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As per a recent review featured in yesterdays bloomberg, mutual funds are now moving on esp where defensives such as pensions and insurancve are concerned:

A year after the financial crisis subsided, the $2.5 trillion private-equity industry is finding the easy money may be gone.

Managers saddled with $1.6 trillion in buyouts made during a three-year boom have marked at least 6 of the era’s 10 biggest deals at or below cost, according to data compiled by Bloomberg. About $470 billion sits idle, according to London-based researcher Preqin Ltd. Announced purchases so far this year total less than a fifth of their volume at the peak in 2007.

Pensions, endowments and mutual funds cut new commitments to buyout funds by more than 50 percent, according to Preqin, questioning whether firms led by Blackstone Group LP have grown too large to generate the returns that made their founders billionaires. Blackstone, the world’s biggest private-equity company, has dropped 67 percent in New York trading since a 2007 offering, and Fortress Investment Group LLC lost 82 percent. KKR & Co. this month canceled a $500 million stock sale.

Indian Private Equity, real estate and infrastructure

Image via CrunchBase

On the payout side, funds continued to chase real estate opportunities with deeper infrastructure or edcaion and entertainment players coming in a poor second likely from the interest real estate generates for funds. However exits continue to create a buzz esp in Asian circles with Elephant Capital exiting NIIT and Bangalore start up and now an all India addiction Justdial planning a nothing less than $149 million IPO for its PE partners SAIF, Tiger Global and Sequoia. The $149 million IPO will probabl let PE exit half their 52% stake in VSS Mani’s Just Dial.

New funds from Jacob Ballas( $450m, Infrastructure) and Frontline Strategy ($150m, Growth, Special Situations) underlined the continuing Asian honeymoon with PE funding based projects with $776 million in July 2010 alone after a $2.8 billion first half. China got another $3.3 billion in the first 6 months. Country dedicated vehicles are now a common entry point for global funds. While Soros entered India as an investor in the Bombay Stock exchange the distant second to NSE, In China TPG partnered Blackstone in August to enter a municipal region Chongquing with a $750 million local currency fund after another in Shanghai.

Blackstone investments

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Meanwhile, Blackstone investments Alliance Medical with a $450 million valuation and Travelport with a $1.9 billion IPO tab continued to detail Blackstone’s tenacity with large PE investments.

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In fact Travelport is opting for more debt as Blackstone digs in its heels in a dozen such investments where a quick exit may become unlikely if not already given up on due to failing liquidity for PE exits. Another IPO from Travel industry major Amadeus had given Travelport some hope to exit with a successful $1.7 billion IPO now listed at a 17% premium. KKR co-listed in US in similar conditions in June-July when Blackstone had raised $13 bln for a buyout fund.

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While HP’s Hurd tickling disasters and the Apple factory grabbed a lion’s share f the attention, the 2008 crisis also marked a full stop to tech titans’ great conqests. Intel however is not one to be stopped, paying a 60% cash premium for the anti virus and security solutions biggie McAfee. For McAfee being valued at $7.8 billion or $48 is a great jump from its staid $30 life in face of $15 billion valuations for facebook and $2-3 billion for anything with the social tag on t ( I believe even a popular orange on you tube could get the billion label pretty soon if the right per subscriber value can be found!)

GM makes it

Meanwhile GM announced a nearly $23 billion filing, taking a fancy to the figure mopped up by AgBank in China and HongKong. While AgBank used two green shoe entitlements of 15% to get to the largest IPO tab, GM intends to float the $5 b in preferred shares from the government alongwith $18 billion in common equity. The treasury has agreed to denote itself as one of the selling common shareholders in the issue contributing $10 illion worth in Common. Compared to the overall 61% they hold, this is just a minor beginning. The IPo will leave GM with 500 mn shares outstanding and the government $15 bn richer after the $50bn payout from the Treasury nearly sunk its own finances last summer.

Intel President and CEO Paul Otellini believes he is adding a third pillar of his own to Intel’s Computing performance and networking capabilities they already boast of. Of course buying CISCO if it ever comes to that would be a wholly different ball game for the Palo Alto company who expects to add the security layer to its new mobile solutions. intel has sales of around $28-30 billion from its continuing leadership in semiconductor devices, as Moore’s law continues to beget more pricing drops for customers’ smiling pockets than the earlier era’s annual performance upgrades

In the meantime GM earned $1.3 billion in the latest quarter with its pruned portfolio of Buick, Cadillac , Chevy and the star performer GMC. The quarter’s revenues definitely revived the old GM with a $33 billion take and a lot of institutions out there would want a piece of the new GM in the new avatar

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As Dealbook gathered and Caixin reported

Now the storm has arrived. CIC’s stake in Morgan Stanley is in equity units that, according to terms of the 2007 agreement, must be converted to publicly traded common stock August 17. The conversion is mandatory and a loss – at least on paper – for CIC seems inevitable.
The equity conversion is expected to cost between US$ 48.07 and US$ 57.68 per share at a time when Morgan Stanley stock price is hovering at about US$ 27 a share.
Meanwhile, as a foreign investor, CIC is looking in a rearview mirror at potential pressure from the U.S. government over the size of its stake in Morgan Stanley. This concern factored into the fund’s decision in recent weeks to sell large blocks of Morgan Stanley common stock on the secondary market.
After the equity conversion, CIC’s stake is expected to reach 11.64 percent of the financial holding group, or 171.6 million shares.

CIC anyway has to sell at least a fifth of its stake as the US treasury has in December 2008 rules limited discretionary investment to 10% of a company’s ownership. Till now CIC has sold more than 20 million shares

Asian Investors in Japan and Korea had in fact stepped in to save Morgan Stanley till the day Lehman turned over and made space for the US Investment Banks to breathe by the fire in 2008. The current Chinese firesale will lead to a further depressed prognostication for the least fancied of US banks.

A potential solution to this impasse might lie in restructuring the deal on new terms but that is likely to only increase CIC’s take above the 10% limit.

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Stanchart paid $90m for sponsoring Liverpool in the Premier League

StanChart reduced impairments by $660 million to take profits for the six months to $3.12 billion, Operating/Pre Tax Margin staying at 33% despite a higher effective tax rate of 32.5%. Stanchart results will be updated after the afternoon conference bits fly in.but the Earnings of $1 per share seem to be a concern going forward as revenues stayed put at $7924 million and Indian IDRs raised its core Tier I Capital to a minimum 9% after the Basel III requirements, however StanChart may not have to change much but still an equivalent of this quarters $5-6 billion will be required again

Apart from its stake in Bohai Bank that has $25b in assets and 42 branches in mainland china, StanChart has also become a Cornerstone investor in AgBank with 320 million retail customers and 2.6 million corporate clients in China mostly SMEs. Stanchart has also grown its Corporate Finance advisory revenues 50% year on year for the six months ended June 2010, getting closer to $1bn in revenues. Profits from India alone are up 19% to $624 million making it a key proponent in StanChart, with Asia CEO also part of the Group Executive Board. Thats the largest market for Stanchart right now.

Retail Banking led contribution to Operating income at $2 billion from Net Interest Income another $1 billion added by unsecured lending ( cards and personal loans) while Investment Banking featured acquisitions in Oil and Gas Harrison Lovegrove. Equities ( Cazenove Asia ) and Africa (First Africa) India’s consumer Banking footprint is restricted to $250 million in Operating income and $94 million in Profits (working profits/segment profits) Non Interest Income in consumer banking led by wealth management fees also touched a veritable $1 billion

Wholesale Banking ex Investment Banking advisory continued to grow faster than retail as well, Overall Non Interest Income contributed 50% or $4 billion to the top line for the bank and the deal pipeline is robust going into 2011. Wholesale Banking contributed $5 billion with $760 million from India and <$700million from Hong-Kong. In wholesale banking some specialist business in trade finance was acquired in Singapore

stanChart is also progressive in adopting back Sports events for furthering the bank brand as lesser competitors drop the ball in the midst of the crisis

Banking, Europe, Bank results season

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BNP Paribas exposure to PIIGS turned out to be a manageable EUR 18 billion or $24billion, wich is comparable with SocGen and Credit Agricole, BNP Paribas results showed a usual 31% jump in Net profit after provisions for loan losses were reduced at the bank and much like its peers, trading revenues fell in the Q2 squeeze.

Bloomberg

Investment Bank, Retail

Pretax profit at BNP Paribas’s corporate- and investment- banking division fell 7.3 percent to 1.28 billion euros, beating the 1.19 billion-euro estimate of analysts. The second-quarter advisory- capital-markets revenue of 1.53 billion euros “is a level from which we can hope to do better, especially in the equities business,” Prot told reporters today in Paris.

BNP Paribas’ equity and advisory business, whose revenue declined 66 percent to 268 million euros, remained profitable in the second quarter as the bank had hedging costs as part of a “rather conservative” risk management policy, Prot said.

“This quarter, for the first time since the second quarter 2007, provision write-backs exceeded new provisions,” BNP Paribas said. The unit’s loan book “saw no new significant doubtful loans.”

BNP Paribas’s French branch network had second-quarter pretax earnings of 479 million euros, up from 414 million euros a year earlier, the bank said. The consumer-banking unit in Belgium and Luxembourg had a 156 million-euro pretax profit, compared with a 26 million-euro loss last year.

BancWest Profit

BancWest, BNP Paribas’s U.S. branch network, had a 153 million-euro pretax profit, compared with a 62 million-euro loss last year. BNP Paribas is seeking “a growth drive in the United States, taking advantage of the group’s new size with large clients and consolidating BancWest’s return to profit,” it said.

Deutsche Bank also had happier times and were the veritable first to have cleared the stress tests, rising to a virtual hegemony in Europe but staying in its regional strengths despite presence in France, Belgium and Luxembourg or with the trading desks well-informed and well situated in London. They may yet make a global play but their unstated ambition may likely die a n early death in the new regulation. They had also invested $3 billion in one of the larger emerging markets of India in 2009 and have wealth, retail banking, retail trading, asset management and investment banking operations in the country much in tune with the universal banking superstructure

DB Investor Relations

Frankfurt, July 27, 2010

- Net revenues of EUR 7.2 billion
- Income before income taxes of EUR 1.5 billion
- Solid result within Private Client and Asset Management (PCAM) and Global Transaction Banking (GTB)
- First-time consolidation of parts of ABN AMRO
- Tier 1 capital ratio of 11.3%
- Leverage ratio, per target definition, steady at 23

Deutsche Bank today reported results for the second quarter and first half of 2010. Net income for the quarter was EUR 1.2 billion versus EUR 1.1 billion in the second quarter 2009. Income before income taxes was EUR 1.5 billion, up 16% versus EUR 1.3 billion in the prior year quarter. Diluted earnings per share were EUR 1.75 versus EUR 1.64 in the prior year quarter. Pre-tax return on average active equity, on a reported basis was 15%, and as per the bank’s target definition, which excludes significant gains and charges, was 13%.

For the first six months of 2010, net income was EUR 2.9 billion versus EUR 2.3 billion in the first six months of 2009. Income before income taxes was EUR 4.3 billion versus EUR 3.1 billion. Diluted earnings per share were EUR 4.35 versus EUR 3.53 in the first six months of 2009. Pre-tax return on average active equity was 22% versus 19%, while per the firm’s target definition, pre-tax return on average active equity was 21% versus 20%.

European Banks have come out strong and regionally focussed according to latest analyses from Accenture and the IBM Global Services team and that is not necessarily a good thing. However, the economies have come out tougher and the banks in each case have shown the resilience and structure to survive in a market where there leadership or culture is neither recognised nor appreciated

While Lloyds (41% state owned) and RBS ( 83% state owned) have already presented results Lloyds coming into the black. Barclays report further in the week, on 05th .

StanChart reduced impairments by $660 million to take profits for the six months to $3.12 billion, Operating/Pre Tax Marging staying at 33% despite a higher effective tax rate of 32.5%. Stanchart results will be updated after the afternoon conference bits fly in.but the Earnings of $1 per share seem to be a concern going forward as revenues stayed put at $7924 million and Indian IDRs raised its core Tier I Capital to a minimum 9% after the Basel III requirements, however StanChart may not have to change much but still an equivalent of this quarters $5-6 billion will be required again

Apart from its stake in Bohai Bank that has $25b in assets and 42 branches in mainland china, StanChart has also become a Cornerstone investor in AgBank with 320 million retail customers and 2.6 million corporate clients in China mostly SMEs. Stanchart has also grown its Corporate Finance advisory revenues 50% year on year for the six months eded June 2010, getting closer to $1bn in revenues. Profits from India alone are up 19% to $624 million making it a key proponent in StanChart, with Asia CEO also part of the Group Executive Board. Thats the largest market for Stanchart right now. Retail Banking led contribution to Operating income at $2 billion another $1 billion added by unsecured lending ( cards and personal loans) while Investment Banking featured acquisitions in Oil and Gas Harrison Lovelace. Equities ( Cazenove Asia ) and Africa (First Africa) India’s consumer Banking footprint is restricted to $250 million in Operating income and $94 million in Profits (working profis/segment profits)

Banking, Europe, Bank results season

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The bank feasted on its new business in Commercial Banking (up to 3.5 million customers) with 6 out of 7 from Emerging Markets while it celebrated its 100th branch in mainland China Its Advances-Deposits ratio or Credit Deposit Ratio is lower than 80% which is still not low enough and almost 2/3rds of the pre tax profits are attributable to reduced loan reserves of $7.5 billion, down from $14 billion as for other banks as market conditions improved.

Here’s the bank’s own media release of date:

Strong increase in profitability

 Pre-tax profit more than doubled to US$11.1 billion on a reported basis – US$10 billion1 excluding fair value on own debt, up 34 per cent.
 Underlying pre-tax profit up by US$2.2 billion or 30 per cent to US$9.6 billion.
 Profit attributable to shareholders more than doubled to US$6.8 billion on a reported basis.
 Loan impairment charges and other credit risk provisions down US$6.4 billion to US$7.5 billion, the lowest since the start of the financial crisis.
 Earnings per share up 81 per cent to US$0.38 (first half 2009: US$0.21).
 Declared dividends of US$2.8 billion or 16 cents per ordinary share in respect of the period.

 Universal banking model delivering profits through the cycle

 Profitable in every customer group and in all regions outside North America.

 Diversified Global Banking and Markets business delivered another very strong performance.
 Commercial Banking exceptionally well placed to support rebounding international trade.
 Strategic repositioning of Personal Financial Services driving improved profitability.
 Strong Asia profits reflect investment in building presence across the region.

Financial strength core to our philosophy and key to future growth
 Profits added US$6.0 billion to tier 1 capital. Tier 1 ratio 11.5 per cent, well above target range; core tier 1 ratio 9.9 per cent.
 Funding strength underpinned by customer deposits of US$1.15 trillion and customer advances-to-deposits ratio below 80 per cent.
 Lending up in all regions since 31 December 2009. Building our customer base and investing for the long term

Customer acquisition focused on international financial needs:
 Premier customers up to 3.9 million; on target for six million by the end of 2011.
 Commercial Banking customers up to 3.5 million, 85 per cent of new customers in emerging markets.

Leadership in emerging markets extended by additional investments in India, China, Vietnam and Kazakhstan.

Strengthened position as leading international bank in China: opened 100th mainland outlet;

Supported Bank of Communications rights issue; grew leadership in renminbi services.

World’s most valuable banking brand for third year running;

Euromoney’s ‘Best Global Emerging Markets Bank’.

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BofA in fact reported its credit losses and net charge offs at $8.11 bn and $9.56 bn after decreasing provisions to make earnings grade. With improving credit quality the non performing leases, and loans plus foreclosures were still $35.6 billion.

Why exactly are interest rates so low?

Univ of Michigan Confidence at 66.5 from 75, Housing Market Index at 14 from 22..these economist tricks and treats do keep people glued to the world wide web, but the economy is going down, yet again. Deflation threats seem to face the World’s strongest Economy and the American Economists are united in thinking the tough days ahead “will not be a double dip recession” but things would be tougher as the fiscal stimulus is withdrawn. Well I believe we are making a yet fundamental mistake. If I knew you could not lower interest rates further ( and we have a 20 year long example from Japan showcasing very much the same economy and the same “yen”) I would definitely ask you to sell lower knowing you couldn’t take it. Not that in a mature treasuries market such ransom is being played out but it is clear that one of the key constraints could be removed overnight if we just decided to peg a 5% minimum on the fed rates , that would even observably reflect the systemic risk, we would be in a better place without flooding the markets with assets, currency and purchase requests for treasury bills we do not need. A Mad hatter if ever there was one, the idea has merits so I stuck my neck out. Additional examples from Australia (doing well in this crisis) or India ( doing well since 1947, never better though ) or China which never considered cutting down rates after a certain time must be old hat for US economists who never seem to discuss the idea in the event of US pride and the Dollar getting that it in the knees.

How much do headquarters in London cost?

However in other such ransoms with positive expectations of profit, J P Morgan is finally letting the cat out of the bag about not being able to afford London and Canary wharf. After having lost 26% of trading revenue, 37% in equity underwriting and 8% in year on year revenue, JP Morgan would need strong incentives and not back breaking regulation costs to justify moving to London. This far ahead in the reforms even David Cameron and Vince Cable would find it difficult to retract government’s paws form other banking players lard and try to give a fair listen to the Cazenove shermans, and so that is unlikely to go any other way now. India and China continue to draw crowds for J P Morgan, especially after the cuts in trading revenues at JPM and their banking cousins Citi and Bank of America. That of course, does not make me blind to the fact that J P Morgan have a large Chase legacy with functioning retail and commercial businesses but right now I would just focus on the plagued revenues at banks in the second quarter that prevented us from reporting interesting times at Citi, Bank of America or others before Goldman Sachs reports tonight. We all know GS is headed south but with the financial regulation bill nearing completion they would be the likeliest ones to make a comeback first and this time with significant investment banking revenues as well, having partaken Tesla and CBOE IPOs in the last quarter

More results: Citi, Bank of America stumble

Bank of America is rumored to lose $5 to $10 billion in revenue from the new Consumer Finance Protection agency and terms on new debit card fees. But before that it cast a gloomy friday on global markets with atiny $1.2 billion trading profit ticket down 75% from Q1 and a net profit of $3.1 billion, much of it on restated loan reserves that would reduce the provisions for losses as distance from the crisis gets bigger. The BofA mortgage bank reported losses of $1.5 bn with $854 m spent in repurchasing mortgages unlikely to go anywhere. That said, JPM’s mortgage unit made profits and Goldman Sachs is going to open tonight without any loss making divisions. Outstanding loans again fell for BofA across credit cards, mortgages and commercial loans

Citi wasn’t as bad as Bank of America, with $2.7 billion in profits only riding a -10% on last quarter’s $3 billion. With its reduced reliance on trading, it did not have to suffer any losses in revenues so the deterioration there is a question mark. Though with better retail performance, they are the likeliest candidates to stay the course of recovery and even win a few key markets where they have been strong esp outside the US where action is focussed now. Citi infact reported increased profits of 9c a share from estimates that had taken its 14c Q1 to a 5c Q2, outscoring analysts with a 80% uptick but could not save the market from crying wolf in the middle of downtown. Tier I Capital has improved to 12% and Tier I Common also 9.7% vying with Dimon’s international Cartel for a place in the sun for posterity

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As result season got underway, the market in India has also moved to a different plane in this phase of the recovery. Along with its global peers in Brazil and China, indeed in market terms even in Europe and US, subdued volatility and a healthy disrespect for positive pronouncements is much more visible this time around. The surrounding commentary in the business news campaigns shows a global market much more used to analyzing each information silo in the larger global puzzle rather than good for its own sake. The bigger stories of growth and effective management are thus waiting to be discovered and rediscovered before their value is made obvious to the world. Witness PE funds in India that are sitting on $30 billion of dry powder, unsatisfied with the deals the money was chasing at the bottom of the cycle. According to mint, this is just a fifth of the $100bn or even as high as $160 bn globally. This corpus excludes any mention of the $1 T lying with Sovereign Funds from Middle East and Asia that is ready to be invested and is already chasing Chinese IPOs, BP and PE darling KKR itself. We have mentioned a number of such candidates earlier, that have been waiting for the right investors for as long as 18 months now including AIG’s global life insurance business, UK banks and more promising candidates from banking in India, China and Brazil that are already approaching markets and in fact Ag Bank has already listed at a 2% premium.

With the Chinese government having found the strength to rein in the growth and score a 10.3% after a 11.9% run in Q1 in its GDP numbers, it is obvious that each of these local constraint based strategies are working for the stakeholders. Each such development will underscore our distance from the crisis events still clouding some skies in Europe. As Portugal takes center stage at the Crisis Quay, paper actions such as timely downgrades from Moody’s for the sovereign and the banks also underscore that such recoveries will be slow and torturous for its stakeholders

What crisis?

With trillions invested in the global economy, today investors and managers have a more complete map of each obvious play in a fresh industry and each hidden gem that will reap structural benefits from reinventing itself in the aftermath of the crisis. What it also means is that today it is more unlikely to find that ideal Private Equity play for new markets in global economies that will break the hypergrowth constraints or possess the tipping point for a market shimmy and a mandate to burn investible cash into productive assets, unlike the ‘obvious’ and ‘poor’ cousins of the digital age such as internet businesses that remain grossly unremunerative or facebooks that have made a business of wasting time and resources of the fun generation.

The US is reporting 3% rise in GDP but that is not enough any longer for its detractors. The Euro is sitting on a debt pile but each component is refusing to crumble with Spain and Greece surviving the structural pain and on way to a tough reform programme. Things will remain at this stage for a decade or more and to live cautiously in the belief that there is still a crisis cloud that will be lifted is a misguided belief inside all of us.

Where is the value motive?

What Warren Buffet did 20 years ago, what George Soros did and what hedge funds did in the nineties and the oughts’ has however become a benchmark for those who have made a habit of winning. What we need however, is not that we jettison those fundamentally sound principles but that we recognize that a different set of factors is at play now. The BRIC formulations or the Global Healthcare and Education deficit, the Lifestyle Spending Hyper cycle to be are all great ideas that are already happening in the here and now. However, those ideas that grapple with such key opportunities with a shallow reach or without the benefit of Chinese or Brazilian or Indian policy or the momentum of government sanctions are just one stet of obvious lame ducks. Such examples that need to be avoided include early players in Training and Education in India without any policy to back it up wasted billions in halfhearted retail investment and unoccupied cities built to grow GDP in the heart of north China.

Businesses with simple value drivers or a key winning meme have to be nurtured in the now, because when you next wake up, they might be in a higher orbit for you to ever see the revolution which already passed you by. However retraining promoters and transplanting global practices in multiple silos is neither an answer nor any euphemism for Global collaboration. Trading remains profitable and we will see a lot of non-bank boutiques grow in the absence of a true business model.

Well researched plays always win and those following ADVANTAGES.US will be reaping that throughout the globe, but effectively the results season is no longer a key harbinger of verdicts on such plays, just one of many that envelope us. But then we all know and take care of these things in our daily chores. Unknowingly we have let loose a revolution of bloggers and reviewers that may each find the next jack in the box for a global play. However these may not by itself be leading anywhere specific. The 40% + unemployed in the US and Chinese workers demanding higher wages in a business model where the real estate is half of your investment and more may still be around when we ring the bells on 2020 and the world would have moved on.

Some of the preferred Private Equity methods of engendering a new kind of promoter or our public formula for growing evangelists is equally at fault for this long winded essay that keeps 2010, and then 2011, 2012 and even 2013 in a limbo.

What now?

Global collaboration still has a few victory laps to go. In fact a lot of Cross border flows will ramp up in this decade. The larger deals will start happening as a minimum ticket size is mandatory to tackle lifestyle gaps, healthcare in Africa, Educational Infrastructure and International businesses that can carry best practices to new locations without being wasteful like traditional Transnational corporations, even nonprofits are likely to be more important in the scheme of things from here. The business of government has also become lucrative now for more stakeholders as they are a key harbinger of policy and have come out from blistering crises and scams. Knowledge businesses are not in danger of becoming socially obsolete for the premium associated with them, but if someone can discover a profitable way to fly and supply your phone infrastructure, that’s proven win too. Unfortunately that and the fact that in the Top 5 economies in 10 years over $2 Trillion will be domestic spending on food and groceries is still not enough to put down the pens and the books or the digital equivalents and get on with it. The money going around may seem to be too much money chasing too few deals but still money is the scarce commodity and that itself will move some markets as commodities find their new secular uptrend and dreams of a belittled Dollar or an ultra-weak Euro fade away.

China is of course a good destination but they are not inviting you in. Other G20 members apart from China and Brazil will still be in a different orbit and always be made aware of their almost second class citizen status including India and the really undeveloped markets in Africa, Mexico and some like the Philippines and Vietnam. The mineral rich economies would run only so far before their limitations are discovered as gatherers were jettisoned very early in the human evolution for hunters and farmers. Which is saying exactly what would have been said 10 years ago on the same subject.

Who else?

Well, the answer, people have realized in various bits and pieces is that till date the only clear mandate in the world has been to build true institutions and that cannot happen overnight or without investment. That also means that regular cycle of 5 years from Private equity are infeasible options as the time and investment will lap into more than one decade and performance measurement cannot be suspended but still has to happen without turning itself into a selling basis or for trading equity in the institution overnight. Maybe private funds can add to sovereign reserves and international investments made to happen as this open transparent era truly deserves. Policy and protectionist pitfalls could be necessary to further the revolution in each case and thus the corrective revelations and pockets have to be agreeable to stakeholders dreaming of such support. For such institutions there needs to be a class of enablers that is specifically supported rather than a generic mass of writers / blogs being promoted or public markets being reported to. Also, there needs to be a realization that not even half of the institutions we build will be public institutions and at least 50-60% of such to be institutions are in the 100% private domain, not limited to non-profits or existing businesses

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In the morning of course, there was clarity that there would be no mandating of bank tax and it was made an optional item, Germany and England ( not the football) game for the new tax..Then Lulla was stuck at home when flooding was reported in Brazil and the BRIC gang never got together for a separate meet, and now there is unanimity that Yuan is not on the agenda of this international forum in deference to China’s wishes and no mention would be made of it in the closing statement.

As I was tweeting yesterday, it seems more topical to catch the NBA Draft on television than Toronto’s political shennanigans even with Obama and Montek Singh Ahluwalia in attendance. The crisis was too much of an interesting time together, now boring days are unnecessarily distracting. Like confucius wshed on his enemies: May you live in interesting times! Of course, the crisis will continue another year and a half at the very least, a spread on Greek and German bunds notwithstanding, Britain and France would not be bankrupt come 2012 and US, real estate and Dollar would remain the most important global assets.

Obama met indonesian premier at breakfast meeting and has bilateral discussions with Sardarji’s team later tonight.

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The developed markets may not bring much new business. However, fixed income franchises are global as also the new investment banking list of probables that scour global investors for much of the new growth. Apart from the restructuring at the top, local teams in India, China and Brazil/Latin America would also need investment approvals and local partnerships with governments to roll out a significant retail strategy in the highly regulated national markets in each case. Also, for successful global corporations a balance between Command and control centralization and a loose federation is essential to establish that presence and grow as a whole, both BoA and ML serving notice of the same in their experience of the local markets and their own unwinding in the earlier edition.

Jamie Dimon is of course ready for the challenge:

“We have got to invest locally, look at clients globally and look at new markets,” he said in the interview. “We are going to get the whole company behind it.”

Mr. Dimon, who spent the last two weeks hopscotching across China, India and Russia, had been laying the groundwork for international expansion for some time. A few years ago, he assigned two top lieutenants to scout out potential consumer banking opportunities overseas. He created a network of global advisers, including Tony Blair, the former British prime minister, and established a partnership with a buyout firm started by several former Citigroup colleagues to hunt for overseas acquisitions.

The global credit crisis postponed those plans.

The NYT original is quite the spinmaster and a good sort too.

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I have long been a fan of my own unique capabilities of filtering, motivating and weaning a new crop of Indian and global leadership across identifying sectors, groups, business persons and though I have toiled hard to establish my unique brand without crowdsourcing there are agents of such drivers as myself in this global pool of PE players the George Soros and the others who have been tracking a global crisis or two like the economists and the Barry Ritholtz and Andrew Sorkin kind of brands.

MEANWHILE INDIA.ADVANTAGES.US features our study of the REVISED DIRECT TAX CODE..

To that list, the original petty larceny artist and known LBO champion KKR had recently been added in this edition of the crisis in 2008 as I heard of Sanjay Nayar moving there at a VC Circle conference in Hyderabad. Of course, since then many have been disappointed, what with the lack of traction in this hyperinflationary track, the loss of developing market status and tougher market winds fighting with China and even the new Mexicans and South Africans for the same petty share of world trade that defines India for example.

Though we have built quite a few telling tales in the last two years most like upcoming financial regulation week have been dud-of-duds and boring repetition to the point that this seems like a dull corner of the global timeline for financial markets where Greece’s downgrades and the consequent ones in Spain and even the goalless draw of Portugal by Ivory Coast ranks next to mundane not so hot times..

You can see your parcel of work could be pretty useful..but back to the moot point.

First Max & Analjit Singh and then Jindals esp Jindal SW

Of course Coffee Day’s VG Sidharth and GMR Infra also went thru a few financing rounds; Tikona and Infotel managed to define a new industry space with Wimax and LTE ; Telecom got a new continent with Sunil Mittal getting out to a new wicket after a 600 million market in india gave Bharti Airtel a 25% market share to go; and Mahindras, Coal India and Reliance made a couple of overseas wins and some gas agreements (very close to it!)

The new crop of Indian majors that plan to defy gravity and look to an unknown quantity of karma from the larger indian audience to pip them to the post in each foreign acquisition and each new oil well purchased or sold have now a defined quantity of support in each with such defined channels under the surface that connect investors, working professionals and even Sachin Tendulkar and Force India backers worldwide and Indian Financial Media steps up to the plate with remarkable alacrity and all round coverage nowadays. It has also become extremely tough to set up a new venture, get funding and get market traction to build a new giant for the masses to track and hail as the new champion with even lifestyle plays like Cox and Kings and gym major Talwalkar’s roping in funds worth $20-50 million where ticket sizes were hardly 4 or 5 million earlier..

The Investment Banking fraternity thus can now afford to operate from a copy book style, with PE giants opting out of startups for corporates with a 5 yr and more profitable ventures and IPO and PE tickets in $100s of millions from the few million that now come from incubators like Y Combinator where startups can look to living off a stipend. The distinction is necessary to observe and define KKR’s operations in India, earlier working with Temasek on a couple of deals and then choosing a select few for $100 million and options for downward second tranches. Elsewhere PE instruments offer immense flexibility for locating and funding unlisted start ups thru the vagaries of down and even consistently under par economic cycles that define in the money options for those venturing out to farm the till and grow the will.

Jindal Southwest has uniquely market priced EV multiples for its businesses in Steel and Energy and expansions include North Karnataka in Bellary with the mandatory 6MT Steel plant in Mittal’s new neighbourhood and its own Power transmission and Distribution operations. Th Jindal expansion operation would however vbe still steeped in the more cash strapped traditional indian business than most with ot without the KKR millions. Analjit Singh’s choice of business and sectors offer a better growth and diversification opportunity at this juncture and both constitute a true VC mould for the next Indian big one, well behind but firmly in VIP seating rubbing shoulders with the Airtel Bharti ventures and the Ambanis’ new plans for Telecom, Energy and Transport

[Tag India, India Infrastructure, Private Equity]

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On Sunday, China’s governing State Council ordered local governments to overhaul these vehicles and instructed banks to restrict lending to them.

It said it would shut these vehicles or prevent them from financing operations if they rely primarily on government funding to repay loans for public projects.

The CBRC estimates outstanding loans to the 8,221 funding vehicles set up by local governments surged 70 per cent last year to Rmb7,380bn. These loans now account for about 20 per cent of all outstanding bank credit.

Thus CBRC is already treading a thin line. Though there is nothing to say that China’s over 600mn urban residents that still make only 47% of the population and the real estate bubbling up can do anything to stop the next 280million hoping to migrate to cities in the next couple of decades. While Citi, GS and even BAC continue to close new funds partnering these local governments, the jury is out on whether these city administrations can keep away from burdening the government to pay back these loans. Thatss $1T to build new cities that India will take a decade to fund and greeece and spain each take a decade to pay back!

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According to current plans for the issue opening this week, the last of the big 4 from China is still hoping to leave its mark in these extreme conditions, with a 40-50% premium over its Book Value [post-issue] of CNY 1.6 or $ 0 and 23.5 cents at HKD 1.1-1.2. They are likely to mark lower to make sure the market is left with an appetite. The Agricultural Bank of China has been variously pulled up for its largely legacy SME clientele[TVE-Town and village enterprises] and high non performing loans and feted for its access to upcoming urban governments. A lot of new urban centers including one in Shanghai are being planned as Financial District Centers.

If cornerstone investors pick up the top third of the issue, likely value of this 15-18% stake will start the upward climb after a dull one year or so.

Last week’s BW report noted:

Agricultural Bank will compete for investors’ money with publicly traded rivals that plan to raise a combined $32 billion in stock and bond sales even with bank valuations near record low levels. The offering also comes as the government cracks down on real-estate speculation and Europe’s debt crisis threatens to slow China’s exports, while spurring companies from Hong Kong to Moscow and New York to postpone IPOs.
“Agricultural Bank has to sell what’s so special about itself because the number of shares it’s offering to the market is huge and investors have many banks to choose from,” said Deng Yongming, who helps oversee about $320 million at Changsheng Fund Management Co. in Beijing. “The global and domestic economic picture isn’t rosy either.”

WSJ’s report notes(and they do rank behind us):

The deal comes at a choppy time for markets, with weak appetite for new deals forcing some IPOs to be pulled and while China’s banks plan to raise around $70 billion in coming months to replenish their capital after a lending binge last year.

In a sign that investor appetite for Chinese listings is waning, Chinese wind-turbine maker Xinjiang Goldwind Science & Technology Co. shelved its US$1.2 billion IPO this weekend.

China’s pension fund is the bank’s sole strategic investor, having bought shares before the IPO was launched. In the prospectus issued last week, AgBank said the pension fund owns a 3.7% stake in the bank, and China’s sovereign-wealth fund and the Ministry of Finance the remainder.

AgBank announced a group of 10 investment banks to underwrite the deal in April, among which China International Capital Corp. will handle both the A- and H-share portions.

Morgan Stanley, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Deutsche Bank AG, Macquarie Group Ltd. and Agricultural Bank’s wholly owned investment banking unit, ABC International Holdings Ltd., are the other underwriters for the H-share offering. Citigroup Inc. is a co-lead manager on the Hong Kong IPO.

Citic Securities Co., Guotai Junan Securities Co. and China Galaxy Securities Co. are the other underwriters for the A-share offering in China.

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What defines good no event days like today is the realization that more people have made uncertainty a part of their lives. With 40% of America unemployed, and progress and economic growth not meaning much change for new nerve centers like India and China, europe’s imminent demise is playing out like a long innings than a shut out the game will have you believe. Everyone knows of the $1T in PIGS’ debt shared by Germany and France and despite the socialist leanings and backstop funding by bankrupt nations, Europe continues to grow, though at 0.2% ahead of maybe a $200bn loss in GDP from the $100bn in fiscal cuts, 20% unemployment in Spain, the dearth of funding for green initiatives and the export weakness of the weakening euro. This is probably a lasting picture of the $14.5 trillion European economy and the Euro. The Dollar will likely see this as a passing phase from how things look, Oil will start moving up soon but US and China debt positions will rise faster and Gold will remain at its new found levels and keep going up forever.

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Volcker’s rule defines investment banks born again as those who can or cannot trade in their own accounts based on whether they accept deposits, while an agricultural shot from MelanieBlanche Lincoln swipes a proposed amendment banning banks from holding derivatives positions at all. These questionable ‘reforms’ target banks and investment banks at an opportune time. Given that JP Morgan has just lost $300mn in Coal punting in Europe and European banks like BNP and SocGen( whose own rogue trader trial of Jerome Kerviel is also on right now) hold swaps in trillions on Greek and Spanish debt that is losing itself in finite percentages every day, some or all of these regulations would definitely be made into a law governing the probable rise of bad boutique traders like LTCM yet again out of the various adds of trading desks, Real estate funds and commodity plays added by the investment banks since 2000.

However, Stiglitz’s Goldman Sachs amendment is not so ill considered unless the investment banks are considering flip flopping status buying and selling bank holding company status much like Carbon certificates that cost $25 a pop. His GS amendment as stated in mainstream media thus backs a one-time treatment for those wishing to apply or keep bank holding company status. Conservative regulation banning trading desks however may be not executed at a holding company level.

Now that US also wishes to be an investment destination it will do well to fall into line with global regulation and not get waylaid by well-meaning local monstrosities or equally arcane British hokum. Global professionals have targeted reform correctly over more than a decade, a good example being Basel II and such regulation could collectively hold the key to a sane regulation with transparency and public record keeping standards more critical than blanket treatments that bring everyone back to the desk in less than a year modifying and tinkering with quick regulation fixes once they start backfiring.

Without derivatives, liquidity may be impaired by well above 75% of even current levels with any re-lending to banks compulsorily done by derivatives covering that collateral. Profitability and thus bankability of the banks may itself be as low as a shaky US Economy satisfied with inflation targets of just 2% ( which to me and any model of growth induced economics is already at the border of deflation and death) A 2% NPM for banks may not enthuse investors or even consumers to bring deposits to the banks.

Corporate debt business is almost dead right now with total trading also down a good 20% over a poor 2009. Economic lending even in emerging markets and across any borders hedges political risk, currency risk and many more windmills fighting Quixotes that well might kill a deal without the indices, the ETFs and the derivatives market that keep it liquid.

What is probably going wrong is that the big guys are trying to use their size to leverage a better deal and that is tweaking too many ears without taking note or gaining any knowledge of what the big deal is demanding. Thus the required transparency and the already committed deleveraging at these banks would well take care of such scenarios. Governments should avoid looking like novice knights at Sir Arthur’s round table and get back to the business of growing the Economy. Frank and Dodd’s leave depth out of the question and treat regulation like a high school kid with a prom night to go to, working on his essay assignments with much ad libbing and no new understanding to speak of. Phil Angelides’ Financial Crisis Inquiry Commission also mostly seems ill informed and unable to appreciate the questions of propriety despite teams that are seemingly well read to assist the case work. It may in fact seem more appropriate to get Goldman Sachs and Berkshire Hathaway into the law making than treat them like petty thiefs being caught and trapped by schoolboys.

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The 5 year roller coaster ride for The Asian baby

The blue chips have significantly underperformed the A50 or the other indices that have significantly downplayed the volatility of the All Share index a direct function of the shallow depth of the pool in China. Even at 2 times (Blue Chip 100 index FCHI) or 3 times ( FTSE XINHUA All Shares Index) its 2005 values the so called chugging economy in China has maintained depressed Stock market values maintaining a continuing quest and nearing their bottom everyday even as GDP recoveries outshine other national currencies, economies and cloud recoveries in metals and minerals globally. With Chinese defaults exacerbating the collapse in Commodities like Copper and Oil, Gold has been the only safe haven with China selling US Treasuries across its CNY 7 T or $1 T in Sovereign investments and also buying US lifestyle brand equities in Apple, Coke and Visa while waiting for the tide to turn in global currency markets and pending its decision to let Yuan appreciate to a new corrected orbit.

The Chinese Real Estate Bubble

We have been intrigued students of human nature and Oriental values noting for the six months how credit was almost exclusively the preserve of Chinese real estate industry and each clampdown in regulation with higher down payments, estoppel on second mortgages and denial of options for third mortgages bringing ever so slight changes in the real estate statistics (assuming they are available and digging for them would be the most horrendous Google stats of 2009 / 2010) Most Foreign banks have changed their partnership strategies in China going with municipal authorities and setting up CRE funds that salute the clinical efficiency of the Chinese in land acquisition and execution of such RE projects However, it is amply clear that even as everyone fears the worst and fully built up cities are lying vacant in china after registering the relevant GDP uptick, China is not ready to bow out in the middle of its recovery while others in Europe have much more significant debt problems.

Undeniable Bank leverage

Meanwhile Capital scarcity at the chinese banks has not stopped them from maintaining quick disbursal rates and credit values albeit forcing them to look for capital in $100s of billions, $30 billion going to ABC alone and another $10-12 for the smaller China Construction Bank There is a lurking suspicion around equity markets that any one of these large IPOs could cause market confidence to plunge once again. Or it could be a real estate pricing collapse itself

So will China actually go thru a Crisis / recession

Most economists haven’t had clear direction in stating that China is heading one way or the other. The asymmetric shallow markets still controlled by a single minded public investor are unlikely to get to a violent stage without managed intervention from the People’s Council and the CBRC. And there is so much development within China and expansion of global trade once deficits are a welcome part of the people’s economy that to us from afar it looks unlikely. It does look in fact as if it is time that public policy might change to a more recognizable global prescription of growth as more private enterprises come out of the closet to support the dull and monolithic ‘blue chips’ On the real estate front a price correction would however be welcome. As of now nothing more is on the anvil and more global trade is being denominated in Chinese Yuan (with Brazil) while the Beijing Olympics and the fiscal stimulus provided the capital Beijing and at least Southern China with surface and rail infrastucture.  Inflation and continuing RE growth have to be managed at a much more stricter level

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Unlike the earlier lessons of Financial history when Europe had a hardly $300 billion sized market and LTCM broke down, this time around Europe is a substantial hub. Europe did not seem that chunky, even when global investors had to build developed market indices and create new ETF assets much like their foray in reforming, exploding markets in India, China and Bill Browden’s Russia.

In this crisis, however Europe and the Euro had used early circumspection to their advantage in browbeating the dollar to size with a financial market with Trillions in liquid treasuries, Trillions in ETF assets, traceable chunks of hot money, largesse from Oil sheikhs and even sizable , sporty purchases from the Russian Oligarchs. All that however, creaked under the weight of clouds of leverage. When the paths thus closed, Europe’s overarching response has been that of denial, come uppance and pandering to information that is allowing vicious circles of misinformation to spread and cloud investment / divestment decisions.

Further up on the road

The very ‘self sufficient’ and proud nature of smaller nation states may not preclude the further devolving of the crisis despite the $1T funded from bankrupt central banks and the new $440bn from the same governments. While pooling funds has been a good home grown advantage, the crisis solution now depends on a $100bn spending cuts from Germany, Spain, France, Hungary, Greece and Ireland among others. Financing growth would have been a simpler solution but this strange aggregation of nation states is otherwise afflicted with the belief in ‘Industrialised’ not needing ‘Change’ or Growth’ and thence falling to economic lacunae of welfare payments and ever increasing ‘public spending’ Even one mistake in allocation now deepens the likely deflationary spirals as it moves to improbable then probable on the Unlikely to Likely Continuum.

However, for global stability, it in fact might be welcome that there is this league of islands of nations forever tightening their belt even at the cost of cutting an arm and a hand, as everyone else prints money to grow its way out of trouble. However, it is unlikely that any of these states will be able to lead in economic philosophy, go-green initiatives & hydrocarbon savings or any other modicum of fiscal responsibility that might be ascribed to prudent spending and saving households due to the nature of spread eagled governments and the international nature of trade.

Also, we look forward to more tales from the muni markets and untenable commercial real estate loans, though the greedy banks in question have already bailed out.

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Visitors really appreciated the lack of clear cut guidelines from India’s distributed FDI regime with the EGOM / DIPP / SIA roles and thus when we cam out with the DIPP’s consolidated document fom there, we now consider it worth your while to continue bringing concise value adds in your FDI regime knowledge base.

INDIA’s EXTANT FDI POLICY – Part III | Advantage ‘zyaada’

Little known facts on the convolutedness of the FDI regime never really disabled Foreign Investment into India as the regime was a fractured mandate keeping pace with each day to day concern as India had trodden the extreme path of maintaining control on virtually each FDI sector/geography/industry decision and the resulting media grab or the issues of control and noise from domestic protectionist interests. Still we always stopped short of checking each corporate’s intentions and history and more or less proceeded based on our known/unknown blueprints for each sector’s growth and ended with a different rollout map for each market from insurance, retail and defence to power, steel, investment from diaspora and yet unclear healthcare, education and media/entertainment issues.

Some factors of interest that we have not covered in the presentation of the consolidated policy with ADVANTAGES .Us are tackled in the third part here:

A. Control Issues in ownership: FDI regime now mandates that any organisation owned more than 51% by foreign investors be deemed a foreign corporation. Exceptions will be issued thru RBI in the Banking sector as voting ownership and control issues have been always separately mandated and there is no plan to treat crown jewels ( yet known as Private enterprise) ICICI Bank and HDFC Bank as Foreign corporations for any investment / policy decision unless control map for the same changes

B. Issues from Downstream(Upstream) investment: However, interestingly, and I am much in favour, any downstream investment by such foreign entities by virtue of more than 50% Ownership/Control have to be chalked down as fresh investment proposals. Thus as an interesting blog at peerpower proposes, if an NBFC with $50 million Capital ( min requirement if established with 51% ownership) now sets up another as subsidiary or through rebadging as another holding company, none of the investments are exempted from the minimum capital requirements of $50 million. this is certainly good regulation.

C. Further issues for deemed domestic companies: Also, in the same vein if thru minority ownership you set up an NBFC with $500k capital you will be a domestic company for all further downstream purposes, but care has been taken to clarify that such a company if interested in setting up a majority foreign owned financial subsidiary or otherwise transmitting foreign control will still be reviewed for sectoral FDI controls

D. The last two issues clarified as part of the extant FDI policy are also welcome from a long term investor’s point of view. Though the FDI regime cannot supercede securities regulator SEBI and thus keeps warrant regulation at SEBI denominated 18 month stops for warrants etc, (which has to be taken up separately and thus relevant debate is delayed) issues of perceived control and transactional transparency (in objective) are taken care of. Thus India is taking forward its small victories in the 2008 crisis to enforce stringent regulation against free attached/stripped warrants of unlimited economic value to debt for rebadging predominantly accounting equity transactions as otherwise. Thus Warrants have to be paid up in advance to 25% and expire in a limited time window presumably while accounting lucidity is again redeemed as trustworthy in due course.

E. All convertible debt and otherwise, the infamous cumulative preference shares and its derivates and any other form of capital participation is now part of sectoral controls thus disallowing easy circumvention of equity control limitations by hot money and even established foreign capital to expand local operations. Portfolio FDI is still not included for party’s control ownership but is counted to the sectoral cap. This does increase the habituation of domestic partner’s connivance into the public domain as tax issues are also heightened. Previously daylight cons have already been observed by sleeping local partners in domestic telecom and perceived as honesty in the retail space.

F. Other changes, relate to simplifying definitions of ‘trading’ and ‘cash and carry’ for Wholesale Trade FDI but even more is coming from clearer denomination of obligations and thus further allowance for multi brand retail and single brand retail ( currently allowed till 51%) and whiteppaers clarifying inter ministerial coordination issues and issues of security relating to the Pakistan and China borders and are mandatory much like these above.

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You have already heard this a couple of times in the bull pen before the trading day begins or read it if you have just been following it with an ear to the ground..over the weekend many things were really solved and many more were expected to be solved by these last victims of the crisis runs and the ones that have been dull to the  point of boredom in the European crisis.  I know a lot of the young ones would still be eagerly awaiting a simpler knowledge of these state entities as colleges are notoriously fickle and not being Deano or sartorially inclined they may not get due attention.

However, here is my expert opinion, gleaned much from stable and high quality data summaries from swfinstitute.org.  I mislaid much of my own earlier expert analysis having been unaware of much actitivities of Chinese SWFs as they have more than 5 active funds including the $5 bn Africa development fund, the $140bn State Security funds and the ever active equity investor China Investment Corporation. Another separate entity SAFE manages china’s Forex reserves to the tune of over $350bn

The Brave new World and the Frontier Factor

The two Singapore corporations recently turning back after being on the verge of going to professional managers are the biggest ones managing $400bn between them but Australia also has a sizable $50bn in its Sovereign surplus and both Singapore and Australia though Brazil makes do with $8 bn and the Fund Soberano de Brazil has recently appointed the state minister of Finance and central bank governor on the advisory council managing the fund, nting thus its advocacy as a state instrument and more its newness in the field.

The other new ones already active in the media megaphone include Malaysian Khazanah which has entered into an open war with private sector indian business to maintain turf in Singapore with an open offer for Healthcare major Parkway Holdings where it holds 25%.

Most sovereign funds have non oil, non commodity origins and restrict investments to Asia or Latam as the case may be and Luxury hotels and older conserves in Real estate in London and New York. The others have notably been heard on the wrong side in Park street CRE deals and Bank equity purchases.

However, Abu Dhabi, Qatar & other Emirates; Korea and CIC continue  their investment charter of locating world class companies to invest in ahead of any new crises that might grip the world in /towards the next down cycle. The Saudi Arabian SAMA that manages $433bn of oil surplus has invested much in sovereign debt till now but may also spin off a separate one, for foreign securities adding a corpus either through new treasury issuance/oil bonds or moving out excess investments in bonds to equity.

Saving Infrastructure

A lot of the trading surplus only funds of course have correctly been analysed as inactive holding large amounts of cash like the Australian Future Fund but the current portfolio activity is spurred by the need to change the hedging already done with sovereign debt ( none of them being really exposed to Europe, even US banks holding only $175b of the $5 T hole in PIIGS nations) and / or learning from the CIC/Temasek example.

The funds in Aussie, Singapore were always expected to guide domestic private sector with portfolio investments and may also serve as examples in Korea and Brazil. Australia Future Fund for example holds $6 bn in Telstra and another $4.5 billion in Aussie companies (divestment?).  Even Vietnam’s SCIC holds VND 5 Trillion in local currency and interests in 405 domestic companies helping restructuring mandates and facilitating exits. The US Alaska Permanent Fund was created from 25% royalties on local mineral and oil produce but invests downstream in interesting real estate and now Alaskan Power if all things go smoothly.

However vehicles like the Africa Development Fund also should be likely in the future for harnessing interest in Global Infrastructure and would greatly ease pressures on financing Infrastructure and emerging Market and N11 businesses. The Africa development Fund has enabled $3bn in Chinese private investment in Africa and China trade is more than $90 billion with Africa with the fund having invested $546mn of its own funds including power plants, glass factories and dedicated trade zones

The new reserve currencies, US Treasuries and SWFs

Apart from Government treasuries these funds would also be active in creating an alternative reserve pedestal for the Euro and the Renminbi now that China is selling USTs and despite the Euro in crisis. Meanwhile China markets are overheating and the Euro is unlikely to brake completely before hitting levels of 1.06 (and not 1.19 like some other commentators have been hoping in May) and Gold is also not likely to increase its share from any 10-20% weights it might have from 2009

As a whole these 50+ funds make available at least a $100bn for Private Equity projects, are notoriously slow and subject to hearsay advice in absence of material professional management and continue to represent hidden national interests. None of these have retail equity participation but do hold debt assets / liabilities from such citizenry.

Oil monies provide Abu Dhabi with over a $1Trillion in investments with $650 million in ADIA and $300m in ADIC based on division of budget surpluses while Oman and Dubai have smaller $8-$12 bn funds, Qatar manages $65bn

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The world ahs changed. Not overnight, but after 2008 the flavour is distinct. There is more anger. There is more of a challenge in the wlobal banking diaspora discovering their new benefactors. Like always, many fromthe global banking sector have been displaced in the crisis.  They are out of options to raise capital with Citi still struggling to sell over $100bn of its bad bank assets, Goldman Sachs fighting phantoms of discord with super regulators yet to be formed, trying to shout in favor of regulations that bring in new regulators to oversee banks, new regulations that ordain higher amounts of capital for each bank in the US and with Vince Cable, also in Europe.

In the mean time, HSBC is already operating from new Asian headquarters. Standard Chartered is dealing with the new world by showcasing its charms in Asia. While it holds adequate capital against assets of $200bn (December 2009) to the tune of $19B in Core Tier I and an equal amount in Tier II, It is closing the year 2009 in $5B in profits on sales of $15B. Against this backdrop, the bank is rumored to have priced its Indian Depository Receipt issue at only $2.5 and less for a total raising of EUR 500mn or GBP 400MN for new shares of 1.16%. That values the bank closer to only $5B for this issue leaving it well targeted in the island of economic prosperity in India (and China where HSBC is targeting the kill) for a close to o5-10X appreciation after listing in the 2nd week of June.

Emerging Market dominance

It is the latest in a series of firsts that have marked the international economic climate and India that has prolonged the boom years and made the slow pace of financial reforms bearable. As the government’s agents walk towards the torturous goal of managing socialist anti WTO rhetoric and populist sentiment with economic grandeur, Infrastructure finance, retail lifestyle markets and FDI from retail to defence now has a new leg to rely on in these ‘foreign’ banks with more than INR 1Trillion in assets in India. With India as a source of economic capital the banks also have a new hope for the rugged decade ahead with US and Europe lying in tatters seemingly, but surviving nonetheless. Already lending profligacy is speeding up in the retarded US finance sectors itself and as the currencies balance out the new path it will be good to see Stan Chart in India, much like it would be good to see Yuan floating. Did you know dollar trade from Brazil and Russia to the extent of $40bn to China is already denominated in Chinese Yuan?

So which ones are the developing markets now? Do we really need that distinction? The SWFs from China, Singapore, Korea and Abu dhabi are already active investors in global currency. It is time for more to join so India can also launch its capital account convertibility campaign.

And of course, SCB IDRs are a must invest at INR 1000-1200 for the SCB share Each IDR representing 0.10 shares, or GBP1.6 at LSE prices and HKD 19 at Hangseng prices ( or $2.8 / Rs. 130 assuming INR40-44 for the Dollar). SCB is obviously looking at using this new economic weather vane to bolt the stables on the right valuation orbit and India shareholders ( IDR holders) will be willing provided the consistent profit record is maintained.

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Darby warned in April of a “perfect storm” striking the Chinese real-estate sector, as government efforts to cool the market were likely to coincide with dwindling sales volumes and increasing supply.

In a research note earlier this month, he said the growing disparity between property prices and a share-price index of real-estate developers, which have moved in opposite directions since October, foreshadow a downturn.

Real estate has finally given due warning in the beginning of May with overnight declines of 20-30% in Shanghai and Shenzen (Week on week)  Prices in Beijing are down 10% m-o-m from April. ‘

Standard Chartered cautioned that the figures were an average of luxury and mid-market transactions, and subject to potential distortions. Volumes of sales in housing in second tier cities like Chongquing are also down while supply has been increasing.

Complicating the life of the crisis is the play by minerals majors from Australia and Brazil which agreed to provide China at new spot prices that are increasingly linked to this market in China

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Unfortunately, just when the Lib Dems finally joined the government in the UK, the Euro almost seems ready to be consigned to history as an experiment. Its detractors, do not realise however, that it has a very large spread and is already a primary alternate reserve currency and the germans can make it without the french as well. However, the assymetric deficits / shocks are going to be a big test and in better times this would have been theLondon decade with the Euro in the lead..all noes from ‘nobelist’ Paul Krugman in the NYT..

When the idea of the euro was first broached, there was extensive debate about whether Europe constituted an “optimum currency area”; the key question was whether European nations would have an adequate way to adjust to “asymmetric shocks”, which left some economies more depressed than others. When countries have their own currencies, they can deal with such shocks, at least in part, by devaluing — an argument made most eloquently by none other than Milton Friedman (pdf). Lacking that alternative, something else is needed.

So now we have a euro crisis, which — to me at least — hinges crucially on that very issue. What makes Greek problems so intractable is the fact that there’s little hope for growth for years to come, because Greek costs and prices are out of line and will need years of painful deflation to get back in line. Spain wouldn’t be in trouble at all if it weren’t for the fact that the bubble years left its costs too high, again requiring years of painful deflation.

Yet if you look at many discussions of the euro crisis, they simply ignore the adjustment issue. Not to especially bash Marco Pagano, but how can you write a whole essay on the euro’s troubles without so much as mentioning the problem of getting relative costs and prices in line?

It’s tempting to psychoanalyze here — to note that if you pretend that it’s all about fiscal profligacy, the problem seems solvable with a bit more discipline, but if you admit that the original optimum currency area issues are key to the situation, you wonder whether the common currency really makes sense.

on the IMF

krugman as always, makes good preparatory ground by stating the obvious here as well…[incl. the ahem emphasis ours kind of london thanks..]

The IMF has a new report (pdf) on fiscal troubles ahead; it’s characteristically full of useful information. But the way it’s written, it’s actually quite hard to figure out what’s going on — and when you do decipher it, the story is quite different from the impression most people will get.

You see, what the report says is that there has been a fundamental deterioration in the fiscal outlook for advanced countries. Not only are they running up a lot of debt in the crisis, but — and much more important — they will emerge from the crisis with large structural deficits that weren’t there before. So spending cuts and tax increases loom.

But here’s the question: where are those structural deficits coming from? It’s not interest on the debt: the IMF shows a large increase in primary (non-interest) structural deficits. So is it permanent increases in spending? No: the report shows that discretionary spending increases are a minor cause of rising deficits even in the crisis, and these increases will be reversed as stimulus winds down.

YES, MR. KRUGMAN, they can’t see the Elephant in the room..

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Much more is on the cards..

It has already been named a contagion. It has traditionally been the hotbed of an elaborate plan, as acceded during LTCM and also 2008, to take control of Global Finance and bat for a parochial Euro getting accepted ahead of the liberal and ireesponsible, even racist Dollar. There are many other conspiracies that will actively bring the situation’s discussion to the round table when history beckons and most start with “an orgy of unregulated spending” and lately by the same politicians, “irresponsible and irreverent” investment bankers with flimsy and fragile structures like CDOs and other bets that were the root cause of an overacting financial crisis that opened a big hole.

Moving on from the stereotypes however, and to do justice to history, let us, as always, crisply and actively delineate what has really happened. You have to know that to stem the crisis, the issue on the radar has become bailout or no bailout, to resolve to the greater public benefit simply. In that itself, lies the demise of economic logic and a great extension for the tragedy to a greater area and a greater period than Greece in 2010. The bailout means further credit, allowing Greece to borrow to pay off current creditors.

Aside #1 [It has in large become similar to the much maligned Fed discount window and the similar Repo windows the world over which allow banks to roll over their current credit with fresh credit and for virtually unlimited periods of time. GE for example, has been a corporation which has used this short term window to finance elaborate capital projects and in the last decade this has been known as the CFO's artful secret in US and Europe]

Once ECB started accepting Greek bonds at cost rather than market price for collatral, it virtually admitted only their illiquidity for accounting purposes and all would seem fine with the EUR110 bn credit line including IMF coffers. But today apart from anecdotal evidence from IMF failures earlier in Latam, it is clear that the same admission by ECB and the fact that Spain and Portugal would be paying off their portion of the handout from their own bleeding balance sheet.

Why is it contagion?

In politico-speak, the issue with the rollover is that creditworthiness has already suffered and the new credit will only go on to beef up creditors without effectively financing any Greek recovery. More importantly, with upto 20% Budgetary cuts, Greek growth is now hostage to debatable cost cutting measures and international grandstanding whichcontrbutes to larges doses of international panic.

Extinguishing credit would have just shortened the crisis, and now with new rollovers we have extended the pain of the creditless Greece and thus Europe.

Also substantially, ECB has adroitly skipped its non central bank character till now and kept the euro afloat. But with the precarious German export situation and the similar compounding factors in servicing local debt throughout Europe, any backstopping by repurchase of govt bonds will finally impact the central banks that are already suffering the consequences of financing large and growing deficits.

Russia and Singapore in 2009 and Japan throughout recent history have shown the danger of economic contraction and deflation on economic production.

How did the disaster happen?

Profligate misreporting is still part of the contagion. Public standards on accounting disclosure and random politico speak remain large unattendant risks to critical “Contraction friendly” EU regulation that has been at the center of this EU implosion from the beginning. As we speak, large European Banks are busy shedding profitable businesses to comply with Competition Commission and there lies the seed for the next storm that will take any dreams of recovery and render them “undescribably jingoistic and non-productive” Rating agencies and their lethargy will be much more difficult to defend now that the ship is going down.

This will serve as a reminder for mostly the strict wannabes that wanted to become the new Financial Capital of the world instead of New York. They are thus different from hot money that hovers around new financial arbitrage opportunities that preclude and define infrastructure and investment opportunities in India, China, Brazil and other emerging markets

It will also extinguish a lot of the liquidity in hot money as the Euro enters a large period of weakness

Some good will come out of his crisis

This crisis has surprisingly given focus to “Indiabulls” and ‘Chinabulls’ that have become vocal in defending Asia’s strengths in conservative fiscal policy as the cornerstone of surviving the crisis. Concurrently, these new fountainheads of democracy and growth have also got the opportunity to put reforms in order ahead of the curve. There finally will be regulation for Real Estate sector in China and new financial instruments keep appearing in India and seem to getting a public debate absent earlier.

European banks have largely been sheltered after being excluded from a lot of the sub Prime securities in their earier phase and being secondary feedstock of Capital. These banks thus get one more chance to prove their real worth in this contagion. We are short of a lot of them including Diamond’s Barclays and our own Deutsche Bank, but a proven earlier RBS, BNP and HSBC have been bad boys as well and this time they will not have the cover of allied forces from the US..they also maintain strong links with their governments that make them vulnerable (BNP shoulders more than 50% of the French exposure to PIIGS

Hot money will get regulated in no small measure, with these market actions allowing them to make a series of wild bets and kill themselves..I am sure that will never be admitted by anyone on Bloomberg or CNBC either in the US, but it seems to be the only ay open to them, with Euro, India and China investments all stuck ina hopeless web of contradictions, Brazil completely isolated and without the benefit of IMF cover..We of course, need to explore and verbalise this more lucidly further..

the bottomline however, is just a six month respite for the Dollar or till someone decides to extinguish the outstanding sovereign debt and take up honest restructuring of the existing loans, which ever comes first.

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Capital raising continues to be an issue in the UK and maybe developed markets elsewhere as Spain also comes under increasing scrutiny for its outstandings and deficit financing in Europe itself in Germany , France and UK.  Markets in China continue their buoyancy and encourage investment bankers in Mexico and Brazil to come out and raise capital for business. Goldman Sachs led a larg capital raising by Bovespa last year in Brazil. Each of these emerging market IPOs is more than $250 million but sizably less than last years’ $1 billion plus IPOs. That honor went to the world’s most popular travel engine Amadeus that raised $1.74 billion and Brazilian beef makeer JBS that plans to raise $1.04 billion domestically this year.

Bringing Home the Bacon: Tripe-Based Drug Hits Gold

April 30, 2010, 6:55 AM

A drug harvested from pigs’ intestines has made a low-profile Chinese couple the nation’s wealthiest overnight. Husband and wife Li Li and Li Tan’s Shenzhen Hepalink Pharmaceutical sold 10 percent of its shares this week in an I.P.O. that values their stake at about $6.2 billion, The Financial Times reported.

The I.P.O. also earned Goldman Sachs a near 200-fold profit on its original $5 million investment. Read More »

Uralchem Said to Pull I.P.O.

Uralchem, the Russian fertilizer company that was planning an initial public offering, has reportedly pulled the listing because of insufficient investor interest, The Telegraph said, citing media reports.

The planned $600 million I.P.O. may be pushed to a later date, people familiar with the situation told Dow Jones Newswires. Books were due to close Thursday with conditional dealing expected to begin Friday.

$707 Million I.P.O. for L’Occitane in Hong Kong

L’Occitane, the French cosmetics company that produces its fragrant body lotions, candles and other goods in Provence, scored $707 million in an initial public offering in Hong Kong.

Citing people familiar with the deal, The Financial Times notedthis was the first I.P.O. of a French company in Hong Kong.

L’Occitane sold 364.12 million shares at 15.08 Hong Kong dollars each, which was the top of its intended price range. The company is valued at $2.8 billion at that price.

Go to Article from The Financial Times (Subscription Required) »

Essar Energy Said to Reduce Asking Price in Giant I.P.O.

London’s biggest proposed stock market listing in over two years will reduce its asking price in a move that highlights the instability of the market in the United Kingdom for new offerings, especially amid the havoc from the crisis in Greece.

The Financial Times reported that Essar Energy had reduced the asking price for its $2.5 billion flotation to below its planned price range. Read More »

Mexican I.P.O.s on the Rise in 2010

April 29, 2010, 5:55 AM

In what would be the first I.P.O. in Mexico since June 2008, supermarket operator, Grupo Comercial Chedraui could raise as much as 4.8 billion pesos ($389.1 million), Bloomberg News reported.

However, Chedraui’s offering won’t be the only one. According to Jose Miguel Garaicochea, a money manager for Banco Santander, six companies may list in 2010. If so, Bloomberg News noted, 2010 would be the busiest year for sales since 1997. Read More »

Sateri Seeking $1 Billion Hong Kong Listing

April 29, 2010, 5:34 AM

Sateri International, a privately held producer of the wood-based cellulose used to make textiles, is eyeing a $1 billion listing in Hong Kong, The Financial Times reported.

The company owns pulp production mills in both Brazil and China and would use the capital to further expansion amid rising demand for its products, the newspaper said citing people familiar with the matter. RGE, controlled by Indonesian mogul Sukanto Tanoto, owns the majority of Sateri.

Go to Article from The Financial Times (Subscription Required) »

Amadeus Raises $1.74 Billion in I.P.O.

April 29, 2010, 5:28 AM

With 1.32 billion euros ($1.74 billion) raised, Amadeus IT Holding has completed the largest initial public offering in Western Europe since 2008. Bloomberg News reported that the flight-booking outfit sold shares above the midpoint of its price range selling 119.68 million shares at a price of 11 euros a piece.

Controlled by private equity firms BC Partners and Cinven, the Madrid-based company had a market value of 4.93 billion euros when it began trading Wednesday. Read More »

Semiconductor Maker Prices I.P.O. for $92 Million

April 29, 2010, 2:46 AM

Alpha and Omega Semiconductor said Wednesday that it priced shares in its initial public offering within the expected range, Reuters reported.

The chipmaker sold a total 5.09 million shares for $18 each, raising about $91.6 million, with 3.4 million shares coming from the company and a further 1.69 million from shareholders. Read More »

Giant Beef Producer to Sell $1 Billion in Shares

April 28, 2010, 7:19 AM

Three months after delaying the listing of its United States unit,JBS is ready to raise $1.04 billion by selling new voting shares. The world’s largest beef producer, based in Brazil, will sell 230 million shares, Bloomberg News reported.

Through the offering, JBS joins a group that includes 12 other companies that scheduled share sales in Brazil so far this year. That figure is a sharp increase compared with the same period last year, when only two companies held share sales. Read More »

Sinopec to Sell Nearly $3 Billion in Bonds

April 28, 2010, 6:34 AM

Sinopec will carry out China’s biggest exchange-listed corporate debt issue when it sells up to $2.93 billion in bonds on the Shanghai Stock Exchange next month.

The Wall Street Journal, citing people familiar with the plans,said the company, Asia’s top oil refiner, intends to pay back bank loans with part of the cash raised. Read More »

China Said to Block Real Estate Fund-Raising

April 28, 2010, 3:22 AM

China will place a moratorium on capital-raising by real estate firms as part of a broader campaign to rein in property price rises, state media reported on Wednesday, citing unidentified sources.

Reuters reports the move could stand in the way of about 110 billion renminbi ($16.1 billion) in share issues planned by 45 companies, unnamed sources close to the China Securities Regulatory Commission told the China Daily.Read More »

Jihua Boots Up I.P.O.

April 27, 2010, 6:09 AM

Jihua Group of China plans to raise up to 3.2 billion yuan ($469 million) from an initial public offering in Shanghai, Finance Asia reported. The Chinese regulator is set to study the application on April 28.

The military goods supplier  — which has a 75 percent market share in the country — has a special client in the form of the People’s Liberation Army. Read More »

Onward, Christian Investors: Church Index Is Born

The Stoxx Europe Christian Index, the first European Christian equity index, was launched on Monday, The Financial Times reported. The launch came as a response to increasing investor demand for so-called ethical stocks following the financial crisis, the newspaper said.

The Stoxx Index is made up of 533 European companies, including BP,Vodafone and GlaxoSmithKline, whose revenues come from only approved sources in line with the values and principles of the Christian religion. Read More »

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The crisis that went by had a lot going for it, with some great contrarian stands from Goldman Sachs and even Dimon’s fledgling JPMorgan, now a de facto twin gold standard in the industry with GS. Goldman Sachs in particular has been in hot soup, floating and even sounding brilliant at times answering the senate committee and the SEC cogently and in detail of the services offered, the risk management position and the trading wins at Goldman Sachs thru end 2006, 2007, shorting of peers in 2008 and selling those bonds and those off balance sheet tricks to Greece and many mnore throughout thee world.

But much a s no one saw the crisis coming, no one saw GS as a villain of the piece in 2008 and no one saw any further crises in the US markets after today’s GDP call coming in at a good 3.2% driven by fresh sales..Still, when BofA ML dropped a coopted bomb de-rating Goldman Sachs itself, the markets responded taking it down 10% in morning trades. And that shows what comes of normalisation of this house of cards. After the deeds have been done, the blame game will probably cost a couple of executives and some new regulation will be closely proscribed to minimising extraordinary profits from structured products and other smart trades that have been the hallmark of both JP Morgan and Goldman Sachs.

In Asia, where the capital markets issuance is big, GS has been under the weather, Merrill Lynch a torn house after the sale and a lot of Indian divestment and retail lifestyle biggies across India China and even Japan already rostered with the best and the brightest in the deal tables. In Latam, Citi sems to have a competing presence. In Europe, many boutiques if not a recovering Barclays and Deutsche Bank would count as threats in the investment banking business. GS in turn is globally seen more as a leader in structuring and trading and with OTC been looked down upon, headinds have surely caught my favourite employment prospect in a swirl today morning!

In its favor, GS has its commitment to executing the full service banking model as it needs access to funds and it also has the capability to shine on despite the reduced leverage. But the public perception is fragile as this morning shows, and therein lies the nub.

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The smog crisis

If you wanted to catch a flight you would have been on the road most of the weekend after picking fare / cab / shared vehicle rides from Twitter and Facebook..
NYTimes

The shutdown of much of Europe’s airspace looked set to last into Monday as ash from an Icelandic volcano continued to spew into the atmosphere Sunday, even as some isolated airports, such as those in Frankfurt, Berlin and Warsaw, cleared the way for a handful of flights heading east or north. But with millions of passengers stranded at airports across the globe, airline industry leaders were openly bristling at the restrictions that have already cost them nearly $1 billion in revenue worldwide.

“While safety remains a non-negotiable priority, it is not incompatible with our legitimate request to reconsider the present restrictions,” Olivier Jankovec, director general of ACI Europe, which represents 400 European airports in 46 countries, said in a statement.

Britain’s National Air Traffic Services extended its ban on flights across its airspace until at least 6 a.m. local time Monday, prompting the country’s flag carrier, British Airways, to cancel all of its Monday flights. Air France canceled flights to Paris flights through 8 a.m. Monday, while Ryanair extended cancellations across most of its network until Wednesday afternoon. Across the globe, Cathay Pacific of Hong Kong, Qantas of Australia and China Airlines in Taiwan also canceled Europe-bound flights into Monday and beyond.

Eurocontrol, the Brussels-based agency that coordinates air traffic management across the region, said it expected 20,000 — more than 80 percent — of the 24,000 flights normally scheduled would be canceled Sunday

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On Obama

Obama has other snide agendas’ none more obvious than the Pentagon trying to co-opt India as an inferior partner on the Kashmir issue and drop its pants in Afghanistan, while Pakistan merrily resorts to tribal responses whether it be Pakistani Cricketers or Indian Tennis players. The only other thing Barack Obama would understand about Tim Gethner’s visit to India is that G20 meets more than once this year and Us needs more friends.. If you are loking for friendless statesman and corporate leaders, you need to look for Geithner, Vikram Pandit and the others that left in 2009. Then it becomes more of a didactic blog post like this than a deep well paid and well followed analysis by more than one.

On Geithner

Geithner cannot really hope to make fiscal friends with India for reasons other than India does use USD as reserve currency and India needs a $2.5 Trillion in Infrastructure Finance. May be Goldman Sachs’ cause could get a little help from his immediate visit. I doubt it would be so. Maybe it is just to make sure he does not feel alienated when he makes a point or two at G20 conferences  but  india also has an important China policy that seems to be going against the grain of the US stance.

On US India Policy and media cameos

On the China front one does feel India and US should cement their ties a little more materially but then there is no reason for Pakistan to be molly coddled, it would set off the bomb, in fact as clear as day. Having witnessed the run of events to Kargill back in 99 soon after the Tiger economy crises in SE Asia, I am pretty sure-footed in this non fiscal, non business yet strategic advice for India. While we did well in trying to befriend the US, they do have a convoluted picture that brings them down and we are better off without them if need be.

On the G20 front and nuclear technologies front we have to grow the business with USA without feeling acrimonious about Pakistan’s participation. Also we should really be able to laugh at these fuddy duddy journalistic pieces on India timed with Geithner’s visit. Not the strategic ones but more the Victory March song in the NY Times on I Nooyi or today, Vikram Pandit. We have really come out of that coming in the way of our Indian Economic Interest and as professionals each of us can do business anywhere in the world for any corporation

On Geithner again

However, having followed the events up to and after the crisis of 2008, I think it likely that Geithner may have a personal agenda as his understanding of the Financial situation , much like mine, is entirely his own and he is a man of strong personal biases. Thus my stance that hopefully this meeting is next week. He has managed to fly under the radar being a Treasury Secretary even after being the Fed chief during the bailout week in September 2008 and he is making a strong case for America’s financial diversification in time and hopefully with the right panache and fervour. America should increasingly get used to more inflation, higher growth statistics and continue to work out debt programs that reduce debt with out impacting growth. Much of the $25 billion in FDI inflows to India in 2010 will be Portfolio inflows but a good 80% will be from the United States, the others advised by American firms like Goldman Sachs and JP Morgan

Here is to Indo US ties

Only thing, as is obvious to most, India has an important role to play globally and it is not just lip service anymore. The day that is suitably addressed by these seemingly blue blooded but “Empty Inside” policy directors in the US, we would have moved. We do not need to become a big bully like China, not yet.

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There is another subtle difference. Today, the business of banking is no longer held to ransom by flippant ads and worse product design than the lusciously expensive architecture of Dubai World. That products are just careful because of the CFPRA regulations and the CARD ACT ( already in force) , not forgetting restrictions globally on misuse of email and telephone lists..but these steps are in fact in their infancy. And as far as we are concerned, we would have guided but a few leaders to the right way to cross the flooded river.

More importantly, the Big 4 and the Citi, BofA and Wells Fargo among banks have realised the folly of not having bothered about the Marketing and PR functions at their hallowed portals. JPM and Goldman Sachs have suffered for their high-handedness because theire was no way they could defend their actions to anyone and now anyone on the street could be paying them…But we being of the same ilk, took a little deeper look at each post we wrote and thus, we think this one also is a mistake easily corrected by the traders by :

A. Throwing money at the problem and hiring a new look Marketing and PR department. Citi has been scouting for its person in charge for the deal since January and has recently closed with one of the two Deputy Mayors of New York leaving Michael Bloomberg as the evening draws to a close on his tenure.

B. Ensuring that everyone is tracking the leverage in the system and in light of restrictions to be placed by a non investment banking / markets friendly administration in both US and the UK, making sure that no BS is aired or heard in lieu of deserved leisure.

C. Adopting conservative thought (guilty!) in prophesying bank growth and impishly exciting assumptions while prophesying country/national growth. Yes, the Good times virus is also back in the market, making it tough for the McDades and the Other iphone billiards Champions accompanying the Senior Managing Directors from keeping their trap shut and creating complications for the banks operations.

Apart from requiring a coherent Communications strategy and sitting together to decide which way the lobbying penny drops, the I banks and Citi also have to take care of prospective customers and time is ripe for the staid and the multi billionaire island owning crowd to assign people and materials to “making things look good” all the time. The Super Tax and the Super Fed Bills will not be the basis in the next crisis either, with everyone bankrupt right now and just exchanging paper at thankfully liquid rates (right now!) . When the next crisis comes, we alone would not be able to help the banks go straight from the outside and they will need insiders who are able to take a birds’ eye view and present a face that can be trusted and at the very least respected before clients are roped in for deals on spreadsheets that continue to make sense to a able few of us.

The social media may also pay a role next time, like it swung away from GS during the week in Greece..but more than that the brand its growth being welcomed in new markets is a sign that when there is another argument, a lot more retail footfalls will be watching the show and making their money’s presence felt ( even if in pennies)

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Ford Sells its European portfolio

In keeping with the symptoms of the crisis, while BofA discovered its way home earlier among the banks, Ford has sold its high end brands like Aston Martin, Jaguar and now Volvo. Barring Mazda, all its sell offs have been iconic brands in Europe which had great potential as brands but were not very profitable. Ford had also sold Jaguar and Land rover for a $1.7 billion to Tatas in India ( plus adding its commitment to pay $600m in pension liabilities.

In the UK much of the auto sales and purchases have been about unions and their costs nullifying the brand’s efforts during hard times.

Ford now just owns Ford, Lincoln and Mercury brands.

China buys into the global lifestyle boom

In fact, just sticking to the auto industry plans for China, there has been a lot of parallel activity by the Chinese albeit slow, not because of government approvals but probably because they have the patience to negotiate for the right price. The typical buyer propensity to bid a higher premium for a purchase has been sucked out by the Chinese and we now have a much more staid and single buyer driven, negotiation friendly, M&A deal market China Investment Corporation has bought a lot of retail stakes of less than 2-3% in Coke, Visa and other iconic American brands.

Nanking Auto Company purchased the MG Rover plant shut down since 2005 in the UK and restarted production there with two seater 2500s rolling out soon after the crisis exploded in August 2008. Nanking Auto Company is a part of Shanghai Auto

China’s domestic Car Market

Domestically China has a growing luxury Cars market with Audi selling 130000 Cars in 2009. Beijing Auto purchased Saab’s powertrain technology even as the unit was purchased by Spyker from Amsterdam. Saab is going public in the next six months. Earlier another Chinese company dropped its plans to buy Hummer from GM. GM is also suing SAIC in China and Daewoo in Korea for IP protection after exiting the ventures. However these luxury brands definitely have a ready market in China itself where car sales are likely to be above 15 million in 2010.

The difference in Europe

It is the European brands like Saab and Volvo more than the high end “Maharaja” brands like Aston Martin and Jaguar that will lead the new luxury push in lifestyle consumption markets. These brands require huge investments at this time just to come up coughing and sputtering into life. The magnitude of those investments may well realize whether it even makes sense to reinvest in the same brand name as the revolution may be functional and aspirational at the same time. As long as the Chinese or the new publicly listed Saab offer a sports car with modern 2011 features, the car may well be a new Saab or Volvo line with its own brand following that competes with the Audi and the known Mercs and the BMWs.

The European brands have a global following because of their own diaspora that may well sell down these brand names of once iconic glory for the sloth and pain they have come to represent. They also have lost their home markets in some cases, but it would be very difficult to change the stripes for a living Volvo or Saab brand that has a thriving market, investments in distribution and good technology on offer.

The Ford Company

Ford in the meantime has ben pushing ahead in the domestic US market. In 2010, it started well, leveraging its hold on fleet cars ( Sales of around 180K cars a month) with gains in retail share at the expense of Toyota’s ‘gainsaying’ market postures . The recalls may have subsided but the brand consideration values for Toyota are down 80% Even as rival GM has shut down 10 out of 16 production and assembly facilities in the US, Ford has stamped its revival story with a 17% share in January/February 2010

Ford posted a $2.7 billion profit in 2009 and forecasts a net income in 2010 as well, its first profits since Mullaly came on board and kick-started this reorganization in 2006. Operating profits will likely exceed $4 billion as 4th quarter sales raised per car realization by $2000 and production rebounds will mean higher profits from the built in economies of scale.

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The Tommy deal leaves with APAX the designer Karl Lagenfeld, not sold as part of the deal but already signed with Tod’s Hogan for a line of shoes from Lagenfeld. Lagenfeld would again be spruced up in the next couple of years for an eventual sale.

PVH owns brands like Calvin Klein Collection, ck Calvin Klein, Calvin Klein, Van Heusen, IZOD, ARROW, G.H. Bass & Co., Bass, City of London, Bugatti and Eagle, and its licensed brands, Geoffrey Beene, BCBG Max Azria, BCBG Attitude, CHAPS, Sean John, Donald J. Trump Signature Collection, JOE Joseph Abboud, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL Michael Kors, Michael Kors Collection, DKNY, Tommy Hilfiger, Nautica, Ted Baker, Ike Behar, Valentino, Hart Schaffner Marx, Gianfranco Ruffini, Studio by Fumagalli’s, Zylos by George Machado, Jones New York and Timberland, as well as various private label brands.

Meanwhile Phillips Van Heusen is moving into China with 155 new stores from IZOD.

However, not all PE players are as value accretive. EMI is well on its way to give Citigroup another opening in PE (after the $9b sale of its existing PE business) EMI is unable to pay up on a huge loan and top up with the bank and s looking for a way to exit without becoming a part of Citi. Not to play a spoilsport on the image games and to use an example from outside Fashion, Man United of UK and WIND Hellas of Greece(Telecom) were purchased in 2007 for $500m with virtually no debt and both company’s own significantly higher debt today, the baggae going up 4 times in 2 years of PE ownership, stifling cash flow and eventual operations.

Hilfiger was sold by APAX for a 100% gain over its acquisition price of $1.6 bn in 2006, and Lagerfeld would be the cherry on the ice. Meanwhile, Banks have stepped forward well in time for Bharti to announce Financial Closure for its proposed deal for Zain Telecom’s Africa assets. PE seems to have known for a long time that the Lifestyle sector value would be in play and its interests in the industry are going to be profitable despite the millions invested by PE partners in their retail and fashion investments during 2007 and post crisis for that elusive exit. Some not so clean operators’ may also do quasi deals in the period around structural constructs like regulations, new geographies but players like KKR Oakhill and APAX along with new deals by players like UBS iwith Bijing to bring PE to the local consumption boom is but a start of a value accretive chain. Citi has earlier announced a PE venture exclusivey for Chinese shopping malls. Closer home in India, some of the PE investment may go to real estate or Holiday leaning ventures (KKR _ Cafe Coffee Day) but a lot is hanging on changing regulations to kick off the boom.

The last completed Deal in the retail lifestyle segment was when Oaktree received $600 million in equity for its $1418 mn investment in Duane Reed from Walgreens. Private Label Brands come more to mind but they might still not reflect most of the Lifestyle boom if the retail chains are neglected in a only apparels analysis.

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Yesterday I was also at the IPL match against Kings XI Punjab and there was some heckling there too, but the semi educated baccalaureate force that serves everything in Bangalore’s yuppy places wouldn’t heckle me unless I was Deepika Padukone or overflowing with new ideas and these waves lopping off to them for free..its mostly the no good senior staff and super senior debt with old clichés in pocket that thinks that such disrespect is the brilliant story for tomorrow.

Yet, here we are, you guys not interested in this banker unless there is an official subject matter and in there inside your head, you know this dumb banker can’t charge you even nuts for the professional stuff he may such dish out that would be worth squatting on.

So..I was at the Ugadi game, where Bangalore struck out on the poor shabby Kings XI from the Punjab and today the only paper I have read ids the Hindu. The stuff around my web, is mostly dull shavings off the myriad banking and investment subjects treated with care and detail here in the last 90 days.

Here are this Investment Bank’s official notes on the year of carnage and the vulture audits commissioned by equally slip shod and half-hearted ny times correspondents and the Fed inquiries commissioned on the Fed and the Treasury by the court , as described in “autopsy of Lehman by court appointed examiner”

The other papers are happier with moving ahead with the Tiger Woods branding story revival as he comes to the Nationals on April 8. Also we look fine with the Oliver Wyman report and have no locus standi in imagining that this peanut snack addicted drubbed lady or tub of lard reading the show’s star article will have any sense to comprehend it or need to appreciate when she can easily imagine herself taking a ride for free nut snack in the new Singapore roller coaster from Universal Studios. So there.

To put it in plain English, the banks and investment banks have to lose at least 15-20% of their top line as super normal gains go out of the capital markets and actually more of the debt investments head due south, Default spreads now being normal at below 300 ( In September 2008, Lehman and AIG had reported spreads of 612+) Two separate trends but both mean that Obama and the UK guv’nor are right is easing the pain on the banks with more taxes and punitive bans on trading. These regulations will take their problems deeper but I doubt if more than 1-2% drop in profits will be reported. Also, Deutsche Bank and at least one more European shop will report higher improvements in Turnover, as all find a common counter party. We expect a short rearing of the head of SIFMA somewhere in May June after all the audit reports have started eating dust on the top shelves.

Right now, it is important to know that AIG never wanted to pay its collateral demands and had next to no traders in is Financial Products shop, while Goldman Sachs and J P Morgan were turning up the heat on AIG and Lehman, with Citi reaching the altar (Lehman’s door) to chop off their head together with J P Morgan a morning in September a week away from Andy Sorkins’ guts and glory story rip off that hit the street. ( Our p’folio transaction history of the purchase of Citi and BofA as they hit 92 cent and lower respectively here )

Also as Krugman says so lucidly in posts all of last week and earlier, this week, Democrats bell the cat or bust on Healthcare all over again. Investments in China are not free frit to hand out on the internet and may be researched in own learning of the Shanghai Warriors that make their script but as of now they are in Coke, Visa and any retail icons you wanted to be America.

Also Coke and Pepsi are in a lot of Coke and Pepsi as well buying their bottlers for $8 bn each and buying back shares ( Pepsi) worth $15 bn. Back to the banks, it is not easy for them to go international with recent history and in the US the Volcker rule on Trading desks and the increase in TCE requirements as Basel III will become handy tools for internal reformists to spell doom for Bart McDades still employed by the larger stamps of Wall Street with even Repo 105 sounding like a personal crime , accounting getting away with the new IFRS standards trying to keep all assets visible on the balance sheet

People who used the crisis to get one on one on their bosses and ended with the Foxhole giving them the joyride south would not be in favor for recruiters who have been and will continue twiddling thumbs most of thus year and next. Those Dust devils and minute loafs in character also will not be in favor for well manicured and well browsed experimental leadership recruiting teams out to make a deal for adding their own stamp of liquid profits to leadership desks.

Sicker turds out to browse for free and use the free frit like on this site as base to say they are doing greater things have this post to make them aware of their seat and office dust devil politics with weevils and fair weather dry drains on office roads..Campuses are still the thing to shake off your disgust and white water rafting still smells in the East and in Latam and EE alternatives for executives hoping to catch up on being targeted by pay limitation rules. .

In short the banking world is more or less where it always was. Marketing spoons are busy with long dead PR campaigns and non existent Marketing offices created overnight in my banking sector and none calling me. Come to think of it , the phone hasn’t been ringing at my end and i think even Mahesh Murthy’s. International Banks will find it uneven and disastrous from the feminine eyes of Indian scouts and such scallywags they might employ for washroom chats, while local banks go gung ho on retail expansion esp in Asia as Real estate loans become profitable again. Bart McDades, Geithners, Flowers’ and others be advised that speaking up ofr looking for a vote of confidence is much like a women jumping on the grass ceiling in joy of having discovered it and might do well to not do the hula dance for a few years. But the salary cap tax will stay in words in the UK and in deeds of graduate batch employment in India and China where banks continue to push outsourcing operations despite Citi trying to show everyone it learned otherwise.

New Islands in China and new roller coasters in Singapore may have a future but Capital Market investing may not grow beyond the 15-20% market in India, while in China even if it grows, Chinese would do well to take their government’s cue and invest in America, Dow is by far the sunniest. Water is greener instead of the grass in Oceania as commodities catch up with the cloud and end in dust.

Banking locally whether it is US or China, India and Australia would be most profitable for the Advisory profession while doers might get stuck with shops and shopping this entire year. Malls, Movies and More Rides are heading India’s Lifestyle Budgets and budget hotels and motel chains all turned out in glory to catch travelers. That still leaves me with unhappy HR departments and useless scum otherwise floating thinking they can jam me with unemployment feeds with or without telling me. Monday indeed. I am one persecuted George Clooney waiting to be recruited to be the CEO of a large investment bank in Hollywood, Dalal Street, Hang Seng and noted in the FTSE Indices and Shanghai Super shares, the sooner the better..for all of you!

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Over and above the $180 billion paid out to AIg to bail out its portfolio of illiquid low priced securities, AIG is still on the verge of the collapse as after the sale of Metlife and Prudential, it still has an outstanding $80 bn to pay off. Add to that the Federal government in the US also paid out $125 billion to Freddie Mac and Fannie Mae, the two mort insurers holding more than $5 trillion of the $10 Trillion national housing debt. The companies have been behind all the mortgages since August 2008 and hold more than half of all home loans. Reforming Freddie Mac and Fannie Mae is next to impossible and new reforms will invariably end all the subsidised lending and foreclosures. Still, precious little has been achieved in rewiting house loans close to foreclosure, most of the stimulus cash lying unused. 130,000 modifications have been competed in 18 months.

Barney of course, wants to start winding down the two institutions as financially that model is unviable and is giving precious little guarantee to homeowners, government running the institution directly. The regulator FHFA is unnecessary and their(FNM and FRE) function of supporting mortgages not good charter for a private lending firm/bank. Thanks to Wash Post for some insightful reference material..

Houses are available at a substantial discount today, fueling property speculation, while at least 7 state governments stare at fiscal failure. Houses are available for as low as $135000 from $440000 earlier

In Europe

Home prices have started rising back in the UK from its ten year low in April 2009. Scandinavian states have also reported a recovery along with UK in the range of 10%-12%. However markets in Spain, Greece followed the crisis into a steep fall along with central and eastern europe, down between 30-50% in 2009

The Continental Europe bulwarks Germany and France have also reported falling real estate prices, drops limited to around 5%. Mortgage prices though will start rising as governments follow US, Asia, India and China in raising rates after a fragile recovery. France and Germany still report large fiscal burdens and may not be able to support better housing conditions in 2010

India and China

China is contemplating a property bubble while lower consumption is forcing it to make fiscal concessions for consumers, resulting in continued spending on property malls, offices and leftover in residential housing. Home prices have been rising continuously in China for the past one year and the January boom show at least one third of the lending surge going to property developers and consumers buying into housing.

India in the mean time, stands on the edge, ready to go back to established processes in real estate financing and selling while the government singles out the sector, deservingly, as a bastion of corruption and prone to market failure..While Real Estate demand has recovered, key towns bore the brunt of the correction in prices and will come back in pricing terms like Bangalore, while low budget housing has hit a few snags in both India and China for the mismatch between costs and returns.

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However, we are going to discuss the 8000-10000 branch strong HSBC and Citigroup where Foreign owned banks are still 2 times the size of City Commercial Banks that form the third tier of Banking in China. These smaller city commercial banks are useful as investment vehicles for entry into China. A foreign bank is allowed to conduct business with a Net worth of RMB 600m of which RMB 200mn is required in freely convertible currency and the other 400 mn in local RMB HSBC has a long history in China with its Shanghai branch opening in 1865

HSBC is one of the more established banks in Mainland China with 8% in the Bank of Shanghai and 19.9% in the Bank of Communications, joint stock banks that are required by CBRC and PBOC regulation to maintain RMB 1000 mn or USD 150 million as Capital. Apart from HSBC’s own 60+ branches across 20 city clusters, BoCom adds 2800 branches in 80 cities. No information was available on Bank of Shanghai. Together the two joint sock commercial banks hold a RMB 1 Trillion in Assets. HSBC also owns 16.9% in the renowned Ping An Life Insurance

Citi established operations as the first American bank in 1902. It operates 30+ branches, and significantly pushes its knowledge of China internationally and in China would have like to push its knowledge of the securities business.

HSBC and other foreign banks together account for a 2.3% market share in China in assets and 10 bp lower in liabilities business. Out of the $150bn in assets and $140 bn in liabilities, locally incorporated foreign banks like Citi and HSBC account for more than half or $90bn and $80 bn respectively. Foreign banks in India hold around $300bn in assets and similarly in liabilities among the Top 5 for a 7% market share.

HSBC also owns a Rural bank in Suzhou Chengdu, and 12.8% H Shares of Industrial Bank. CEO Stephen Green has recently moved his HQ to Hong Kong to collect his larger 2010 bonus and focus on the emerging markets in Asia, China and India.

HSBC plans adding 10-15 branches in addition to 90+ by end 2010 and additional M&A as it readies for a first IPO in Shanghai/Hang Seng. China earned HSBC a NPAT of $752 mn, a sixth of its global $5bn in six months 2009 profit. HSBC is still waiting for new CBRC regulation and approvals for its $7.3 billion IPO.

Citi would likely have reported business profits of $300mn from China in the same six months

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By far the largest China Huijin holding, the bank had almost 400,000 employees in 2009 and a domestic Corporate Credit of $480 bn or $3232 RMB. Its total assets of $1.6 Trillion or 11T RMB(Renminbi) Its Credit book is spread across 515 bn RMB (same as CNY or Chinese Yuan) in Personal Loans ( USD 77bn) and $42 billion to Real estate Developers (incl. $13bn in construction).

As the rest of the Big 4, ICBC spent time and resources in building partnerships with financial services majors to increase ‘green credit’ or access to SMEs and by extension local municipal bodies, that are facing the brunt of accelerated real estate bubble as their repayment ability is stretched. The green credit wave started in 2007 end after all the Big 4 went public in 2006 in Hong-Kong IPOs. With 190 million PB clients and 3 million Corp Customers ( 30000 SME customers) and 16000 branches, it may see to be undervalued at its current market value of RMB 1.1 T. However after reduction of NPLs from 20% a decade back, their current NPL ratio is still far high at nearly 5%

Since 2007 it has managed to diversify into global investment banking business lines with RMB 1.1 Trillion in Custody assets, and RMB 54bn in custody management annuities, increasing volumes in futures agency, bancassurance ( across 50+ insurance firms), precious metals and other trading businesses.

Its 2006 IPO amounted to $22 billion with $16 billion in H-Shares and $6 bn in S-Shares ( free float of 22%) and its 2009 savings balance was RMB 4 T or $586 bn. Annual Persona Banking sales now exceed RMB 1 T in “Elite” products and even 240 million credit cards as of 2008. Trading generated volumes of more than $1 T for ICBC alone (RMB 7.6T) with only $170 bn in FX trading

China’s Big $ have still not updated December 2009 results but prior 12 months results show ICBC sales at more than RMB 400 billion ($61 bn) and 130 bn in Net Income ( $20 billion )

Property funding shifts to PE

With ICBC and the Big 4 stopping credit for Real Estate, on CBRC’s express instructions, the PE firms are increasingly the source for Property and Local Municipal companies to close current projects.

ICBC and others could invest in the Real estate funds as Limited Partners to control their exposure. Citibank has raised one such RMB 3400 bn fund with China Resources group to invest in China’s Shopping Malls. Also sovereign investments in Gold have topped off at 1054 Tonnes and CIC/China claims to hold Euro and Yen for FX stabilization apart from its large holdings of US Treasuries

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US and China

China holds 23% of US Treasury debt and in the near future may also add from the 21% held by Japan, safe in its aspiration to be US’s banker (China) Thus China would not likely do anything to tipple the Dollar from its perch as it by policy likes the US whe it plans to expand in the West despite other political aspirations.

It was a slow crisis

Back in January when by tradition, the Big 4 in China opened the floodgates they quickly notched up more than the $550 m in new loans at the end of the month. Bank of China, covered earlier, led with $135bn or $800bn Renminbi(CNY) in loans. In the same period china Mobile suffered at the bourse for spending $3 bn to pick up 20% of the tiny Shanghai Pudong Bank, and it came three months after the Chinese added a large amount of Yuan in float at the Hong kong markets for preparing for the inevitable. The crisis is currently panning out in a slow expansion of derelict inventory and falling consumption in pockets of the economy. Do go back to all these stories at http://china.advantages.us

This year, we will have more half-drawn swords to show faith in the demands made by the Western World and as the natural sequence of credit dries up, China will look more and more like us. In that light we coevr the other three banks from the mainland held by the Huijin for the PRC. In just October 2008, even as the lemmings sold themselves upstream for the TBTF failures of July and September, ken Lewis paid $7bn for 6.8% of CCB at a substantial discount with the TARP cash. Eventually in 2009 BofA was rid of both Lewis and CCB, CCB sold to a local PE fun, Hopu Invest Management for $3 bn for the 3bn shares coming to 7% of CCB it held. BofA’s 17% netted $7.3 billion for 54 cents a share. Hopu is funded by Temasek of Singapore and the Golden Goldman Sachs. Temasek also pad USD 600MM for a direct stake in CCB.

The Bank

Like other Huijin banks, CCB started global push outs with 3 fund management JVs by 2005, with Credit Suisse, COSCO and Schroeders in the last one in 2005. It’s post IPO hare holders included China Life and Temasek (5.7%) when the government stake through Huijin came to below 50% It established resources in Hong Kong with the acquisition of BofA(Asia) the Bank of Canton successor in the territory in 2006

Currently the Central Huijin has reinvested in CCB with 78.4 moillion H-shares and the S-shares repurchased in six month long market operations and from China Jianyin(Jianyin=Bank) another of its own investment companies in 2009 to 57%

Current CCB Capital Adequacy at 11% is a might lower than 11.5% required by the China Bank Regulatory Commission but has denied rumors of further consolidation by Huijin or new shares issuance to boost the TCE

Huijin is also injecting $12 billion in China EXIM Bank and $4 billion in Sinosure as a CIC subsidiary. China’s banking system liquidity reserves are also lower than the internationally accepted 15% though the regulaors have raised such reserve requirements in 2009.

many of those smaller banks are believed to need new capital to boost their adequacy ratios.

China CITIC Bank (0998.HK)(601998.SS) is actively exploring raising capital [ID:nBJC002509], and China Merchants Bank (3968.HK)(600036.SS) is launching a $3.2 billion rights issue, but this week said it should require no further capital raising for at least the next three years. [ID:nBJB003703]

Bank of Communications (BoCom) (3328.HK) (601328.SS), China’s fifth-largest lender, said last month that it planned to raise as much as 42 billion yuan via a rights issue in Shanghai and Hong Kong to bolster capital.

Strictly Bank Business

CCB October 2009 reported more than $4.52 bn in profits ( 6.7 RMB= 1 USD) growing 18% y-o-y by bank’s IFRS interpretation, $12.86 bn for the 9 months of 2009. It has recently attempted a $730 million Healthcare Fund. At a total of 234 bn shares outstanding, CCB is worth $196 bn as of March 2010. In line with the crises of plenty, it has recently increased down payments on retail mortgages and second homes, designed to step with CBRC’s plans to protect the economy from a property bubble. he bank is opening 100 rural branches with Banco Santander as also a $100mn auo financing unit with them. The Banco Santander JV has a capital of RMB 3 bn. It has also recently bought a 50% stake in Antai Life from ING. It’s last capital raising was thru subordinated bonds worth $15 bn in December

CCB is expected to close 2010 with $40 billion in Sales and has its share of exposure to real estate groups ( $10 bn contract with leading developer) and local bodies though the new debt is mostly from smaller banks

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The $300 billion HK economy if measured by its international connections, has been instrumental in giving a lot of trading history to the Chinese behemoth. It is also another unbridled horse right now, with money supply growing at 53% in 2009. IT’s relative insulation from the bust was inherently because of the mainland linkages with 16.9 million domestic tourists in 2008. Among other items like food and resources it imports over 11 billion units in Electricity alone.

Hong kong’s measures to tackle the incipient bubble also look like they could easily be adopted by the mainland in due course of the year. While Russia’s actions have heightened the importance of managing property rights, Hong kong’s raising of stamp duties to 4.25% from 3.75% can very well be counted as effective in the next few months and replicated by the nation.

Of course, with China’s local government bodies planning competing tourist islands despite the crisis and despite the clampdown on lending, it may be pressurised into or lured into not acting along the same lines as HK, but China does continue to use the Hangseng Index and other Hong kong infrastructure to dabble in growing an internationally stable national economy.

Apart from the arms purchases by Taiwan and the Dalai Lama’s visit to Tibet, that continue to other international media, China is pretty much united on getting on with business and because of the nature of government, unfortunately, doubly so. At one time, the middle kingdom even included villages in Korea even if just to show up its arch rival “Nippon”, but Korea’s contribution to the Chinese economy is being restricted of late and local inventories in China giving them policy strength to dump their produce in the International Markets. You can’t see much sophistication in their foreign policy and trade, lending them the difference that cannot be covered with Hong kong so easily, Hongkong however, busy with trade.

unfortunately Hong kong, much like Singapore remains steeped in real estate as a basis of growth in the Economy and thus greatly exposed to corruption and crime apart from deeper boom and bust cycles.

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Catching up with the FT Lag

Even in the past there have been rare instances when FT has suppressed a business story in US or India/China markets to bring it up later with a dash of Pekingese lemon and the partridge eggs for breakfast

Stabilizing the loans dragon – CHINA

Meanwhile, China’s banking crisis has taken a hiatus with brakes on lending ( see http://china.advantages.us) and we still have 3 out of 4 china banks to cover over this weekend and next) Local business denizens have taken over reporting and op-eds in WSJ in India and China. And that has made a difference to the firmness and quality of opinion. This is the insider track.

The surge in lending and strong house prices, which increased 9.5 per cent year-on-year in 70 large cities, will underscore concerns that the economy is at risk of overheating.

However, consumer price inflation moderated last month to 1.5 per cent from 1.9 per cent the month before, although factory-gate prices rose faster than expected to 4.3 per cent from 1.7 per cent.

The mortgage bundle continues to give sleepless nights to the Kremlin in Beijing as urbanization continues unabated and a good 1 in 5 of the 200 cities try to emulate the New Central Business District in their city

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CIC, one of the world’s biggest investment funds, was launched in September 2007 with $200 billion in capital to earn a better return on Beijing’s reserves. One-third of its capital was earmarked for investment abroad, and the fund has bought minority stakes in mining, oil and financial companies.

The biggest holding in CIC’s disclosure is $3.5 billion in Canadian mining company Teck Resources Inc., an investment that was previously announced.

CIC has expanded cautiously abroad, trying to avoid a repeat of the political uproar in Washington that followed state-owned CNOOC’s 2005 bid to buy U.S. oil and gas producer Unocal Corp. CNOOC Ltd. withdrew its bid after some U.S. lawmakers complained the sale might jeopardize national security. Investing/Business Week

CIC investments include $360 million in VISA, $6 million in Apple and $9 million in Coke, minority stakes as a planned passive investment in growth. CIC had a bad run in its investments in 2008 when it had holdings in Morgan Stanley and Blackstone in the run up to the crisis.

The CIC subsidiary China Huijin owns more than 30% in each of the Big 4 banks in China including ICBC, Bank of China and China Construction Bank

Coke Results

Coke reported its fourth quarter today, and sales continued to dip in North Americas, down 1% in the nearly $2 billion US Markets. Coke reported Sales of $7.51 billion, with full year profit growing 17% to $6.82 billion or $2.93 per share on marginally lower sales of $31 billion.

Coca Cola Zero reported double digit growth in North America in unit case volume despite six fewer days in Sales in the period. Coke China jumped 29%, India grew 20%, while Brazil and France grew 8% and 12% in unit case volume.

Coca Cola reports its juices and teas in the Still Beverages which also grew 9% in unit Case volume.

Apple had earlier reported double digit growth and new sales of iPad can easily be expected to add $1.2 billion in the next quarter’s sales adding 15 million units for the year.

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The time when there was no banking crisis in the air is now distinctly 5 years ago. But the world survived on other controversies in that time. In 2007 and 2008 when the markets were engaged in the biggest beastly moves that really changed the denominations of the investors dreams twice, the media including the business papers like WSJ and FT were going through a churn of megalithic proportions. That News Corp has turned a profit last week, was thence an epic saga’s anticlimactic first break.

The show isn’t over yet by a long mile. Conan will be back in a few days. Jay Leno has managed to be the King and beat others to the new preferences of a DVR drunk time shifted audience that is demanding content from the networks. Even smaller stations in mid-town America will be more demanding now and if and when Conan comes back with another $30 million, he may just realize his folly in messing with the King. That one’s a no show, really There cannot be any Conan vs Leno and it won’t be a paying proposition for Rupert Murdoch or Lachlan either.

Star was not, for so many years in the Asia-Pacific even as it was on the fringe of the most watched TV programming and really his network was a quality assurance program live for the upwardly mobile audience in the region stuck in competitive jobs with ever-growing salaries and ever-increasing uncertainty. Today there are more cars in China than in the US in one year and an Indian household is likely to spend $10,000 of disposable income for the latest in dining, gadgetry that’s closer to the heart and so many more avenues of entertainment than ever before.

Avatar’s paid off for Murdoch, adding $324 million from movies to the bottom line and his news properties delivered another $260 million for the year which is an eye opener. His MySpace is undergoing pain and his pay wall experience needs to be refined by his market’s readers and publishers. But anyone who can see content delivering the windfall every time, I’d say has the right mind to do the job.

The newly available avenues of entertainment and content across digital web, cameras and video capturing devices, mobiles and iPads/iPods are exponentially generating higher demand for quality ‘content’ and real entertainment without boundaries and each element raising the bar of expectations. Also increasingly, all these channels are looking similar as it becomes easier for content to propagate without overtly changing form, whether it is news, or a business document with video or an entertainment megathon like Avatar, or the Harry Potter series. You will see more of that in a while.

I think the Web Marketers of these last 5 years need to move aside and sit and learn the social experience, see the uniformity of content and let digital media grow as a part of the social whole than an alien world of misplaced metrics. The revolution is here. We’re on it. And no Letterman is not the next ticket to paradise.

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The series name may be a little objectionable to the regulars. it is however the choice of China to consider its policy for banking in 2010 based on the same headlines of late 2009 and early 2010. Counting CNY (RMB) 1.4 trillion in residential mortgages, the banks issued new loans for $1.4 Trillion in 2009 and though they crossed Japan and came out second in Global GDP, it seemed a little hot under the collar for the nation of closed door policymakers and much to borrowers chagrin, currently a block is in place, raising CRR rates for select banks like ICBC and restricting further lending. In fact, just today, loans have been called back, starting with bills discounted last month. Short Term financing from Bill discounting is likely contributing oto speculation in the Property market and in stocks. Chinese Banks still ended January with CNY 1.1 T in loans. The State’s Investment arm CIC invests in the Big 4 through the Central Huijin Investment Ltd company, so it has no direct stake in the banks. It recently picked up 30 million shares in ICBC and 5 million shares(Shanghai issue)  in Bank of China to take its stake to 67.5% in Bank of China. The state’s stake in ICBC and CCB is similarily 35% and 57% respectively.

Bank of China is a part of the Hang Seng Finance sub Index and the S&P Asia 50. ETFs on the latter are likely based on the S & P Global 1200 (AIA in the US). Bank of China is also part of the SSE50 on the Shanghai Exchange. New Equity is planned to be issued only on the Hang Seng in Hongkong. 8.4%  of its equity after the 2006 IPO was co-owned by RBS and billionaire Li Ka Shing. It also issues banknotes in Hongkong and Macau. It raised $9.7 billion in the 2006 IPO. The troubled UBS holds 1.3% in the bank’s equity.

Bank of China is a part of the big 4 but as the smallest, landed bank limits of CNY 600 billion or $88bn in the new regime, of which it has lent the most in January, a total of 23% of the limit or $20 billion already with clients in approvals and disbursals.

Bank of China as a player is also likely geared towards activity in Hong kong and leads the Big 4 in Foreign Exchange Lending. It is planning a capital issue of $5.86 billion or RMB 40 billion in 3% coupon Bonds ( 6 yr Convertible Bonds with coupon near 3% ) based on the early credit expansion which it has then scaled back at CBRC’s insistence. The bond issue will likely sail through along with another Rights issue by March 2010.  BOC is the largest lender in China after ICBC and thus the most affected by the curbs.

It is opening branches in Taiwan in this year and expanding corporate business in the US with ‘Mega Finance’

The ex SIA investment Singapore Aircraft Leasing is now a BOC company listed as BOC Aviation.  It had a 2009 agreement with Financial One to increase business in the SME space and opened a South American branch also in 2009 in Brazil. It has reported RMB 200 billion or $29 in Interest Income in the first nine months and may report results this week after getting them checked with CBRC. The asset base in the meantime is expected to be RMB 8.6 T at end 2009 and RMB 8.760 T this month or $1.3 T

This time they seem to have found the hole in their discount tiers in residential mortgages..i know some swiss and Europenan Banks that still haven’t looked.

References:

CBRC calling back loans

BOC.CN

WSJ China on Mortgages

BOC Wiki

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Today’s Banking institutions need stricter capital monitoring, predictable business streams, a depth in distribution and customer trust. However without adequate leadership, these can easily be misunderstood for credit clampdown, decimation of Treasury and investing functions, hankering for government subsidy and playing the blame game.

ICICI Bank has been one of the pioneers in banking in India, getting together with HDFC Bank to deliver benefits of private sector ownership and belief in innovation, values and a mission in the nineties and some oughts. But with Mr Kamath stepping down, this has become passe for the bank. The Leadership crisis of 2008, brought forth the traditional mindsets in the bank at the helm with Chanda Kochhar typifying the old guard that is neither in the mould of a traditional banker, nor capable of swinging deals for the bank with the regulators, the government and any stakeholders, current or new. Though we waited a year to say this, this has been public opinion at the banks stakeholders since the election of a new Chairman was completed.

Today ICICI lives with its legacy talent. In retail, it is quite notorious for the company it keeps and that may change for the better. However, in Chanda’s mind and that of many older generation babus, innovation is a sure ticket to unbridled aggression and failure. And that is not even the crime we are discussing here. Every piece of customer service, every ounce of growth for ICICI will be a hard-fought internal battle in these next 5 years esp, as the bank does not have many friends in the global arena either. The bank has shrunk its retail assets by 16% now, which is good because the credit quality was driven by sales quality and is very suspect. However, that is nearly not enough as in India, China and even Korea, it is still counter-intuitive to grow at a rate less than 30% and to constrain distribution growth. The bank must find a way to growth however without slipping into an ethical morass and allowing market pressures to compromise its mission, vision and values.

During the nineties, ICICI Bank was a leader in taking banking to the ever-growing consumer’ pockets offering credit cards , personal loans in retail and salary accounts, building ICICIDirect for the salaried professionals, and expanding its corporate and small business services. Today ICICI Bank has realized the follies of urban growth, and more than that, has firmly denied its mandate after the new leader was chosen. That means that in the guise of conservatism, the bank would be denying new opportunities, good credit and watching from the sidelines as players like HDFC build themselves with portfolio investments from FIIs, a loyal customer franchise and more open leadership. Internet Banking as a channel and the new rural banking platform may not allow pecuniary big brother opportunities for this desi concoction, nor a Kotak or HDFC.

Treasury Income, Securities Business and the other have become unwilling targets as they have historically run their business independent of the banks charter lol. However, it seems almost as if she created a bland wall of crippling controls that will give her leewyay to shriek and shout down any and every big deal at the bank esp when it pertains to insurance, mutual funds, I-Sec advisory and other new business. These new developments also include shrinking corporate credit, slowly diffusing the NPL bomb and following the bank herd in promoting the Commercial and residential real estate sectors at its own books expense. Where earlier it had become a derigeur component of every Corporate’s international growth plans, today it fights smaller labels as it struggles in corporate relationships both in Credit thru the Bank and Capital Markets thru the ICICI Securities business. Where globally, banks plan to split the bad bank, ICICI Bank identifies all investing opportunities as risky, PE opportunities and arms itself to start a consolidation of its vairous components into the central franchise with Chanda Kochhar’s ‘stewardship’.

Axis Bank has shown the capacity for innovation but is distinctly smaller than ICICI, while ICICI cannot count itself as the megalith which gets usurped by the State Bank of India and now in a couple of years even HDFC Bank.

ICICI Bank is today back to ways that typify Chanda’s almost moronic troubles and tribulations, the latest being her denial of Treasury Income as a part and parcel of the Bank. IAS39 in its purest form or IFRS 11, and other such regulation have long since faced distinct resistance from Indian Bankers and Kamath may have missed the reason and her protegé’s thoughts on the subject in ICICI Bank’s earlier avatar. The Treasuries business is not to be confused with Proprietary trading, but for the new leadership at the Bank, it is likely to be counted in the same breath. Securities related, Corporate Finance Advisory and MF and Insurance businesses are planned as in-house extensions of the bank once again where Internationally these are planned to be separated into different silos without predatory access that compromises retail deposits and equity at the center in the holding bank. Treasury Income was down at most banks in the final quarter of calendar 2009 but remains the most critical function of any bank.

HDFC and HDFC Bank on the other hand has a better track record in 2009 and will lead in 2010. Chanda’s tactical insecure utterances and clampdown will cause more than a random glitch at the bank’s Mumbai headquarters. It’s rural and SME segments are also unlikely to show the resilient growth that was so characteristic of India in the nineties and which will now be passed with the baton to other banks like HDFC and Axis Bank. Deepak Parekh’s stepping down from HDFC Bank however seems much smoother for the markets and Keki Mistry and Aditya Puri are made of sterner stuff that does not shy away from promoting growth. The highways mandate with Kamal Nath is but one example of what ICICI Bank was expected to deliver for the country, there are unfortunately none other this year, when most growth seats have been taken on the round table.

If I made some sense, do write in.

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The State Owned Enterprises have always been large customers in China. They do not pay their bankers and do not ‘lose’ money despite reforms initiated and verbally enunciated by the government which still has the word ‘Communist’ somewhere in the offices of all its governing denizens.

It finally comes out that Goldman Sachs has $80 million due from Shenzen Nanshan Power and Morgan Stanley has written off close to $20 million in Oil derivatives contracts bought in September, as the speculation on OIL dried up in that September – November 2009 window. Morgan Stanley’s customer interestingly is a China Haisheng Juice Holdings. All these derivatives were bought for speculation with Treasury Cash, and none of it will likely be paid back, China backing its state owned enterprises in its courts in any litigation by the Foreign banks.

The Bank Crisis

The Bank Crisis is a little different. State owned enterprises do constitute more than 67% of China’s industrial landscape, but there are other local private sector corporations as well and there are a 5-10% MNC companies that are setting up shop. The Local companies saw 2010 as an opportunity and with CBRC giving banks new annual targets to lend, most of these by habit approached the banks. Chines enterprises have borrowed half of the year’s target in a fortnight. Despite talk of protectionism and restrictive trade policy, China obviously welcomes new investment at this growing period of its economy and put the brakes on in lending when the acceleration affected its own calculations based on its checkered non performing loan record.

We therefore want to present to you some numbers from each of their major banks in the next few research pieces. Please do bookmark http://china.advantages.us and visit often.

Chinese Bank Assets

Bank of China currently has assets of $1.2T, ICBC has total Assets of $1.71T, Bank of America partner China Construction Bank total assets of $1.374 Trillion compared with the Indian Banking systems reserves of $1T and assets of $5 trillion overall. To help with some comparisons for Foreign players down the line, well-developed systems in India have allowed global players to grow up to $25 billion each in assets only, those with the Top 3-4 players like Stanchart, HSBC and Citi. JP Morgan has institutional business in China but not much retail presence, similarly in India

American Wells Fargo Corp has assets of $1.25 T, Bank of America $2.25 T and Citibank has global assets of $1.85 T

Chinese Bank Profits and Reserve Requirements

All the three players mentioned above bring in profits (Net Income) near the range of $41 – $48 billion thru 2008 2009 and 2010 annually. Chinese banks have prudent reserve requirements of less than 15%. NPAs in the banking system have been as high as 20% and never written off.

CCB is more profitable than the others and is part owned by a local PE player after Bank Am’s withdrawal.

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The NY Times quoted this Reuters report

Honda Motor Co <7267.T> said on Friday it would recall a total 646,000 units of the Fit/Jazz and City models globally, including 140,000 in the United States.

The recall covers the models sold in North America, South America, Europe, South Africa and Asia, but not Japan, a spokeswoman said.

The Fit is Honda’s best-selling model in Japan.

Keyless Car Entries have also reported other usage issues for luxury car owners. Though the Fit and the Jazz are not  very high-end cars, Toyota and Honda houses are definitely expected to keep up higher standards of quality. Advertising recall is not to be confused with these recalls, and these could even take these brands to the level of the Chinese players like SAIC. The world is flat, and it just overturned on the pike. Yes, it’s not moving to Ford, it’s more China and Taiwan.

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Huffington Post broke us this one, Thanks James, Adrinana! Huff!

Of course China’s government brought it upon themselves by asking them to lend , when $1.4 trillion in new loans were made in 6 months without solving the earlier ‘NPA raising’ habit at chinese state institutions. China is also raising interest rates right now and clamped down on new Credit at carefully targeted institutions. In fact, its largest bank ICBC and 7th largest in loans China Citic have been selectively told to put in an additional 0.5% in reserves. However, the state media has corrected earlier assertions (CCTV):

Top lenders ICBC and the Bank of China say instructions are for prudence and balance in lending, not a complete standstill. The watchdog has confirmed this, saying its pace not volume that needs careful management.
Top executives at China’s two big state banks, Bank of China and the Industrial and Commercial Bank of China, or ICBC, have told CCTV they were never told to stop lending for the rest of the month.

Add someone in Hongkong who writes a default swap for them ( insurance, in case of default, maybe the local Nankiang units can diversify ) and you have another perfect crisis, for the Chinese to fund this time. And they’ve defaulted on quite a few contracts themselves! ( commodities, October 2009)

The China Bank Regulatory Commission, CBRC, Chairman Liu Mingkang is currently walking a tightrope. The banking regulator has set 2010′s annual target at 7.5 trillion yuan. ( a 22% decrease from 2009). January’s ramp up has been uniquely quick and hence the ‘crackdown’

Citi taught us to use Off Balance sheet financing

Banks are moving loans off their balance sheets in order to dress up their accounts for worried regulators.Only this time it isnt Citigroup C or State Street SST thats involved, but Chinas big banks.In November Chinas banks packaged and then sold $18.6 billion in loans to Chinese trust companies, removing those loans from the banks balance sheets, Shanghai Benefit Investment Consulting has told the Wall Street Journal. Thats a huge 54% of all the new loans banks made in the month according to government figures. For the year the total of loans packaged and sold by banks comes to almost $90 billion.The repackaging and sales come as Beijings bank regulators have started to worry that the countrys banks dont have enough capital to back all the loans theyve made in 2009.

So far in 2009 Chinas banks have made more than $1 trillion in new loans, according to government figures. Regulators have begun to press banks to raise more capital to buttress their balance sheets.By selling the loans to trust companies, banks take them off their balance sheets. That has the effect of reducing the amount of loans that the banks look like they have made.

That in turn reduces the amount of capital it looks like they need to raise to support these loans via James Jubak: Chinas Banks Copy Citigroup in Hiding Bad Loans Off Their Balance Sheets.(last month)

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China has definitely outgrown the revolution, the crisis and is now hurtling so fast, it has asked the banks to keep the brakes on. As the SMH just mention a couple of days back, and NYT reiterated, it is well onth eway to cross Japan out of the mix and take its place as the World #2. GDP growth for 2009 was 8.7%

The NY Times put the statistics succinctly here

The National Bureau of Statistics also announced on Thursday that industrial production in December increased by 18.5 percent and retail sales rose by 17.5 percent. The December consumer price index grew by 1.9 percent and producer price index by 1.7 percent.

FT.COM

China’s economy grew 10.7 per cent in the fourth quarter compared with the same period a year earlier but the strong growth was accompanied by higher inflation, raising fears that Beijing may introduce stronger measures to avoid economic overheating.

Consumer prices rose 1.9 per cent in December from a year earlier, a rapid acceleration on the 0.6 per cent increase in November, when the index swung back into inflationary territory after nine months of deflation.

Producer prices rose 1.7 per cent year on year in December, well up from November’s 2.1 per cent fall.

China’s CPI does not cover prices of assets such as real estate.

Mr Ma also said the government was also worried about continued overcapacity in many industries.

China’s GDP growth:

Period Year-on-year growth (%)
Q4/2009 10.7 Q3/2009 9.1 Q2/2009 7.9 Q1/2009 6.1
Q4/2008 6.8 Q3/2008 9.0 Q2/2008 10.1 Q1/2008 10.6
Q4/2007 11.2 Q3/2007 11.5
Source: Bloomberg

via FT.com / China / Economy & Trade – China grows 10.7% in fourth quarter.

Whatever path china takes to temper and even channel this growth next, it is likely not so much in control as it would look, but the next blueprint is already in place with more than 10 new CBD being developed, The quandary of overcapacity in Industry and runaway inflation that worries them, would have pressed lesser mortals into making more mistakes, but the government’s ethos here is of a different grain. You can just imagine them in offices and conferences, tracking each plan item in great detail and executing the same by taking care of any negative energy for each of those items..sounds theatrical, but they also seem quite impressionable with Avatar and Google being blocked for influences on the populace which you and I would not even imagine.

Will the US catch them? India?

I think now, this is mostly a rhetorical question as everyone knows the limitations of the US models and the deficit facing them. Similar is the case for India, – We may even grow at 12% in the near enough future, but we will not have IIP growing at 20%.

Ofcourse with the recent crisis one wonders whether we will even attempt to get into growing retail sales that aggressively, again that being a function of economic well being and performance and there-in maybe there is a chance for us to compete with China.

The credit crunch

CHINESE policy makers have curbed new lending to avoid a repeat of last year&apos;s credit explosion, causing the Australian dollar to fall three-quarters of a cent.

Commodities markets and shares in Australia and Shanghai also fell after the banking regulator confirmed he had ordered some major banks to stop lending for the rest of this month.

The chairman of the China Banking Regulatory Commission, Liu Mingkang, said he had targeted banks that had not met prudential supervision requirements.

&apos;&apos;For those that failed to meet these standards, we told them to limit lending,” he said in Hong Kong.

“[Chinese banks] need to get ready for the wrong kind of borrowers and the wrong kind of weather.”

Mr Liu said this year&apos;s new lending will be confined to 7.5 trillion yuan ($1.2 trillion), down from last year&apos;s extraordinary 9.6 trillion yuan.

via China’s credit crunch.

Talk about it!

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The Emerging Markets will be busy of course with Infrastructure Finance, with smaller tickets like ICICI Bank and Kotak sticking to stonewalling new credit for non existing capabilities to absorb NPAs. No one is asking their creditors to run away specifically, but we continue to be sure that they are in trouble. Also Commercial real estate may not be allowed under infrastructure tab in any risk profile markets either N11 or India & China or the resurgent Yuan fed Africa.

Recently Moynihan also addressed town hall meetings as foreclosures modified exceeded 4% of the mortgages after a blank ten months. A similar town hall of bankers is now in progress in India hosted by SBI as the dollar continues for a resurgent 2010. Euro trades might not catch on to Indian FX intermediation even after a couple of bankruptcies, you may not be able to tell them apart from the Pound bashing that will ensue after British polls

Harder to understand and predict also will be the hopes of offshored jobs coming back whether it is Obama tricks or new centers in Morocco, Monte Carlo and mid-town America. Banking in any case is happier with the current branch marketstructure and does not envisage new branches from Chinese competitors or the phantom regulations of the pay czars.

Brian Moynihan and Benmoshe do indicate however that there are likely more new jobs for everyone by virtue of their own selves being virtual dolls of Greenberg and Kenneth Lewis. Citi is likely to pay second fiddle to Wells Fargo in the market sweepstakes and BofA may follow both if not careful. The other continents are likely to hear from only JP Morgan and Goldman Sachs this year. I hope Kotak and ICICI do not start recruiting, nor the Asian banks from Mainland China ;lol

South Africa and Brazil may yet write the new chapter for Banking growth, given the deeper pockets that reach those shores in Infrastructure. Random thoughts or the Perfect Storm 2e edition, we’ll decide after Hank Paulson publishes his fictional piece on the raison d’etre of the crisis and the raison d’etat.

Welcome to Advantage Banking and Advantage Infrastructure in the new decade. We don’t think banking ever slimmed down at all! However, Fat Cat bankers are out of the mix.

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Prokhorov’s MFK bank said on Tuesday it would get three new shareholders.

The combined wealth of the four tycoons was estimated at around $19bn (£12bn) by the Russian edition of Forbes magazine, and some of this money is in cash.

“Active work on solving Russian firms’ debts and offering help to the state to restructure the national banking system have a special place in our new strategy,” MFK’s chief executive Alexander Popov said.

Prokhorov, also a stakeholder in the world’s largest aluminium firm RUSAL, is worth $9.5bn, down from $22.6bn in 2008.

While many of his Russian peers have sought state bailouts, Prokhorov is flush with money after cashing out of assets in 2008 before the global crisis caused commodity prices to crash.

Kerimov was one of the top investors in state banking and energy majors such as Sberbank or Gazprom, but later reduced his stakes to buy into Western banking majors just before the crisis wiped out most of their value.

Kerimov, ranked Russia’s 13th richest man with $3.1bn, has also never asked for a direct state bailout like his peer Vekselberg, whose empire also includes large stakes in Swiss technology group Oerlikon and Swiss engineering group Sulzer. Vekselberg is worth $1.8bn.

The only tycoon out of the four who has received direct state funding during the crisis is Abramov, whose Evraz has already repaid part of a $1.8bn loan to the state. Forbes rated Abramov sixth in May with $4.4bn.

Sources close to the bank told Reuters the tycoons plan to turn MFK into a top Russian private banking player.

via Reuters

Prokhorov is already restructuring debt for Rusal helping Oleg Deripaska’s 3% stake ib British CV maker LDV. Though an overnight market for private equity is unlikely,  their ambition does show a likely intent to step into new fields with a bang and at least some of it could implore the SWFs like Kazakhstan and other state millionaires to come into global deals.

Unfortunately, global ambitions of Religare, M&M and Reliance seem as ill-placed as that of Tata and Suzlon in 2007. It needs much more international policy support and subsidy to take on foreign units with their workforce follies and high cost structures leaving it to global muscle like Mittal ( of Arcelor Mittal) and GM to try taking sick units out of bankruptcies. Even a Volksagen looks competent to manage its ne investments as others like Prokhoov, Keshub Mahindra and Tulsi Tantis get increasingly frustrated and eager to do the rong deals beacue they fit on thei plate by some old definition. A Mahinaldra Satyam did not even try to act transformational in its bid for cash from Satyam and the same evaluations are required for the LDVs and the Lyondell Basells which would be a litmus test for any new Mikhail Prokhorov to come to the table and go out a Arcelor Mittal.

Indian entrepreneurs must also be feeling eager to get into business ith their Russian and middle east counterparts to steward the scuttled global midships and put the world back on an even keel, but a dry docks specialist ith a salvage yard may be a minimum requirement even for Prokhorov, Mahindra and the Ambanis. China would be a formidable competitor and maybe it is affecting deal making capability of other JP Morgan customers

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Did you ever wonder what the brazilians are cooking? They are a pretty big community on Facebook and Twitter too! And they have their own languages like the Chinese which leaves their innovation effort rather a plurk! you would think. You would be wrong though.

This article in today’s N Y Times

As with Facebook, D.S.T. will invest directly in Zynga while also buying stock from shareholders, including the company’s employees. The move is aimed at giving employees and shareholders of the prominent start-up a way to cash out before an initial public offering. Tiger Global, a New York hedge fund, and the venture capital firms Institutional Venture Partners and Andreessen Horowitz also invested. Zynga had previously raised $39 million. The companies did not disclose Zynga’s valuation as a result of the new capital, but the game company’s annual revenue has been reported to be around $250 million and growing quickly. Two experts in Internet company finance said it would be reasonable for Zynga to command a valuation of two and a half to six times its annual revenue. That could put the value of the two-year-old Zynga at $1.5 billion; one industry insider believes the value could be as much as $3 billion. With the investment, D.S.T. is doubling down on its billion-dollar bet on social networks and online games, which draw people who do not normally play video games into virtual simulations that they can play with friends. Players might spend only a few minutes each day in the game, and are persuaded to pay real money to buy virtual goods, like bales of hay and gasoline for their tractors in FarmVille, a game in which players run a farm. D.S.T. began investing in 2005, mostly in Internet firms based in Russia and Eastern Europe, where, as in Asia, people have adopted social games and virtual goods marketplaces faster than in the United States. “People did not believe that this Chinese model of micropayments and social games was real,” said Yuri Milner, D.S.T.’s chief executive. “I am pretty convinced this market will have tremendous pick-up on the Western side of the world.”

With DST having picked up a stake in both Facebook and zynga, Farmville and Mafia Wars would be part of more daily lives.
Here are some recent Facebook and Twitter stories defining their early impact. Twitter has started testing its contributor feature to allow brands and businesses to set aside a permanent budget for Twitter and Facebook in their business. It will take a lot of business to keep steering this network esp as not just Asia and Eastern Europe is taking more to these networks but also because it is intuitively appealing to all age groups and takes a considerable bit of your time in the ‘daily diet’.

You can also expect some daily ‘interference’ from Fans on the more discernible social media than they could on Radio and TV. Scott Tozer of DST Technologies is himself listed on Facebook. Also see some recent ‘hits’

This just might be Russia’s next ticket after Gas/Oil without Ukraine. Seemingly the Chinese are still counted as the largest population on the internet despite that most social sites are banned in countries like China and Vietnam

Our estimate of the valuation of zynga conventionally as not exceeding $1 billion but wih hypergrowth, even $3 billion is cheap. Amazon started the same way and survived the bubble and the credit crisis. Our brands site had the first stab at this story, but we finally gave in too..

Also we think these decision games like Predictify and Filife from WSJ are a good way to latch on to not just brand and consumer behaviour but also a great social entrapment which is likely to benefit from the job losses and the new digital age, all that money lying with investors ..what a steal!

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You see, this is not how the Greatest trades were made. ( Link to the article is really superfluous, you can meet umpteen such articles in the financial media and even find ranches in Texas that would hold dinner galas spouting much the same philosophy.) Also, the book is available from Amazon.com here Our comments are on Gregory Zuckerman’s ‘Lessons Learnt’ post in WSJ (Financial Adviser) The Amazon link with cover is also available on an alternative version of this post

1. Listen to your experts : And this is serious. The man who says the crisis teaches us to “Don’t rely on experts’, he s just taking time off to be a papa stooge. The experts not only have an edge on the information, they also have a ‘record’ behind them. But yes, don’t take one source for granted, be sceptical, trust your judgment

2. Bubble trouble – True. Everyone doing the same thing at the same time changes things. But the tectonic shift is not necessarily better always, or bad OR Black Swan either..and don’t ever use your nest savings..we are never even talking about it. Better still, for this take advice #1 and add to it..Dine with your experts..take an evening walk in the park with them, and don’t forge to be nice to them. This one also is not the excuse to shout and scream like Osama bin Laden, nor does that make you and your investments any better – or grade worthy – or worth selling low and buying high

3. The Contrarian point – is a studied viewpoint, not an allergic reaction to the expert’s makeup and Maria’s sartorial and travel lifestyle ( as ‘reported’ on CNBC. Drink it in with beer at dinner and wake up in the morning to drink another coffee..raving and ranting is counterproductive to gray cells..not the drinking

4. Focus on Debt Markets – That is a great lesson from this crisis. In fact that would even give us some breathing space when we try to avert the next crisis. There is an imperfect natural hedge there, and it saves us, esp when everyone starts thinking of OIL and GOLD too..those times or in a normal economy bubble or ultra mega size bubble, you need to see that the debt is at any time no less than 5 times the size of the entire Global Equity market investments and that is a lot, in fact what went out of equity went to bonds and then it will come back from there too..

5. Master new Investments – On the dot. Exchange Trading Funds are a good idea. Publicly traded debt in india, China and the N11, G8+3 not so much. So here, listen to more than one expert. Read us here. and don’t feel like Bruce Willis in Die Hard, Make the calls and ask around. That gets any thoughts of crises from developing, esp not overnight and not a crisis of the household budget

6. Use Derivatives to your advantage: Getting that safety net in place is harder to do with just CDs and real estate. You need to balance the equation more than once every year. Realign to a new fact or facts. Don’t sit on it. and then making a jump to new products is easier, and the ill-informed salesperson is unable to fool you into buying unsecured, unpayable. ETFs are a great place to start.

7. Reconstruction is the key. So is infrastructure. Keep your eyes open. 3 out of 5 ETFs are going to fail. Derivatives by their nature are going to leave someone stranded again. It will happen. So will real estate, and Lehman Bros. and in fact next time the cash buried in the backyard would not be safe either. Get used to a little higher risk. start small.

8. Experience counts. On the dot. But hero-worship kills, indiscriminately

9. Luck helps? See 1 to 4 above and redo the equation . Talk to us. Talk to your neighbourhood broker. All investment classes are inherently the same once you have figured them out. They make money if they are right. and if they are right they work for you. and your friends.

Paulson made his greatest trades after he had made a few winning trades every year. that is the only thing to learn, rest is the debate..and hating the experts is only handing America’s markets to the Osamas of the world..

Also if you are a corporate denizen, take a lesson from the lady that failed to catch Cadbury and her investment bankers..you go in with only one price and you come out empty handed.

[Tag Paulson, investing, US, Retail Lifestyle, Wealth]

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Still Another Digression: (S.A.D.#9-1-1) There was that ‘ranch’ in South California too, but that’s been taken down in full after the 30 year OSA veils were lifted, Scooter Libby and others awakened and all the rest. And for investors outside the US, the same holds as we are all following the same crisis; the next tipping point for reforming the way financial markets and the budget for our home and hearth are run much the same way too.

1. Listen to your experts : And this is serious. The man who says the crisis teaches us to “Don’t rely on experts’, he s just taking time off to be a papa stooge. The experts not only have an edge on the information, they also have a ‘record’ behind them. But yes, don’t take one source for granted, be sceptical, trust your judgment.

You see, this is not how the Greatest trades were made. ( Link to the article is really superfluous, you can meet umpteen such articles in the financial media and even find ranches in Texas that would hold dinner galas spouting much the same philosophy.) Also, the book is available from Amazon.com here Our comments are on Gregory Zuckerman’s ‘Lessons Learnt’ post in WSJ (Financial Adviser) The Amazon link with cover is also available on an alternative version of this post For references on the crisis, watch out for the widget on the sidebar up here near the search button

2. Bubble trouble – True. Everyone doing the same thing at the same time changes things. But the tectonic shift is not necessarily better always, or bad OR Black Swan either..and don’t ever use your nest savings..we are never even talking about it. Better still, for this take advice #1 and add to it..Dine with your experts..take an evening walk in the park with them, and don’t forget to be nice to them. This one also is not the excuse to shout and scream like Osama bin Laden, nor does that make you and your investments any better – or grade worthy – or worth selling low and buying high

3. The Contrarian point – is a studied viewpoint, not an allergic reaction to the expert’s makeup and Maria’s sartorial and travel lifestyle ( as ‘reported’ on CNBC. Drink it in with beer at dinner and wake up in the morning to drink another coffee..raving and ranting is counterproductive to gray cells..not the drinking

4. Focus on Debt Markets – That is a great lesson from this crisis. In fact that would even give us some breathing space when we try to avert the next crisis. There is an imperfect natural hedge there, and it saves us, esp when everyone starts thinking of OIL and GOLD too..those times or in a normal economy bubble or ultra mega size bubble, you need to see that the debt is at any time no less than 5 times the size of the entire Global Equity market investments and that is a lot, in fact what went out of equity went to bonds and then it will come back from there too..

5. Master new Investments – On the dot. Exchange Trading Funds are a good idea. Publicly traded debt in india, China and the N11, G8+3 not so much. So here, listen to more than one expert. Read us here. and don’t feel like Bruce Willis in Die Hard, Make the calls and ask around. That gets any thoughts of crises from developing, esp not overnight and not a crisis of the household budget

6. Use Derivatives to your advantage: Getting that safety net in place is harder to do with just CDs and real estate. You need to balance the equation more than once every year. Realign to a new fact or facts. Don’t sit on it. and then making a jump to new products is easier, and the ill-informed salesperson is unable to fool you into buying unsecured, unpayable. ETFs are a great place to start.

7. Reconstruction is the key. So is infrastructure. Keep your eyes open. 3 out of 5 ETFs are going to fail. Derivatives by their nature are going to leave someone stranded again. It will happen. So will real estate, and Lehman Bros. and in fact next time the cash buried in the backyard would not be safe either. Get used to a little higher risk. start small.

8. Experience counts. On the dot. But hero-worship kills, indiscriminately

9. Luck helps? See 1 to 4 above and redo the equation . Talk to us. Talk to your neighbourhood broker. All investment classes are inherently the same once you have figured them out. They make money if they are right. and if they are right they work for you. and your friends.

Paulson made his greatest trades after he had made a few winning trades every year. that is the only thing to learn, rest is the debate..and hating the experts is only handing America’s markets to the Osamas of the world..

Also if you are a corporate denizen, take a lesson from the lady that failed to catch Cadbury and her investment bankers..you go in with only one price and you come out empty handed.

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I hate writing influencing stuff for these ‘namakool’ government people..a true laissez faire capitalist as bollywood would say today – but much as I like to disappoint wooden leg intelligentia (sorry Saugata, not you) and unfortunate colleagues who cannot see the depth and incisiveness of my decisions ( only some times, as most of my followers and poachers would attest from the last 15-20 years, i have quite some intellectual property when it comes to establishing the kingdom’s fine traits and setting up the next wins. 

Well, this introduction is probably embedded into my names and branding choices as also in the discussions I have created across all Advantage zyaada properties, and while everyone has decided that the worst is past and we have recovered, the stock markets have finally got the cue,albeit from continuing discussions of interest rate when none are necessary unless a bank offers a loan.

China and India share a $2.5 trillion retail spending of a gross GDP of $3.5 trillion (Economic Times, It’s cold out in the west   ). While single brand FDI was raised earlier to 51% whatever was allowed in multi-brand retail has now been withdrawn due to recent changes in FDI definition and no move to allow multi-product retail.  Our reticence to allow Indian business property in retail spending to Foreign investors stems from the fact that we wish to be paid for allowing such to happen like for the Telecom Licences and paid so we don’t have that damned Fiscal Deficit overhang but that is just a digression here and it is definitely not ideology we are peddling.

Also, despite the caution adopted by RBI in not moving the GDP target ( 6% w/ upward bias ) I am reasonably confident that the growth rate would be between 7.5% – 8% with the IIP having recovered and there being only some agrarian doubts in the nation’s performance which would well be taken care of by the food inflation incl. grain procurement prices. In the mean time, China allowed banks to fund the corporates $1 trillion indiscriminately and now will provision at leisure; India mid-way through its own $120 billion borrowing program

Making fiscal policy – Dividing work with the RBI ( MOF, Economic Advisory Committee)

Some of my better endowed readers who are also leader of men would appreciate that it is always tough to appreciate the RBI or the FED if you are in the US and ‘get’ the inner depths of what is happening, what is doable, what is to be said and what is to be communicated to which stakeholders all at the same time..that is why probably Duvoori Rao had no qualms in handing over the tough job to the ‘center’ or in this case the Economic Advisory Committee and Mr Rangarajan.

Making Policy Count – Avoid being Abrasive

Let’s not forget that the RBI is doing a good job yet. With the Aussies having raised interest rates, it might have tempted lesser mortals to go in for rate increases right away, but we have just decided to raise the eponymous SLR a full basis point as banks continue to sidestep economics and lenders in each breath. The most laudable and really India thought centric piece of the policy was the important 150% ramp up in the provisioning of real estate loans to 1% of LTV carried on the books. It is a good reminder to banks that the costs of idle money will go up on both the treasuries and cash they keep ( a huge 35% in most banks, more for Citi) when the statutory rates even now are just 30%. In fact costs will also go up on the RE portfolio they are so eager to cultivate by a good 70-80 basis points, after all the entire provisioning concept for banks is based on being able to sell their collateral in case of default

Following up

However, next quarter we are suddenly going to get a flurry of results which proclaim greater volumes, no one will talk of pricing constraints, FDI will flow smoothly and I might just get time to read Ranga’s economics to take this slow elephant further. And that is how sand castles are blown away and not made into glass, nor kept for posterity. A mixed metaphor, maybe? But it is clearer now that the RBI is just battling select ‘investor guarantee’ holding bank companies that have never advanced adequate resources ( neither people, nor journalists, nor the money) to India as they reinvent the new way to leverage their own and their host nations ( i almost sound socialist there, but i am laying out the real hidden map where I share economic prowess in predicting the next turn and getting done with the rest of influenza to focus on earning real moolah in a real job / business)

But the credit policy for the Indian markets..

Coming back to the policy, it is a non starter, because it is a tired ramification of pending business like flowing credit and reforms undone by a crisis. The banks are prudent enough to lend only to profit making businesses and the governments are out of money to print at the mint, The government will continue to be the biggest borrowing program, the agrarians will suffer as rabi prices rise and production drops off,  the corporates will bide time as India’s holiday season is past though the stats are still due, and the RBI is not handling the fun, neither the EAC by admitting to any innovation. In my eyes, that will slow up this pack of hounds till ( probably just next week, probably just good news) some great FDI and energy releasing decisions come through. 

The next RBI ride will last the six months it can raise rates, but finally we have to start signing some good deals and get business done. Simple innovations like co-opting banks in the policy making and making obvious your support of public sector banks with larger balance sheets have to be reflecive of the new media and the new pace of competition where everyone is now ready to drive home their point to their investors and their stakeholders.

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They do maintain a continued conservative stance which will come in useful, but given the history of the markets..they are much more likely to be the source of the next big black hole in a few days (years) maybe. However, with Citi planning to get out of government stakes as well, this could really absorb the prior decades’ sentiments some more and yet faster..leaving us with a blank slate in which to regulate our childrens’ future.

Coming back to the French, they do not have the depth in their markets to fund expansion and their global diaspora in terms of expansion by SocGen and BNP hardly enough to give them currency to support their non US pro Iran , pro Russia stance. They could however be the closest Euro member state for the new nations in East Europe that have been trying to get a piece of the global economics in this last decade as also they could substantially support some African nations. Being pragmatic however, they are likely to discover faster that they really do not want significant exposure in these markets

BNP recently paid $19.8 billion for Fortis (October 2008) and has therefore significantly completed its footprint in West Europe while SocGen has been active in Asia ( Offshore from Singapore, JVs with SBI in India)

China has had a long history with European Banks with the Deutsche Asiatique Bank, British Belgian Industrial Bank of China and the Sino Belgian Bank which issued Taels (North Asian currency) during Siberian-Japanese-Chinese trade ‘wars’ of the late 19th century but has never been remunerative for Foreign bank ( Comparitively with India, Chinese have very few branches and investment assets in Foreign banks)

However, as of March 2009 Bank of china had already purchased 20% in the Paris based Banque de Rothschild and with BNP out of government indebtedness, its reasons for going into China would be more mercantile than ever.

BNP Paribas, the largest French bank, said on Tuesday that it would raise €4.3 billion from investors to repay government bailout funds, The New York Times’s David Jolly and Chris V. Nicholson reported.

BNP Paribas, based in Paris, said its board had decided to repay, within the next month, the €5.1 billion, or $7.5 billion, it borrowed from the state March 31. The government would also receive a payout of €226 million on the nonvoting preferred shares it purchased.

Baudouin Prot, BNP Paribas’s chief executive, said in a conference call that the G20 meeting in last week in Pittsburgh, where world leaders agreed in principle that banks should raise more capital, had influenced the timing of BNP’s decision to issue shares, as had the lender’s share price, which is up more than 92 percent this year.

Christophe Nijdem, a banking analyst at Alphavalue in Paris, called the stock issue’s timing “judicious.”

“They had a window of opportunity,” he said. “A lot of banks will turn to the market in the months to come, and it’s first come, first serve.”

Mr. Nijdem added that, compared to American banks, European banks were more leveraged, and had to play catch up. Major Western banks are forecast to post losses of almost $2.5 trillion for the period 2007-2010, according to the International Monetary Fund.

via BNP Paribas to Raise $6.27 Billion to Repay Bailout – DealBook Blog – NYTimes.com.

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Posted on September 9, 2009. Filed under: Financial Markets, Global, TARP, US | Tags: Meltdown, RBS, AIG,Insurance, Aircraft Leasing, ILFC | Edit This

As the world’s largest Aircraft Lessor, ILFC is still in play with a mountain of debt which was $17 billion even 12 months ago. ILFC and General Electric Co.’s GE Commercial Aviation Services, the world’s largest aircraft-leasing firms, are the biggest customers for aircraft makers including Airbus SAS and Boeing Co. ILFC, founded 36 years [...]

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Gaining market share in Life Insurance

Posted on August 25, 2009. Filed under: Financial Markets, Meltdown, Obamanomics | Tags: AIG,Insurance, Insurer, NYLife, Obamanomics, recession, US, WSJ | Edit This

The New York Life Insurance Company, 9th till last year, jumped to No. 2 in market share behind Metlife with a near 6% market share in Life taking a leaf out of the book of the World’s best. AIG dropped just 4 places in the whole melee of the stimulus and this continuing depression. New [...]

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AIG’s Taiwan Life Unit

Posted on August 18, 2009. Filed under: Financial Markets, GDOW, Global, Investments, Obamanomics,TARP, US | Tags: Acquisitions, AIG, Asia, Credit Crisis, Financial Markets, Fire Sale, Insurance, Investments,Liquidity Crisis, Meltdown, Private Equity, Sell off, Venture Capital | Edit This

zyakaira notes: The Taiwan Life unit: The recent laundry list of asset sales planned by AIG see here continues to find conflict of interest in almost each of its deals, as AIG remains the buck stopper of the entire industry’s claims good or bad..
Bloomberg reports that Morgan Stanley’s (NYSE:MS) private equity fund pulled out [...]

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AIG sells fast to make $80b

Posted on August 17, 2009. Filed under: Bank Stocks, Infrastructure, Investments, US | Tags: 2009, AIG,Financial Markets, Global investing, Hedge Funds, Insurance, M&A, Meltdown, Private Equity, Restructuring,TARP, US | Edit This

AIG is in quite a turn having to sell most of its profitable Asian and other International Insurance and Investment Management Businesses ( also see here)
While it announced the division of its businesses into AIA + Alico in Life in Asia, Chartis for Property & Casualty and the Domestic US insurer, it has not gone [...]

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AIG results update

Posted on August 7, 2009. Filed under: Financial Markets, GDOW, TARP, US | Tags: 2008, 2009, AIG,Meltdown | Edit This

AIG will soon be a domestic insurer if the planned three way split comes through to let the company return Federal funds as it has already spun off its International insurer AIA. In related news, all top four investment bankers are involved in this break up and sale of AIG. The current scrip (closing at [...]

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Tweets from the Market – July 24, 2009

Posted on July 24, 2009. Filed under: Bank Stocks, Financial Markets, Global, Real Estate, US | Tags:Amazon, Amitonomics, Bank Stocks, China, DealBook, Financial Markets, Infrastructure, Retail Lifestyle,Socialpicks, Stock Markets, The Invisible Continent, Twitter, US | Edit This

Do remember to validate picks at http://socialpicks.com/zyaadakairaada/portfolio $AMZN is down 8% as we speak
Facebook at 77 million visitors, Amazon 64 m, Craigslist at 47 m, WordPress at 26m and Twitter at 20m compared to Goog at 157m in June09
about 2 hours ago from TweetDeck
So $AMZN makes $1.75 bn per month from 64 million visitors
5 minutes [...]

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Dems want higher tax on wealthy for health care – MarketWatch

Posted on July 13, 2009. Filed under: Healthcare, Obamanomics | Tags: 2009, Barack Obama, Economy,GS, Healthcare, Healthcare Reform, Healthcare Tax, Obama, Obamanomics | Edit This

WASHINGTON (MarketWatch) — House Democrats intend to pay for their health-care reform plan with higher taxes on wealthy Americans.
A tax on the wealthy is the “best way” to raise money for the overhaul, Rep. Charles Rangel, the New York Democrat who is chairman of the House Ways and Means Committee, told reporters late Friday.
The House [...]

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AIG $180 b down the tube | Reuters

Posted on July 9, 2009. Filed under: Bank Stocks, Financial Markets, Investments, Meltdown, US | Tags:Acquisitions, Amitonomics, Bank Stocks, Citi, Financial Markets, Global investing, M&A, Meltdown | Edit This

American International Group Inc AIG.N, the insurer rescued by a series of federal bailouts, may have zero equity value due to the risk of more credit default swap losses and the disposal of key assets at low valuations, Citigroup said.Shares of the company fell 22 percent to $10.22 in early trade Thursday on the New [...]

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BOTTOMLINE: Outsourcing in trouble, Infrastructure hungry for Ca$h, Retail Lifestyle businesses up on the move, Asian Banks will remain gems in the global portfolio and lots of IPOs

@blrmoneytalkz

1. BOTTOMLINE: Invest in Axis Bank, exit RBS, sell the casino banks and sit and enjoy annuity income _TYY4less than 20 seconds ago from TweetDeck
2. BOTTOMLINE: Asian Banks will remain gems in the global portfolio and lots of IPOs _TYY41 minute ago from TweetDeck
3. BOTTOMLINE: Outsourcing in trouble, Infrastructure hungry for Ca$h, Retail Lifestyle businesses up on the move _TYY41 minute ago from TweetDeck

Amit Mittal
amittal92@gmail.com
MD, Advantage Research Pvt Ltd
@Innovative Film City, Bidadi 562109
On the web Advantage ‘zyaada’ http://advantages.us/zya

http://astore.amazon.com/mmmzyaada-20

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Dutch bank ING Group ING.AS has hired JPMorgan JPM.N to advise on the sale of INGs private banking business in Europe and Asia, which could fetch more than $1 billion, sources told Reuters on Thursday.The sale is part of INGs move to raise cash after being hit badly by the global credit crisis, which forced it into a loss in 2008 and led to the Dutch government injecting 10 billion euros into the bank.”The deal could be over a billion dollar,” said a source with direct knowledge of the deal, adding JPMorgan is advising the firm. “But its a bit early in the process.”ING declined to comment and JPMorgan was not available to comment.The Dutch bank has been working on a program to reduce risks, raise up to 8 billion euros from asset sales and exit from 10 of 48 countries where it operates.”I think it is a good sign that will give an extra buffer to ING. Secondly, in private banking, ING will never become a world leader. Strategically it makes sense to sell,” Rabo Securities analyst Cor Kluis said.Kluis said he did not expect ING to sell its Dutch private banking business, which administered 20 billion euros in assets out of the total 62 billion euros the Dutch bank had under management at the end of 2008.

via ING hires JPMorgan to sell private bank units: sources| Deals| Reuters.

Meanwhile, RBS has completed sale of the RBS Asia Pac units including ABN AMRO to StanChart and Goldman Sachs & BofA have earlier sold one third of their stakes in ICBC and China Construction Bank

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Wells Fargo had a far worse business performance but they were only $17 b short in the stress test, as BofA was one of the biggest mortgage and trading players, not good old WFC. Probably that image gap is the first thing BofA must prioritize for 2010. Where it was the strongest retail brand in the US after its 2001 takeover of Fidelity in the east, today it looks like it may be playing second fiddle to others. Not only because it had to cough up more capital, but also because it is one of the very few who sold their crown jewels outright in China and other Emerging Markets and whose global presence is now severely in question.

While the US Economy suffered a 6.1% deceleration in Q1 of 2009 and passed a shaky $3.9 trillion Budget for 2009 after much soul searching, Non Performing assets continued to grow at the bank rising to $31 billion at June 2009. The bank is currently on its way to sell Columbia Asset Management for an expected $2 b in pre tax gains and will likely report $12-13 b in pre tax profits in each of the remaining two quarters thus maintaining profitability after paying preferred dividends to the Government and even paying off some of the $45 b it had to borrow from the government. It is also selling the Asian real estate investing business of erstwhile Merrill Lynch. (Merrill’s Asian Business Drawing Strong Interest)

Will BofA therefore be able to act as the Market Leader American Investors expect it to be from here? There is no other way. However, it cannot sell all the banking businesses it acquired albeit in the last 5 years like MBNA (2000-1) and hope to do so. The Merrill Lynch units in Asia and at home in North America also have to turn in a good performance as the investment banking business becomes the most profitable at current valuations. It’s higher fees on retail accounts by itself will not be able to absorb rising credit losses as retail customers implode on current accounts ( overdrafts) , cards and mortgages.

To quote Ken Lewis at a recent Town Hall meeting in LA where he was addressing the Countrywide/Mortgage issues – “The bad news is that consumer confidence is at its lowest point since 1992. It’s easy to see why. Here in Los Angeles, distressed home sales are up from 3 percent of total sales in spring of 2007 to 30 percent in spring of 2008; 3.7 percent of all homes are in foreclosure; and across California, home sales prices are off almost 30 percent. And that is not to mention $4 gasoline and record food and commodity prices that are pinching household budgets.” In mortgages, the market will return to more traditional products also, along with Home buyer education and renegotiation of defaulting loans and that is no small exercise, but financial innovation has to continue as well. At this stage, while BofA consolidates it has to invest in more of market development efforts thru its extensive network and refocus on producing returns from the world’s nook and corners like in China and Brazil where there is more and more business as BRIc countries maintain their growth. BofA has to find robust business models and risk management while increasing its presence in Europe, LatAm and the developing world without decimating itself in the crisis and imploding on itself. Direct Banking models, Prudent Credit Card lending and tapping unbanked populations in responsible lending and banking programs are but obvious choices which cannot be swept aside for feigned problems in their operating structures. Business is successful in China, there are successful Credit Card companies and you are Bank of America, not an also ran. You owe it your investor and your customer.

Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world and serves clients in more than 150 countries

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A sweet summary of everything else in Infrastructure | ibef.org

The information was so rich, i kept all the results, take your time through the snippets

via Infrastructure for Brand India

Filed under: Financial Markets , Acquisitions, Amitonomics, Credit Crisis, DealBook, Financial Markets, India, India Infrastructure, Indian Economy, Infrastructure, Investments, Private Equity, Venture Capital

• 5:16 AM 0

Reliance ADA – Life Insurance worth 12000 crore

Reliance Capital who stock is almost up by more than 45 percent in just 4 trading session has informed that its looking to divest up to 26 percent in its insurance arm Reliance Life Insurance through an IPO as well as by inducting a strategic investor. Reliance Capital holds 100% in Reliance Life Insurance. Reliance Life Insurance would be valued well in excess of Rs 12,000 crore and they will have more clear picture on it in another 3 to 4 months.
Reliance Life insurance is considered to be 4th strongest in line next to ICICI, SBI Life and Bajaj Allianz. They have almost more than 10 percent share in the indian insurance market.
via <a href=’www.rupya.com’>Rupya</a>

zyakaira notes: The 3-4 insurance IPOs including ICICI Bank IPO for separating capital structures and governance would themselves bring companies with a valuation of INR 120000 Crores or around $25 Billion to the listed markets at BSE and NSE. Along with the PSUs and Infra stocks we may be adding market cap equivalent to India’s GDP in these 1-2 years and raising more than $10 billion from the markets

Filed under: Film making, Financial Markets, Home and away, India, Investments, Mergers & Restructuring , 49% FDI, Amitonomics, Bank Stocks, Banking, Business, Economy, Finance, Financial Markets, Financial Services, Global investing, India, India Infrastructure, Indian Economy, Infrastructure, Insurance, Investments, IPO, IRDA, RBI, Reform, Reliance ADA, SEBI

• 5:11 AM 0

Bharti-MTN a Dream Deal for SingTel – WSJ.com

After a long and fruitless hunt for acquisitions, Singapore Telecommunications is in sight of a growth booster. And going by its involvement in the Bharti Airtel-MTN Group merger talks, it is determined to grab it.

SingTel’s current business model depends on its foreign holdings, including Indian associate Bharti Airtel, to generate profit growth, with operations in Australia and Singapore yielding cashflow. But some of its foreign mobile associates are under pressure from increasing market competition while others are posting losses.

Bloomberg News/Landov

A Bharti-MTN merger would be a godsend for SingTel.A combination of Bharti and MTN would thus be a godsend for the Singapore company — Tuesday SingTel said it will “continue to be actively involved in due diligence and key aspects of the transaction,” emphasizing its interest.

If the $23-billion merger deal goes through, SingTel could own a piece of an outfit that would have more than 200 million subscribers in Asia, the Middle East and Africa combined, generating more than $20 billion in annual revenue. That’s almost twice SingTel’s revenue during the fiscal year that ended March.

Although the deal could dilute SingTel’s holding in Bharti to 19%-20% from the current 30.4%, SingTel could get as much 12% of MTN.

via Bharti-MTN a Dream Deal for SingTel – WSJ.com.

Filed under: Financial Markets, Home and away, India, Investments, Mergers & Restructuring , Acquisitions, Amitonomics, Business, Financial Markets, Global investing, India, India Infrastructure, Indian Economy, Infrastructure, M&A, Obamanomics, Private Equity

JUNE 7, 2009 • 3:13 PM 0

Reliance ADA to launch film/TV outsourcing unit | FT.com

Adlabs Films, India’s largest multiplex chain, controlled by billionaire industrialist Anil Ambani, is launching one of the country’s biggest outsourcing businesses to service the global movie and television industries.

The new unit will digitise films and television shows from clients’ archives or libraries, restore old prints and adapt content for use in different formats, such as DVDs or mobile phones.

Its first contract is from the state-run National Film Archive of India in Pune to digitise and restore 1,000 films.

“One [area of work] is the old legacy content, which has to be converted into digital, including all these studio classics – Paramount, Mickey Mouse and all of that – and then there is all of the television content,” said Anil Arjun, chief executive officer of Adlabs.

Mr Ambani’s Reliance group is not the first Indian company to target media outsourcing, but it claims to be the largest effort yet attempted, with a dedicated workforce starting at 300 people and scaling up to 1,200 in one year.

The company says India’s competitive advantage is outsourcers’ ability to build quickly the scale necessary for large projects, such as the contract from the National Film Archive of India.

Adlabs operates 430 multiplexes in India, the US and Malaysia and has a film and media services unit specialising in post-production and processing among other things.

The company is a unit of Mr Ambani’s Reliance ADAG group, which also has a tie-up with Stephen Spielberg’s DreamWorks. It argues that its 25-year history in the film industry will enable it to trump competition from existing operators that are more experienced in outsourcing.

These include a joint venture between outsourcing company Genpact and media group NDTV, and a separate tie-up between another conventional outsourcing group Infosys BPO and TV 18, a media conglomerate.

The joint venture between Infosys and TV 18, Source18, does not have a dedicated team for media outsourcing but instead assembles teams as necessary when contracts come in.

via FT.com / India.

Filed under: Bollywood, Film making, Financial Markets, Global, India, Investments, Media and Entertainment, US , Finance, Financial Services, Financial Markets, NDTV Profit, Outsourcing, Infrastructure, office space, India Infrastructure, Films, Infrastructure Financing, Spielberg, Reliance ADA, Indian Stocks

MAY 27, 2009 • 8:11 AM 0

Reliance Power may earn Rs 4,000 cr from carbon credit sale

zyakaira notes:  RPOWER recently completed Financial Closure for its 5 CR per unit SASAN UMPP Project. Carbon Credits are already selling for €26 per unit. This is a positive sign

The Anil Ambani-controlled Reliance Power is expected to earn more than Rs 4,000 crore over the next 10 years by selling carbon credits from its upcoming Sasan power project in Madhya Pradesh, according to people familiar with the development. The company is expected to get the UN-managed Clean Development Mechanism executive board’s nod for 37.5 million of carbon credits by June, said an official who wished not to be named.

When contacted, a spokesman for R-Power said the validation process for carbon credits is going on. The project has received the host country approval from the Indian government and German agency TUV Nord has been appointed as the designated operation entity for evaluating the eligibility for the credits, he added.

According to R-Power’s project design documentation with the UN body, the Sasan project qualifies the eligibility for generating 3.75 million units of carbon credits per annum — which would gross 37.5 million units in 10 years — at 80% plant load factor by saving green house gas emissions. Analysts with several research agencies such as the New Carbon Finance and Barclays have rated carbon credit prices in the range between 17 euros and 26 euros per unit and estimate the prices to move even higher due to limited supply of carbon credits.

Even at a conservative estimate of e17 per unit made by analysts of New Carbon Finance, R-Power could earn about Rs 4,000 crore at current exchange rates, that is close to its equity contribution of Rs 4,850 crore for the Sasan project.

Under the Kyoto Protocol of United Nations’ Framework on Climate Changes, industrialised nations can invest in clean energy projects in developing countries and in return receive carbon credits which can be used for credit compliance, or sold to buyers. Potential buyers of credits are often individual companies who expect their emissions to exceed the standard levels.

As per as the requirements under the CDM, R-Power’s project design document was web hosted for global stakeholder consultation, on the website of United Nations’ Framework on Climate Changes and has so far not received any objection, said an official familiar with the issue. He said the project is in the final stages of validation and would be submitted to the CDM executive board for registration in this quarter.

R-Power recently completed its financial closure for the 4,000 megawatt Sasan ultra mega power project.

The power project with an estimated investment of about Rs 19,500 crore has a debt equity ratio of 75:25. The debt would come from a consortium of 12 state-owned banks and lenders led by SBI and other financial institutions.

via Reliance Power may earn Rs 4,000 cr from carbon credit sale.

Ping this!

Filed under: Financial Markets, Home and away, India, Investments , Amitonomics, GII, Global investing, India, India Infrastructure, Indian Economy, Infrastructure, Infrastructure Financing, Investments, SBI

APRIL 7, 2009 • 10:11 AM 0

Macquarie SBI Infra Fund Announces First Close At $1B | VCCircle

Macquarie SBI Infrastructure Fund (MSIF) has taken off with initial investor commitment of $1.037 billion. According to a disclosure made to the stock exchange by SBI, international investors have already committed $887 million while SBI is going to bring $150 million to the fund.

The fund, which is a tri-party joint venture between financial services firm Macquarie, SBI and World Bank’s private sector financing arm IFC, is targeting to raise $2-3 billion in total and will continue to seek money from prospective investors through 2009.

The fund is targeting so called ‘traditional’ infra assets which generate long term identifiable cash flows. These include roads; airports; seaports; power generation, transmission and distribution; telecom and logistics. The investments will be aimed at both greenfield and existing projects.

Though there were reports earlier, that the fund may revise it targeted $2 billion target size to $1-1.5 billion, the sponsors are still optimistic of sticking to a higher corpus. The three partners had signed a JV agreement last October after signing an MoU for the proposed infra fund in April 2008.

SBI joins a growing list of financial firms planning or setting up large infrastructure funds for India. IDFC-Citigroup sponsored mega $5 billion India Infrastructure Fund is already in the process of raising funds (the fund size has a revised equity ceiling of $1.25 billion as against the $2 billion originally) and Blackstone which pulled out of the above mentioned India Infrastructure Fund is looking to come up with its own standalone infrastructure fund for India.

Last year, UK-based 3i (which scooped $1.2 billion) was the first to raise a billion dollar infra fund dedicated for India.The interest in infrastructure sector stems from a Planning Commission report which projected that India requires infrastructure investments to the tune of $450-500 billion by 2012.

With the new fund SBI could well be on its way to challenge the dominance of ICICI(which operates through ICICI Venture Funds) in the PE business in the country. SBI already has a $100 million VC fund with Soft Bank of Japan since 2006. It had earlier bought a 20% stake in Mumbai-based Sage Capital Fund Management’s $250 million special situations fund and had also indicated plans to float a real estate fund.

via Macquarie SBI Infra Fund Announces First Close At $1B | VCCircle.

zyakaira notes: Once a stable UPA/Congress government is in place in June 2009, we also see a new era for deficit financing budgets as the infrastructure gap requirement is unlikely to be solved as easily as we solved the telecom superstructure issue. Power, Roads, Aviation and the Others would need to become spending and thrust centers. More on this in coming posts as we look to the election to establish the direction and find that cornerstone on which future budgets would now be built ( which would be as acceptable to MSA and Manmohan Singh & P Chidambaram ) and run alongside debates for the not so palatable segments of Indian polity and society.  China has also jumped a lead on us.

Filed under: Bank Stocks, Elections, Financial Markets, India, Investments, Meltdown , Citi, Deutsche Bank, Finance, Financial Markets, India, India Infrastructure, Indian Economy, Infrastructure, Liquidity Crisis, VCCircle, Venture Capital

NOVEMBER 29, 2008 • 12:27 AM 2

For those in India – Tune In

Hi Amit,

Thank you for your interest in VCC Investment Forum Hyd.

This is to let you know that NDTV Profit will telecast a special series on INVESTING IN PERFECT STORM, at these times

29th Nov. – 11:00pm
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Filed under: India , Credit Crisis, Financial Markets, India, India Infrastructure, Obamanomics, Private Equity, Venture Capital

NOVEMBER 26, 2008 • 9:42 AM 1

DLF Assets To Raise $450M From JPMorgan, TPG? | VCCircle

DAPL raised $450 million from Symphony Capital, a London based investment firm in May this year.

DLF Assets (DAL), the property fund of DLF, will raise around $450 million from a cluster of private equity investors including JP Morgan Asset Management, Texas Pacific Group and others, reports CNBC-TV18, quoting investment banking sources. An email sent to TPG spokesperson did not elicit any response till the time of writing this report.

The DAL PE deal, in which JP Morgan and Texas Pacific will together put in $200 million, is likely to be signed in the next few days, and DAL will receive money by January-end, sources added, adds the report.

DAL owes Rs 4,804 crore to DLF as on September 30, 2008 and was targetting capital raising to the tune of $400–500 million.

via DLF Assets To Raise $450M From JPMorgan, TPG? | VCCircle

Filed under: Bank Stocks, India, Investments , Acquisitions, Dealmakers, India Infrastructure, J P Morgan, Mergers, Priuvate Equity, Venture Capital

NOVEMBER 15, 2008 • 4:54 AM 1

Aviation Infrastructure – India: Jet Plans Equity Sale, Rs 1,000 Crore Debt From Abu Dhabi Fund | VCCircle

Jet Airways reportedly plans equity sale to Temasek, and Rs 1,000 crore debt from UAE Fund.

Jet Airways, the country’s largest airlines, is desperately seeking funds as losses continues to pile up with dropping air traffic and higher operating costs. While it is reportedly (The Economic Times) in talks with Temasek to sell 10% stake it appears that the airlines is also seeking loans from overseas entities to keep the business running. Acoording to Mint and Business Standard reports, Jet is in talks with Mubadala Development Co, an investment firm of the emirate of Abu Dhabi, for a Rs 1,000 crore(~$210 million) loan to meet working capital and other expansion needs.

The Temasek deal being negotiated is believed to be worth around Rs 250 odd crore which values the airlines at Rs 2,500 crore, much higher than its current market cap of Rs 1,680 crore.

via Jet Plans Equity Sale, Rs 1,000 Crore Debt From Abu Dhabi Fund | VCCircle

Filed under: Bank Stocks, Financial Markets, Global, India , Corporate Bank, Economy, Finance, India Infrastructure, Institutional Investors, Obamanomics, Pension Funds

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 .

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However, the book is here and this does not claim to be a book review [AMAZONPRODUCT=0385529910]

Still Another Digression: (S.A.D.#9-1-1) There was that ‘ranch’ in South California too, but that’s been taken down in full after the 30 year OSA veils were lifted, Scooter Libby and others awakened and all the rest. And for investors outside the US, the same holds as we are all following the same crisis; the next tipping point for reforming the way financial markets and the budget for our home and hearth are run much the same way too.

1. Listen to your experts : And this is serious. The man who says the crisis teaches us to “Don’t rely on experts’, he s just taking time off to be a papa stooge. The experts not only have an edge on the information, they also have a ‘record’ behind them. But yes, don’t take one source for granted, be sceptical, trust your judgment

2. Bubble trouble – True. Everyone doing the same thing at the same time changes things. But the tectonic shift is not necessarily better always, or bad OR Black Swan either..and don’t ever use your nest savings..we are never even talking about it. Better still, for this take advice #1 and add to it..Dine with your experts..take an evening walk in the park with them, and don’t forge to be nice to them. This one also is not the excuse to shout and scream like Osama bin Laden, nor does that make you and your investments any better – or grade worthy – or worth selling low and buying high

3. The Contrarian point – is a studied viewpoint, not an allergic reaction to the expert’s makeup and Maria’s sartorial and travel lifestyle ( as ‘reported’ on CNBC. Drink it in with beer at dinner and wake up in the morning to drink another coffee..raving and ranting is counterproductive to gray cells..not the drinking

4. Focus on Debt Markets – That is a great lesson from this crisis. In fact that would even give us some breathing space when we try to avert the next crisis. There is an imperfect natural hedge there, and it saves us, esp when everyone starts thinking of OIL and GOLD too..those times or in a normal economy bubble or ultra mega size bubble, you need to see that the debt is at any time no less than 5 times the size of the entire Global Equity market investments and that is a lot, in fact what went out of equity went to bonds and then it will come back from there too..

5. Master new Investments – On the dot. Exchange Trading Funds are a good idea. Publicly traded debt in india, China and the N11, G8+3 not so much. So here, listen to more than one expert. Read us here. and don’t feel like Bruce Willis in Die Hard, Make the calls and ask around. That gets any thoughts of crises from developing, esp not overnight and not a crisis of the household budget

6. Use Derivatives to your advantage: Getting that safety net in place is harder to do with just CDs and real estate. You need to balance the equation more than once every year. Realign to a new fact or facts. Don’t sit on it. and then making a jump to new products is easier, and the ill-informed salesperson is unable to fool you into buying unsecured, unpayable. ETFs are a great place to start.

7. Reconstruction is the key. So is infrastructure. Keep your eyes open. 3 out of 5 ETFs are going to fail. Derivatives by their nature are going to leave someone stranded again. It will happen. So will real estate, and Lehman Bros. and in fact next time the cash buried in the backyard would not be safe either. Get used to a little higher risk. start small.

8. Experience counts. On the dot. But hero-worship kills, indiscriminately

9. Luck helps? See 1 to 4 above and redo the equation . Talk to us. Talk to your neighbourhood broker. All investment classes are inherently the same once you have figured them out. They make money if they are right. and if they are right they work for you. and your friends.

Paulson made his greatest trades after he had made a few winning trades every year. that is the only thing to learn, rest is the debate..and hating the experts is only handing America’s markets to the Osamas of the world..

Also if you are a corporate denizen, take a lesson from the lady that failed to catch Cadbury and her investment bankers..you go in with only one price and you come out empty handed.

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