Currency
September 10, 2013
The Saga of Corruption And Misgovernance in India We have been massively bearish on the Indian stock markets for a long time now citing the huge […]
May 18, 2013
Bitcoins Bitcoins are a form of “e-money” which is made of complex code created with the help of computer. Process of creating Bitcoin is called mining […]
April 24, 2013
Bitcoin Bitcoin also known as BTC is a kind of digital currency which was first described in 2008 by Satoshi Nakamoto. It was known as an […]
March 12, 2013
Foreign Currency Convertible Bonds (FCCB) FCCB or the Foreign Currency Convertible Bonds is a type of convertible bond issued in a currency different than the issuer’s domestic currency. It […]
November 15, 2012
Capital Account Convertibility Capital Account Convertibility is nothing but the freedom to convert the local financial assets into foreign financial assets and vice-versa at market determined […]
January 26, 2012
Quick quiz. What is common to Suzlon, Moser Baer, Indo Solar, Websol Energy systems and Orient Green Power? All these stocks had successful runs on the stock market and hyped as the next game changers in wind energy, semi conductors, solar power and hydel/geo thermal power. Valuations were more on growth stories than through an hard nosed DCF spreadsheet. But now, they trade at record lows(like other stocks but what is different is the pressing fundamental concerns in each case). Is this a bubble finally bursting, or are investors panicking?
January 3, 2012
Chinese Solar Panel Producers have become a famous target of an anti dumping petition brought on by Solarworld and other companies.Though US Solar Installers have opposed the move as it will increase the solar panel prices in US,ITC has gone ahead with the investigation.Though the charges of subsidies and efficiency can be debated,the fact remains that US Solar Panel Producers can't compete with Chinese Solar Panles.Massive industrial overcapacity in China has made the prices of products very cheap and made it difficult for Western producers to compete in most areas such as Chemical,Renewable Energy,Textiles etc.The Chinese win because of their low interest rates,cheap labor,free land,massive government support.
July 6, 2011
Greece Referendum is set to become the hottest media topic related to the European Debt Crisis in the coming months.In a totally surprising move Greek Prime Minister George Papandreou called a referendum and a parliamentary confidence vote on 31st October just a week after the European leaders had agreed on a package to .Papandreou’s personal and government popularity have plunged amid fresh austerity measures that sparked a wave of social unrest.The PM is calling this vote probably to bolster his government as it loses support of the masses
July 5, 2011
According to reports coming from Europe where the summit of major European leaders took place to resolve the growing debt crisis,a deal has been reached on Greek debt.The Euro 350 billion debt which dwarfs the size of the negatively growing Greek economy has been a major source of instability in the last 2 years.The private holders of the Greek government bonds have agreed to take a 50% writeoff on their holdings.This means that if they hold Euro 100 of bonds they have become Euro 50 now as the rest has been written off as bad debt.Not that it was not apparent as Greek CDS and Greek bonds were touching all times lows in the secondary market.In fact the only buyers of Greece bonds were the European Central Bank and the Greek banks.The capital markets had been going up in the last month in the hope of some sort of resolution.The deal does not look like a win win as there will be some big losers in this deal (though they were already losing for some time).Nicolas Sarkozy announced the deal which would be voluntary in nature so that the CDS would not be invoked.Here are the winners and losers from this deal
April 2, 2011
India has become the latest country to join in the bashing of Renminbi undervaluation saying it leads to a massive advantage for Chinese exporters.A research paper from India's Central Bank says that its artificially boosts China giving it a competitive advantage over Indian exports.Note Brazil another one of the famed BRIC quartet has too been complaining about Chinese imports swamping its industry.Note Brazil has seen massive currency appreciation in recent years due to a combination of high interest rates and strong economic fundamentals.
December 21, 2010
The Dollar is being relentlessly attacked by Bears due to massive QE program unleashed by the US Fed.However the US Dollar continues to be a safe refuge in many parts of the world.For countries affected by major politicial and economic problems,dollar is looked upon a safe haven for capital preservation.Many of these places have a history of high inflation and major political upheavals.In these places,Gold and Dollar are looked upon as equals for preserving wealth during times of chaos.Vietnam serves as a reminder where even citizens of relatively fast growing stable economies look upon as Dollar as a rock of stability.The South East Asian country has seen high inflation in recent times and numerous devaluations of its currency.The Communist led country has tried to replicate China in many of its policies some of which have backfired.The recent scandal and debt default of a major government owned company has shaken the confidence of investors.With high inflation and depleting foreign reserves
November 20, 2010
Deflating Developed Countries are fueling Inflation in Developing Ones with ultra low interest rates.QE2 has been heavily criticized around the world due to the dangers of it creating asset bubbles in emerging markets as yield hungry investors look for growth at any price.With hundred of billions flooding emerging debt and equity markets,the situation has become volatile for a lot of countries.Brazil has already seen its currency skyrocket in the last 2-3 years due to the huge spread between its bond yields and the US interest rates.With carry investors able to make around 10%,Brazil remains a favorite market for the inflow of dollars.Other countries like Thailand,Malaysia,Indonesia have seen their stock markets rallying to all time highs as well.Many of these countries have already imposed capital controls earlier.Now they are increasing further,as monetary authorities rush to close the gates.
October 22, 2010
While Section 301 was a powerful, unilateral U.S. trade policy weapon prior to the establishment of the WTO dispute settlement process, since 1995 it has rarely been invoked and has not produced any sanctions or WTO cases. In a post-WTO world, therefore, the USW petition could be said to be unprecedented. It is the first to be accepted by USTR that, if proven, would, invalidate for WTO purposes what amounts to a national industrial policy. It would seriously undermine the validity of China’s efforts to create “national champions” in certain sectors, to focus on building domestic capacity to address its environmental and energy challenges, and to be a significant, and possibly the dominant, global player in green technologies. Beyond the impact on China, a successful U.S. challenge in the WTO would inevitably chill similar efforts in other countries to use the Chinese industrial development template in other sectors. All of these effects are above and beyond the question of the immediate fall-out that could result if China declines to implement an adverse WTO finding and the U.S. compensation and retaliation is authorized.
September 27, 2010
Brazil,Peru,Colombia and now South Korea have all joined the "Buy Dollar and Sell Local Currency" Club.The Brazilian Real has appreciated by 34% in the last 2 years while similar stories lie behind Peru and Colombian interventions as well.With yields at near zero,Developed World Investors are pouring money into debt,equity and commodities fueling some of the Emerging Markets to all time highs.Some of the valuations like the Indian market are already stretched with local investors shunning the bubble markets.Countries with large Export Sectors like South Korea are particularly sensitive to currency appreciation and are joining in the chaos that the currency markets have become.The $4 Trillion Currency Markets are too big for a single country to take on as the Swiss found out losing Billions of Dollars in the process.The Currency Chaos is set to persist as the Financial System has become Unstable with Huge Debts,Moral Hazard and Central Bank Meddling.Gold has touched an all time high of $1300 with Silver following closely.With such volatility in Currencies,Business has become quite difficult with faith in currencies eroding at a fast pace.
September 18, 2010
In our Financial linked world where Capital is Globalized while Regulation is not,Hot Money Flows are fueling inflation and asset based bubbles in Developing Countries.Some of the Emerging Markets are either close to or have surpassed the 2008 all time highs.Inflation is also hitting dangerous levels in some countries like Argentina,India and others.The depreciating dollar brought upon the the US Federal Reserve Printing of money has made it necessary that the Central Banks purchase Dollars.This has been done not only by Brazil and Singapore but also by Japan.With more Dollar Printing,these Purchases will increase the Liquidity in the Developing Countries.This is a sure shot recipe for high inflation which will be difficult to control.India has already raised Interest Rates 5 times this year in order to rein in the pernicious effects of high inflation on its largely poor population.
September 17, 2010
Rise of American Protectionism – Two cases against China in WTO and "Buy American" Bills by Congress
USA is increasing its protectionist actions recently filing 2 cases in World Trade Organisation against China over Electrical Steel and Credit Card payment providers.Only last week a US Union had filed a complaint with the US government about the Predatory Practices of Chinese Green Companies.USA thinks that China has unfairly put duties on US made Steel and it is locking out Mastercard and Visa from the credit card processing market in China.There is little doubt that China indulges in favoritism and implicit and explicit support of domestic companies.However it the scale that is the only difference .Like all other things China also implements its policies king size.MNCs in recent times like GE,Google,Siemens have all criticized Chinse discrimination against foreign companies.However WTO remains an ineffective body to resolve complex Trades Disputes.The US Congress is also getting into the China-Bashing Act by passing 2 bills that mandate "Buy American" clauses.The US has already antagonized the Indian IT Industry by specifically targeting the Indian companies like Infosys and Wipro.These new bills target China making it mandatory for government departments to buy American made goods.With November Elections fast approaching,politicians are outdoing each other in protectionist rhetoric.
September 15, 2010
With Every Country wanting to Use Exports to get out of their Tough Fiscal Situations,it does seem that Currency Manipulation will become a mainstream activity.Gold and Silver are already touching new highs and with countries hell bent on competitively devaluing their currencies,expect the precious metals to go even higher.
September 14, 2010
Global Imbalances back to pre-Lehman Days Global Imbalances are growing deeper by the day as the world returns to its unsustainable pre-Lehman days of Unbalanced Trade.Trade […]
September 9, 2010
One of the factors behind the Yen Rise is the Chinese record buying of Japanese Government Bonds (JGBs).The Japanese Finance Minister has become concerned as the Japanese cant reciprocally buy Chinese Government Bonds which are not freely traded.Note Japan has a huge government debt load of around 200% of Japans GDP which is mainly financed by domestic investors.China with its humongous Foreign Reserves is the biggest player in the Foreign Exchange Markets Today.
September 5, 2010
.Europe and UK remain in equally difficult conditions suffering to some extent from the debt induced overhang.Hong Kong and the rest of Asia in comparison have escaped relatively unscathed and countries in the region have resumed their strong growth trajectory.Its not a wonder then that global talent is looking at Asia for newer growth opportunities.Non-Resident Indians are migrating back to their homeland in record numbers to take advantage of the booming economy.Its the same in case of other Asian centres like Singapore,Hong Kong and Shanghai.Asian companies are now raising money from capital markets in HK rather than NY.
August 17, 2010
The stock might offer some short term profits for high risk traders on a dead cat bounce,but it is definitely not a fundamental pick.Unless the company really makes significant progress on the revenue and orders front,it is not a buy in my book.
August 13, 2010
Germany which was a Reluctant Rescuer of Spain and Greece during the Greek Contagion has emerged as the surprise beneficiary of the crisis.The country’s economists and […]
August 4, 2010
India looks unlikely to impose capital or currency controls like Asian countries to stem the increasing capital inflows from developed nations.The Indian government and the Central […]
July 19, 2010
The recent recovery in Euro from 1.2 to 1.3 USD and the strength of the stock markets would make you think that the Greek Contagion is […]
July 13, 2010
There has been reports of massive debt distress in Eastern European countries following the Global Financial Crisis.One of the major factors leading to this is the […]
July 2, 2010
In Seven Reasons that China’s Economy might be slowing down, I had described the factors that might lead the super strong Chinese growth engine to slow […]
June 22, 2010
China’s Central Bank Statement which signaled more flexibility in yuan’s fixed exchange rate to the dollar led to a major market rally in commodities ,emerging markets […]
June 20, 2010
China’s Central Bank had released a statement on Yuan Reform seeking to defuse international pressure.The statement which rambled about recovery,BOP,world macro situation,yuan history had a brief […]
June 20, 2010
Indian exporters are overwhelmingly in favor of a fixed currency exchange rate as recent currency gyrations due to the Greek Contagion has made their lives very […]
June 19, 2010
China and US Tensions increasing on Currency Valuation The US Senate and President Obama have been increasing pressure on the Chinese Government to revalue the yuan […]