Amitonomics | The Investment Blog from Advantage 'zyaada'

Dec 4, 2009 0

After AOL Warner, the new megalith?

Can conventional media survive yet?

General Electric And Vivendi Come To Tentative Agreement On NBC's Value

The proposed $30-billion transaction is the fruition of a longtime ambition by Comcast’s 50-year-old chief executive, Brian Roberts, to recast his family-controlled Philadelphia company into a leading producer of movies and television shows and a purveyor of prominent cable and broadcast networks, including the venerable NBC.

Under terms of the deal, Comcast will contribute its entertainment channels, including E and Versus; nine regional sports networks; and about $6.5 billion in cash in exchange for 51% of the new venture, which will continue to be called NBC Universal for the immediate future.

The deal underscores how cable television — not a broadcast network or a Hollywood movie studio — has become the new profit center for media conglomerates.

GE, which has owned the NBC network for 23 years, will reduce its ownership in the company to 49%. The deal sets up GE for a gradual exit from the entertainment business, granting Comcast the right to buy out GE’s interest within eight years. GE placed a value of $30 billion on its NBC Universal businesses.

via Comcast deals to get GE out of NBC

The October MF report | Advantage zyaada

The Data is courtesy http://amfiindia.com (AMFI)

October turned out to be buoyant for the entire economy with retail and auto sectors reporting a 30% + uptick in sales and mutual funds also adding a neat INR 20000 Crores or $4.33 billion.

However individual fortunes were mixed as some fund houses managed to lose in Assets under management in the cracker season. UTI MF grew further by INR 3260 Crores or $720 million, and even Tata MF growing by INR 2500 Crores or $550 million. A small player like Kotak grew its corpus by INR 1350 Crores or $ 300 million. It is definitely a market whose time has come.

However Religare lost over 350 crores in AUM in the festive celebrations as it also withdrew from its AIG The newer giant Reliance at INR 116782 Crores also reported a reduction of INR 2000 crores and the growth is favoring the progressive biggies with a good corporate governance score. ICICI Prudential kept losing custom with markets withdrawing their favor after the recent turmoil in its ranks losing a miniscule but significant INR 400 crores, while its larger rival HDFC MF has taken its market share up to 12.23% growing to INR 93.300 Crores

The only other significant player in the Birla Sun Life MF grew rapidly by INR 2000 crores with the AUM of INR 65.500 crores reflecting a market share of 8.5% Ajay as head of the Financial Services business for the group has recently appeared in a a few network interviews to beef up these gains and reiterate BSL’s plan and vision in the upcoming wealth explosion in India. Fidelity MF remained between ICICI and HDFC in the rankings with INR 87000 crores or $19 billion without reporting any close ended schemes in October

UTI MF grew best in its Income funds with INR 5000 Crores adding in its Treasury Advantage plan and HDFC has grown its best performing Prudence ( Balanced ) and Top 200 ( Equity , medium risk ) schemes among others

What China might learn from India | Advantage zyaada

A First rough draft

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.

Dual Listing requests and other cultural 'absurdities'

Global businesses must have more of these war stories. We will see them again. If only that European and now African businesses are using recessionary conditions and development as excuses to bring down their hammer on the world. For this, they are using parochial and hithertho untenable institutions / policies that were at the root of all the misdemeanours of socialism and then for some of the backwardness of France, Western Europe and the black Continent that they successfully colonialised 200 years ago. MTN is not the onl one from South Africa. There is going to be more than one Dubai World..

But enough of the historical frisbee tour. We are at the corner of another new growth thrust, funded by liquid cash from all the elected governments. At least a chunk of this money will come to serious Infrastructure requirements of China, India, South Africa, Brazil, Russia and all the rest that work on foreign investors and that cater to their populace’s future needs at the policy level.

It is thus important that we do not allow such anachronisms as dual listing and funding of anti US / anti – Afghanistan sentiment, brokering war and such fancies that have titilated the French and the neo-socialists. I am not here to reiterate the freedom of free-speech but as a dealmaker and as an observer, I have always felt it sensible on the part of the decision makers to give in to the clauses that clinch the deal, even if only in the last mile. If you note any successful deals and growth initiatives of the 90s and the first decade now over, you will not the strong hand of political will showing where enablement of deals was required and not otherwise. Do not be fooled by the old China either. They have seen it and they have already changed their stance unknown to you and me, but showing in the increasing pace of dealmaking and in key reform stance being forced open by influential government denizens.

For me, that is a sure fire sign of guaranteed success and growth for the entire next decade just like any other. That, finally Arcelor bowed to commercial pressure to make Arcelor Mittal happen was made to happen by people who knew the need for change . Europe’s competition commission is not doing so badly either. However, these policy mis-steps would be used to weed out such losers from the plethora of emerging market investments..

The full story was first featured in the India Infrastructure feed here

Let's see some Temasek muscle

India WSJ reports today that Temasek is planning to add to its investments in India and China. Temasek recently completed its bond issue of $1.5 billion (Bloomberg). As of 2007 itself, Temaseks holdings in India included a 5% stake in Airtel and amounted to over 4% of its global portfolio at over $3 billion. It would have risen further in Dollar terms today with SGD having appreciated to 1.394 SGD to USD from 1.71 levels then.

They began in India (2004) with a 9% stake pick up in ICICI Bank, then at its vaunted peak, and 7.7% in Matrix Labs. They also bought a 5% stake in Apollo Hospitals and 20% in Onesource.(see here) Obviously Temasek already holds a sizable interest in Singapore Airlines, SingTel and DBS Bank to name a few within Singapore.

Being a city-state, Singapore has the advantage of cool crisp governance translating into control and business growth through such primarily SME modes of direct ownership in large infrastructure businesses. Their superb performance is underlined by quick decision-making and strong financial health as shown by its response to its and its clients’ recent bond issues for Temasek, PSA and one more. Interestingly, no non Temasek company has been able to raise debt from Singapore in 2009

As WSJ reports:

In China, Temasek already owns a 6% stake in China Construction Bank Corp. and a 4% in Bank of China Ltd. It has tried to invest in China’s airline industry, but a deal for Temasek and its unit Singapore Airlines Ltd. to pay $923 million for a 24% stake in China Eastern Airlines Corp. Ltd. fell through last year when China Eastern shareholders rejected the offer in hopes of a higher bid from Air China that never materialized.

Singapore Airliners is eager to restart talks with China Eastern if Beijing were to support foreign investment in the carrier, one of the people said.

In India, Temasek owns stakes in Tata Teleservices, conglomerate Mahindra & Mahindra, ICICI Bank, Bharti Airtel and logistics company Gateway Ditriparks. Manish Kejriwal, Temasek’s senior managing director, investment, international & India, said Temasek believes opportunities in consumer-oriented businesses and infrastructure in India “will lead to emergence of champions that are excellent proxies for economic growth.”

Temasek’s holdings also include major stakes in a cross-section of Singapore blue-chip companies. It has raised those stakes by subscribing to rights issues in a number of those companies that have turned out to be profitable.

Temasek bled heavily earlier this year from its stakes in Merrill (above 10%) and quickly withdrew. It is also making profits on its stakes in Citi however and is holding StanChart as well for short-term profit. Its profits from Citi ( over $3 billion) may somewhat compensate it for its losses at BofA Merrill and others. Despite these losses, it is one of the few SWFs that has survived today and is growing larger. Temasek still plans to add to its investment in ‘Western Banks’ as per their own discussions with the press.

ING gets to make a profit, Buyer Beware?

The Discussion on Citi, BofA results, GS bonuses and JPM’s growth is scheduled on the same Diwali weekend as well..

The ING Sale: Will OCBC grow into a larger Pan Asian role?

ING has sold the Asian private banking business to OCBC, which was having difficulty in growing in Asia but has made rapid strides in expanding in KL and can now focus again on Singapore. The $1.46 billion price ( Sing $ 2 billion) for assets that are not growing is based on the assumed scalability of the asset base of $15-16 billion. The unit was costed for $1 billion for the bank in its balance sheet. The N11 will thus provide a second chance to OCBC to grow.

OCBC has a healthy 60-40 split of interest and non interest income from its current assets ( economic assets or people assets in the case of fee based income) and as expected Q2 income went down with decrease in advisory and other fee based income to S$ 466mn or USD 335 million ( EUR 221 m). Also, interestingly OCBC currently has one of the most healthy cost-income ratios of 34% which can equip it with the necessary depth in absorbing any new costs and continue during the lean times where larger competition from US/Europe/India apart from JPM and GS is unlikely to withstand the current cost of business.

However its Private Banking acquisition may well add to its woes in the region as it has failed to grow beyond Malaysia and Singapore and PB assets may be offshore banking assets domiciled in these other ASEAN countries and even India. OCBC currently earns only 20% of its bank profits or $77 million from Consumer Financial Services where it has been hiding its Private Banking assets presumably. Even in that, as much as $ 10 million is from Islamic Banking in Malaysia (Bank Negara) The transaction adds just about $20 million to OCBC profits and margins may reduce further. However, it looks as if these assets would be lazy and no flight of assets to other competition in the region will ensue whether SocGen or Deutsche Bank

At this stage let me also reiterate that it is important to know that the final price is closer to the author’s estimation for this deal as well as the UBS captive sale, the Satyam sale , the AIG Investments sale, except for the Nan Shan Insurance unit for Life Insurance, Valuation premium is no longer for the selling brand ( Citi BPO assets for over $505 million just a year back) but for real business and real value delivered to the acquirer..The bear phase as always is a euphemism for the opportunity to deliver justice to buyers of economic value over noise)

Fortunately, Julius Baer is happy with its progress in Swiss assets from the acquisition as the Swiss pie is a little more localised and protected by Swiss banking law and does not expose the niche bank to new ( see ING sells Private Banking assets) Julius Baer has paid a half a billion dollars for the Swiss Assets

Infrastructure spending is the hot button

Infrastructure spending is sacred, countries aren’t

Infrastructure spending is supposed to reach $35 trillion ( that’s 10 China’s or maybe 5 including the future growth) in the next 20 years according to CIBC World Markets and thus the deficit we have been running in infrastructure spending will soon reflect in national deficits and the economic paradigm may shift too! ( more on that later !)

China has been increasingly activating itself in the last few weeks, what with the $6 billion bid for Nigerian Oil, and the bid for mineral resources in Guinea.

The Chinese GDP of $3.4 trillion thus has built up at least $44 billion in aid extended by it to others including 28 countries in Africa) Though any attempt to measure it might fail in relating the two figures, it is important that this has been done without jeopardising their debt to GDP ratio and now when that ratio may be in threat after the $8 trillion bubble of new 2009 domestic debt

However, China has started facing infrastructure financing blockages of its own and this project could well signify a Rubicon given the increasing deficits and inflation which would emerge from such financing off the national GDP of China

In the meantime Russia has already collapsed from printing money to fund deficits contracting 5% in 2009 and Brazil and Venezuela have gone thru multiple cycles of re-denominating currencies and surrendering debt even as Lehman, IMF and AIG continued extolling the virtues of leverage and printing money. The world hasn’t changed a wee bit but the lessons to learn might be new, whether China or Brazil or Good old USA and India trying deficit financing. The infrastructure spend however, will not suffer this time whether in India, in China or in Kenya.

Unfortunately, Sovereign Wealth Funds including the CIC, Temasek and Dubai World have already suffered reverses at the break of dawn and the same cultural anathema that broke global banks in 2001 and 2008 is the over riding culture at banks allowing Taiwan over India and Venezuela and Russia over China in economic decisions..it is the language, it is the global classroom and it is the incapacity to give the deserving a place in the face of an opportunity to screw yourself with leverage instead, as depicted in the Cold War movies and James Bond, in the Gazprom pipeline crossing all Western Europe without a bit to the Eastern padres and in the social catastrophe that was communism.

However, that digression apart Private Equity would be an important element after the first flush of Government debt gets tired and PPP and Take-out models are given enough impetus. Given that then these would be again financed by highly leveraged structures, another disaster would look simplistically the only way forward..

India has already raised INR 60000 Crore of its 100000 Crore target for 2009 ( as evinced by Advantage zyaada here) because public funds have shown that success can be achieved with investor funds and returns given. Private Equity can generate even more interest but maybe needs to be told firmly to not leverage up its books in the ‘hot season’

India’s Aviation infrastructure would be a germaine example in this case where Private Enterprise has taken root in such large ticket requirements. However in such Aviation , railroad, lifestyle or urban infrastructure as metros and airports the effect of unremunerative operations has also internationally manifested in most cities. Rural and Oil infrastructure has till now been heavily subsidised even in the US and other developed nations, enabling the unholy nexus between war-mongering governments and Oil and Defence companies. The jury is still out and there will be more to write as a quantitative evaluation of these financing models and their results comes out and our children take over from us.

Indian Market Tweets from Friday | zyaada

From Marketwatch.com Dow up more than 50 points as U.S. stocks open Frida.. http://bit.ly/C53J4 :ask us to analyse
24 minutes ago from twitterfeed

Valuations too high http://post.ly/5WrL
about 1 hour ago from Posterous

Indian PE deals, lousy skype fights ..just bad weather everywhere Valuations! Valuations! | The investment blog http://bit.ly/Tq2Ip
about 1 hour ago from Splitweet

And to end the day of tweets, from the Sun Tsu of War ( from Gekko) when your enemy is stronger than you, don’t be afraid..to run away
about 6 hours ago from HootSuite

Hollywood: Wall Street 2 started filming this September, Can Will Smith be far behind
about 6 hours ago from HootSuite

China farming Energy in the Mongolian desert. What took so much time!
about 6 hours ago from HootSuite

RIL losing a $100 million a month sales in KG basin, D6 but never produced more than 30 million cu m per day !!
about 6 hours ago from HootSuite

Bollywood: KKK2 star to ride sea bobs & skimpily clad Lara Dutta in ‘Blue’ Arindam Chaudhri’s Last Lear
Mr Bachchan to keep anchor at Colors
about 6 hours ago from HootSuite

Mutual Fund investments in August fell 74% to add less than $700 million with banks staying away http://advantages.us/a/amit…
about 6 hours ago from HootSuite

BSNL, MTNL not to buy stake in Kuwaiti Telecom company Zain for an estimated $14 billion ( Rs 70000 Crores), twice their annual turnover
about 6 hours ago from HootSuite

US has 22.5 GW of installed capacity, India 14 GW (663 bn units in Jan 2008) Germany also upgrading lot of Power
about 6 hours ago from HootSuite

IDFC buying BP wind power in India for $135 m, UBS selling for $100m ( 1.35 times sales) and WNS likely sold to Intelenet for half the price
about 6 hours ago from HootSuite

Do oversubscriptions matter? OIL ipo 30 times , not going to list at premium either..what’s the hurry to invest?
about 6 hours ago from HootSuite

India’s NSE to introduce strategies trading in Futures and Options, combined with IRD, Commodities and Forex a lot of new stuff, thin volume
about 6 hours ago from HootSuite

Pipavav at Rs 55-60 gets $115 m for working capital and odds and ends, one Dry Dock, 50% orders to be renegotiated down! Don’t bother
about 6 hours ago from HootSuite

Angel Broking (Picks outperforming 2009-10) says India’s chocolate market alone would be $500 million ( Livemint Sept 11)http://ow.ly/pW8S
about 7 hours ago from HootSuite

India key to Kraft bid ($KFT, $CBY) http://bit.ly/mKg0r Emerging markets make 40% of $CBY sales
about 7 hours ago from HootSuite

SBI cnsolidating its other subsidiaries into the bank to focus on size, may start in London with a small acquisition
about 7 hours ago from HootSuite

ICICI Bank heralds the market down turn every time in the last 6 months hyper growth.. Will SBI take off where ICICI left _TYY4
about 7 hours ago from HootSuite

Indian companies raised only $4.73 billion from ECBs, down 28% despite relaxation of upto $100m without approvals
about 7 hours ago from HootSuite
Rural Distrbn: Current FDI limits / Foreign Investment limits of 20% / 49% in DTH may go up to allow foreign media investors to catch upabout 7 hours ago from HootSuite
Unitech Telenor has revised capital participation terms putting responsibility on Telenor to fund all expansion, ready with 8500 towers..about 7 hours ago from HootSuite
New Islamic Bank Al Baraka to take off in Kerala based on Shariat principle of Bai al salam, distribution of profit and est of a social fundabout 7 hours ago from HootSuite
China’s bear trend unlikely to be braked but may recover based on Emerging markets strength $EEM, $CICabout 7 hours ago from HootSuite
More banks to join India Post in sales of the new pension funds (NPS) All pension money since 2004 has been routed to NPS for Govt employeesabout 7 hours ago from HootSuite
Lot of investor cash is aching to come back into the markets, accelerating the rise in Emerging Markets $EEMabout 7 hours ago from HootSuite
Reliance raising Cash in Rupees from a treasury sale, may make international expansion in energy fields more likely _TYY4about 7 hours ago from HootSuite
Gold also crosses Rs 16000 in India ( per 10 gm) with $GLD ruing above 101 and $FXE inching to 1.50about 7 hours ago from HootSuite
With Mutual Fund and Insurance loads and agency charges also banushed, the next 3 years should see a super normal rise in these productsabout 7 hours ago from HootSuite
Rupee may rise to 46 by year end, continue rise till Q3 2010about 7 hours ago from HootSuite
Similarily Global Forex reserves are up $441 billion (up 6.5%) to $7 trillion, buoyed by rise in Korean Won, Brazilian Real & India Rupeeabout 7 hours ago from HootSuite
Similarily Global Forex reserves are up $441 billion (up 6.5%) to $7 trillion, bouyed by rise in Korean Won, Brazilian Real & India Rupeeabout 7 hours ago from HootSuite
Foreign holdings of Indian bonds climbed 28 percent since March 31 to $6.4 billion, stock exchange data show http://ow.ly/pW1nabout 7 hours ago from HootSuite
I have 3,571 tweets that show that Twitter isn’t for lunch anymorehttp://retwt.me/2S6f (via @Scobleizer) by @tweetmemeabout 8 hours ago from HootSuite
Karnataka Prem League: #KPL Provident dent Belagavi Panthers hopes, Brigadiers second to B’lore Rural! games are worth watching not vettori!about 9 hours ago from HootSuite
Can Atlanta make it 16-0 this season? #NFL #Falconsabout 9 hours ago from HootSuite
#irreverentfridays Irene Rosenfeld looking for fly-by strategy support http://ow.ly/pVveabout 9 hours ago from HootSuite
By @EconomyFacts How To Stimulate Consumer Spending And Jumpstart The Economy http://cli.gs/j8esBabout 9 hours ago from HootSuite
Signs of markets having peaked as emerging markets and midcaps continue to outperform, why not 20k next week itself?about 9 hours ago from HootSuite
Citi sells Government stake of 34% « Obamanomicshttp://bit.ly/ORZ0Oabout 9 hours ago from HootSuite

Airtel MTN deal comes through | Reuters

zyakaira notes: While leading media analysts were continuing discussion on the various touchy edges of the deal, Bharti and MTN finalised the first phase of the deal yesterday, avoiding control issues and closing well before the deadline. Airtel upped the offer to $14 billion for MTN for 49% while MTN is now likely to acquire 33% of Airtel for $10 billion. The MTN take includes added cash in return for lesser discussions on control issues. Being adequately funded the cash rich Airtel still walks away with a great deal combining Singtl, Airtel and the kingdom of South Africa

As Prahalad Santigram of Stanchart mentions, Telecoms remain a hot bed of M&A activity making sure India continues to figure at the top in the Deal tables in 2009 and 10

Indian mobile-phone company Bharti Airtel (BRTI.BO) and South Africa’s MTN (MTNJ.J) have reached a preliminary agreement for their planned $24 billion share and cash swap, Bloomberg reported on Wednesday.

Bharti sweetened its bid to buy 49 percent of MTN by increasing the cash portion of its offer, Bloomberg said, citing three people familiar with the situation.

“MTN doesn’t comment on market speculation,” said MTN spokeswoman Marina Bidoli, adding that the two companies are still in talks until the end of the month.

An earlier tie-up collapsed over sensitivities over who would control what and the new deal — in which both companies will hold a large stake in each other’s businesses — seems carefully crafted to avoid a repeat.

Bharti is the leading partner in the deal. It will consolidate MTN’s business and hold 49 percent in its South-African rival. But MTN will likewise hold 36 percent in Bharti Airtel once the deal completes (This precentage was revised?)

via Bharti, MTN in early agreement on tie-up-Bloomberg | Industries | Technology, Media & Telecommunications | Reuters .

China to Sell Yuan in Hong Kong – Bloomberg.com

zyakaira notes: China just recently announced the acceptance of Yuan for global trade with the opening of a window in Hongkong allowing payments in the city and mainland in Yuan. Meanwhile since July 2005 scrapping of the APM, the Yuan has moved up 21% till end 08

The phenomenon of Fixed Income trading though new to the continent has considerably higher volumes in India, while other countries in the region continue to swim in USD notes and even barter to hide exposure to their weak local currency. China is more concerned about pushing Yuan for international trade now, after having seen the greater threat to its $2.1 trillion USD reserves.

Oil continues to lag this week because of the commodities default threat from China, which is showing up in addition to the precarious credit situation in China as a teetering fault in China’s market policies and point to a long winter for the nation. However, these domestic measures to strengthen the Yuan are being seen for the first time in the mostly discontinuous or fractured China policy positions that believe in knee jerk reactions without notice and in direct antagonism to other BRIC and nations and indeed the west. In those terms, this gentler unwinding, is welcome esp if they are able to travel and make an international mark in investments in Russia and China

Bloomberg:: In 2009, Hong Kong’s yuan deposits increased by 932 million yuan to 54.4 billion yuan in June, official figures show.

Bank of China Ltd., Export-Import Bank of China, Bank of Communications Ltd. and China Construction Bank Corp. are also among Chinese banks that have sold yuan debt in the city.

HSBC Holdings Plc and Bank of East Asia Ltd. sold 6 billion yuan of bonds in Hong Kong this year. HSBC Bank (China) Co., the mainland unit of HSBC, said yesterday it received orders for 4.4 times the amount of debt it planned to sell, allowing it to raise 2 billion yuan. The two-year notes pay an annual interest rate of 2.6 percent compared with 0.8 percent on a one-year deposit in Hong Kong.

China may sell up to 100 billion yuan of government bonds in Hong Kong over several stages, the city’s English language Standard newspaper reported today before the official announcement was made, citing people it didn’t identify.Hong Kong is seeking to become an offshore center for the yuan after China’s government in April gave Shanghai until 2020 to become a global financial hub. The issuance announced today is “a new milestone” for developing yuan business in the city, Hong Kong’s government said.“Six billion yuan is a small amount on the mainland market, but it shows the central government’s support for Hong Kong as an international financial center,” said Zhao Qingming, an analyst at China Construction Bank Corp. in Beijing. “It expands the channels of yuan usage in Hong Kong by offering high-yield, low-risk investment products.”

via China to Sell 6 Billion Yuan of Bonds in Hong Kong Update3 – Bloomberg.com.

DJIA	10779.17	+45.50
NASDAQ	2391.28	+2.19
S&P 500	1165.82	-0.39
^TWII	7886.34	+38.50
^AORD	4877.70	+0.00
EEM	41.78	-0.27
PGX	14.07	+0.00
PBR	46.27	-0.58
KKE	0.00	+0.00
YESBANK.NS	249.55	+3.60
PFE	17.20	-0.01
HDB	129.63	-1.60
RECLTD.NS	250.45	+6.15
HBC	52.19	-0.78
ADBE	35.81	+0.32

The Investment Blog from Advantage 'zyaada'

After AOL Warner, the new megalith?

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