India Economic Scan | 5 May 2009

5-May-2009

India Economic Scan

In this edition: Indian economy to grow 6.1-6.5%, India still looks strong - Motley Fool, Housing Development Finance profit falls 4.6%, Indian bonds drop, Indian stocks rally 5-6% on monday.

Top headlines

Economy will grow between 6.1-6.5%: CII

• The Indian economy is expected to grow by 6.1-6.5% during 2009-10 owing to high growth in key sectors like agriculture and services, according to an industry lobby study.
• "We are factoring in GDP (gross domestic product) growth of 6.1-6.5% in 2009-10, based on sectoral growth rates of 2.8-3%, 5-5.5% and 7.5-8%, respectively for agriculture, industry and services," the report by the Confederation of Indian Industry (CII) said.
• According to the advanced estimate figures of the Central Statistical Organisation, the economy grew by 7.1% in 2008-09 after the expansion rate dipped to 5.3 per cent in the third quarter.

India Still Looks Strong

• India doesn't rely on exports as much as some other emerging markets, for instance in 2008 the export-to-GDP ratio for singapore was 96% versus India's 15%.
• When the Sensex bottomed out in March, the exchange traded at 9.2 times earnings, the lowest since 1996. Even after its recent rally, its P/E ratio is still near five-year lows.
• Unfortunately, even with expected economic growth in the neighborhood of 5%, Morgan Stanley estimates that earnings at Indian companies will decline 16% in 2009, compared with a 25% decline for emerging markets as a whole.

Housing Development Finance Profit Declines 4.6%

• Housing Development Finance Corp, India’s biggest mortgage lender, said Q4 profit declined 4.6% to 7.33 billion rupees ($148 million) in the three months to March 31 from 7.68 billion rupees a year earlier, the company said in a statement to the Bombay Stock Exchange.
• Profit in the year-earlier quarter included a one-time gain of 2.02 billion rupees from the sale of a 26% stake in HDFC General Insurance Co. to a unit of Munich Re.
• Shares of Housing Development rose 14% to 1,965.05 rupees at the close of Mumbai trading. They have climbed 32% this year.

Indian Bonds Drop on Speculation Investors Sold Before Auction

• Yields on benchmark notes due 2019 climbed to a two-week high as the government prepared to offer 120 billion rupees ($2.4 billion) of bonds.
• The sale is part of the record 2.41 trillion rupees India plans to raise in the first half of the fiscal year that started April 1 to help fund stimulus spending.
• The yield on the 6.05% note due February 2019 jumped 15 basis points to 6.37% at the 5:30 p.m. close in Mumbai, according to the central bank’s trading system. The price declined 1.05 per 100-rupee face amount to 97.67. A basis point is 0.01 percentage point.

Indian Stocks Advance to Seven-Month High, Led by Sterlite

• The BSE’s Sensitive Index, or Sensex, jumped +6.4% to 12,134.75. Markets were closed on April 30 and May 1 for holidays. The S&P CNX Nifty Index on the NSX gained 5.2% to 3,654. The BSE 200 Index advanced 5.7% to 1,415.13. Nifty futures for May delivery added 4.9% to 3,652.35.
• Overseas investors bought stocks worth 65.08 billion rupees ($1.3 billion) in April, the most since October 2007, according to the nation’s market regulator.
• ICICI Bank +11% to 529.90 rupees, State Bank of India +6.9% to 1,366.25 rupees, Tata Consultancy +6.9% to 666.40 rupees, Allahabad Bank +8.8% to 56.90 rupees.

Brazil Economic Scan | 5 May 2009

5-May-2009

Brazil Economic Scan

In this edition: Brazil's GDP may shrink less than previously forecast, Brazil April trade surplus widens to $3.71 bln, BlackRock bets on Brazil, Claro to grow faster than Brazil rivals in 09, Bovespa rises above 50,000.

Top headlines

Brazil’s GDP May Shrink Less Than Previously Forecast

• Analysts expect Latin America’s biggest economy to shrink 0.30% in 2009, compared with a previous forecast of a 0.39% contraction a week earlier, according to the median estimate in an April 30 central bank survey of about 100.
• In the bank’s April 17 survey, economists forecast a 0.49% contraction for 2009.
• The real gained 1.4% to 2.1443 per dollar at 9:43 a.m. New York time from 2.1740 on May 1.

Brazil April Trade Surplus Widens To $3.71 Bln

• Brazil's foreign trade surplus widened in April to $3.71 billion from $1.77 billion in March as imports continued their sharp fall on a sluggish local economy.
• The April figure was higher than analyst expectations. A Dow Jones poll of 12 analysts predicted an April trade surplus of $2.84 billion. The surplus in April 2008 was $1.74 billion.
• In April, Brazilian exports were $12.32 billion, down from $14.06 billion in April 2008. Imports were only $8.61 billion, down sharply from the figure of $12.32 billion in April a year ago.

BlackRock bets on Brazil, warns about Mexico

• BlackRock is overweight Brazil by about 6 to 7 percentage points, according to MSCI's Latin America index, a regional benchmark, and underweight Mexico by 3 to 4 percentage points. Brazil makes up about 65% and Mexico 22% of the index.
• "Clearly for us, over the last six months, Brazil has been our preference over Mexico," said Will Landers, a managing director at BlackRock, who oversees about $4 billion in regional equities.
• Brazil has soared almost 33% so far in 2009, widely outperforming regional peers such as Mexico, which is down 2%, and Chile, which is up 20%, according to MSCI country indices.

Claro to grow faster than Brazil rivals in 2009

• Claro's customer base is up 27% from the first quarter of 2008. Net income grew 5.8% in the first three months of 2009 from the same period a year earlier, the company reported on April 29.
• Claro's 25.8% market share compares with Vivo's 29.7%. Brazil has 153.7 million mobile phone users, according to Anatel, the country's telecommunications regulatory agency.
• Claro's parent company, America Movil, is controlled by Mexican billionaire Carlos Slim, the world's third-richest man.

Bovespa Rises Above 50,000 on Commodities Outlook; Bolsa Gains

• The Bovespa jumped +6.6% to 50,404.53. Markets across Latin America rallied with those in Mexico and Argentina surging more than 5% in the first day of trading since the May 1 holiday. The MSCI Latin American Markets index rose 8.9%, the most since Dec. 8.
• Foreign investors bought 3.1 billion reais ($1.5 billion) more in stocks than they sold last month, the largest monthly net inflow since April 2008, according to data compiled by the Sao Paulo-based exchange BM&FBovespa SA through April 28.
• The currency strengthened +2.5% to 2.1196 per U.S. dollar, from 2.1740 on May 1. The yield on Brazil’s zero-coupon bonds due January 2010 rose five basis points, or 0.05 percentage point, to 9.82%. Vale +8.8% to 33.15, Petrobras 7.1% to 31.63 reais, Gafisa +11% to 20.90 reais, Cyrela Brazil Realty +14% to 15.30 reais, Rossi +10% to 8.15 reais.

6 May 2009 edition | China Economic Scan

6-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China bank loans likely fell in April, China passes US as top trading partner with Brazil, China to let foreign-registered companies open accounts at local banks, China stocks 'bubble' ready to burst, Chinese stocks close up slightly.

Top 5 headlines

Report: China new bank loans likely fell in April

• China's new bank lending in April was likely above 600 billion yuan ($87.8 billion), sharply lower than the record trillion-plus yuan loans in earlier months this year
• New loans in March totaled 1.9 trillion yuan ($220 billion), with new lending for the first quarter totaling 4.58 trillion yuan ($670.6 billion).
• "Clearly, new lending in the rest of the year at the same pace ... or half as fast ... as in the first quarter would be unthinkable and too fast," UBS economist Tao Wang said.

China surpasses U.S. to become Brazil's biggest trading partner

• China replaced the United States to become Brazil's biggest trading partner, said Brazil's Ministry of Development, Industry and Exterior Trade on Monday.
• The sum of Brazil's exports and imports with China reached $3.2 billion in April, greater than the $2.8 billion in its trade with the U.S.
• According to Brazil's official statistics, the bilateral trade volume between Brazil and China reached $36.44 billion in 2008, increasing 55.9% from 2007. Brazil's export volume to China was $16.4 billion, import volume $20 billion, rising 50.8% and 56.9% from the previous year respectively.

China To Let Foreign-Registered Cos Open Accts At Local Banks

• China's foreign-exchange regulator said it plans to allow companies registered overseas to open foreign-currency accounts at domestic banks, ending the practice of restricting this business to just foreign banks.
• The State Administration of Foreign Exchange (SAFE) said in a statement on its Web site the move will help ensure the safety of domestic firms' funds used for overseas investments, particularly during the financial crisis.
• SAFE said companies registered abroad, including in Hong Kong, Macau and Taiwan, will be allowed to set up foreign-currency accounts at domestic banks under the draft rules. It is seeking public opinion on the rules through May 19.

China Stocks ‘Bubble’ Ready to Burst, Galaxy Says

• China is at risk of a stock market “bubble” that may burst as investor confidence in the nation’s economic recovery weakens and bank lending slows, according to China Galaxy Securities Co., the nation’s largest brokerage.
• The Shanghai Composite Index has surged 50% since last year’s low on Nov. 4, driving valuations on the index to 27.2 times earnings.
• “China’s economy has bottomed but the recovery may be weaker than forecast,” said Teng Tai of Galaxy, “Bank lending will have to slow down. This will cap the growth in money supply and affect the supply of funds for the stock market.”

China stocks rise 0.3 pct to 9-mth closing high

• Chinese stocks rose slightly on Tuesday, the Hang Seng +0.30% to 16,430.08, Shanghai Composite +0.29% to 2,567.34, Shenzhen Component +0.49% to 9,947.81.
• China Vanke advanced +2.73% to 9.04 yuan, extending Monday's 3.77% gain. Fujian Cement and Fujian Zhangzhou Development jumped by their +10% daily limit after China's State Council, or cabinet, approved plans for an economic development zone in the southeastern province of Fujian to promote economic ties with Taiwan.
• China Shenhua Energy -0.71% to 26.50 yuan after jumping +7.93% on Monday. CITIC Securities dropped -0.83% to 25.15 yuan after rising +4.58 percent on Monday, while Jiangxi Copper sank -2.92% to 24.95 yuan after gaining +6.07% on Monday.

Financial Indicators:

USD/CNY	Hang Seng Index	Shanghai Composite	Shenzhen Component
6.8235	16,430.08 (+0.30%)	2,567.34 (+0.29%)	9,947.81 (+0.49%)

5 May 2009 | China Economic Scan

5-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: CLSA PMI rises to a 9 month high, Chinese listed companies report profits up 450% in Q1, Li & Fung to raise $350m in secondary equity offering, Sohu doubles Q1 net profit, Chinese stocks finish up over 3.3% on Monday.

Top 5 headlines

China on road to recovery, new survey suggests

• An index based on a survey of industry executives conducted for Hong Kong-based brokerage CLSA rose to a nine-month high of 50.1 in April from 44.8 in March.
• It was the first time since July 2008 that the Purchasing Managers' Index (PMI), designed to provide a timely snapshot of manufacturing conditions, has been above 50 (indicating expansion).
• "China's government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April," said Eric Fishwick, head of economic research at CLSA.

Chinese listed companies net profit up 450% in Q1

• The combined net profit of the 1,624 listed companies in the Chinese mainland dropped 25.81% YoY (up 450.39% from the last quarter in 2008) to 203.8 billion yuan (about US$30 billion) in Q1.
• 1,186 companies reported gains, making up 73.03% of the total. The number of companies reporting losses increased nearly 200% to 438 compared with the same period last year.
• "The quarter-on-quarter profit surge showed production began to stabilize in the first three months after taking the major blow from the global financial crisis in the fourth quarter last year," said Qin Xiaobin, chief analyst with Beijing-based Galaxy Securities.

Li & Fung to Sell $350 Million Stock for Acquisitions

• Li & Fung Ltd plans to raise about $350 million, selling stock at a range between HK$22.55 and H$23.38 per share to institutional investors. Citigroup and Goldman Sachs are managing the sale.
• The sale would be the largest secondary stock offering by a listed company in the city since the HK$2.96 billion ($382 million) sale by Champion Real Estate Investment Trust, Hong Kong’s first prime office property trust, in May 2008.
• Li & Fung is raising capital to finance potential acquisitions and strengthen its balance sheet. Li & Fung last traded up 9.09% at HK$24.

Sohu First-Quarter Net Doubles on Ads, Online Games

• Sohu.com Inc said Q1 earnings jumped 106% to $44.6 million (beating analyst estimates of $40.3 million), or $1.15 a share, from $21.6 million, or 55 cents, a year earlier, Sohu said today in a statement.
• Changyou, 68.5%-owned by Sohu, said Q1 profit more than doubled to $33.5 million, according to a separate statement today. Revenue, mostly sales from the Tian Long Ba Bu role-playing game, increased 50% to $61.6 million.
• China added 16.2 million Web users in the first quarter to a total of 316 million. Sohu last traded up +2.38% at $58.10, Changyou last traded up+6.07% to $34.10 versus its IPO price of $16.

China stocks rise 3.3 pct to nine-mth closing high

• Chinese stocks jumped on Monday with the Hang Seng +5.54% at 16,381.05, Shanghai Composite +3.32% at 2,559.91, Shenzhen Component +4.18% at 9,899.67
• China Shenhua Energy +7.93% to 26.69 yuan, Jiangxi Copper +6.07% to 25.70 yuan. Steel industry leader Baoshan Iron and Steel climbed +4.50% to 6.04 yuan, Guangzhou Steel +10% daily limit to 4.73 yuan after saying it had set up a venture with Linde.
• Property sector leader China Vanke advanced +3.77% to 8.80 yuan. Analysts said China's property market may have finally found a floor, with steep price falls having come to an end while sales were recovering. Drugmakers were mixed China Animal Husbandry Industry -1.50% to 23.00 yuan after rising 20% over the previous 4 sessions.

Financial Indicators:

USD/CNY	Hang Seng Index	Shanghai Composite	Shenzhen Component
6.8273	16,381.05 (+5.54%)	2,559.91 (+3.32%)	9,899.67 (+4.18%)