May 13 (Bloomberg) -- India’s next government that emerges from elections ending today needs to follow through on pledges to bring back cash stashed overseas to help fund an $85 billion economic stimulus plan and bolster markets, Credit Suisse Group AG and Credit Agricole SA say.
“India has to claw back every cent it can get,” said Joseph Tan, chief economist for Asia in Singapore at Credit Suisse, the second-biggest Swiss bank. The prospect of “revenue is the impetus for this crackdown on tax evasion and tax havens,” he said.
The government said in a Supreme Court filing this month that it proposed a new tax agreement with Switzerland to improve the exchange of banking information. The affidavit followed an April petition from Ram Jethmalani, a law minister in the previous Bharatiya Janata Party-led government, calling for the repatriation 70 trillion rupees ($1.4 trillion) of funds he estimates are illicitly held overseas.
Cracking down on illegal outflows from India may help extend a rally in the nation’s stocks and currency, said Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment banking arm of Paris-based Credit Agricole. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, climbed 49 percent since closing at a three-year low on March 9, while the rupee gained 5.2 percent in the same period to 49.315 per dollar.
“If they do get back even a part of the money, it would be positive for the rupee and Indian stocks,” Kotecha said.
Matter of Priority
Calyon forecasts the rupee will appreciate almost 3 percent to end the year at 48 a dollar, while Barclays predicts 47 in six months. The median estimate in a Bloomberg survey of 27 analysts is for the rupee to trade at 49.20 on Dec. 31.
The Global Financial Integrity program, a Washington-based non-government organization campaigning for tighter controls on tax havens, estimates “illicit outflows” from India probably averaged as much as $27 billion annually in the five years through 2006, equivalent to about 35 percent of the nation’s budget deficit.
“The government has already initiated action,” Jayanthi Natarajan, a spokeswoman in New Delhi for the Indian National Congress, the biggest party in the coalition government, said in an interview on May 6. “It is not an election issue for us, though the opposition has made it an issue. This is a matter of principle and priority.”
Election Rhetoric
India’s Supreme Court asked the government on May 4 to provide more information on money held in offshore accounts in response to the request by the BJP’s Jethmalani. The government has failed to act so far because politicians may be among the offenders, the petition said. The government said in a statement filed this month it has no “authentic” estimates of the amount lying in those bank accounts.
“This is election rhetoric,” said N. Bhaskara Rao, chairman of the Center for Media Studies, an independent policy research group in New Delhi. He said he expects the government won’t follow through with its pledge.
Both parties made election promises to build roads, bridges and rural health centers in a country where the World Bank estimates 76 percent survive on less than $2 a day. They have also pledged to reduce a budget shortfall that has swelled to 6 percent of gross domestic product, the most since 2001.
‘Join the Queue’
Lal Krishna Advani, leader of the BJP, vowed last month to bring back the black money within the first 100 days of its administration, the Press Trust of India reported on April 17.
Both the Congress party and the BJP may need to form a government in coalition with smaller parties, which have won support by criticizing corruption among officials, according to surveys before balloting began on April 16.
“It is time India joined the queue,” Sitaram Yechury, leader of the Communist Party of India (Marxist), said in an interview in New Delhi on April 30. “We are on a better wicket now after the Swiss banks relented” to the U.S., he said, referring to favorable playing conditions on a cricket pitch.
UBS AG, Switzerland’s largest bank, paid $780 million in February and agreed to part with about 250 names of American account holders after the Justice Department accused the lender of conspiring to defraud the U.S.
European leaders among the Group of 20 countries said in March that they would introduce more transparent regulations for tax havens. Under the new rules, Switzerland will assist in all investigations provided the governments produced “concrete evidence of wrongdoing,” said James Nason, a spokesman for the Basel-based Swiss Bankers Association in an April 30 e-mail.
Speculation is growing that Indians are bringing money back to the country “due to the fear that a new government will take action on Swiss funds,” said R.K. Gupta, who oversees the equivalent of $130 million in Indian stocks at Taurus Asset Management Co. in New Delhi.
Tuesday, May 12, 2009
Monday, May 11, 2009
Investment slowdown fears for central Europe
By Jan Cienski in Warsaw and Thomas Escritt in Budapest
Published: May 12 2009 03:04 | Last updated: May 12 2009 03:04
Central Europe has been hard hit by the global economic downturn, but the pain has not yet persuaded many investors to close recently built factories that have sprung up across the region in the past decade.
The reason is that factories tend to be more modern than their counterparts in western Europe and central European labour – helped by recent declines in local currencies – is still significantly cheaper than in more developed parts of the continent.
EDITOR’S CHOICE
Poland considers postponing euro entry - May-11
Risk shifts summit from Gdansk - May-09
IMF gives $17.1bn loan to Romania - May-05
Lithuania hopes for entry deal on euro - Apr-07
ECB rejects euro short cuts in east Europe - Apr-06
IMF urges eastern EU to adopt euro - Apr-05
However, investment agencies are reporting new investment is likely to slow significantly this year and there are fears over the region’s status as an investment hub.
Companies have been rethinking or putting off future commitments, part of a wider trend of slowing foreign investment in a region that had until recently been one of the world’s leading investment magnets thanks to its close ties to western Europe and lower costs.
Poland, which saw €12bn ($16bn, £11bn) in foreign direct investments last year, expects that there will be only about €7bn this year. In Poland, Marcegaglia, the Italian steel maker, was thinking about building a new rolling plant near the city of Szczecin, but has decided to hold off, concentrating on other priorities.
“Poland is still a very attractive country for us because of its large market and lower costs,” said Antonio Marcegaglia, the company’s chief executive. “The investment in Szczecin is not completely out, but we needed more time to look and decide if we want to go ahead in the future.”
Central Europe could also benefit as international companies struggle to cut costs, which could help partially shield the region from steep recession.
In one recent example Dell, the computer maker, announced it was shifting production from its factory in Limerick to its plant in Lodz. Rafal Branowski, the company’s spokesman, said that the reason for the move was purely to save money. Dorota Lombardi, a director of the special investment zone near the central Polish city of Lodz, said none of the companies that had set up factories in her region had pulled out, but several potential investors had put off talks until later this year.
“We are seeing interest from companies who already have investments with us. Those who are new are more hesitant,” she said, adding that it made little sense for investors to close new factories. Some companies are pulling out: Hitachi, the Japanese electronics company, is closing a new flat-screen television factory in the Czech Republic because of a slump in demand.
Central Europe could benefit as international companies struggle to cut costs, which could help partially shield the region from the steep recession expected in western Europe.
Sorin Vasilescu, director of Romania's Agency for Foreign Investment, said: “A few projects have been cancelled – and their number is not significant, but more than a few are on standby.”
Mr Vasilescu said he expected to find out the fate of these postponed investments in the second half of this year.
Published: May 12 2009 03:04 | Last updated: May 12 2009 03:04
Central Europe has been hard hit by the global economic downturn, but the pain has not yet persuaded many investors to close recently built factories that have sprung up across the region in the past decade.
The reason is that factories tend to be more modern than their counterparts in western Europe and central European labour – helped by recent declines in local currencies – is still significantly cheaper than in more developed parts of the continent.
EDITOR’S CHOICE
Poland considers postponing euro entry - May-11
Risk shifts summit from Gdansk - May-09
IMF gives $17.1bn loan to Romania - May-05
Lithuania hopes for entry deal on euro - Apr-07
ECB rejects euro short cuts in east Europe - Apr-06
IMF urges eastern EU to adopt euro - Apr-05
However, investment agencies are reporting new investment is likely to slow significantly this year and there are fears over the region’s status as an investment hub.
Companies have been rethinking or putting off future commitments, part of a wider trend of slowing foreign investment in a region that had until recently been one of the world’s leading investment magnets thanks to its close ties to western Europe and lower costs.
Poland, which saw €12bn ($16bn, £11bn) in foreign direct investments last year, expects that there will be only about €7bn this year. In Poland, Marcegaglia, the Italian steel maker, was thinking about building a new rolling plant near the city of Szczecin, but has decided to hold off, concentrating on other priorities.
“Poland is still a very attractive country for us because of its large market and lower costs,” said Antonio Marcegaglia, the company’s chief executive. “The investment in Szczecin is not completely out, but we needed more time to look and decide if we want to go ahead in the future.”
Central Europe could also benefit as international companies struggle to cut costs, which could help partially shield the region from steep recession.
In one recent example Dell, the computer maker, announced it was shifting production from its factory in Limerick to its plant in Lodz. Rafal Branowski, the company’s spokesman, said that the reason for the move was purely to save money. Dorota Lombardi, a director of the special investment zone near the central Polish city of Lodz, said none of the companies that had set up factories in her region had pulled out, but several potential investors had put off talks until later this year.
“We are seeing interest from companies who already have investments with us. Those who are new are more hesitant,” she said, adding that it made little sense for investors to close new factories. Some companies are pulling out: Hitachi, the Japanese electronics company, is closing a new flat-screen television factory in the Czech Republic because of a slump in demand.
Central Europe could benefit as international companies struggle to cut costs, which could help partially shield the region from the steep recession expected in western Europe.
Sorin Vasilescu, director of Romania's Agency for Foreign Investment, said: “A few projects have been cancelled – and their number is not significant, but more than a few are on standby.”
Mr Vasilescu said he expected to find out the fate of these postponed investments in the second half of this year.
IMF Eases Pakistan’s FY10 Budget Deficit Target to Boost Growth
May 12 (Bloomberg) -- The International Monetary Fund, which approved a $7.6 billion loan to Pakistan in November, has agreed to ease the country’s budget-deficit target to help boost economic growth.
“The slowing economy, additional donor support, and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009-10,” the IMF said in a statement yesterday. An increase in the target to 4.6 percent of gross domestic product from 3.4 percent “will provide fiscal space and boost growth,” the Washington-based lender said.
Pakistan’s economy has deteriorated in the past two years amid the highest interest rates in Asia and the nation’s fight against Taliban militants, which the United Nations says has forced one million people to flee their homes.
The government predicts the economy will expand 2.5 percent this fiscal year, the slowest pace in eight years, compared with annual average growth of 6.8 percent in the past five years.
The IMF said any cut in the central bank’s key interest rate “will await a significant decline in core inflation.” The lender also called for increasing the country’s tax-to-GDP ratio.
State Bank of Pakistan last month cut its benchmark lending rate by one percentage point to 14 percent to slow inflation.
“The slowing economy, additional donor support, and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009-10,” the IMF said in a statement yesterday. An increase in the target to 4.6 percent of gross domestic product from 3.4 percent “will provide fiscal space and boost growth,” the Washington-based lender said.
Pakistan’s economy has deteriorated in the past two years amid the highest interest rates in Asia and the nation’s fight against Taliban militants, which the United Nations says has forced one million people to flee their homes.
The government predicts the economy will expand 2.5 percent this fiscal year, the slowest pace in eight years, compared with annual average growth of 6.8 percent in the past five years.
The IMF said any cut in the central bank’s key interest rate “will await a significant decline in core inflation.” The lender also called for increasing the country’s tax-to-GDP ratio.
State Bank of Pakistan last month cut its benchmark lending rate by one percentage point to 14 percent to slow inflation.
Asian Stocks Fall From Seven-Month High on Valuation Concerns
May 12 (Bloomberg) -- Asian stocks fell from a seven-month high, led by banks and mining companies, as investors sold shares trading at their most expensive valuations in five years.
Mitsubishi UFJ Financial Group Inc., which soared 26 percent in the past three days, dropped 4.8 percent. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, slumped 4.5 percent after JPMorgan Chase & Co. cut its recommendation on the stock. Sony Corp., which gets a quarter of its sales from the U.S., retreated 2.4 percent as the yen climbed versus the dollar.
“Of course its time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television. “I don’t see the stock market as a great place to be for the next two to three years, maybe for the next decade.”
The MSCI Asia Pacific Index fell 1.3 percent to 97.25 as of 1:47 p.m. in Tokyo, snapping a six-day advance. Optimism the global economy is recovering drove the gauge to the highest since Oct. 7 yesterday. The average valuation of its constituent members is 28 times trailing earnings, a level not seen since March 2004, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average retreated 1 percent to 9,356.16. The measure’s price-book ratio climbed to 1.14 yesterday, the highest level since Oct. 7, from a record low of 0.81 on March 9, according to gauge compiler Nikkei Inc.
Most Asian markets declined except in China, India and Vietnam. South Korea’s Kospi Index lost 0.8 percent as the nation’s central bank left its benchmark interest rate unchanged at 2 percent.
Technical Indicators
Sumitomo Heavy Industries Ltd., Japan’s largest maker of plastic-injection-molding gear, slumped 9 percent after projecting lower earnings. Asahi Glass Co. climbed 11 percent after Nomura Holdings Inc. recommended buying the shares. NCsoft Corp., South Korea’s biggest online-game maker, surged 13 percent as brokerages raised their share-price targets.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.5 percent. The gauge fell 2.2 percent in New York yesterday, retreating from the most expensive level in seven months.
“Technical indicators suggest the market is overheating and investors are ready to take profit after recent gains,” said Toshio Sumitani, a strategist at Tokai Tokyo Securities Co.
The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, climbed to 78 yesterday, above the threshold of 70 that some investors use as a signal to sell.
Mitsubishi UFJ, Japan’s largest publicly traded bank, retreated 4.8 percent to 642 yen. Yuanta Financial Holding Co., the owner of Taiwan’s largest securities brokerage, slumped 6.9 percent to NT$23.55 in Taipei. Commonwealth Bank of Australia, the nation’s largest lender, fell 1 percent to A$36.30.
Mounting Losses
Finance companies accounted for 43 percent of the MSCI Asia Pacific Index’s drop today. The shares are the second-worst performing of the benchmark measure’s 10 industry groups in the past year. The deepening credit crisis has caused losses at the biggest financial institutions to swell to more than $1.4 trillion since the start of 2007.
HSBC Holdings Plc, Europe’s largest bank, said yesterday it will be a “tough” year in 2009 as bad loans increase and the economy deteriorates. Former Oppenheimer & Co. analyst Meredith Whitney said in an interview with CNBC yesterday profits at U.S. banks will miss consensus estimates in 2010 and 2011, adding shares of lenders are “grossly overvalued.”
HSBC added 1.1 percent to HK$66.85 in Hong Kong.
Fortescue dropped 4.6 percent to A$2.93. The stock was cut to “underweight” from “neutral” at JPMorgan, which cited weaker-than-expected production and higher costs.
Metal Prices
BHP Billiton, the world’s largest mining company, slumped 2.6 percent to A$34.37. Mitsui & Co., Japan’s second-largest trading company, declined 3.3 percent to 1,156 yen. A measure of six primary metals traded in London fell 1.8 percent yesterday, the sharpest drop since April 28. Copper futures in New York dropped 2.7 percent.
Sony lost 2.4 percent to 2,630 yen as the yen strengthened against the dollar to as much as 97.14 today, a level not seen since April 29, from 98.43 at the 3 p.m. close of stock trading in Tokyo.
Mazda Motor Corp., Japan’s fifth-largest automaker, lost 5 percent to 247 yen. Kyodo News said the company may forecast an operating loss of more than 25 billion yen ($257 million) for the current fiscal year due to slumping vehicle sales.
Toyota Motor Corp., the world’s largest automaker, dropped 1.6 percent to 3,730 yen after the company said it’s idling three of 11 production lines at a domestic engine plant in anticipation of lower sales.
Brokerage Upgrades
Sumitomo Heavy slumped 9 percent to 413 yen. Net income for the year ending March 2010 will decrease by 74 percent to 3.5 billion yen ($35.5 million), Sumitomo Heavy said in a release to the exchange yesterday. That missed the median profit estimate of 10.9 billion yen by analysts surveyed by Bloomberg.
Asahi Glass jumped 11 percent to 650 yen, the highest since Oct. 21, after Nomura raised the stock to “buy,” citing a recovery in demand for liquid crystal glass substrates.
NCsoft climbed 13 percent to 177,000 won. Credit Suisse Group AG increased its share-price estimate by 18 percent, citing higher-than-expected first-quarter earnings. Goldman Sachs Group Inc. raised its stock price estimate by 7.7 percent.
Mitsubishi UFJ Financial Group Inc., which soared 26 percent in the past three days, dropped 4.8 percent. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, slumped 4.5 percent after JPMorgan Chase & Co. cut its recommendation on the stock. Sony Corp., which gets a quarter of its sales from the U.S., retreated 2.4 percent as the yen climbed versus the dollar.
“Of course its time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television. “I don’t see the stock market as a great place to be for the next two to three years, maybe for the next decade.”
The MSCI Asia Pacific Index fell 1.3 percent to 97.25 as of 1:47 p.m. in Tokyo, snapping a six-day advance. Optimism the global economy is recovering drove the gauge to the highest since Oct. 7 yesterday. The average valuation of its constituent members is 28 times trailing earnings, a level not seen since March 2004, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average retreated 1 percent to 9,356.16. The measure’s price-book ratio climbed to 1.14 yesterday, the highest level since Oct. 7, from a record low of 0.81 on March 9, according to gauge compiler Nikkei Inc.
Most Asian markets declined except in China, India and Vietnam. South Korea’s Kospi Index lost 0.8 percent as the nation’s central bank left its benchmark interest rate unchanged at 2 percent.
Technical Indicators
Sumitomo Heavy Industries Ltd., Japan’s largest maker of plastic-injection-molding gear, slumped 9 percent after projecting lower earnings. Asahi Glass Co. climbed 11 percent after Nomura Holdings Inc. recommended buying the shares. NCsoft Corp., South Korea’s biggest online-game maker, surged 13 percent as brokerages raised their share-price targets.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.5 percent. The gauge fell 2.2 percent in New York yesterday, retreating from the most expensive level in seven months.
“Technical indicators suggest the market is overheating and investors are ready to take profit after recent gains,” said Toshio Sumitani, a strategist at Tokai Tokyo Securities Co.
The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, climbed to 78 yesterday, above the threshold of 70 that some investors use as a signal to sell.
Mitsubishi UFJ, Japan’s largest publicly traded bank, retreated 4.8 percent to 642 yen. Yuanta Financial Holding Co., the owner of Taiwan’s largest securities brokerage, slumped 6.9 percent to NT$23.55 in Taipei. Commonwealth Bank of Australia, the nation’s largest lender, fell 1 percent to A$36.30.
Mounting Losses
Finance companies accounted for 43 percent of the MSCI Asia Pacific Index’s drop today. The shares are the second-worst performing of the benchmark measure’s 10 industry groups in the past year. The deepening credit crisis has caused losses at the biggest financial institutions to swell to more than $1.4 trillion since the start of 2007.
HSBC Holdings Plc, Europe’s largest bank, said yesterday it will be a “tough” year in 2009 as bad loans increase and the economy deteriorates. Former Oppenheimer & Co. analyst Meredith Whitney said in an interview with CNBC yesterday profits at U.S. banks will miss consensus estimates in 2010 and 2011, adding shares of lenders are “grossly overvalued.”
HSBC added 1.1 percent to HK$66.85 in Hong Kong.
Fortescue dropped 4.6 percent to A$2.93. The stock was cut to “underweight” from “neutral” at JPMorgan, which cited weaker-than-expected production and higher costs.
Metal Prices
BHP Billiton, the world’s largest mining company, slumped 2.6 percent to A$34.37. Mitsui & Co., Japan’s second-largest trading company, declined 3.3 percent to 1,156 yen. A measure of six primary metals traded in London fell 1.8 percent yesterday, the sharpest drop since April 28. Copper futures in New York dropped 2.7 percent.
Sony lost 2.4 percent to 2,630 yen as the yen strengthened against the dollar to as much as 97.14 today, a level not seen since April 29, from 98.43 at the 3 p.m. close of stock trading in Tokyo.
Mazda Motor Corp., Japan’s fifth-largest automaker, lost 5 percent to 247 yen. Kyodo News said the company may forecast an operating loss of more than 25 billion yen ($257 million) for the current fiscal year due to slumping vehicle sales.
Toyota Motor Corp., the world’s largest automaker, dropped 1.6 percent to 3,730 yen after the company said it’s idling three of 11 production lines at a domestic engine plant in anticipation of lower sales.
Brokerage Upgrades
Sumitomo Heavy slumped 9 percent to 413 yen. Net income for the year ending March 2010 will decrease by 74 percent to 3.5 billion yen ($35.5 million), Sumitomo Heavy said in a release to the exchange yesterday. That missed the median profit estimate of 10.9 billion yen by analysts surveyed by Bloomberg.
Asahi Glass jumped 11 percent to 650 yen, the highest since Oct. 21, after Nomura raised the stock to “buy,” citing a recovery in demand for liquid crystal glass substrates.
NCsoft climbed 13 percent to 177,000 won. Credit Suisse Group AG increased its share-price estimate by 18 percent, citing higher-than-expected first-quarter earnings. Goldman Sachs Group Inc. raised its stock price estimate by 7.7 percent.
Sunday, May 10, 2009
Indian Bonds Decline as Some Investors Sold Before Debt Sales
May 11 (Bloomberg) -- Indian bonds fell for a third day on speculation some investors sold part of their holdings to raise cash for purchases at bond auctions later this week.
Benchmark 10-year bond yields climbed to the highest level in almost a month before the government’s scheduled sale of 120 billion rupees ($2.4 billion) of debt on May 14, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.
“The approach is to not hold positions for long because of a large supply,” said S. Srikumar, chief debt trader at state- owned Corporation Bank in Mumbai. “That is going to keep the pressure on yields to rise.”
The yield on the 6.05 percent note due February 2019 rose four basis points to 6.42 percent as of 9:45 a.m. in Mumbai, according to the central bank’s trading system. The price fell 0.26, or 26 paise per 100-rupee face amount, to 97.37. A basis point is 0.01 percentage point.
The 2019 debt’s yield may increase to 6.50 this week, Srikumar said.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, was little changed. The rate, a fixed payment made to receive floating rates, was at 5.75 percent.
Benchmark 10-year bond yields climbed to the highest level in almost a month before the government’s scheduled sale of 120 billion rupees ($2.4 billion) of debt on May 14, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.
“The approach is to not hold positions for long because of a large supply,” said S. Srikumar, chief debt trader at state- owned Corporation Bank in Mumbai. “That is going to keep the pressure on yields to rise.”
The yield on the 6.05 percent note due February 2019 rose four basis points to 6.42 percent as of 9:45 a.m. in Mumbai, according to the central bank’s trading system. The price fell 0.26, or 26 paise per 100-rupee face amount, to 97.37. A basis point is 0.01 percentage point.
The 2019 debt’s yield may increase to 6.50 this week, Srikumar said.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, was little changed. The rate, a fixed payment made to receive floating rates, was at 5.75 percent.
Indian Rupee Rises to Two-Month High as Fund Inflows Increase
May 11 (Bloomberg) -- India’s rupee rose to a two-month high on optimism a nine-week rally in local shares will encourage overseas funds to increase holdings of local assets.
Data from the capital markets regulator showed share purchases by foreign funds exceeded sales on all but two of the last 21 trading days. The Bombay Stock Exchange’s Sensitive Index has rebounded 46 percent from a three-year low reached on March 9, and on May 8 rounded out the best run of weekly gains in 2 1/2 years.
“The rupee is expected to keep its positive bias as capital inflows are showing a sustained improvement,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Further gains in equities will support that trend.”
The rupee strengthened as much as 0.5 percent to 49.0600 per dollar, the strongest level since Feb. 17, and traded at 49.1275 as of 9:46 a.m. in Mumbai, according to data compiled by Bloomberg. It advanced 1.7 percent last week, the most since the five-day period ended March 20.
Offshore contracts indicate bets the rupee will trade at 49.18 to the dollar in a month, compared with expectations of 49.34 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Overseas funds bought a net $655 million of Indian shares this month, according to data released by the Securities and Exchange Board of India.
The Reserve Bank of India estimates Asia’s third-largest economy will expand 6 percent in the fiscal year that began April 1. Gross domestic product rose 5.3 percent in the three months ended Dec. 31, the second-fastest pace among the world’s top-20 economies after China.
Data from the capital markets regulator showed share purchases by foreign funds exceeded sales on all but two of the last 21 trading days. The Bombay Stock Exchange’s Sensitive Index has rebounded 46 percent from a three-year low reached on March 9, and on May 8 rounded out the best run of weekly gains in 2 1/2 years.
“The rupee is expected to keep its positive bias as capital inflows are showing a sustained improvement,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Further gains in equities will support that trend.”
The rupee strengthened as much as 0.5 percent to 49.0600 per dollar, the strongest level since Feb. 17, and traded at 49.1275 as of 9:46 a.m. in Mumbai, according to data compiled by Bloomberg. It advanced 1.7 percent last week, the most since the five-day period ended March 20.
Offshore contracts indicate bets the rupee will trade at 49.18 to the dollar in a month, compared with expectations of 49.34 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Overseas funds bought a net $655 million of Indian shares this month, according to data released by the Securities and Exchange Board of India.
The Reserve Bank of India estimates Asia’s third-largest economy will expand 6 percent in the fiscal year that began April 1. Gross domestic product rose 5.3 percent in the three months ended Dec. 31, the second-fastest pace among the world’s top-20 economies after China.
Hindustan Unilever Quarterly Sales Miss Estimates
May 11 (Bloomberg) -- Hindustan Unilever Ltd., India’s biggest household products maker, posted lower-than-estimated sales as retail chains shut stores and wholesalers reduced inventories on speculation of price reductions.
Sales rose 6 percent to 39.9 billion rupees ($810 million) in the quarter ended March, lower than the 43.6 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Companies are cutting prices to boost demand and retailers are shutting money-losing stores to shore up profit as Asia’s third-biggest economy slows from 9 percent average growth in the past four years, damping consumer demand. India has announced tax cuts to boost demand after its economy expanded 5.3 percent in the three months ended December, the slowest pace in five years.
“Because of frequent price corrections, trade downstocking has been observed,” Vice Chairman D. Sundaram told reporters in a conference call yesterday. “The number of organized retail stores has also come down.”
The company cut prices of several items including Lux and Lifebuoy soaps, Sundaram said.
Indian retailers are shutting unprofitable stores and reducing costs to maintain profit margins as the economic slowdown hurts sales. Retailer Subhiksha Trading Services Ltd. said on Jan. 30 its business has come to a “near standstill” and it needs 3 billion rupees to survive.
Hindustan Unilever has lost 7 percent of its market value compared with a 23 percent gain for India’s benchmark Sensitive Index. Hindustan Unilever gained 1 percent to 233.05 rupees on May 8.
Profit Estimate
Hindustan Unilever posted a 3.7 percent increase in profit in the March quarter, missing estimates after a one-time charge for retirement benefits and restructuring.
Net income increased to 3.95 billion rupees in the three months ended March, the company said. That lags behind the 4.51 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Profit before one-time items rose 20 percent as the company benefited from lower raw material prices, it said.
The company made a one-time provision of 604.8 million rupees for retirement benefits and 257 million rupees for restructuring in the quarter ended March.
Prices of raw materials including palm oil and petroleum derivatives have reduced from record levels last year.
“Input costs are down sequentially except in tea” Hindustan Unilever said yesterday.
Lower costs and cost savings boosted the operating margin, or the percentage of sales left after subtracting production and other expenses, by 2 percentage points in the quarter.
Hindustan Unilever’s revenue from soaps and detergents, which contribute about half of sales, gained 16 percent to 20.1 billion rupees. Profit before interest and tax rose 43 percent to 3.34 billion rupees.
Profit before interest and tax from more expensive personal care products such as skin creams and toothpaste fell 2.8 percent to 2.39 billion rupees. Sales of Fair & Lovely skin cream, Pepsodent toothpaste and other personal care products rose 1.9 percent to 10.4 billion rupees.
Sales rose 6 percent to 39.9 billion rupees ($810 million) in the quarter ended March, lower than the 43.6 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Companies are cutting prices to boost demand and retailers are shutting money-losing stores to shore up profit as Asia’s third-biggest economy slows from 9 percent average growth in the past four years, damping consumer demand. India has announced tax cuts to boost demand after its economy expanded 5.3 percent in the three months ended December, the slowest pace in five years.
“Because of frequent price corrections, trade downstocking has been observed,” Vice Chairman D. Sundaram told reporters in a conference call yesterday. “The number of organized retail stores has also come down.”
The company cut prices of several items including Lux and Lifebuoy soaps, Sundaram said.
Indian retailers are shutting unprofitable stores and reducing costs to maintain profit margins as the economic slowdown hurts sales. Retailer Subhiksha Trading Services Ltd. said on Jan. 30 its business has come to a “near standstill” and it needs 3 billion rupees to survive.
Hindustan Unilever has lost 7 percent of its market value compared with a 23 percent gain for India’s benchmark Sensitive Index. Hindustan Unilever gained 1 percent to 233.05 rupees on May 8.
Profit Estimate
Hindustan Unilever posted a 3.7 percent increase in profit in the March quarter, missing estimates after a one-time charge for retirement benefits and restructuring.
Net income increased to 3.95 billion rupees in the three months ended March, the company said. That lags behind the 4.51 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Profit before one-time items rose 20 percent as the company benefited from lower raw material prices, it said.
The company made a one-time provision of 604.8 million rupees for retirement benefits and 257 million rupees for restructuring in the quarter ended March.
Prices of raw materials including palm oil and petroleum derivatives have reduced from record levels last year.
“Input costs are down sequentially except in tea” Hindustan Unilever said yesterday.
Lower costs and cost savings boosted the operating margin, or the percentage of sales left after subtracting production and other expenses, by 2 percentage points in the quarter.
Hindustan Unilever’s revenue from soaps and detergents, which contribute about half of sales, gained 16 percent to 20.1 billion rupees. Profit before interest and tax rose 43 percent to 3.34 billion rupees.
Profit before interest and tax from more expensive personal care products such as skin creams and toothpaste fell 2.8 percent to 2.39 billion rupees. Sales of Fair & Lovely skin cream, Pepsodent toothpaste and other personal care products rose 1.9 percent to 10.4 billion rupees.
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