaugurated a memorial to the late Dhirajlal Ambani in Chorwad in the western state of Gujarat.

Reliance Communications Ltd. (RCOM), controlled by 52 year-old Anil, climbed to a two-week high on Dec. 27 on speculation that improved sibling relations may help the company clinch a deal to lease mobile-phone towers to Reliance Industries Ltd. (RIL), run by Mukesh, 54. The elder Ambani operates India’s biggest natural gas field, while Anil needs the fuel for his power plants.

“It will matter to shareholders if it is a business reunion,” said Jagannadham Thunuguntla, strategist at SMC Global Securities Ltd. in New Delhi. “That would be a huge positive rerating opportunity for Anil Ambani group stocks. From Reliance Industries’ perspective, it would be an opportunity to expand their dream of entering into telecom.”

When India’s second-largest business group split in 2005, Mukesh got the Reliance group’s petrochemicals, oil and gas units, while Anil took the power, financial services, telecommunications, and entertainment businesses. Both retained rights to the Reliance name.

Last year the brothers scrapped agreements that prevented them from competing in similar businesses.
Dandiya Dance

Mukesh Ambani and Anil yesterday traveled in separate Mercedes-Benz cars to pray and have breakfast at the local Ambaji Mata temple after spending the previous evening performing the dandiya, a traditional Gujarati folk dance, along with their wives, mother and sister, Bloomberg UTV showed.

Anil flew in a Reliance Industries helicopter yesterday morning to offer prayers at the ancient Hindu temple of Somnath, Parimal Nathwani, group president for corporate affairs at Reliance Industries, said in an interview in Chorwad. Security arrangements in the village were managed by the officials from the company’s refinery complex at Jamnagar and 60 local volunteers, he said.

Daljeet Singh, a spokesman for Reliance ADA Group, declined to comment.
Share Performance

Reliance Industries shares fell 1.9 percent to 739.05 rupees at close in Mumbai yesterday, compared with a 0.9 percent decline in the benchmark Sensitive Index. (SENSEX) Reliance Infrastructure Ltd., the Anil Ambani-controlled builder of a mass rapid transit system in Mumbai, dropped 2.9 percent to 358.6 rupees and Reliance Communications lost 1.4 percent to 71.9 rupees.

Shares of Reliance Industries have more than tripled in value since the brothers divided the family business in June 2005. Anil’s flagship Reliance Communications has slumped 76 percent since it started trading in 2006.

Chorwad, a coastal fishing village where Dhirajlal Ambani, known as Dhirubhai, grew up, lies 855 kilometers (530 miles) northwest by road from Mumbai, where Mukesh has built a skyscraper home. The building equipped with helipads and a movie theater cost $1 billion, according to Forbes.

Dhirubhai founded Reliance Commercial Corp. to trade spices and yarn in 1959, the year Anil was born, and built an empire with businesses ranging from textiles to petrochemicals. His two sons fought for control of the group after he died in 2002 without leaving a will. They split the family business three years later in a settlement brokered by their mother, Kokila Ambani.
‘Old Wounds’

In the following five years their battle over the price and supply of natural gas from Reliance Industries’ assets halted plans for a major north Indian power plant, while a merger between Anil’s Reliance Communications and South Africa’s MTN Group Ltd. was scuttled after Mukesh said he had the first right to buy shares in his brother’s company.

“It looks like they’ve reconciled to working together, and that could be the best thing for them individually,” said U.R. Bhat, managing director of Dalton Capital Advisors India Pvt. in Mumbai. “Old wounds can’t completely be healed, but they can be stitched. There’s a scar nevertheless.”

To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net; Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; Arijit Ghosh at aghosh@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asian Stocks Fall, Copper Snaps Four-Day Rally on Europe, Growth Concerns By Shiyin Chen and Wes Goodman - Dec 27, 2011

2011-12-27T18:40:00.001-08:00

Asia stocks (MXAP) fell, extending the MSCI Asia Pacific Index’s annual loss, while copper snapped a four- day rally amid concern economic growth in the region is slowing and before Italy sells debt today and tomorrow.

The MSCI Asia Pacific Index declined 0.4 percent at 11:07 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index rose less than 0.1 percent. Copper lost 1.1 percent in London, soybeans slid for the first time in nine days and gold sank to a one-week low. The 17-nation euro was little changed against the dollar and yen. Treasury 30-year yields slipped two basis points to 3.01 percent.

Economic reports today showed Japan’s industrial production dropped and confidence among South Korean manufacturers sank to a 30-month low. U.S. home prices fell more than projected in October even as consumer confidence gained in December to an eight-month high, data showed yesterday. Italy is scheduled to sell 9 billion euros ($12 billion) of 179-day bills and as much as 2.5 billion euros of zero-coupon 2013 bonds today.

“We haven’t seen any resolution from the European area, and the situation is going to be the same next year,” said Chungkeun Oh, a debt trader in Seoul at Industrial Bank of Korea, South Korea’s largest lender to small- and medium-sized companies.

More than two shares slid for every one that rose on the MSCI Asia Pacific Index. The measure has fallen 18 percent this year, compared with a 12 percent drop on the Stoxx Europe 600 Index and a 0.6 percent gain in the Standard & Poor’s 500 Index.

Australia’s S&P/ASX 200 Index declined 1 percent and Hong Kong’s Hang Seng Index retreated 0.6 percent as the markets open after a two-day holiday. South Korea’s Kospi Index slipped 1 percent. SK Telecom Co. (017670) led losses among companies that trade without the right to the year’s final dividend payments.

U.S. Economy

The S&P 500 was little changed yesterday following last week’s 3.7 percent rally. The Conference Board’s index of consumer confidence rose to 64.5, exceeding all estimates in a Bloomberg News survey, and the highest reading since April, figures from the New York-based private research group showed.

The S&P/Case-Shiller index of home values in cities dropped 3.4 percent from October 2010 after decreasing 3.5 percent in the year ended September, the New York-based group said yesterday. The median forecast of 27 economists in a Bloomberg survey projected a 3.2 percent decline.

“The U.S. housing market has yet to get on a firm recovery path because we don’t know if prices will actually come back,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $29.6 billion. “Market participants are in vacation mode and aren’t doing much.”

Treasury 10-year yields fell one basis point to 2 percent today. Treasuries have returned 9 percent this year, according to Bank of America Merrill Lynch indexes.
Italian Sales

The euro was little changed at $1.3072 and weakened 0.1 percent to 101.71 yen. In addition to today’s sales, Italy is scheduled to sell bonds maturing in 2014, 2018, 2021 and 2022 tomorrow. The nation’s 10-year bond yields climbed two basis points yesterday to 7 percent, the level that spurred Greece, Ireland and Portugal to seek bailouts.

A report tomorrow may show Italian business confidence dipped to the lowest in almost two years.

The won traded at 1,158.60 per dollar, near a one-week low, after the Bank of Korea said an index of manufacturers’ expectations for January was 79, the least since July 2009.

Three-month copper fell to $7,544 a metric ton in London after gaining 4 percent last week. The metal is down 21 percent this year, set for the first annual fall since 2008. Soybean futures dropped 1.2 percent to $11.945 a bushel, halting an eight-day, 9 percent jump. Corn declined 0.4 percent to $6.305 a bushel after prices rose 9.4 percent in the previous seven days.
Gold Falls

Gold for immediate delivery slid as much as 0.5 percent to $1,586.13 an ounce, the lowest prices since Dec. 19, on concern that an escalation of Europe’s debt crisis may weigh on global growth amid slowing demand in India and China. Futures were on course for the longest losing streak since 2009.

The cost of insuring corporate bonds against non-payment fell in Australia and Japan. The Markit iTraxx Australia index decreased two basis points to 179 basis points, Westpac Banking Corp. prices show. The index is headed for its lowest close since Nov. 8 and at those levels would have risen 75.5 basis points this year, according to data provider CMA.

The Markit iTraxx Japan index declined 1 basis point to 186, Deutsche Bank AG prices show. The gauge is set for its lowest close since Dec. 27, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net

To contact the editor responsible for this story: Shiyin Chen in Singapore at schen37@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Japan Set to Unveil India Currency Swap Deal By Kyoko Shimodoi - Dec 26, 2011

2011-12-26T19:12:00.000-08:00

Japan is poised to unveil a currency-swap line with India in its second international financial agreement with top Asian powers this week.

Finance Minister Jun Azumi told reporters today in Tokyo that Japan is negotiating an agreement with India, the third- largest economy in Asia, after China and Japan. The deal is likely to be unveiled during a trip by Prime Minister Yoshihiko Noda to India that starts today, with the amount of the swap line about $10 billion, a Japanese government official said on condition of anonymity.

Japan two days ago agreed with China to promote direct trading of the yen and yuan without using dollars and start purchases of Chinese bonds for its foreign-exchange reserves. The nation has also deployed some of its reserves, the world’s second biggest, after China’s, for aiding Japanese companies in making overseas acquisitions.

For India, the deal expands the ability to respond to financial shocks as Prime Minister Manmohan Singh’s administration contends with a slump in the rupee that risks stoking inflation.

To contact the reporter on this story: Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

China, Japan to Back Direct Trade of Currencies By Toru Fujioka - Dec 25, 2011

2011-12-25T18:33:00.000-08:00

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for the exchange, to cut costs for companies, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday.

The deals between the world’s second and third-largest economies come as the two-year-old European debt crisis keeps global financial markets volatile. Japan will start to buy “a small amount” of China’s bonds, a Japanese government official said on condition of anonymity because of the ministry’s policy, without elaborating on when and how much of the debt the nation plans to purchase.

“Given the huge size of the trade volume between the Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.

Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would be beneficial for Japan because it would help reveal more information about financial markets in China, the world’s largest holder of foreign currency reserves.
Biggest Trading Partner

Encouraging direct yen-yuan trades will aim to reduce currency risks and trading costs, Japan’s government said. Currently, about 60 percent of trade transactions between the two nations are settled in dollars, according to Japan’s Finance Ministry. China is Japan’s biggest trading partner.

Then-finance minister Noda said in September 2010 that Japan should be able to invest in China’s market given that China buys Japanese debt. Japan holds $1.3 trillion of foreign- currency reserves, the world’s second largest.

Austria has already been granted the eligibility to buy Chinese bonds, according to the Japanese government official. Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore.

China sold the second-biggest net amount of Japanese debt on record in October as the yen headed for a postwar high against the dollar and benchmark yields approached their lowest levels in a year. It cut Japanese debt by 853 billion yen ($11 billion), Japan’s Ministry of Finance said on Dec. 8.

Separately, the Japan Bank for International Cooperation, JGC Corp., Mizuho Corporate Bank Ltd., the Export-Import Bank of China and other Chinese companies will establish a $154 million fund to invest in environment-related businesses such as recycling and energy, the Japanese government said.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Bond Auction Overload Eased by $9.5 Billion Fund Program: India Credit By Jeanette Rodrigues and V. Ramakrishnan - Dec 23, 2011

2011-12-23T18:33:00.000-08:00

A government plan to borrow 500 billion rupees ($9.5 billion) from state banks will reduce the need to increase record sales of new bonds and help the market extend the best rally among the biggest emerging nations.

The country may use land and shares as collateral to raise the money, two officials with direct knowledge of the matter said yesterday. Rupee-denominated notes returned 2.7 percent this month, JPMorgan & Chase Co. data show, as 10-year yields slid 34 basis points to 8.40 percent. Local-currency debt earned 0.8 percent in Brazil, 1.1 percent in China and 0.06 percent in Russia, the data show.

Sovereign bonds have surged the most this month since May 2010 as the Reserve Bank of India halted a record run of interest-rate increases on the first contraction in factory output since 2009. Nomura Holdings Inc. and Standard Chartered Plc predict that the government will raise its debt-sale target for a second time in the fiscal year ending March 31 as the deepening slump erodes revenue.

“This would help the government’s budget management and lowers the chances of another increase in market borrowings,” Vivek Rajpal, a Mumbai-based fixed-income strategist at Nomura, Japan’s biggest brokerage, said in an interview yesterday. “If indeed there is no further increase in debt supply, then we could see benchmark bonds rallying further.”

India will set up a fund by Jan. 15 that will use government stakes in non-state companies including ITC Ltd. (ITC), Axis Bank Ltd. (AXSB) and Larsen & Toubro Ltd. (LT) as collateral, the officials said, declining to be identified before a public announcement on the deal. The company will use the funds raised to buy the government’s stakes in state-run firms, the officials said, boosting federal revenue and supporting Finance Minister Pranab Mukherjee’s efforts to trim the budget deficit.
Delayed Sales

The plan may help the nation use assets the officials said are valued at 1 trillion rupees and prevent the failure of an earlier government proposal to raise 400 billion rupees in the fiscal year ending March 31 from sales of shares in state-owned companies.

A 23 percent drop in the benchmark BSE India Sensitive Index (SENSEX) of shares this year prompted Mukherjee to delay selling stock of Oil & Natural Gas Corp., Steel Authority of India Ltd. and Indian Oil Corp. The minister has raised 11.44 billion rupees through asset sales this fiscal year compared with 227.63 billion rupees in the 12 months through March, 2011, according to data provided by the Department of Disinvestment.
Deficit Challenge

The government plans to cut the revenue shortfall to a four-year low of 4.6 percent of gross domestic product by March 31, according to budget estimates. Moody’s Investors Service said this week that the deficit will widen to 7.6 percent this year. The Finance Ministry increased its annual debt-sale target by 13 percent in September to a record 4.7 trillion rupees.

Bond risk in India surged the most among the largest developing nations in 2011 amid concern public finances will worsen.

The cost of protecting the debt of State Bank of India, seen as a proxy for the nation, against non-payment for five years using credit-default swaps jumped 231 basis points this year to 392 basis points, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Contracts on China’s government bonds increased 77 basis points to 149, while Russia’s climbed 132 to 279 and Brazil’s added 50 to 161. 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.

The rupee strengthened 0.1 percent to 52.70 a dollar today.
‘Surprise Move’

“There’s no doubt that this surprise move by India will help in meeting the deficit target and have a benign impact on market sentiment,” Gopal Agrawal, chief investment officer at a local unit of South Korea’s Mirae Asset Financial Group in Mumbai, said in an interview yesterday. “Everybody will be keenly watching how quickly and effectively the government works out the modalities.”

Yields on benchmark 8.79 percent notes due in November 2021 declined 15 basis points after a government report on Dec. 12 showed that industrial production shrank 5.1 percent in October from a year earlier. The yield, which rose five basis points today, will drop to 8.25 percent next month, should the government refrain from increasing debt sales, Nomura predicts.
Growth Forecast Cut

Central bank Governor Duvvuri Subbarao signaled yesterday that Asia’s third-largest economy may expand less than an earlier estimate of 7.6 percent in the year through March 2012. Indian inflation, which slowed to 9.11 percent last month from 9.73 percent in October, will decelerate to 7 percent by March, the central bank predicts.

“Growth worries are probably beginning to outweigh inflation concerns,” M. Natarajan, Mumbai-based head of treasury at the Bank of Nova Scotia, said in an interview on Dec. 20. “Investors now expect the Reserve Bank to cut rates in January instead of waiting until March or April.”

Slower inflation is encouraging international investors to boost investments in Indian bonds, which yield more than four times as much as U.S. Treasuries. Overseas funds bolstered holdings of rupee government and corporate debt by $8.2 billion this year to a record $25.8 billion on Dec. 20. The extra yield demanded on 10-year Indian government debt over similar-dated Treasuries was 638 basis points today.

Government bonds are also rallying after the central bank resumed open-market purchases of sovereign debt last month for the first time since January to boost the amount of cash in the banking system. The monetary authority has purchased 331 billion rupees of government debt at auctions in the past month, central bank data show.

“The outlook for bonds is positive in the medium term as the monetary cycle may turn,” Roy Paul, deputy general manager of treasury at Federal Bank Ltd. in Mumbai, said in an interview yesterday.

To contact the reporters on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net; V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Plans to Borrow $9.5 Billion Pledging Assets to Fund Budget Deficit By Anto Antony - Dec 22, 2011

2011-12-22T18:31:00.000-08:00

India plans to borrow as much as 500 billion rupees ($9.5 billion) using land and shares as collateral in an effort to narrow a budget deficit, two government officials with direct knowledge of the matter said.

The South Asian nation will set up a fund manager by Jan. 15 that will pledge stocks it holds in non-state companies including ITC Ltd. (ITC), Axis Bank Ltd. (AXSB) and Larsen & Toubro Ltd. (LT), the officials said declining to be identified before a public announcement. The company will use the proceeds to buy the government’s stakes in state-run firms, the officials said.

Finance Minister Pranab Mukherjee is exploring options to bridge a widening budget deficit after raising just 3 percent of a 400 billion rupee asset-sale target for the year ending March 31. The decision may help the government utilize assets the officials said are valued at 1 trillion rupees and narrow the gap that’s fanned inflation and driven the rupee to a record low.

“The government is doing this to raise funds as the market isn’t conducive for asset sales, while they are hard pressed to meet deficit targets,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd.
Share Slump

A 23 percent drop in the benchmark Sensitive Index (SENSEX) this year prompted Mukherjee to delay selling shares of Oil & Natural Gas Corp. (ONGC), Steel Authority of India Ltd. (SAIL) and Indian Oil Corp. (IOCL) He has raised 11.44 billion rupees from asset sales this fiscal year compared with 227.63 billion rupees in the 12 months through March, 2011, according to data provided by the Department of Disinvestment.

Mukherjee said in October that it would be a “challenge” to meet his aim of narrowing the budget gap to a four-year low of 4.6 percent of gross domestic product as slowing growth reduce tax collections. Moody’s Investors Service yesterday said the deficit will widen to 7.6 percent this year.

The yield on 10-year government bonds fell as much as 2 basis points at 3:26 p.m. in Mumbai, while the Sensex reversed losses and gained 0.8 percent. The rupee pared losses and traded at 52.66 a dollar, 0.3 percent weaker than yesterday’s close.

“There’s no doubt that this surprise move by India will help in meeting the deficit target and have a benign impact on sentiments,” said Gopal Agrawal, chief investment officer at a local unit of South Korea’s Mirae Asset Financial Group in Mumbai. “Everybody will be keenly watching how quickly and effectively the government works out the modalities.”
Transfer Assets

The new holding company will pledge the stakes and real- estate properties transferred to it from the Specified Undertaking of the Unit Trust of India, to state-run banks, the officials said. Specified Undertaking, formed in 2003, will be wound up within three weeks, the officials said.

Moody’s said yesterday that India’s public debt at 70 percent of gross domestic product is a constraint on the nation’s ratings, which are at the lowest investment grade. India’s $1.7 trillion economy expanded 6.9 percent in the three months through September, the slowest pace in more than two years.

The Reserve Bank of India has raised interest rates 13 times since the start of 2010 to lower the inflation rate that has stayed above 9 percent all of this year. In October Governor Duvvuri Subbarao has partly blamed the fiscal deficit for contributing to inflation.

To contact the reporter on this story: Anto Antony in New Delhi at aantony1@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Bearish Rupee Bets at Three-Year High as RBI Confidence Ebbs: India Credit By Jeanette Rodrigues - Dec 21, 2011

2011-12-21T18:31:00.000-08:00

International investors are boosting bets that India’s rupee will extend the worst slide since 2008 as an economic slump deepens, suggesting a lack of confidence in the central bank’s steps to curb exchange-rate volatility.

Twelve-month non-deliverable forward contracts on the rupee dropped 2 percent this month to 55.85 per dollar even as the Reserve Bank of India introduced measures to boost dollar supply and curb rupee sales. Forwards fell as much as 6.5 percent below onshore spot rupee prices yesterday, the deepest discount since 2008, data compiled by Bloomberg show. Similar contracts signal a 0.7 percent drop in China’s yuan and a 1.2 percent decline for South Korea’s won.

Bond risk in India has surged the most among the largest developing nations this year as the rupee’s 15 percent tumble threatens to further fuel inflation that’s already more than 9 percent, according to CLSA Asia-Pacific Markets. The sliding rupee is also boosting costs for Indian companies, faced with a record $11.4 billion of dollar-bond repayments in 2012.

“While the RBI has taken decisive steps to reduce speculation, these measures don’t necessarily address the underlying cause for the rupee’s weakness,” Olivier Desbarres, head of foreign-exchange strategy for Asia-Pacific ex-Japan at Barclays Capital in Singapore, said in an interview on Dec. 16.

The rupee, the worst performer against the dollar among Asian currencies and of the so-called BRIC nations in 2011, plunged to a record low of 54.305 per dollar on Dec. 15, poised for a third straight quarter of declines, data compiled by Bloomberg show.
Worst of BRICs

Brazil’s real lost 11 percent this year to 1.8598 per dollar and the Russian ruble retreated 3.6 percent to 31.72. The Chinese yuan gained 4.2 percent to 6.3391. The rupee may slide to 60 per dollar next year, according to CLSA and Skandinaviska Enskilda Banken AB.

Currency options signal further declines in the Indian currency. Implied volatility on three-month dollar-rupee options, a gauge of expected exchange-rate swings, doubled in the second half of 2011 to a 19-month high of 14.2 percent this week, data compiled by Bloomberg show.

Similar-dated contracts offering the right to sell the rupee against the dollar cost 350 basis points more than those to buy yesterday, compared with 115 at the end of June. The so- called risk reversal rate was 74 basis points for the yuan, 475 for the ruble, and 825 for the real.
‘Not Real Money’

“This is a sign of rupee weakness driven by foreign investors,” Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong, said in a phone interview on Dec. 13. “Offshore forwards are leading onshore forwards. This means it is possibly not real money.”

Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars on currencies that are traditionally not easily convertible for foreign investors.

The rupee has rebounded 3.5 percent from last week’s lows after the Reserve Bank restricted trades in onshore forward contracts to temper speculation and freed interest rates on dollar deposits held locally to spur fund inflows.

Companies can’t enter into multiple forward contracts to cover a single overseas transaction, the central bank said on Dec. 15. The monetary authority eased rules for overseas borrowings by microfinance companies on Dec. 19.
‘Other Measures’

Last month, policy makers relaxed rules for firms to sell foreign currencies through swaps. They also sold dollars in recent weeks to curb the rupee’s slide, according to Mumbai- based IndusInd Bank Ltd. The central bank sold $943 million of foreign currency in October, compared with $845 million in the previous month, data on its website show.

“These are not the only measures we have,” Reserve Bank Deputy Governor Subir Gokarn told reporters in Mumbai on Dec. 20. “There are other measures we can undertake to bring stability to this market. But for the moment, clearly some degree of stability has returned, and that’s important.”

Indian local currency-denominated debt has returned 6.3 percent this year, compared with the 17 percent earned on Brazilian real bonds, JPMorgan data show. Chinese notes returned 6 percent, while Russia’s gained 5.4 percent, the data show.

The rupee fell more than other Asian currencies as India’s economy slowed and Europe’s debt crisis spurred capital outflows from developing nations. India is more vulnerable as it has Asia’s widest current-account deficit.
Investor Exodus

Factory output fell 5.1 percent in October from a year earlier, the first decline since June 2009, government data showed last week. Governor Duvvuri Subbarao, who has raised borrowing costs 13 times since early 2010 to stem inflation, left rates unchanged on Dec. 16 to support the slowing economy.

Global investors pulled almost $20 billion this year from the stock markets of India, South Korea, Taiwan and Thailand, exchange data show. India’s current-account shortfall widened to $14.2 billion in the three months ended June 30, from $5.4 billion in the first quarter, government data showed.

The gap may widen to to 3.5 percent of gross domestic product in the year ending March, Commerce Secretary Rahul Khullar said this month. India’s GDP was $1.7 trillion in 2010, according to the World Bank.

“The RBI’s measures, along with some intervention, will buy time for the country to address medium-term issues such as the current-account deficit and capital outflows,” Ananth Narayan G., Mumbai-based head of South Asia currency and bonds trading at Standard Chartered Plc in Mumbai. “Those are the root causes of the rupee’s weakness.”
Bond Risk

Yields on 10-year government bonds climbed 42 basis points, or 0.42 percentage point, in 2011. The yield on the 8.79 percent note due 2021 climbed six basis points yesterday in Mumbai to 8.34 percent, according to the central bank’s trading system. Rupee-denominated bonds returned 6.5 percent in 2011, compared with the 20.5 percent earned by Indonesian debt, HSBC Holdings Plc indexes show.

The cost to protect the debt of State Bank of India against non-payment has surged the most this year since 2008 as the rupee weakened. Credit-default swaps on the state-owned lender jumped 234 basis points in 2011 to 395 basis points, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. China’s government bonds increased 84 to 152, while those for Russia climbed 128 to 275 and Brazil’s added 51 to 162.
Retail Investment

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. State Bank is viewed as a proxy for India by investors as the nation doesn’t have dollar- denominated debt.

The central bank predicts Indian inflation, which slowed to 9.11 percent in November from 9.73 percent the previous month, will slow to 7 percent by March.

“Since inflation is on an easing path, investors are betting on a cut in interest rates in the coming months,” N.S. Venkatesh, head of treasury at Mumbai-based IDBI Bank Ltd., said in an interview on Dec. 16. That is “encouraging for bond investors.”

Overseas funds boosted holdings of rupee-denominated government and corporate debt by $8.16 billion this year to a record $25.8 billion on Dec. 20, exchange data show. Investors still demand extra yield of 642 basis points to hold India’s 10- year sovereign notes over similar-dated U.S. Treasuries.

The central bank’s latest measures show “the commitment of the RBI to fight further rupee depreciation,” Sebastien Barbe, chief emerging-market strategist in Paris at Credit Agricole CIB, said in an interview on Dec. 15. “I think this draws a line in the sand at close to 54 per dollar.”

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Double Whammy for Corporates as Record Debt Payments Looming: India Credit By Anurag Joshi - Dec 20, 2011

2011-12-20T18:33:00.000-08:00

Indian companies have a record $11.4 billion of dollar-denominated bonds to repay in 2012 just as the rupee falls to an all-time low and borrowing costs in the U.S. currency exceed all but one of Asia’s markets.

Companies have more than double the debt coming due next year compared with a five-year average of $5.6 billion, while ICICI Bank Ltd. (ICICIBC) and Bank of Baroda have the most maturing debt, according to data compiled by Bloomberg. Yields on Indian company dollar-denominated bonds have increased for five straight quarters and currently sit at 6.85 percent, the second- highest level among 11 Asian countries tracked by HSBC Holdings Plc.

The rupee’s 15.5 percent drop against the dollar this year to the weakest level in data compiled by Bloomberg going back to 1973 makes paying back dollar debt more expensive for Indian companies earning income in rupees. Lower profits will damp economic growth that Prime Minister Manmohan Singh said will increase 7.5 percent in the fiscal year ending March 31.

“There is a dual impact on widening of refinancing costs and the depreciating rupee,” Ananda Bhoumik, a Mumbai-based vice president at Fitch Ratings said in a phone interview on Dec. 16. “Dollar spreads have widened overseas, so refinancing debt through borrowing abroad is also costlier.”

The extra yield investors demand to hold dollar-denominated bonds sold by Indian companies rather than U.S. Treasuries rose 290 basis points, or 2.9 percentage points, this year to 615.2 basis points yesterday, according to indexes compiled by HSBC. Borrowers are paying a premium that’s more than double the 262 basis-point spread for debt of U.S. corporates, according to Bank of American Merrill Lynch indexes.
No Access

Yields on India’s corporate bonds may be pushed higher by a decline in benchmark Treasury bonds, with yields on 10-year Treasury notes expected to rise 88 basis points to 2.7 percent by the end of 2012, according to 70 analysts surveyed by Bloomberg.

“Our liquid funds and repayments from the asset side would be the primary source of funding for meeting the bond repayment obligations and we do not expect to access the markets for refinancing,” ICICI Bank said in an e-mailed reply to questions yesterday. Bank of Baroda Chairman M.D.Mallya declined to comment yesterday.

Indian companies sold $9.2 billion of non-rupee bonds this year, compared with $8.7 billion last year, according to data (BOB) compiled by Bloomberg.

“The rupee’s fall is beyond any speculation and now issuers have to ensure they repay bondholders,” M.V. Tanksale, chairman of Central Bank of India, said in an interview yesterday. “Their refinancing options are few because domestic liquidity is tight and there is a debt crisis in Europe.”
Europe’s Debt Crisis

Relative yields on company bonds from the U.S. to Europe and Asia have expanded 102 basis points to 271 this year as the European sovereign debt crisis intensified, threatening global growth and corporate earnings. That’s the biggest annual increase since a 329 basis-point jump in 2008, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index.

“Issuers would resort to an approach that doesn’t disrupt their business processes and that won’t hamper investor confidence,” Arun Kaul, chairman of Kolkata-based Uco Bank said in a phone interview yesterday. “They will have to bear a cost for this which has risen in an unprecedented way in the form of a sharp depreciation in the rupee.”

Refinancing overseas debt in the next 12 months may be challenging for Indian companies “if Europe’s credit crunch reaches Asia and causes spreads to widen or curtails lending,” Moody’s Investors Service said in the Dec. 14 report.
Rising Yields

Lenders borrowed 1.7 trillion rupees ($32 billion) from the Reserve Bank of India overnight on Dec. 19, the most this year, indicating a shortage of cash in the banking system. They borrowed 1.6 trillion rupees yesterday, according to central bank data.

ICICI Bank, India’s largest private lender, has the equivalent of $3.7 billion of principal payments on bonds and loans due in 2012, data compiled by Bloomberg show. Bank of Baroda, a Vadodara, north-east India-based lender, has $216 million of interest payments due, the data show.

The rupee was little changed at 52.89 per dollar in Mumbai yesterday, according to data compiled by Bloomberg.

Yields on 10-year government bonds have gained 40 basis points this year as the central bank raised the benchmark repurchase rate by 375 basis points since March 2010 to curb inflation. Reserve Bank of India Governor Duvvuri Subbarao left the rate unchanged at a three-year high of 8.5 percent on Dec. 16, halting the fastest round of increases on record.

Yields on the 8.79 percent bonds due November 2021 fell five basis points to 8.28 percent in Mumbai yesterday, according to the central bank’s trading system.
Default Swaps

The cost of insuring the debt of State Bank of India against non-payment was little changed at 395 basis points on Dec. 19, up from 161 at the end of last year, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. State Bank is regarded as a proxy for the nation, which doesn’t have dollar debt.

Credit-default swaps insuring the sovereign debt of the biggest emerging-market nations have also increased. Contracts on Brazil have risen 53 basis points to 164 this year, while those on China have more than doubled to 150, according to CMA. Russia’s are up 129 to 276. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Rupee ‘Surprise’

Sales of rupee-denominated bonds plunged 15 percent to 1.7 trillion rupees this year as companies sought cheaper methods of fundraising, data compiled by Bloomberg show.

The cost of borrowing in rupee bond markets is 250 basis points higher than average yields for dollar debt, with five- year AAA rated corporate debt yielding 9.35 percent, according to data compiled by Bloomberg.

“The rupee’s fall will come as a surprise for many companies,” Parthasarathi Mukherjee, Mumbai-based president of treasury and international banking at Axis Bank Ltd., the biggest rupee-denominated bond arranger this year, said in a phone interview on Dec. 19. “Some companies will be under pressure and defaults can’t be entirely ruled out.”

To contact the reporter on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Default Swaps Jump Most in BRICs as Gandhi Subsidizes Food: India Credit By V Ramakrishnan and Kartik Goyal - Dec 19, 2011

2011-12-19T18:36:00.000-08:00

India’s plan to boost food subsidies by 50 percent is threatening efforts to cut the budget deficit, extending the biggest jump in bond risk among the largest developing nations.

The cost to protect the debt of State Bank of India, seen as a proxy for the nation, against non-payment rose 234 basis points in 2011 to 395 basis points, the most in three years, according to data provider CMA. Credit-default swaps on China’s government bonds increased 78 to 146, while those for Russia climbed 124 to 270 and Brazil’s added 53 to 164.

Indian Prime Minister Manmohan Singh is tapping public finances to boost assistance as the economy of the nation, where the World Bank says more than 75 percent of the people live on less than $2 a day, slows. Nomura Holdings Inc. and Standard Chartered Plc predict Finance Minister Pranab Mukherjee will raise his borrowing target for a second time in the fiscal year ending on March 31.

“The passage of the food security bill may further pressure the government’s finances and push its borrowings higher,” A. Balasubramanian, the Mumbai-based chief executive officer of Birla Sun Life Asset Management Co. who oversees the equivalent of $12.1 billion in assets, said in an interview yesterday. “Given the persistent fiscal problems, the continuous supply of government debt will remain a negative factor for the market.”

India’s cabinet approved the Food Security Bill to grant the nation’s poor the right to buy food grains at discount rates, Information and Broadcasting Minister Ambika Soni told reporters in New Delhi on Dec. 18. The bill, aimed at meeting a pledge by the ruling Congress party to spread the benefits of economic growth, will need the consent of the parliament to become law.
Wooing Voters

Prime Minister Singh is betting on the legislation, the drafting of which was overseen by Congress party President Sonia Gandhi, to woo voters before elections in five states in the first half of next year. The government needs to boost food subsidies by 320 billion rupees ($6 billion) to 950 billion rupees a year to implement the policy, which will provide grains to 64 percent of India’s 1.2 billion-strong population, about 768 million people, Food Minister K.V. Thomas told reporters last week.

“The government’s eyes are on state elections next year and the upcoming federal election and hence we will see such populist measures,” Amol Agrawal, a Mumbai-based economist at STCI Primary Dealer Ltd., said in an interview yesterday. “Such measures may be good for the poor but will have negative implications for fiscal health.”
Rising Yields

The rising subsidy burden will force the government to increase its borrowings, maintaining “upward pressure” on sovereign bond yields, Agrawal predicts.

Ten-year government bond yields in India climbed 40 basis points, or 0.40 percentage point, this year, the most after Vietnam among Asian local-currency debt markets, as inflation accelerated and an economic slowdown threatened to crimp government revenue and stymie efforts to narrow the budget shortfall. Yields fell five basis points to 8.33 percent in Mumbai yesterday, according to the central bank’s trading system.

Finance Minister Mukherjee plans to cut the government’s deficit to a four-year low of 4.6 percent of gross domestic product by March 31, according to budget estimates.

Factory output in Asia’s third-largest economy fell 5.1 percent in October from a year earlier, the first contraction since June 2009, as the highest borrowing costs in three years damped demand for goods, government data showed this month. The $1.7 trillion economy expanded 6.9 percent in the three months ended September from a year earlier, the slowest pace since 2009, according to government data.
‘Downward Trajectory’

“Given that we are on a downward growth trajectory, the timing is not appropriate for coming up with policies like the food subsidy bill that add to the fiscal burden when revenues falter,” Vivek Rajpal, a Mumbai-based fixed-income strategist at Nomura Holdings, said in an interview yesterday.

Japan’s biggest brokerage predicts India’s government will borrow 300 billion rupees more than already planned in the year through March. Standard Chartered estimates the increase may be at least 400 billion rupees. The Finance Ministry last increased its annual debt-sale target by 13 percent in September to a record 4.7 trillion rupees ($88.5 billion).
Lower Tax Collections

India’s Finance Ministry said in a Dec. 9 report that lower tax collections in a slowing economy and delayed plans to sell stakes in state-owned companies mean it may miss its goal to narrow the budget gap. The economy may expand 7.25 percent to 7.75 percent this fiscal year, less than the 9 percent growth estimated in February, the report showed. Nomura’s Rajpal predicts the budget deficit will widen to 5.5 percent of GDP from 4.7 percent the previous year.

Reserve Bank of India Governor Duvvuri Subbarao has raised the benchmark repurchase rate by 375 basis points since March 2010 to curb inflation. Subbarao left the repo rate unchanged at a three-year high of 8.5 percent on Dec. 16, halting the fastest round of rate increases on record in the country.

DSP Blackrock Investment Managers and Credit Suisse Group AG predict that the Reserve Bank will cut rates in the first half of 2012 as inflation slows, joining central banks from Brazil to China in easing monetary policy. Brazil’s central bank has cut the Selic rate by a total 150 basis points since August to 11 percent, while the People’s Bank of China decreased the reserve ratio for banks by 50 basis points from Dec. 5, the first reduction since 2008.
Improving Bond Returns

Indian bonds are outperforming debt of the largest emerging markets this month as the central bank predicts inflation to slow to 7 percent by March from 9.11 percent in November.

Rupee-denominated notes have returned 2.22 percent in December, JPMorgan & Chase Co. data show. Local-currency securities lost 0.1 percent in Brazil and earned 1.1 percent in China and 0.04 percent in Russia.

“The outlook for bonds will improve over the next six months,” Ganti N. Murthy, the Mumbai-based head of investments at Peerless Mutual Fund, said in an interview yesterday. “Falling inflation may increase returns on fixed-income securities and prompt the central bank to cut rates from March or April.”

Murthy predicts the the 10-year bond yield will fall to 8 percent by the end of March. Yields have already retreated 67 basis points from a three-year high of 9 percent reached last month. Investors demand extra yield of 646 basis points to hold India’s 10-year notes instead of similar-dated U.S. Treasuries. The rupee fell 0.3 percent to 52.88 per dollar yesterday.
Election Pledge

Credit-default swaps on State Bank rose 44 basis points this month, according to data from CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. 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. State Bank is viewed as a proxy for India by investors as the nation doesn’t have dollar-denominated debt.

The Food Security Bill will fulfill an election pledge by Singh’s Congress party in 2009 that it will supply 25 kilograms of rice or wheat at below-market rates to poor families each month should the party be voted back into power.

Every Indian falling within the so-called priority category will get 7 kilograms (15.4 pounds) of rice or wheat or millet a month, according to Food Minister Thomas. Rice may be sold at 3 rupees per kilogram, wheat at 2 rupees and millet at 1 rupee. That compares with market prices of 24 rupees a kilogram for rice in New Delhi and 15 rupees a kilogram for wheat, according to data provided by the Food Ministry.

“Once implemented, the food bill will add to the expenditure burden and thus to the fiscal deficit as revenue generation remains under pressure in the current low-growth scenario,” Anubhuti Sahay, a Mumbai-based economist at Standard Chartered, said in an interview yesterday.

To contact the reporters on this story: V Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net; Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Inflation, Infrastructure Problems Persist By Kartik Goyal - Dec 18, 2011

2011-12-18T18:40:00.000-08:00

Truck driver Sujan Singh should be delivering cars to Mumbai from Maruti Suzuki India Ltd. (MSIL)’s plant near New Delhi. Instead, he’s sitting at a roadside cafe by one of India’s busiest highways, waiting for the traffic to ease.

“I’ll start again in the evening and travel through the night as you face huge congestion during the daytime,” he said, enjoying the warmth of a burning pile of trash in the New Delhi winter air. “Most of the highways are just single lanes and the roads are so uneven and bad that that it causes accidents.”

India’s failure to upgrade its 4.2 million kilometers (2.6 million miles) of roads, close a 10 percent power deficit and ease congestion at ports is hobbling the central bank’s efforts to beat inflation. Even after raising interest rates by a record 375 basis points in 1 1/2 years, wholesale prices have risen more than 9 percent for 12 straight months. The bank says supply bottlenecks that push up costs must be tackled.

The country of 1.2 billion people is paying for two decades of neglect. While China 20 years ago went on a multitrillion dollar spending spree for roads, railways, ports and power stations, its South Asian neighbor concentrated on services. Now, as China reins in prices and expands industry inland to restrain wages, India’s near record-low rupee and price gains are damping consumer spending and choking off company earnings.

“India has allowed a large number of cars without creating enough roads; a large number of industries without enough power to run them,” said Sunil Sikka, president of Havells India Ltd., the nation’s second-largest electrical components maker by value. “It’s like trying to wear shoes without socks -- very, very irritating and difficult.”
Cars and Soap

Sikka said Havells has to pay higher packaging costs to protect lamps and switchgears from India’s bumpy roads, where average speeds are 20 kilometers per hour (12 mph). Businesses from Maruti to soap and food maker Hindustan Unilever Ltd. (HUVR) also suffer, said Jagannadham Thunuguntla, chief strategist at SMC Wealth Management Services Ltd. in New Delhi.

“All companies where there is movement of goods and services and distribution are getting hit,” said Thunuguntla. “It adds to their costs and affects productivity.”

Maruti, Godrej Consumer Products Ltd., and Hero MotoCorp Ltd., maker of almost half the motorcycles sold in India, are among hundreds of manufacturers that make their own electricity.

“From the beginning we took the decision to use our own power as the power supplied by the government wasn’t reliable,” said R.C. Bhargava, chairman of Maruti, a unit of Hamamatsu, Japan-based Suzuki Motor Corp., which has made vehicles in India since 1983. “Doing business in India is much costlier.”
Share Discount

The transport delays and power shortages make shares of Indian companies less valuable than those of rivals abroad, said Sadanand Shetty, a Mumbai-based senior fund manager at Taurus Asset Management Co., which manages about $1.3 billion.

“They have to pay a huge cost,” said Shetty. “Indian company shares trade at a discount to competitors overseas.”

Maruti’s estimated price-to-earnings ratio for this fiscal year, a measure of how expensive a stock is within an industry, is 15, compared with 7 for SAIC Motor Corp., China’s biggest automaker, according to data compiled by Bloomberg.

The additional expenses in India add to inflation, limiting the country’s tools to cope with a worsening global economic outlook. The rupee, down 15 percent so far this year, is heading for its second-worst year against the dollar since 1991, when Prime Minister Manmohan Singh, then finance chief, began a shift toward free-market policies.
Higher Inflation

India’s inflation is the highest among the so-called BRIC nations, which include Brazil, Russia and China, with its benchmark gauge rising 9.1 percent in November from a year before. By comparison, China’s rate eased to a 14-month low of 4.2 percent, giving its policy makers more room to support growth as Europe’s debt crisis curbs exports. Russia’s pace was 6.8 percent and Brazil’s 6.6 percent.

The prime minister said in a Dec. 14 interview in New Delhi that “if the international situation doesn’t stand in our way, we will bring down inflation,” predicting it will come down to “no more than 5 or 6 percent.” While international commodity prices have pushed up costs in India, record food production should help ease pressures, he said.

The International Monetary Fund sees India’s consumer-price inflation still outpacing China’s rate by almost 2 percentage points by 2015.
Lasting Disadvantage

“Even if the global economic slowdown provides some relief from inflation in the short term, India will continue to be at a disadvantage until it fixes its problems with power, roads and other infrastructure,” said Arun Singh, a Mumbai-based senior economist at Dun & Bradstreet Information Services India Pvt.

China in 2009 spent an estimated $539 billion on infrastructure, amounting to 10.8 percent of its gross domestic product, compared with $99 billion, or 7.5 percent of GDP, for India, according to Morgan Stanley.

“Look at China, they first put in place all the necessary roads, electricity, power,” said Ravi Sud, chief financial officer of Hero MotoCorp. “That’s the reason they now have faster growth, with manageable levels of inflation. We, on the other hand, are still struggling to take off.”

Singh has pledged to tackle the problem with policies that call for $1 trillion in infrastructure spending between 2012 and 2017.
‘Huge Plans’

“India has huge plans,” said Rajat Nag, managing director-general of the Asian Development Bank. “It’s a question of implementing them. It needs to accelerate the pace of approvals, take care of environmental clearances and issues related to land acquisition. Bottlenecks are a huge drag on the economy.”

Targets to lay more highways and generate more electricity have been repeatedly missed. In the year through March 2011, the National Highways Authority of India built 1,780 kilometers of motorways, about 30 percent less than its target. In the same period, the nation added 9,585 megawatts of power, 34 percent less than forecast.

“The delays have been due to problems in land acquisition, environmental clearances and in some cases poor performance of contractors,” said Manoj Singh, an adviser at the nation’s Planning Commission in New Delhi. “It would be unrealistic to think of matching the U.S. or China in terms of infrastructure. It would take many decades.”

Fitch Ratings changed its outlook for Indian infrastructure projects to negative for 2012, from stable this year, in a report released Dec. 15, citing risks to the credit quality of power projects, airports and toll roads.
Service Gain

India may still reap some reward from the development of industries that don’t rely so heavily on transport networks. Its aggregate share in global commercial services trade will exceed China’s in the next five to six years, driven by information technology, which accounts for about 60 percent of India’s services exports, according to Morgan Stanley.

The country may also get some respite from inflation as a global economic slowdown curbs demand for goods. Exports rose 10.8 percent in October from a year earlier, the least in two years, the Commerce Ministry said Dec. 1. Factory output that month shrank 5.1 percent from a year earlier, the first drop since June 2009, the Central Statistical Office said.

That’s pushed the yield on India’s 10-year government bond close to the level of the one-year note, showing that some investors are betting growth in the country will slow. The Reserve Bank of India in October cut its economic growth forecast to 7.6 percent for the year through March, from 8 percent previously. RBI Governor Duvvuri Subbarao has said his comfort zone for inflation is 4 percent to 6 percent.
Retail Reversal

Prime Minister Singh’s efforts to restrain prices took a blow earlier this month when the government reversed a decision to allow overseas retailers like Wal-Mart Stores Inc. to open supermarkets, after failing to get support from political allies.

Singh and Commerce Minister Anand Sharma have said allowing the investment would create 10 million jobs, and help rein in inflation by reducing the 40 percent of fruit and vegetables that rot before they get to market.

The prime minister vowed in last week’s interview to revive the plan after regional elections next year.

India aims to award projects for 7,300 kilometers of new roads and expressways this fiscal year, and spend 550 billion rupees ($10.4 billion) widening existing thoroughfares, according to the highways authority.

With 3.7 million new vehicles hitting India’s streets last year, that’s little consolation for truck driver Singh.
Getting Worse

“I’ve been driving for 20 years and every year the traffic gets worse,” he said, as other drivers sat at the cafe eating dal and chapattis and waiting for the jam to disperse.

While India has the second-largest road and rail networks in the world, even on highways -- which account for 2 percent of all roads -- average speeds are 35 kph, compared with 80 kph in the U.S., according to JC Bamford Excavators Ltd.

JC Bamford, which sells its yellow diggers in 150 countries, says it takes at least nine days to move equipment 2,900 kilometers from New Delhi to Trivandrum in South India, said Vipin Sondhi, the local unit’s chief executive officer. The equivalent journey in the U.S. would take four days.

Once exporters finally get their goods to port, there are more delays. The average time taken by ships to unload and load at Indian ports is nearly 96 hours, almost 10 times longer than in Hong Kong, a government estimate showed last year.

“Roads are like the arteries,” said Rupa Rege Nitsure, a Mumbai-based economist at the state-owned Bank of Baroda. “If your arteries are clogged, your life is at risk.”

To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Subbarao Leaves Benchmark Repo Rate Unchanged to Support Economic Growth

2011-12-17T21:25:00.000-08:00

By Kartik Goyal - Dec 16, 2011 6:41 PM GMT+0530

inShare7
More
Print
Email

Enlarge image India Pauses Rate Rises as Growth Risks Halt Tightening

The rupee rebounded today from a record low, helping cut import costs and giving the central bank scope to spur expansion. Photographer: Kainaz Amaria/Bloomberg
Reserve Bank of India Monetary Policy, Currencies

Play Video

Dec. 16 (Bloomberg) -- Ashok Bhundia, a fixed-income strategist at Bank of America Merrill Lynch in Hong Kong, talks about Reserve Bank of India monetary policy, and investment strategy for global currencies. India’s inflation slowed to the lowest level in a year, boosting the central bank’s scope to support growth by pausing its record interest-rate increases. Bhundia speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

India’s central bank refrained from raising interest rates for the first time in eight meetings as inflation cools and the fallout from Europe’s debt crisis threatens growth. Ten-year bonds gained the most in six months.

The Reserve Bank of India left the repurchase rate at 8.5 percent, according to an e-mailed statement in Mumbai today. The decision matched all 14 estimates in a Bloomberg News survey.

Governor Duvvuri Subbarao paused after inflation slowed to a one-year low and industrial output fell for the first time in 28 months, tilting the balance of risks toward growth. The rupee rebounded today from a record low, helping cut import costs and giving the central bank scope to spur expansion.

“It’s prudent to pause as growth is slowing substantially amid global uncertainties and inflation is on a downward path,” said Samiran Chakraborty, a Mumbai-based economist at Standard Chartered Plc. “The RBI will have to wait for a quarter or so before cutting rates as inflation is still high.”

The yield on the 8.79 percent bonds due November 2021 fell 11 basis points, or 0.11 percentage point, to 8.38 percent at the close in Mumbai. The BSE India Sensitive Index, which has lost a fifth of its value in 2011, declined 2.2 percent.
Rupee’s Rebound

India’s rupee, which has weakened about 15 percent this year, surged 1.7 percent to 52.7450 per dollar, the biggest gain since May 2010. The jump followed the central bank’s move to curb rupee-forwards trading yesterday after the currency dropped to an all-time low of 54.3050 per dollar.

“The need to improve business sentiments and recover the growth momentum in the remaining months of the current fiscal necessitated a review of the monetary policy stance,” Finance Minister Pranab Mukherjee said in an e-mailed statement today.

Besides industrial production shrinking, growth prospects were set back by the government’s decision on Dec. 7 to put on hold plans to allow overseas retailers such as Wal-Mart Stores Inc. to open supermarkets. The move followed political protests, and sent the stock index to its biggest three-day drop since July 2009.

“Growth is clearly decelerating,” the central bank said in today’s statement. “This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.”

Even so, the central bank said inflation risks “remain high” and the “rupee remains under stress.”
BRIC Inflation

India’s benchmark wholesale-price inflation slowed to a one-year low of 9.11 percent in November. It’s still higher than in other so-called BRIC nations. Consumer prices rose 6.6 percent in Brazil, 6.8 percent in Russia and 4.2 percent in China last month.

While the “projected trajectory” for inflation remains, “from this point on, monetary policy actions are likely to reverse the cycle, responding to risks to growth,” the central bank said.

Subbarao told reporters in Mumbai today that he won’t speculate when the central bank would start cutting rates, saying a “rate cut is an event some way ahead.”

The Reserve Bank paused its monetary tightening after industrial production fell 5.1 percent in October from a year earlier and the economy expanded 6.9 percent last quarter, the weakest pace in more than two years. The central bank has raised its repurchase rate by 375 basis points in 13 moves since mid- March 2010, the fastest round of increases since the central bank was established in 1935.
Tightening Complete

“With slowing growth momentum amidst moderating inflation and heightened uncertainty in the global environment, the current phase of rate tightening is complete,” Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd., said before the report. “The retail FDI reversal is very disappointing and what India needs is a fresh batch of reforms to boost the economy.”

Prime Minister Manmohan Singh, in an interview with Bloomberg News this week, said he expects to succeed in his push to open the nation’s retail market to foreign companies after regional elections conclude by March. He said the slide in the rupee won’t diminish investor confidence in India and the economy will return to a long-term growth pace of 9 percent.

Singh, halfway through his second term, said India’s gross domestic product will expand 7.5 percent in the year ending March 31 and inflation will cool to between 6 percent and 7 percent.
Earnings Estimate

Still, analysts are cutting their earnings estimates for companies in Asia’s third-largest economy.

Earnings forecasts for Sensitive Index (SENSEX) companies for the year ending in March 2012 have fallen 7.9 percent to 1,160 rupees ($22) per share, the biggest drop since the 12 months ended March 2009, according to about 1,500 estimates compiled by Bloomberg. Analysts cut outlooks for Maruti Suzuki India Ltd., the country’s biggest carmaker, and Tata Steel Ltd., the largest producer of the alloy, by at least 29 percent, the data show.

The Reserve Bank’s decision to keep borrowing costs unchanged may also have been prompted by a cash squeeze in commercial lenders.

Cash availability with Indian lenders dropped after the central bank bought rupees to stem the decline in the currency and companies borrowed money to fund imports, Mahendra Jajoo, the Mumbai-based head of fixed-income investments at Pramerica Asset Managers, a unit of Newark, New Jersey-based Prudential Financial Inc., said before the report.
Cash Crunch

In an indication of cash shortages, lenders borrowed 924.7 billion rupees on average a day in November from the Reserve Bank, almost twice the amount sought in October, according to data compiled by Bloomberg. They borrowed 867.6 billion rupees on average a day this month. Overnight rates surged to 9.15 percent today, the highest level in three years.

The central bank resumed open-market purchases of sovereign debt last month for the first time since January to boost the amount of cash in the banking system. The monetary authority has purchased 243 billion rupees of government debt in auctions over the past month, central bank data show.

“We hope the RBI will now shift its focus to encouraging growth,” Chandrajit Banerjee, director general of the Confederation of Indian Industry, said before the release. “The industrial slowdown is taking very serious dimensions and there is an urgent need to improve sentiment.”

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
Want to save this for later? Add it to your Queue!

inShare7
More
Print
Email

Sponsored links
Videos You May Like
Gold May Return to $1,200 Range, Stephenson Says
Reserve Bank of India Monetary Policy, Currencies
India, China Economy, Markets, Europe, Strategy
by Taboola
Related News

Economy ·
Asia ·
India & Pakistan

Sponsored Links
Subscribe Now & Get Your Free Issue of Bloomberg Markets Magazine
More Stories

China’s November New Home Prices Increase in 66 Out of 70 Cities on Year
Q
China’s November Home Prices Post Worse Performance This Year Amid Curbs
Q
Google Unit to Join Japan Business Lobby in January: Mainichi
Q
Consumer Spending in U.S. Probably Rose as Discounts Drew Holiday Shoppers
Q

[Rate These Stories] Rate These Stories More News »
Advertisement
Most Popular Stories

France’s AAA Outlook Cut; Fitch Reviews Others
Q

Tax-Cut Deal Caps Year of D.C. Concessions
Q
Updated 18 minutes ago
Death-by-Air in Beijing Exposes Pollution’s Untold Heart Risk
Q

NYC Police Arrest 141 Over IPhone Thefts
Q

Congress Clears $1 Trillion Budget Measure in Rare Bipartisan Compromise
Q
Updated 18 minutes ago

More Most Popular Stories »
Sponsored Links
Advertisement
Advertisements
Click here to find out more!
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law

Bloomberg Link
Bloomberg Markets Magazine
Bloomberg Mart
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2011 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC

India Leaves Benchmark Rate Unchanged as Record Increases Threaten Growth By Kartik Goyal - Dec 16, 2011

2011-12-16T18:34:00.000-08:00

India’s central bank refrained from raising interest rates for the first time in eight meetings as inflation cools and the fallout from Europe’s debt crisis threatens growth. Ten-year bonds gained the most in six months.

The Reserve Bank of India left the repurchase rate at 8.5 percent, according to an e-mailed statement in Mumbai today. The decision matched all 14 estimates in a Bloomberg News survey.

Governor Duvvuri Subbarao paused after inflation slowed to a one-year low and industrial output fell for the first time in 28 months, tilting the balance of risks toward growth. The rupee rebounded today from a record low, helping cut import costs and giving the central bank scope to spur expansion.

“It’s prudent to pause as growth is slowing substantially amid global uncertainties and inflation is on a downward path,” said Samiran Chakraborty, a Mumbai-based economist at Standard Chartered Plc. “The RBI will have to wait for a quarter or so before cutting rates as inflation is still high.”

The yield on the 8.79 percent bonds due November 2021 fell 11 basis points, or 0.11 percentage point, to 8.38 percent at the close in Mumbai. The BSE India Sensitive Index, which has lost a fifth of its value in 2011, declined 2.2 percent.
Rupee’s Rebound

India’s rupee, which has weakened about 15 percent this year, surged 1.7 percent to 52.7450 per dollar, the biggest gain since May 2010. The jump followed the central bank’s move to curb rupee-forwards trading yesterday after the currency dropped to an all-time low of 54.3050 per dollar.

“The need to improve business sentiments and recover the growth momentum in the remaining months of the current fiscal necessitated a review of the monetary policy stance,” Finance Minister Pranab Mukherjee said in an e-mailed statement today.

Besides industrial production shrinking, growth prospects were set back by the government’s decision on Dec. 7 to put on hold plans to allow overseas retailers such as Wal-Mart Stores Inc. to open supermarkets. The move followed political protests, and sent the stock index to its biggest three-day drop since July 2009.

“Growth is clearly decelerating,” the central bank said in today’s statement. “This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.”

Even so, the central bank said inflation risks “remain high” and the “rupee remains under stress.”
BRIC Inflation

India’s benchmark wholesale-price inflation slowed to a one-year low of 9.11 percent in November. It’s still higher than in other so-called BRIC nations. Consumer prices rose 6.6 percent in Brazil, 6.8 percent in Russia and 4.2 percent in China last month.

While the “projected trajectory” for inflation remains, “from this point on, monetary policy actions are likely to reverse the cycle, responding to risks to growth,” the central bank said.

Subbarao told reporters in Mumbai today that he won’t speculate when the central bank would start cutting rates, saying a “rate cut is an event some way ahead.”

The Reserve Bank paused its monetary tightening after industrial production fell 5.1 percent in October from a year earlier and the economy expanded 6.9 percent last quarter, the weakest pace in more than two years. The central bank has raised its repurchase rate by 375 basis points in 13 moves since mid- March 2010, the fastest round of increases since the central bank was established in 1935.
Tightening Complete

“With slowing growth momentum amidst moderating inflation and heightened uncertainty in the global environment, the current phase of rate tightening is complete,” Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd., said before the report. “The retail FDI reversal is very disappointing and what India needs is a fresh batch of reforms to boost the economy.”

Prime Minister Manmohan Singh, in an interview with Bloomberg News this week, said he expects to succeed in his push to open the nation’s retail market to foreign companies after regional elections conclude by March. He said the slide in the rupee won’t diminish investor confidence in India and the economy will return to a long-term growth pace of 9 percent.

Singh, halfway through his second term, said India’s gross domestic product will expand 7.5 percent in the year ending March 31 and inflation will cool to between 6 percent and 7 percent.
Earnings Estimate

Still, analysts are cutting their earnings estimates for companies in Asia’s third-largest economy.

Earnings forecasts for Sensitive Index (SENSEX) companies for the year ending in March 2012 have fallen 7.9 percent to 1,160 rupees ($22) per share, the biggest drop since the 12 months ended March 2009, according to about 1,500 estimates compiled by Bloomberg. Analysts cut outlooks for Maruti Suzuki India Ltd., the country’s biggest carmaker, and Tata Steel Ltd., the largest producer of the alloy, by at least 29 percent, the data show.

The Reserve Bank’s decision to keep borrowing costs unchanged may also have been prompted by a cash squeeze in commercial lenders.

Cash availability with Indian lenders dropped after the central bank bought rupees to stem the decline in the currency and companies borrowed money to fund imports, Mahendra Jajoo, the Mumbai-based head of fixed-income investments at Pramerica Asset Managers, a unit of Newark, New Jersey-based Prudential Financial Inc., said before the report.
Cash Crunch

In an indication of cash shortages, lenders borrowed 924.7 billion rupees on average a day in November from the Reserve Bank, almost twice the amount sought in October, according to data compiled by Bloomberg. They borrowed 867.6 billion rupees on average a day this month. Overnight rates surged to 9.15 percent today, the highest level in three years.

The central bank resumed open-market purchases of sovereign debt last month for the first time since January to boost the amount of cash in the banking system. The monetary authority has purchased 243 billion rupees of government debt in auctions over the past month, central bank data show.

“We hope the RBI will now shift its focus to encouraging growth,” Chandrajit Banerjee, director general of the Confederation of Indian Industry, said before the release. “The industrial slowdown is taking very serious dimensions and there is an urgent need to improve sentiment.”

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Profit Forecasts Cut Most Since ’09 as Sensex Sinking Most in World By Rajhkumar K Shaaw - Dec 15, 2011

2011-12-15T18:46:00.000-08:00

Indian stocks are ending 2011 with the biggest decline among the world’s largest equity markets, and analysts say the worst is yet to come.

Earnings forecasts (SENSEX) for BSE India Sensitive Index companies for the year ending in March 2012 have fallen 7.9 percent to 1,160 rupees per share, the biggest drop since the 12 months ended March 2009, according to about 1,500 estimates compiled by Bloomberg. Analysts cut outlooks for Maruti Suzuki India Ltd. (MSIL), the country’s biggest carmaker, and Tata Steel Ltd. (TATA), the largest producer of the alloy, by at least 29 percent, the data show.

While Prime Minister Manmohan Singh said in a Dec. 14 interview with Bloomberg News that he expects economic growth in India to accelerate to an annual pace of 9 percent, analysts are slashing their forecasts for companies as seven interest-rate increases this year drive up financing costs and a 17 percent plunge in the rupee boosts import prices. Bank of America Corp., CLSA Asia-Pacific Markets and UTI Asset Management Co. say the downgrades will extend into the 2013 fiscal year and deepen declines in the Sensex, which has slumped 23 percent this year, the most among benchmark measures in the 10 largest markets.

“Till now, the concern was that inflation and interest rates are going to hurt earnings growth,” said Swati Kulkarni, who helps oversee $12 billion at Mumbai-based UTI Asset, India’s fifth-largest money-management company. “Now the rupee is causing the biggest damage to earnings. We may see more earnings downgrades in the next two-to-three months.” Kulkarni’s UTI MNC (UTIUGSC) fund has beaten 97 percent of its peers this year, data compiled by Bloomberg show.
BRIC Declines

The Sensex may sink to 14,500 in the next six months, according to a Dec. 5 Bank of America report. That’s 8.4 percent lower than its close of 15,836.47 yesterday. The gauge’s drop this year has outpaced the Standard & Poor’s 500 Index’s 3 percent loss and, in dollar terms, is more than the declines for measures in any of the so-called BRIC countries that include Brazil, Russia and China.

“I am sure investors are wise enough to distinguish between short-term aberrations and long-term prospects,” Prime Minister Singh said in the interview in New Delhi two days ago. “There are short-term issues sometimes over which we don’t have any control.”

With inflation above 9 percent for the past 12 months, the Reserve Bank of India increased its benchmark interest rate 375 basis points in 13 moves since March 2010. That’s slowed the expansion in India’s $1.7 trillion economy, Asia’s third- largest, to 6.9 percent in the three months to September, the least in more than two years. Industrial production fell 5.1 percent in October from a year earlier, the first decline since 2009, according to statistics office data on Dec. 12.
‘Biggest Threat’

“A slowdown in economic growth, a weak rupee and global factors are the biggest threat to earnings growth,” UTI’s Kulkarni said. “The question is how much is priced” into stock markets, she said.

While net income at the Sensex’s 30 companies climbed a combined 7 percent in the three months through September, the least in five quarters, 40 percent of the gauge’s companies including New Delhi-based Bharti Airtel Ltd. (BHARTI), the nation’s largest mobile-phone operator, and Mumbai-based Tata Consultancy Services Ltd. (TCS), the biggest software services exporter, reported profit that missed analysts’ estimates, data compiled by Bloomberg show.
Lower Target

Bank of America predicts Sensex companies may earn 1,200 rupees per share for the year ending March 2013, 21 percent lower than the 1,510 rupees estimated in April, according to the report from Bank of America analysts led by Jyotivardhan Jaipuria, the lender’s Mumbai-based head of India research.

The bank’s latest target is 9.2 percent lower than the 1,322 rupee forecast of analysts compiled by Bloomberg.

“For the next six months, we will see most of the downgrades happening,” Jaipuria said in a Dec. 1 interview.

The slide in the Sensex means the gauge trades at 2.7 times corporate net worth, near the lowest level since July 2009. While that’s higher than the MSCI BRIC Index, which trades at 1.4 times, cheaper valuations are luring Franklin Templeton Investments’ Mark Mobius, who is buying consumer banks that benefit from increasing wealth in India as well as utilities, because of electricity shortages.

“Valuations are good in India,” Mobius, who oversees $40 billion as Hong Kong-based executive chairman of Franklin Templeton Investments’ Emerging Markets Group, said in a telephone interview on Dec. 9. “We can get great opportunities right now.”
More Expensive

Indian stocks remain 39 percent more expensive than companies in the MSCI Emerging Markets Index, compared with an average premium of 12 percent since 1996, according to price- earnings ratios based on trailing profits compiled by MSCI Inc. and Bloomberg.

International investors withdrew $787.1 million from local shares last month, the most since August, data from the market regulator show. Foreign funds have pulled out $321.5 million from domestic stocks this year compared with a record inflow of $29.4 billion in 2010, as Europe’s worsening debt crisis prompted investors to flee from assets perceived as risky. The European Union is the Asian nation’s biggest trading partner, according to India’s Commerce Ministry.

“There is a long-term appetite for Indian equities but in the near term, with the global crisis dominating, investor appetite for risk is not high,” Nick Cringle, co-chief investment officer at Royal Bank of Scotland Group Plc’s wealth management division, said in a Nov. 23 interview in Mumbai. The Sensex trades at 13.7 times estimated profit and equities will become attractive when valuations fall to 11-to-12 times, according to Cringle.
Risk Appetite

Kotak Institutional Equities, the Mumbai-based brokerage controlled by billionaire Uday Kotak, has pared its earnings growth forecast for Sensex companies for the year ending in March to 14.4 percent from 19 percent, Sanjeev Prasad, co-head of institutional equities at Kotak, said in an interview with Bloomberg UTV on Nov. 23.

CLSA lowered its target for Sensex companies’ earnings per share for 2013 by 3 percent to 1,269 rupees, analysts led by Mahesh Nandurkar wrote in a Dec. 8 report. CLSA cut its 12-month Sensex target to 17,000 from 18,200 citing lower earnings and “political logjam,” according to the report.

Prime Minister Singh decided on Dec. 7 to shelve plans to allow overseas investment in some domestic retailers, bowing to opposition lawmakers and adding to government initiatives that haven’t been completed, such as the planned sale of stakes in state-run companies to help narrow the budget deficit. Singh expects to push through the reform of the retail industry next year, he said on Dec. 14.
‘Uncertainty and Confusion’

Policy decisions in India are fraught with “uncertainty and confusion,” John Flannery, chief executive officer for General Electric Co.’s local unit, said in an interview in New Delhi on Dec. 7.

“Any near-term positive newsflow appears unlikely on the ‘reforms’ front,” CLSA’s Nandurkar and his team wrote in their report. An economic “slowdown is visible,” they said.

The rupee’s slump is also driving up financing costs and providing little relief to the trade deficit, which widened by $19.6 billion in October, the most in at least 17 years, according to government data.
Rising Costs

Tata Steel reported an 89 percent drop in group profit in the quarter ended Sept. 30. The Mumbai-based company’s costs to service its foreign currency bonds may rise by 1.5 billion rupees because of currency depreciation, Chief Financial Officer Koushik Chatterjee told reporters on Nov. 10.

New Delhi-based Maruti Suzuki, India’s biggest passenger car maker, is “selectively” hedging its foreign-exchange risk as the rupee plunges, Chief Financial Officer Ajay Seth said in a Nov. 21 interview. Maruti’s imports are about twice the size of the company’s exports, he said. Maruti Suzuki and Tata Steel’s shares have slumped more than 30 percent this year.

“A lot of analysts tend to keep the forex loss as a one- off,” Bank of America’s Jaipuria said. “It would be probably worse if we took the forex loss into account. Earnings will come down.”

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

No Surrender on India Retail Initiative: Singh By Unni Krishnan and Matthew Winkler - Dec 14, 2011

2011-12-14T18:38:00.000-08:00

India’s Prime Minister Manmohan Singh pledged to overcome opposition to opening the country’s retail industry to companies like Wal-Mart Stores Inc. (WMT), saying his two-decade reform agenda is the best way of reviving the slowest economic growth in two years.

In an interview in his office at Parliament House in New Delhi, Singh said he’ll succeed in letting foreign companies buy majority stakes in Indian retailers after contesting regional elections early next year and as slower inflation bolsters support for his administration. He said he underestimated the opposition that derailed the plan a week ago and sent the benchmark stock index to its biggest three-day drop since July 2009.

“There was inadequate preparation and some partners in the coalition developed cold feet,” Singh said in the interview yesterday covering subjects from his legacy to the losses suffered by Kingfisher Airlines Ltd. “But I can assure you, India remains committed to a system of regulation that is supportive of enterprise and we will do everything to encourage foreign investment.”

Singh is facing one of the most challenging periods since taking office in 2004 after opposition from coalition allies prompted his Dec. 7 decision to delay indefinitely the retail- opening measure. At stake for Singh, 79, is preserving an economic turnaround that began in the 1990s, when as finance minister he helped engineer a shift toward free-market policies.

The policy setback is a symptom of a functioning democracy, Singh said. Still, a democratic system of government remains “the most credible,” he said.
‘Only Path’

“There may be zigzags along the way, but the path is the one I set,” said Singh, the only Indian to have served as governor of the Reserve Bank of India, finance minister and prime minister and the nation’s first head of government to come from a religious minority. “It is the only path to reduce the chronic poverty millions still live under.”

He predicted that gross domestic product will increase 7.5 percent in the fiscal year that ends March 31, while inflation will cool to between 6 percent and 7 percent. Once the global economy stabilizes, India will return to 8.5 percent to 9 percent trend growth, he said.

Shoppers Stop Ltd. (SHOP), India’s second-largest retailer by market value, gained 1 percent to 310.6 rupees, ending five straight days of losses after Singh’s comments yesterday.
Rupee, Stocks

The rupee briefly pared losses, before weakening to a record low of 53.715 per dollar in Mumbai. India’s currency has tumbled 17 percent so far this year, the worst performance among 10 major Asian currencies tracked by Bloomberg, hurt by India’s parliamentary gridlock, elevated inflation, widening budget gap and the weakest economic growth in two years. The benchmark Sensitive Index (SENSEX) of stocks has fallen 23 percent in 2011.

“This is his last innings and he has everything to gain,” said B.G. Verghese, an analyst with the Centre for Policy Research in New Delhi, using a term from cricket, India’s most popular sport. “The economic indicators are such that he realizes that he better do something or there will be trouble.”

Verghese, who served as an aide to former Prime Minister Indira Gandhi and has written books on Indian development policy, predicted the government will invigorate its legislative record by passing an anti-corruption bill. Policy makers may follow up with efforts to reduce regulation in the financial industry and the revival of the foreign retailers’ measure, he said.
Political Patchwork

As prime minister, Singh has had to hold together a coalition government in a nation of 1.2 billion people where political backing in some areas is aligned with social castes. More than half a century after independence from Britain, debates still occur over carving out new states to acknowledge ethnic and social differences.

The Congress party-led United Progressive Alliance has 263 seats in the lower house of parliament, 9 short of a majority. Two allies, the All India Trinamool Congress party that’s centered in West Bengal, and the Dravida Munnetra Kazhagam based in southern Tamil Nadu state, have 18 members each.

Both of those allies opposed the policy to allow foreign direct investment in retailing, a measure that Singh and Commerce Minister Anand Sharma said would create 10 million jobs, and help rein in inflation by reducing the 40 percent of fruit and vegetables that rot before they can be sold due to a lack of cold-storage facilities.

“Reforms were not sold the way they ought to have been,” said Eswar Prasad, a senior fellow at the Brookings Institution in Washington and former International Monetary Fund economist. “The narrative that was built up around the change in policy on FDI into retail was that it would end up benefiting some big multinational companies,” rather than improving the nation’s distribution system and keeping prices down, he said.

Kingfisher (KAIR) Aid

Turning to Kingfisher Airlines, the Indian carrier seeking cash after losses, Singh predicted that banks will support its turnaround efforts. Kingfisher has pledged assets ranging from its brand to office furniture for bank loans of as much as 64.2 billion rupees ($1.2 billion).

“In the case of Kingfisher, where government banks have given loans, if they take corrective measures I am sure things should work out,” Singh said. “The Indian banking system has a stake in their well-being. With a government nod things will turn around.”

The prime minister said some of his administration’s unpopularity at home stems from high inflation. Wholesale prices, India’s benchmark gauge, rose 9.1 percent in November from a year before, the government reported yesterday. India’s inflation is the highest among the BRIC nations, which include Brazil, Russia and China.
Inflation Pressures

While international commodity prices have pushed up costs in India, record food production should help to ease inflation pressures, said Singh. Interest rates should be about two percentage points more than inflation over the long run to encourage savings, he said.

The Reserve Bank of India has raised interest rates 13 times since the start of last year, to 8.5 percent. Governor Duvvuri Subbarao has blamed fiscal deficits for contributing to inflation. Singh yesterday indicated he agreed.

“We have taken steps on the monetary policy side but we haven’t been as successful in the fiscal side,” Singh said. “You should understand fiscal policy is an acutely political weapon.”

ICICI Securities Primary Dealership Ltd., a unit of the nation’s second-biggest lender, sees the gap widening to 5.5 percent of GDP, compared with the 4.6 percent target.
2004 Appointment

Without making a harder push to get his economic agenda approved, Singh may risk clouding his legacy, after his initial appointment by Congress party President Sonia Gandhi in 2004 won accolades from overseas investors.

The government has failed to enact key economic legislation, including an overhaul of the tax code, since the end of last year. The past three sessions of parliament have been disrupted by opposition protests in the aftermath of a former telecommunications minister, bureaucrats and businessmen being accused of conspiring to benefit from a 2008 sale of mobile- phone licenses.

“The government should have done more -- it is very frustrating as an investor,” said Walter Rossini, a Milan-based fund manager who oversees 200 million euros in Indian equities at Aletti Gestielle SGR SpA. Rossini has switched to an underweight on the country’s shares from overweight in the last year, compared with benchmarks he uses to gauge performance.
Welfare System

Singh has had more success in strengthening India’s welfare system than deepening market deregulation since he took office as prime minister. The government has expanded programs to provide jobs and subsidized food for the nation’s poor, in a country where more than three quarters of the population lives on less than $2 a day.

“He played a very important role in setting India on a high growth path, and that will be his legacy,” said Prasad, who serves on an advisory committee to India’s finance minister. “The lack of an independent political base certainly constrained his ability to push forward reforms aggressively. That in addition to his modest and demure personality made it very difficult for him to be as effective as prime minister.”
Engineer of Change

A Sikh born in what is now Pakistan, Singh studied economics at both Oxford and Cambridge universities. He built his reputation as an engineer of change during his time as finance minister in the government of Congress party Prime Minister Narasimha Rao. With a surge in oil prices depleting India’s foreign exchange reserves, he began removing barriers to investment in what had until then been an economy dominated by state enterprises.

In his first two months as finance minister, Singh devalued the rupee, dismantled government monopolies, cut import tariffs and taxes and let foreign companies take 51 percent stakes in sectors including automobiles and pharmaceuticals. The measures helped growth accelerate to 7.6 percent from 2.1 percent during his tenure, and the economy has quadrupled in size.

“The world has seen India’s potential,” Singh said. “India should remain a functioning democracy which is integrated with the evolving global economy, that recognizes globalization brings many advantages, that makes a success of globalization.”

To contact the reporters on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net

To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

StanChart to Increase India M&A Financing By George Smith Alexander and Ruth David - Dec 13, 2011

2011-12-13T18:54:00.000-08:00

Standard Chartered Plc (STAN) plans to increase takeover financing for Indian companies as it seeks to gain ground in mergers advisory in emerging markets on rivals weakened by Europe’s credit crisis.

“As the world goes through this turmoil, banks like ours which do have the capability and a strong balance sheet see that as an opportunity,” to lend for acquisitions, Neeraj Swaroop, the U.K. bank’s outgoing chief executive officer for India and South Asia, said in an interview in Mumbai yesterday.

Standard Chartered funded deals including Aditya Birla Group’s $875 million acquisition of Columbian Chemicals Co. in January to help defend its No. 3 position in Indian mergers advisory this year, data compiled by Bloomberg show. The London- based bank ranks 43rd globally among arrangers of takeovers.

Banks that offer financing to gain advisory credit distort the rankings among takeover arrangers, said Uday Kotak, the billionaire owner of rival Kotak Mahindra Bank Ltd. (KMB) Kotak did not specifically name Standard Chartered. The Mumbai-based firm, which is 21st in arranging mergers involving Indian companies this year, runs financing operations independently of advisory, he said.

“An advisory league table is about what value has been added by a banker and you don’t mix it with financing,” Kotak said in an interview in Mumbai on Dec. 12.
‘Whole Solution’

The value of mergers involving Indian companies has slumped 42 percent this year to $37.4 billion, according to Bloomberg data. Inbound purchases are outpacing acquisitions abroad for the first time in at least a decade, the data show.

Barclays Plc, State Bank of India (SBIN) and Standard Chartered advised on, and were among the financiers for, New Delhi based Bharti Airtel Ltd.’s $9 billion acquisition of Kuwait’s Mobile Telecommunications Co.’s African operations.

Standard Chartered wants to offer a “whole solution” to clients in India, including domestic and offshore financing, advisory, and transaction banking, Swaroop said. The bank assesses the overall return on capital it can achieve on each client when deciding whether to extend takeover loans, he said.

Swaroop, who joined Standard Chartered as India CEO from domestic rival HDFC Bank Ltd. (HDFCB) in 2005, will move to Singapore next year to run the company’s Southeast Asian operations.
Profit Generator

Standard Chartered got over 70 percent of its pretax profit from Asia last year, as CEO Peter Sands expanded in emerging markets while European rivals sought to fend off contagion from the sovereign debt crisis. It is the largest foreign bank in India by number of branches, and the country was Standard Chartered’s third-largest profit generator in the first half, behind Hong Kong and Singapore.

The bank’s profit in India before taxes for the first half of 2011 fell 39 percent to $378 million, amid increased competition and rising interest rates in India, Bloomberg data show. Swaroop said he expects earnings to rise in 2012 as profits increase at the wholesale bank.

Standard Chartered bolstered its position in India with acquisitions, including the purchase of the South Asian and Middle Eastern operations of Melbourne-based ANZ Grindlays Bank Ltd., in 2000, which made it the biggest foreign lender in India, Pakistan, Sri Lanka and Bangladesh. It bought the banking unit of American Express Co. for about $860 million in 2007, adding branch licenses in markets including India and Taiwan.

Standard Chartered, the only foreign company to list (STAN) its shares in India, had 1.06 trillion rupees ($19 billion) of assets in India as of March 31. Swaroop said the company plans to add “a few hundred people” at its local consumer and wholesale banking operations next year.

To contact the reporter on this story: Ruth David in Mumbai at rdavid9@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Funding Squeeze Driving ICICI Default Swaps Up Most in Asia: India Credit By Anoop Agrawal and Jeanette Rodrigues - Dec 12, 2011

2011-12-12T19:04:00.000-08:00

Costs to protect the bonds of Indian banks against default are rising at the fastest pace among Asian lenders as a worsening cash crunch threatens profits.

Five-year credit-default swaps on Mumbai-based ICICI Bank Ltd. (ICICIBC), the nation’s largest private lender, jumped 76 basis points in the past month to 471 basis points, the biggest advance in the region, while those for government-controlled State Bank of India (SBIN) rose 43 to 361, according to data provider CMA. Similar contracts for China Development Bank fell 15 to 283 and those for Korea Development Bank slipped 10 to 178.

Lenders in India have borrowed from the central bank each day since April to meet fund shortages as policy makers raised interest rates seven times in 2011 to slow inflation that has stayed above 9 percent. The Reserve Bank of India won’t compromise on its fight against price increases to address the cash deficit in the financial system, Deputy Governor Subir Gokarn said last week.

“Banks face risks on profit margins because of policy makers’ stance on liquidity,” Aneesh Srivastava, the Mumbai- based chief investment officer at IDBI Federal Life Insurance Co. that oversees about $430 million, said in an interview on Dec. 4. “The central bank has to bring inflation down so it will ensure that cash is available at a higher premium.”

The average cost of credit-default swaps insuring against non-payment by five Indian lenders more than doubled in 2011 as the Reserve Bank boosted the repurchase rate by 225 basis points, or 2.25 percentage points, to a three-year high of 8.5 percent. Swaps for State Bank, the largest lender and a proxy for the nation, hit a two-year high of 397 basis points this quarter, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Interbank Loan Rates

Credit swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a nation or company fail to adhere to its debt agreements.

Indian banks borrowed an average 745 billion rupees ($14 billion) a day from the central bank this quarter, compared with 438 billion rupees in the three months to Sept. 30, as rising benchmark rates bolstered funding costs in the money market. Rates on overnight interbank loans climbed 315 basis points this year to 8.65 percent, according to data compiled by Bloomberg. Inflation was 9.73 percent in October, the fastest pace among Asia’s 10 biggest economies.
‘No Sustained Easing’

“The outlook is not really comforting on the liquidity front because there is no sustained easing in inflation,” Diwakar Gupta, a managing director at Mumbai-based State Bank, said in an interview on Dec. 4. “So there will be implications on the performance of the banking industry while inflation is what it is.”

State Bank will cancel untapped lines of credit and reorganize its balance sheet to boost the amount of available funds as it waits for an injection of funds from the government, Chairman Pratip Chaudhuri said in an interview yesterday in Mumbai. The lender has set up a panel to review ways to conserve capital, Chaudhuri said.

Moody’s Investors Service downgraded the outlook for India’s banking system last month to “negative,” saying a domestic economic slowdown and the surge in borrowing costs will boost bad loans. State Bank had its financial strength rating cut by the ratings provider in October on inadequate capital buffers and rising non-performing credit. The Bankex index (BANKEX), the nation’s main gauge of banking stocks, has lost 26 percent this year.
No ‘Dramatic Recovery’

Non-performing assets at the biggest Indian lender rose to 4.19 percent of total debt last quarter from 3.35 percent a year earlier. Bad-loan provisions jumped 35 percent to 29.2 billion rupees in the same period. India’s industrial production shrank 5.1 percent from a year earlier in October, the first decline in 28 months, government data showed yesterday.

“India’s growth momentum has been slipping in the last few months, and we don’t expect a dramatic recovery in the near term as long as the export outlook remains clouded, borrowing costs high and business confidence low,” Atsi Sheth, a credit analyst at Moody’s, said in an e-mail on Dec. 8.

The government’s decision last week to suspend plans to allow overseas investment in the retailing industry due to lack of political consensus will further hurt investor confidence, Moody’s said in a research note yesterday.

“The policy reversal is credit negative,” Mumbai-based Sheth wrote in the note. “It reinforces the popular view that Indian politics hamper the government’s ability to implement policies decisively.”
Bank Lending Slows

Annual increases in bank lending slowed to 17.6 percent last month from 24.4 percent at the end of 2010, according to central bank data. Sales of rupee-denominated bonds by Indian companies shrank 23 percent this year to 1.49 trillion rupees from 2010, data compiled by Bloomberg show. The Reserve Bank forecast in June that bad loans will rise 25 percent in the year to March to 2.91 percent of total credit.

Mumbai-based ICICI Bank bought the first rupee-denominated credit-default swap contract last week to guard against the risk of debt defaults. The lender bought credit protection on Rural Electrification Corp.’s one-year bond from Mumbai-based IDBI Bank Ltd., N.S. Venkatesh, head of treasury at IDBI, said on Dec. 7.
Lower Returns

Yields in India’s government and corporate notes have gained this year as the central bank boosted benchmark rates. Yields on 10-year sovereign bonds climbed 53 basis points in 2011 to 8.47 percent. The yield on the 8.79 percent note due 2021 fell nine basis points yesterday in Mumbai, according to the central bank’s trading system. The extra yield demanded by investors to hold the notes over similar-dated U.S. Treasuries has widened 182 basis points to 644 in 2011.

Rupee-denominated bonds returned 5.1 percent in 2011, compared with the 20 percent earned by Indonesian debt, according to HSBC Holdings Plc indexes.

The Indian rupee’S 15 percent slide in 2011, the worst performance among Asian currencies, will also boost the risk of bad debt, according to Morgan Stanley. The currency slid 1.5 percent yesterday to 52.8350 per dollar and touched a record-low 52.84.

“Higher cost of capital, a slowdown in growth, and foreign-exchange volatility are likely to result in a further rise in non-performing loans,” analysts at Morgan Stanley led by Hong Kong-based Chetan Ahya wrote in a research note dated yesterday.

To contact the reporters on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net; Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Sensex Index Drops as Europe Woes, Policy Logjam Threaten Economic Growth

2011-12-10T21:43:00.000-08:00

By Shikhar Balwani and Rajhkumar K Shaaw - Dec 9, 2011 5:39 PM GMT+0530

Tweet
inShare2
More
Print
Email

India’s benchmark stock index posted its biggest two-day drop in almost three months amid concern a freeze in decision-making by the government and Europe’s debt crisis will stall growth in the South Asian nation.

Reliance Industries Ltd. (RIL), India’s largest company, tumbled 3 percent to a two-week low as Nomura Holdings Inc. downgraded the shares. Prime Minister Manmohan Singh backtracked this week on plans to allow overseas retailers including Wal-Mart Inc. (WMT) to expand in the country, undermining efforts to revive growth and deepening a yearlong paralysis in policy making. The BSE India Sensitive Index (SENSEX) has slumped 21 percent this year, faster than the 19 percent drop in the MSCI Emerging Markets Index.

“India may continue to underperform emerging markets for now because policy inaction and corruption scandals are pushing investors away,” Adrian Mowat, JPMorgan Chase & Co.’s Hong Kong-based chief Asia and emerging-market strategist, said in an interview to Bloomberg UTV today. “Growth is slowing and headline inflation” hasn’t come down as fast as expected.

The Sensex slumped 274.78, or 1.7 percent, to 16,213.46 at the 3:30 p.m. close in Mumbai, its steepest two-day loss since Sept. 23. The gauge, which lost 3.8 percent this week, rallied the most in 2 1/2 years last week on speculation the central bank may boost cash as China cut the reserve ratio for banks for the first time since 2008. As many as 26 of the 30 stocks (MXAPJ) in the measure retreated today.
Euro Concerns

Asian stocks declined for a second day, with the MSCI Asia Pacific Index (MXAP) losing 2 percent on economic reports indicating Europe’s debt crisis is contributing to slower growth in Japan, South Korea and China. Japan’s Nikkei 225 Stock Average (NKY) sank 1.5 percent after a report showed the nation’s economy grew less last quarter than the government’s initial estimate. South Korea’s Kospi Index (KOSPI) declined 2 percent after producer prices rose at the slowest pace in a year in November.

European leaders holding all-night talks in Brussels added 200 billion euros ($267 billion) to their crisis-fighting fund to halt two years of debt-driven turmoil in financial markets and dispel concerns that the 17-nation euro currency is on the brink of unraveling. Europe is India’s biggest trading partner.

The Sensex was Asia’s worst performer yesterday after Reserve Bank of India Deputy Governor Subir Gokarn said Dec. 7 the central bank won’t compromise on its fight to tame inflation to ease a cash deficit. Policy makers are concerned that adding cash by freeing up a part of the reserves held by banks will fan inflation that has stayed above 9 percent all year, even after seven interest-rate increases.
Food Prices

Still, food inflation slowed to the lowest level in more than three years in the week ended Nov. 26, the trade ministry said yesterday, giving the central bank more scope to pause rate increases when it meets Dec. 16.

The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. fell 1.6 percent to 4,866.7. Its December futures traded at 4,882.25. The BSE-200 Index (BSE200) lost 1.4 percent.

Reliance retreated 3 percent to 755.70 rupees, the lowest close since Nov. 25. Nomura downgraded the stock to ‘neutral’ from ‘buy’ and cut its price estimate 18 percent to 870 rupees, citing a likely slowdown in earnings.

Sterlite Industries (India) Ltd. (STLT), the biggest copper maker, slumped 3.3 percent to 101.30 rupees. Bharat Heavy Electricals Ltd. (BHEL), India’s biggest power-equipment maker, slid 3.3 percent to 263.75 rupees, extending yesterday’s 5.7 percent retreat. Bajaj Auto Ltd. (BJAUT), the second-biggest motorcycle maker, lost 3.3 percent to 1,670.35 rupees and Mahindra & Mahindra Ltd. (MM), the biggest sports-utility vehicle maker, sank 3.7 percent to 703.25 rupees.
Sensex Target

CLSA Asia-Pacific Markets yesterday reduced its 12-month Sensex target to 17,000 from 18,200, citing lower earnings and a “political logjam.” The brokerage cut its earnings estimate for Sensex companies by 3 percent to 1,269 rupees per share for the year to March 2013, joining Credit Suisse Group AG, which on Dec. 7 pared its forecast by 7 percent to 1,300 rupees.

The Sensex trades at 13.9 times future earnings, down from 21.5 times in March 2010. The MSCI Emerging Markets Index (MXEF) is valued at 9.6 times.

India’s economy grew 6.9 percent in the September quarter, the slowest pace in two years, as rising borrowing costs and accelerating inflation cooled demand. Industrial production in October may drop 0.7 percent, the first contraction since June 2009, according to the median estimate of 24 economists in a Bloomberg survey. The government will release the data Dec. 12.

Foreign funds have reduced holdings of domestic shares by $2.4 billion from a record $104.4 billion in July, contributing to the slide in stocks and the rupee, which tumbled to a record 52.73 per U.S. dollar on Nov. 22.

The currency slid 6.7 percent in November, the most since March 1992, and is heading for its second-worst year against the dollar since 1991, when Singh, then India’s finance chief, began a shift toward free-market policies.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.
Want to save this for later? Add it to your Queue!

Tweet
inShare2
More
Print
Email

Sponsored links
Videos You May Like
Faber on Outlook for Equities, Euro, China
MUFJ Says Up to Three Nations May Leave Euro
Branson Sees `Hopeful Signs' for Crisis Solution
by Taboola
Related News

India & Pakistan ·
Emerging Markets ·
Stocks

Sponsored Links
Give a Gift of Bloomberg Markets Magazine and Get Great Savings!
Advertisement
Most Popular Stories

IMF Seeks Funds for European Debt Crisis
Q

Trapped by $50,000 Degree in Low-Paying Job
Q

Gingrich Focus of Iowa Debate
Q

Creditors: Throw Out Jefferson County Bankruptcy
Q

Russians Protests Against Putin
Q

More Most Popular Stories »
Sponsored Links
Advertisement
Advertisements
Click here to find out more!
Bloomberg

Bloomberg on
Facebook
Follow Bloomberg
on Twitter
Follow Bloomberg
on LinkedIn

More from Bloomberg

Bloomberg Businessweek
Business Exchange
Bloomberg Briefs
Bloomberg Government
Bloomberg HT
Bloomberg Institute
ブルームバーグ(日本語)
Bloomberg Law

Bloomberg Link
Bloomberg Markets Magazine
Bloomberg Mart
Bloomberg New Energy Finance
Bloomberg Open Symbology
Bloomberg Press
Bloomberg Sports
Jobs by Indeed

Company

About Bloomberg
Careers
Press Room
Advertising
Contact Us
关于彭博中国
会社概要(日本語)

Help
Sitemap
Trademarks
Feedback
Terms of Service
Privacy Policy

[Rate this Page] Rate this Page
©2011 BLOOMBERG L.P. ALL RIGHTS RESERVED. Made in NYC

Sensex Index Drops as Europe Woes, Policy Logjam Threaten Economic Growth By Shikhar Balwani and Rajhkumar K Shaaw - Dec 9, 2011

2011-12-09T18:50:00.001-08:00

India’s benchmark stock index posted its biggest two-day drop in almost three months amid concern a freeze in decision-making by the government and Europe’s debt crisis will stall growth in the South Asian nation.

Reliance Industries Ltd. (RIL), India’s largest company, tumbled 3 percent to a two-week low as Nomura Holdings Inc. downgraded the shares. Prime Minister Manmohan Singh backtracked this week on plans to allow overseas retailers including Wal-Mart Inc. (WMT) to expand in the country, undermining efforts to revive growth and deepening a yearlong paralysis in policy making. The BSE India Sensitive Index (SENSEX) has slumped 21 percent this year, faster than the 19 percent drop in the MSCI Emerging Markets Index.

“India may continue to underperform emerging markets for now because policy inaction and corruption scandals are pushing investors away,” Adrian Mowat, JPMorgan Chase & Co.’s Hong Kong-based chief Asia and emerging-market strategist, said in an interview to Bloomberg UTV today. “Growth is slowing and headline inflation” hasn’t come down as fast as expected.

The Sensex slumped 274.78, or 1.7 percent, to 16,213.46 at the 3:30 p.m. close in Mumbai, its steepest two-day loss since Sept. 23. The gauge, which lost 3.8 percent this week, rallied the most in 2 1/2 years last week on speculation the central bank may boost cash as China cut the reserve ratio for banks for the first time since 2008. As many as 26 of the 30 stocks (MXAPJ) in the measure retreated today.
Euro Concerns

Asian stocks declined for a second day, with the MSCI Asia Pacific Index (MXAP) losing 2 percent on economic reports indicating Europe’s debt crisis is contributing to slower growth in Japan, South Korea and China. Japan’s Nikkei 225 Stock Average (NKY) sank 1.5 percent after a report showed the nation’s economy grew less last quarter than the government’s initial estimate. South Korea’s Kospi Index (KOSPI) declined 2 percent after producer prices rose at the slowest pace in a year in November.

European leaders holding all-night talks in Brussels added 200 billion euros ($267 billion) to their crisis-fighting fund to halt two years of debt-driven turmoil in financial markets and dispel concerns that the 17-nation euro currency is on the brink of unraveling. Europe is India’s biggest trading partner.

The Sensex was Asia’s worst performer yesterday after Reserve Bank of India Deputy Governor Subir Gokarn said Dec. 7 the central bank won’t compromise on its fight to tame inflation to ease a cash deficit. Policy makers are concerned that adding cash by freeing up a part of the reserves held by banks will fan inflation that has stayed above 9 percent all year, even after seven interest-rate increases.
Food Prices

Still, food inflation slowed to the lowest level in more than three years in the week ended Nov. 26, the trade ministry said yesterday, giving the central bank more scope to pause rate increases when it meets Dec. 16.

The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. fell 1.6 percent to 4,866.7. Its December futures traded at 4,882.25. The BSE-200 Index (BSE200) lost 1.4 percent.

Reliance retreated 3 percent to 755.70 rupees, the lowest close since Nov. 25. Nomura downgraded the stock to ‘neutral’ from ‘buy’ and cut its price estimate 18 percent to 870 rupees, citing a likely slowdown in earnings.

Sterlite Industries (India) Ltd. (STLT), the biggest copper maker, slumped 3.3 percent to 101.30 rupees. Bharat Heavy Electricals Ltd. (BHEL), India’s biggest power-equipment maker, slid 3.3 percent to 263.75 rupees, extending yesterday’s 5.7 percent retreat. Bajaj Auto Ltd. (BJAUT), the second-biggest motorcycle maker, lost 3.3 percent to 1,670.35 rupees and Mahindra & Mahindra Ltd. (MM), the biggest sports-utility vehicle maker, sank 3.7 percent to 703.25 rupees.
Sensex Target

CLSA Asia-Pacific Markets yesterday reduced its 12-month Sensex target to 17,000 from 18,200, citing lower earnings and a “political logjam.” The brokerage cut its earnings estimate for Sensex companies by 3 percent to 1,269 rupees per share for the year to March 2013, joining Credit Suisse Group AG, which on Dec. 7 pared its forecast by 7 percent to 1,300 rupees.

The Sensex trades at 13.9 times future earnings, down from 21.5 times in March 2010. The MSCI Emerging Markets Index (MXEF) is valued at 9.6 times.

India’s economy grew 6.9 percent in the September quarter, the slowest pace in two years, as rising borrowing costs and accelerating inflation cooled demand. Industrial production in October may drop 0.7 percent, the first contraction since June 2009, according to the median estimate of 24 economists in a Bloomberg survey. The government will release the data Dec. 12.

Foreign funds have reduced holdings of domestic shares by $2.4 billion from a record $104.4 billion in July, contributing to the slide in stocks and the rupee, which tumbled to a record 52.73 per U.S. dollar on Nov. 22.

The currency slid 6.7 percent in November, the most since March 1992, and is heading for its second-worst year against the dollar since 1991, when Singh, then India’s finance chief, began a shift toward free-market policies.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India’s HCL Targets ‘Aggressive’ Acquisitions Amid European Debt Crisis

2011-12-08T20:26:00.000-08:00

By Beth Mellor - Dec 8, 2011

HCL Technologies Ltd., an Indian provider of technology services whose clients include Deutsche Bank AG and GlaxoSmithKline Plc (GSK), said the European debt crisis will help it to buy and partner with local companies.

The New Delhi-based company targets deals in the Nordic countries, Germany and France because continental Europe is the “biggest growth area for us,” Chief Executive Officer Vineet Nayar said in an interview in HCL’s London office. Clients often want to work with a local vendor and HCL will pursue “aggressive partnerships in the local markets and aggressive acquisitions,” he said.

Potential targets are probably more “open for acquisition” as a result of the current economic crisis, Nayar said. HCL’s order pipeline is “bigger than ever before” and the company plans to expand offerings for data analysis and cloud computing, which let clients rent software delivered over the Web rather than install it on their own machines.

Indian IT and software companies are benefitting from rising corporate spending on computer services and from governments trying to improve efficiency with technology as budget cuts bite. HCL bought U.K. software provider Axon Group for $658 million in 2008, its biggest ever deal. Indian rival Tata Consultancy Services Ltd. (TCS) said in September it was weighing acquisitions in France, Germany, Japan and the U.S.

“All large Indian IT companies are looking at the M&A game more closely, given that valuations have come down in Europe,” said Standard Chartered analyst Pankaj Kapoor, who has an “outperform” rating on HCL shares.
Search for Value

Before today, HCL had dropped 8.4 percent in Mumbai trading this year, valuing the company at $5.6 billion.

HCL doesn’t plan to expand its U.K. presence and would only be interested in British companies with a strong continental European footprint, Nayar said.

HCL is also benefitting from the current economic climate as more companies and governments are ditching their existing information technology service providers and searching for partners that offer better value, he said.

The $1 trillion information technology services market is “at the beginning of a phase of further disruption, similar to the one the low-cost airlines have brought in the transportation industry,” because of “low-cost” cloud-computing services, researcher Gartner Inc. said Dec. 1.

Gartner in October predicted worldwide enterprise IT spending will rise by 3.9 percent to $2.7 trillion in 2012. While growth will slow from a predicted 5.9 percent increase in 2011, the researcher said that “despite the global economic challenges, enterprises will continue to invest in IT.”
Phone-Hacking Probe

The HCL CEO reiterated that the company is cooperating with the U.K. Home Affairs committee and Metropolitan Police in a phone-hacking inquiry at News Corp.’s U.K. publishing unit.

HCL, which won a five-year contract to manage News International’s data center and networks in 2009, said in a letter to U.K. lawmakers this year it was asked for assistance in deleting e-mails nine times between April 2010 and July 2011.

In January 2011, the month when News Corp. began handing information to the police, the company requested help to “truncate a particular database,” according to the letter. HCL said it wasn’t able to handle the request and suggested another company.

Nayar said it is “common practice across all customers” for IT services providers to be asked to delete data, and that “only the customer knows what the data is.” He also said that “we don’t store the data and therefore the actual deletion was done by some other agency.”

To contact the reporter on this story: Beth Mellor in London at bmellor@bloomberg.net

To contact the editor responsible for this story: Simon Thiel in London at sthiel1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Singh Retail Retreat ‘Nail in the Coffin’ for India Opening By Andrew MacAskill and Kartik Goyal - Dec 7, 2011

2011-12-07T18:52:00.000-08:00

Prime Minister Manmohan Singh’s decision to backtrack on plans to let overseas retailers expand in India may undermine efforts to revive growth and curb inflation, while deepening a yearlong paralysis in government.

The 79-year-old Singh, credited with sparking India’s economic transformation when finance minister two decades ago, yesterday bowed to opposition protests that had forced repeated adjournments of parliament since the Nov. 24 move to allow foreign investment in multibrand retail. Finance Minister Pranab Mukherjee told lawmakers the decision was suspended until a consensus could be reached.

The reversal indefinitely puts off an influx of foreign investment from companies including Wal-Mart Stores Inc. (WMT) and Tesco Plc (TSCO) that are bidding to enter the $396 billion market, at a time when the rupee is already trading near a record low. It also adds to a list of unfinished economic initiatives that includes a proposed tax overhaul and changes to how land is acquired for infrastructure projects.

“It is frustrating to look at unresolved issues and know that they’re resolvable if you can get some leadership and orientation around them,” John Flannery, chief executive officer for General Electric Co. (GE)’s India unit, said in an interview yesterday.

India’s $1.7 trillion economy expanded last quarter at the slowest pace in almost two years after the central bank raised interest rates to slow inflation. The rupee has fallen almost 14 percent this year as investors sold emerging-market assets on concern Europe’s debt crisis will lead to a global recession.
Local Suppliers

In an attempt to kick start the economy, Singh had approved allowing overseas companies including Carrefour SA (CA) to own as much as 51 percent of retailers selling more than one brand, as long as they sourced 30 percent of their products from local suppliers. International retailers are currently restricted to wholesale operations.

Singh argued that opening the retail sector to foreign investors would tame inflation and reduce food wastage in a country where 40 percent of vegetables rot before they can be sold. Foreign companies would bring expertise growing crops and developing a supply chain to keep food fresh, he said at a rally of his ruling Congress party in New Delhi last month.

The government immediately ran into resistance from its two largest coalition partners, Trinamool Congress and the Dravida Munnetra Kazhagam, as well as from opposition parties. Small shopkeepers, who said the plan would wipe out their jobs, joined a one-day union strike Dec. 1 to protest the move.
‘Even More Cautious’

“For anyone hoping that this government would do something, it’s effectively another nail in the coffin,” said Robert Prior-Wandesforde, Singapore-based head of India and Southeast Asia economics at Credit Suisse Group AG. “They will be even more cautious in taking reforms forward than they were before.”

The government has just 10 days left of a crucial session during which it’s seeking to sign into law proposals to set up an anti-graft agency with power to punish civil servants. Transparency activists say they will renew protests that roiled the government in August if the bill isn’t passed this year.

The government has failed to push through any major pieces of legislation since the middle of last year after being embroiled in corruption charges, including allegations against a former minister, bureaucrats and businessmen over a 2008 sale of mobile-phone licenses. Opposition lawmakers’ protests against the government’s failure to check graft had disrupted the previous three sessions of parliament.
‘Political Suicide’

While Singh may have bought breathing space for his administration, both have been badly damaged, said Surjit Singh Bhalla, chairman of New Delhi-based Oxus Fund Management.

“This is political suicide on the part of the Congress government,” Bhalla said in a phone interview. “The only conclusion one can draw is that this government has lost any moral authority to lead. It is completely inexplicable.”

Shares of Indian retailers that could have tied up with foreign companies fell in Mumbai trading yesterday. Shoppers Stop Ltd. (SHOP) dropped 4.9 percent to 349.65 rupees and Trent Ltd. (TRENT) fell 0.7 percent to 956.2 rupees. The benchmark BSE India Sensitive Index gained 0.4 percent.

The government’s decision was “deeply disappointing” and “highly regressive,” Harsh Mariwala, president of the Federation of Indian Chambers of Commerce, said in a statement.

The rupee touched a record low of 52.73 to the dollar on Nov. 22 as overseas funds turned net sellers of stocks amid slowing growth, rising interest rates and the failure of policy makers to rein in prices. Benchmark inflation has stayed above 9 percent all year.
Ambani Call

“We currently have a run on the rupee because we have a total loss of confidence in the government’s capacity to govern,” said Prem Shankar Jha, an independent political analyst and former aide to former Prime Minister Vishwanath Pratap Singh. “The failure to push through FDI in retail is symbolic of the government’s lack of ability” to win arguments.

Reliance Industries Ltd. (RIL) Chairman Mukesh Ambani, India’s richest man, last month urged the government to prioritize laws to bolster the economy.

Major economic changes in the remaining two years of Singh’s second term are unlikely, said Jay Shankar, chief economist at Religare Capital Markets Ltd. in Mumbai. That may rule out opening pension, insurance and aviation sectors to foreign investment, he said.

“The government is now facing more challenges from its coalition partners to carrying out reforms than it is from opposition parties,” Shankar said in an interview.
Disappointments

After leading Congress to its biggest victory in two decades at elections in 2009, Singh has disappointed the businesspeople and analysts who expected him to build on his 1990s’ dismantling of India’s state-dominated economy. Instead, his government has continued a focus on direct support for the nation’s poor, in a country where more than three-quarters of the people live on less than $2 a day.

Singh enacted a jobs plan in 2006 that gives 100 days’ work to any rural household that requests it, and this year indexed the pay rates to the pace of inflation.

Welfare systems, which include a food security bill that will provide cheap grain to nearly three-quarters of India’s 1.2 billion people, have been promoted by Rahul Gandhi. He probably will lead the ruling party into the 2014 election, according to Eurasia Group, after taking over as party president from his mother, Sonia Gandhi. She was treated overseas in August for a medical condition neither the family nor the party will discuss.

Faced with at least five regional elections next year, including one in Uttar Pradesh, India’s most populous state, the government may refrain from making controversial decisions, said Religare’s Shankar.

After those regional ballots “we will be heading into general elections and the closer we get to that, the less likely you are likely to bring out reforms,” Shankar said.

“This is the beginning of the end for this Congress government,” said Bhalla of Oxus. “The government is floundering. The opposition knows these guys are extremely vulnerable and they are just going to keep on attacking them.”

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Andrew MacAskill in New Delhi at amacaskill@bloomberg.net

To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asia Stocks Gain on Europe Optimism By Kana Nishizawa and Toshiro Hasegawa - Dec 6, 2011

2011-12-06T18:47:00.001-08:00

Asian stocks (MXAPJ) rose on speculation the European leaders meeting this week in Brussels will step up efforts to fight the debt crisis to stave off lower national credit ratings that will make funding bailouts more costly.

Nintendo Co., a maker of video-game players that gets 34 percent of its sales in Europe, rose 1.2 percent in Osaka after a report that sales of a handheld game machine will reach target ahead of schedule. Meiji Holdings Co., a Japanese dairy-products producer, gained 3.6 percent after slumping the most since March 15 yesterday on a report radioactive cesium was found in some its products. Hyundai Development Co. (012630), a South Korean builder, rose 3.3 percent after a report the government will announce measures to spur housing markets.

“There is an expectation in the market that Europe will advance measures to overcome the debt issues,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “While there’s a sense of expectation in the market, investors still want to see the results of meetings this week of the European Union and European Central Bank.”

The MSCI Asia Pacific Index (MXAP) rose 0.6 percent to 117.29 as of 9:46 a.m. in Tokyo. All 10 industry groups on the measure gained, with about four stocks advancing for each that dropped.

Japan’s Nikkei 225 Stock Average (NKY) rose 0.8 percent. Australia’s S&P/ASX 200 index gained 0.7 percent after its economy grew more than estimated during the third quarter. South Korea’s Kospi Index advanced 0.5 percent.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Asian Stocks Drop as S&P Puts Euro Nations on Downgrade Watch By Kana Nishizawa and Norie Kuboyama - Dec 5, 2011

2011-12-05T18:50:00.000-08:00

Asian stocks fell, with a benchmark gauge headed for its first loss in seven days, after Standard & Poor’s said it may cut credit ratings on Germany, France and 13 other members of the euro amid the worsening debt crisis.

STX Pan Ocean Co., a South Korean shipping line, dropped 4.8 percent in Seoul after saying a leak was found in its vessel. Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, slid 1.4 percent in Tokyo. Tosoh Corp., a maker of chemical products, slid 4.4 percent after Mizuho Securities Co. cut its rating on the stock to “neutral” from “buy.” Newcrest Mining Ltd. (NCM), an Australian gold producer, declined 2.7 percent after Deutsche Bank AG cut its rating to “hold” from “buy.”

“People want to move away from risk assets,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $20 billion. “The market is unstable and has been moving up and down like a seesaw. Investors buy stocks (MXAPJ) on good news after a plunge and are selling unless the news moves in the right direction. The downgrade news is a bad story in the middle of such movements.”

The MSCI Asia Pacific Index fell 0.5 percent to 117.64 as of 10:21 a.m. in Tokyo, set to end its longest winning streak since Oct. 13. All but one of 10 industry groups on the measure declined, with more than twice as many stocks retreating as gaining.

Japan’s Nikkei 225 Stock Average (NKY) fell 0.7 percent. Australia’s S&P/ASX 200 index retreated 0.6 percent, while South Korea’s Kospi Index fell 0.8 percent.

The MSCI Asia Pacific Index sank 14 percent this year through yesterday, compared with less than 0.1 percent drop by the S&P 500 and a 12 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.9 times estimated earnings on average, compared with 12.7 times for the S&P 500 and 10.6 times for the Stoxx 600.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.