Category Archives: India

India’s wealth drop 32%

(PTI – NDTV.Com)
The wealth of world’s rich people dropped nearly 20 per cent to $32.8 trillion, while India saw the second largest decline in the number of High Net Worth Individuals at the end of 2008, says a report.
 
The population of HNWIs shrank by about 15 per cent to 8.6 million and in India, the numbers came down by 31.6 per cent to 84,000, says the World Wealth Report from Merrill Lynch and Capgemini.
 
HNWIs are referred to those who have at least $one million in investable assets, excluding primary residence, collectibles, consumables, and consumer durables.
 
“At the end of 2008, the worlds population of HNWIs was down 14.9 per cent from the year before to 8.6 million, and their wealth had dropped 19.5 per cent to $32.8 trillion.
 
The declines were unprecedented, and wiped out two robust years of growth in 2006 and 2007,” the report said.
 
Interestingly, the wealth of such individuals grew about 7.2 per cent from 2005 to 2007 while their wealth rose 10.4 per cent during the same period.
 
“India’s HNWI population shrank 31.6 per cent to 84,000, the second largest decline in the world, after posting the fastest rate of growth (up 22.7 per cent) in 2007.
 
“India, still an emerging economy, suffered declining global demand for its goods and services and a hefty drop in market capitalisation (64.1 per cent) in 2008,” the report said.

Posted via email from The investment blog on Post

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RBS says good interest in Asia assets for sale | Deals | Reuters

Part-nationalized Royal Bank of Scotland RBS.L has received good interest from potential buyers for its Asian assets, its chief executive said on Friday.

“Were seeing good levels of interest, but it would be premature to declare victory with respect to price or executability,” RBS Chief Executive Stephen Hester told reporters after a shareholder meeting.

“Were in the process of working through expressions of interest, but were not at the stage where bids you can rely on are being called for,” he said.

RBS asked potential bidders to register their interest by April 1, Reuters reported last month, citing people familiar with the matter.

RBS is retrenching to its core businesses and plans to exit or significantly scale back in up to 36 of the countries where it operates globally.

HSBC HSBA.L0005.HK, Standard Chartered STAN.L2888.HK and Australia and New Zealand Banking Group ANZ ANZ.AX are all considering bids for the Asian assets, separate sources with direct knowledge of the matter have previously told Reuters.

All of the assets in the region could fetch around $2 billion, although RBS is also considering offers for assets in individual countries, sources have said.

via

RBS says good interest in Asia assets for sale

| Deals

| Reuters

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Barron’s Online | This is not just a recession..

via High Debt Service costs mean a long depression

Isn’t the process of restructuring under way in households and at corporations?

They are cutting costs to service the debt. But they haven’t yet done much restructuring. Last year, 2008, was the year of price declines; 2009 and 2010 will be the years of bankruptcies and restructurings. Loans will be written down and assets will be sold. It will be a very difficult time. It is going to surprise a lot of people because many people figure it is bad but still expect, as in all past post-World War II periods, we will come out of it OK. A lot of difficult questions will be asked of policy makers. The government decision-making mechanism is going to be tested, because different people will have different points of view about what should be done.

What are you suggesting?

An example is the Federal Reserve, which has always been an autonomous institution with the freedom to act as it sees fit. Rep. Barney Frank [a Massachusetts Democrat and chairman of the House Financial Services Committee] is talking about examining the authority of the Federal Reserve, and that raises the specter of the government and Congress trying to run the Federal Reserve. Everybody will be second-guessing everybody else.

So where do things stand in the process of restructuring?

What the Federal Reserve has done and what the Treasury has done, by and large, is to take an existing debt and say they will own it or lend against it. But they haven’t said they are going to write down the debt and cut debt payments each month. There has been little in the way of debt relief yet. Very, very few actual mortgages have been restructured. Very little corporate debt has been restructured.

The Federal Reserve, in particular, has done a number of successful things. The Federal Reserve went out and bought or lent against a lot of the debt. That has had the effect of reducing the risk of that debt defaulting, so that is good in a sense. And because the risk of default has gone down, it has forced the interest rate on the debt to go down, and that is good, too.

Debt servicing is more than 15% of the GDP, and that means it will be a long winter

Debt servicing is more than 15% of the GDP, and that means it will be a long winter

However, the reason it hasn’t actually produced increased credit activity is because the debtors are still too indebted and not able to properly service the debt. Only when those debts are actually written down will we get to the point where we will have credit growth. There is a mortgage debt piece that will need to be restructured. There is a giant financial-sector piece — banks and investment banks and whatever is left of the financial sector — that will need to be restructured. There is a corporate piece that will need to be restructured, and then there is a commercial-real-estate piece that will need to be restructured.

Is a restructuring of the banks a starting point?

If you think that restructuring the banks is going to get lending going again and you don’t restructure the other pieces — the mortgage piece, the corporate piece, the real-estate piece — you are wrong, because they need financially sound entities to lend to, and that won’t happen until there are restructurings.

On the issue of the banks, ultimately we need banks because to produce credit we have to have banks. A lot of the banks aren’t going to have money, and yet we can’t just let them go to nothing; we have got to do something.

But the future of banking is going to be very, very different. The regulators have to decide how banks will operate. That means they will have to nationalize some in some form, but they are going to also have to decide who they protect: the bondholders or the depositors?

Nationalization is the most likely outcome?

There will be substantial nationalization of banks. It is going on now and it will continue. But the same question will be asked even after nationalization: What will happen to the pile of bad stuff?

Let’s say we are going to end up with the good-bank/bad-bank concept. The government is going to put a lot of money in — say $100 billion — and going to get all the garbage at a leverage of, let’s say, 10 to 1. They will have a trillion dollars, but a trillion dollars’ worth of garbage. They still aren’t marking it down. Does this give you comfort?

Then we have the remaining banks, many of which will be broke. The government will have to recapitalize them. The government will try to seek private money to go in with them, but I don’t think they are going to come up with a lot of private money, not nearly the amount needed.

To the extent we are going to have nationalized banks, we will still have the question of how those banks behave. Does Congress say what they should do? Does Congress demand they lend to bad borrowers? There is a reason they aren’t lending. So whose money is it, and who is protecting that money?

The biggest issue is that if you look at the borrowers, you don’t want to lend to them. The basic problem is that the borrowers had too much debt when their incomes were higher and their asset values were higher. Now net worths have gone down.

Is Apple hunting for a new CEO?

America already got a new CEO this week. We also have a new saviour in the chair at Citibank/Group. Interestingly, Steve Jobs (AAPL) has already stepped out for a long while. After his first break in 2003, when Pixar came into the world and while AOL Time Warner (TWX, TWC) was still struggling to tape itself together; 5 years before inorganic acquisition Merrill (MER) and Bank of America (BAC) started on the wrong foot (Thain just stepped down) we are looking at a very serious gap in Apple’s strategy that could spell worse turmoil for the financial markets than the preceding crisis as it shows up a lack of character in large corporations that affects employees, investors and friends alike.

We have a smart well placed shimmy from the PR team at Apple about the capabilities of the team of 35000 employees at Apple (AAPL), which could have been part of its core strategy but probably wasn’t. Large organizations do need to be more expressive about their plans for their senior executives. Ones like Apple that survive on luxury pricing for the mass audience come once in “I don’t know another” years and they are on the precipice in this simple crisis. Thankfully, with the markets at such a bend no one may have the time to notice, but my friends at Apple would today be a tortured lot for this uncertainty. There are good leadership candidates outside the company as well whose names should be known to investors and the public in advance if this revolution is going to survive. In its international, and to some extent even in the home US markets, Apple still hangs to a precipice because of its pricing and a lot more transparency into the organization is mandated at such a critical time. Its lack of communication in its international markets would make the situation even more frightening for those outside Cupertino CA.

This is a thought that gets life today as we discuss what will come next at Apple. how will we treat the next breakthrough innovation? How will we get real market share for its iphones and iMacs which had just started to capture popular imagination? How will we grow the iPod business which has proved itself but is still not probably even a tenth of its potential?

Deal Journal – WSJ.com : How Steven Spielberg Handles the Credit Crisis

 

The global credit crisis has roiled the country, but in Hollywood the stars are still spending. Along with Reliance Big Entertainment, filmmaker and DreamWorks SKG co-founder Steven Spielberg wrote a $26.5 million check this week to Paramount Pictures.

 

 

Getty Images

 

 

Mr. Spielberg and DreamWorks Chief Executive Stacey Snider last fall left Paramount in order to launch a film company, with funding from Reliance, one of India’s largest conglomerates.

 

 

As part of an extensive corporate divorce agreement, the name “DreamWorks” and much of its staff went with Mr. Spielberg and Ms. Snider to their new venture.

 

 

But Viacom’s Paramount has retained other DreamWorks assets, such as the right to remain involved in any projects the company puts into production this year. The newly independent DreamWorks also had to pay for 17 movie projects it wanted to take from Paramount to the new company–hence the $26.5 million check Mr. Spielberg just signed. DreamWorks owes an additional sum to Paramount, between $3.5 million to $8.5 million, to cover overhead for producers and screenwriters working on those projects.

 

 

Hollywood insiders are touting the check as a sign that plans for the film venture are proceeding. Those plans came into question at the end of 2008, when the turmoil in the global credit markets slowed J.P. Morgan Chase’s attempts to raise the $700 million to $750 million in debt the new DreamWorks wanted. Reliance had agreed to provide Mr. Spielberg and Ms. Snider as much as $550 million in equity, but only as they had raised an equal amount in debt financing.

 

 

Now, Reliance and DreamWorks are both saying they are confident the money will come through, if at a slower pace. J.P. Morgan plans to raise at least $325 million of the $700 million to $750 million by the end of the first quarter, which Reliance will match for a combined total of at least $650 million.

 

 

via Deal Journal – WSJ.com : How Steven Spielberg Handles the Credit Crisis.

Satyam goes down

Well, first the data you need. Rs 7136 crores addded to books with no accompanying transactions. Just extra revenues and extra profits from these non existent revenues; a non existent personal loan of Rs 1236 crores and non existent cash of Rs 5000 crores on assets. Added revenues of 588 cr in Sep Qtr which could not withstand preliminary due diligence. And to quote the Ramu Raju of the piece, no one knew about it. A plain shame.

None the less, though industry experts come out with Satyam is not representative of India, that is just not true. This is happening everywhere, just a blind eye to the Financials that compromises the best of analysts and market-makers. Criminal concerted planned breakdown of a global systemic disease that is keeping our hopes live for the next corner. Reform that is inordinately delayed and hanging a damocles sword over working professionals.

Satyam’s cash value would now be more like $250 m for just the real estate and the employee roster. And $255m in secured loans. and the liabilities are not going to be transferred to the client roster. At least I would not recommend it. CLSA’s valuation of post diligence breakdown at 600 m seems way off the mark. JPM and Credit Suisse reactions are better. The markets have reacted worse than expected. For stocks outside Satyam, huge falls raise questionsof faith that are representative of the lack of faith that pulls India down.

And when the totem poles of reform like ICICI Bank or institutions like Fidelity cannot do even a semblance of due diligence before investing it is really a question mark on corporate governance at these institutions. And KPMGs and E&Ys and the other Top 20 auditors who have failed once in 2000 and once again in 2008. A shame!

An undue prolongation of the shame that is evident at Enron, GM Ford and now Satyam and a few more. Atleast we have the processes and the structure to discover them and withstand them. I doubt a China and a Russia have even a remote modicum of the process and the regulation. I doubt if the servicing It companies and the users that are even Whistleblowers are doing even remotely enough to make this world a livable one. Nonetheless, one step at a time we will get there.

BAC and Citi also have agreed to cut executive bonuses. It’s a good start to 2009.

NDTV Profit | India emerging as one of the strongest in the crisis

India will emerge as the fourth strongest economy among the G-20 countries after China, Russia and S Korea from the global crisis, given its robust forex reserves, high GDP growth rate and various fiscal and monetary measures taken to tackle the downturn, a study said.

Developed economies like the US, UK and Japan would fare relatively bad in terms of their emergence from the crisis with a ranking of 11th, 12th and 13th respectively, Assocham said in its study titled India & G20: Economic fundamentals amid global recession.

The study considered seven economic indicators relating to size of the economy, spending power, tax structure, interest rate policy, budget balances, debt burden and foreign exchange reserves.

“India, along with China, Russia and South Korea would emerge stronger out of the current crisis as they enjoy strong economic foundations based on foreign exchange reserves, higher growth rates in GDP per capita and sound monetary policy measures,” the chamber said.

India ranked last 19th in terms of budget balance as a per centage of GDP and 12th in terms of public debt as a per centage of GDP, it said, adding that low ranking on these indicators gives the country key challenges to announce heavy fiscal stimulus package, it said.

via India to be 4th strongest economy post crisis: Assocham .

FT.com / Lex / Financial services ; property – UBS/Bank of China

UBS has scored a first in – or rather, out of – China. The Swiss bank, in the dying embers of 2008, sold its 1.3 per cent stake in Bank of China. It netted a few hundred million dollars in the process. Other banks, including Royal Bank of Scotland and Bank of America, could rake in substantially more by selling their shares in Chinese lenders. Because both are recipients of state cash striving to bolster balance sheets, gains in excess of $1bn plus would presumably come in handy.

The logic for selling now, as lock-up periods expire, is compelling. In all, foreign banks spent about $9bn accumulating stakes during the privatisation of China’s big three lenders three years ago. Although the Hong Kong-listed shares have fallen sharply from their 2007 peaks, strategic investors are still comfortably in the money. Shares in Bank of China, which are below the initial public offering price, would still yield a gain of about $1.3bn for RBS based on Wednesday’s close.

via FT.com / Lex / Financial services & property – UBS/Bank of China.

zyakaira notes: i do hope these investments are not being sold in a hurry. For example many such investments in india are among the precious few profit-making ventures left with these global institutions. If these are also sold then the business model is unlikely to be able to recover!

FT.com / Lex / Financial services & property – UBS/Bank of China

UBS has scored a first in – or rather, out of – China. The Swiss bank, in the dying embers of 2008, sold its 1.3 per cent stake in Bank of China. It netted a few hundred million dollars in the process. Other banks, including Royal Bank of Scotland and Bank of America, could rake in substantially more by selling their shares in Chinese lenders. Because both are recipients of state cash striving to bolster balance sheets, gains in excess of $1bn plus would presumably come in handy.

The logic for selling now, as lock-up periods expire, is compelling. In all, foreign banks spent about $9bn accumulating stakes during the privatisation of China’s big three lenders three years ago. Although the Hong Kong-listed shares have fallen sharply from their 2007 peaks, strategic investors are still comfortably in the money. Shares in Bank of China, which are below the initial public offering price, would still yield a gain of about $1.3bn for RBS based on Wednesday’s close.

via FT.com / Lex / Financial services & property – UBS/Bank of China.

zyakaira notes: i do hope these investments are not being sold in a hurry. For example many such investments in india are among the precious few profit-making ventures left with these global institutions. If these are also sold then the business model is unlikely to be able to recover!

Bank rate cut Saturday – update

The government launched its second attempt to stimulate the economy into growing faster. Simultaneously, the Reserve Bank has lowered two key rates to help get more credit flowing through the economy. The repo and the reserve repo rate under the liquidity adjustment facility (LAF) has been cut by 1 per cent while the cash reserve ratio (CRR) has been reduced by 0.5 per cent. The reverse repo rate is now 4 per cent, the repo rate at 5.5 per cent and the CRR at 5 per cent. The CRR cut will effectively make about Rs 20,000 crore available banks. It remains to be seen how much of this the banks will actually use for fresh credit.
Other major steps announced this evening are:

* FII investment limit in rupee denominated corporate bonds increased from $6 bn to $15 bn.
* The ‘all-in-cost’ ceilings on external commercial borrowings (ECBs) removed
* Development of integrated townships would be permitted as an eligible end-use of the ECB
* NBFCs dealing exclusively with infrastructure financing permitted to access ECB from multilateral or bilateral financial institutions
* A Special Purpose Vehicle will be designated shortly to provide liquidity support against investment grade paper to Non Banking Finance Companies (NBFCs) fulfilling certain conditions. The scale of liquidity potentially available through this window is Rs.25,000 crores, although details are yet to be announced.
* An arrangement will be worked out with leading Public Sector Banks to provide a line of credit to NBFCs specifically for financing commercial vehicles.
* Credit targets of Public Sector Banks are being revised upward to reflect the needs of the economy in the present difficult situation. Government will closely monitor, on a fortnightly basis, the provision of sectoral credit by public sector banks.
States will be allowed to raise in the current financial year additional market borrowings of 0.5% of their Gross State Domestic Product (GSDP) for capital expenditures. This would amount to about Rs 30,000 crore.
* India Infrastructure Finance Company (IIFCL), which has already been authorized to raise Rs.10,000 cr. through tax free bonds by 31st March ’09 for refinancing bank lending of longer maturity to eligible infrastructure bid based PPP projects, will be accessing the market next week for raising the first tranche of the amount. This will enable the funding of mainly highways and port projects on hand of about Rs.25,000 crore. To fund additional projects of about Rs.75,000 crore at competitive rates over the next 18 months, IIFCL is being enabled to access in tranches an additional Rs.30,000 crores by way of tax free bonds once funds raised in the current year are effectively utilised.

Apart from these, there are also measures to help exporters and some duty changes.

from http://www.valueresearchonline.com