THOUGHT FOR THE DAY

“Be less curious about people
and more curious about ideas.”

                              

                                      ~ Marie Curie

India - Touching New Heights

Way Above the Rest

India is doing far better than its peers

Business Today's article on India by Shankar Sharma has some eye catching facts highlighted by the author who is the Vice Chairman and Joint Managing Director, First Global. Shankar raises concern stems from disquieting reports in the media about how foreign brokers are turning bullish on India, turning bullish on India's prospects, on India's rupee, on India's current account deficit, on India's reforms, on India's rule of law, on India's movies. However he mentions that the Wall Street biggies have never got it right on their predictions about the market.

 

The Supremo’s, the analyst and economists placed in Hong Kong and Singapore have been bullish on China and bearish on India and many Global Rating agencies like Morgan Stanley, S&P 500 had also started pushing down the progress of India and we could witness the Indian Finance Ministry and Central Bank opposing the facts and predictions laid down by these rating agencies. The downgrade had crossed all limits as the article states that few Western analysts had even stated that the "I" in BRIC should be Indonesia and not India. This could be a profound thought or research as the world economy saw a slowdown and India was also impacted by the wave.

SOME FACTS ABOUT INDIA

1) India is the fourth best performing market in the world this year, up 22 per cent.

2) The rupee has been flat through the year. China is down 4.5 per cent this year. Russia is up just three per 

cent. Brazil is up one per cent (and its currency is down eight per cent this year!).

3) Growth of Indonesia is up 13 per cent however its currency is down six per cent this year.

4)  India is 14th in terms of volume of factory output

5) India is regarded as the 15th best economy in terms of production in the services sector

India has seen some changes in its policy in the near past with the government making road for FDI (Foreign Direct Investment) in single and multi-brand retail (a long pending action that could help overpower other emerging economies). India's economy ranked 3rd largest in the world in 2011 GDP PPP (Purchasing Power Parity) with above USD 4000 bn only behind the Unites States (USD 15094 bn) and China (USD 11316 bn) as per IMF World Economic Outlook April 2012 report and PriceWaterhouseCoopers 2050 Report predicts India to beat United States and run ahead in the ranks to position itself at no. 2. India's Consumer Confidence Index (CCI) has been consistently above the world average as per Nielsen Global CCI where India stand at 119 points in Q2, 2012 and in Financial Market Development India has been ranked 21st, much better than other Emerging Market Economies (EME).

After considering the fact that India is an emerging economy and has a lot of potential we also need to keep in mind that Indian Business houses has to face a lot of challenges and has many restrictions because of the deep-rooted Indian laws, unstable political environment, significant number of people still below the poverty line and certain other such facts. India has slipped four places to 40th place in a ranking of 62 leading financial systems and capital markets, because weak institutional framework, business environment and relative instability failed to support growth as stated by the World Economic Forum said in a report released on 31 October.

Before giving a pat on its back, India has to overcome various such hurdles and also uproot the core issues of poverty and income instability. I still say and agree that India projects all qualities of being a 'Developed Economy' in the coming years.

A LESSON LEARNT

The price 
of anything
is the amount
 of
 LIFE 
you exchange 
  for it

       - Henry David Thoreau.

GREEN SHOE OPTION - An IPO's Best Friend

Many have heard of IPO or Initial Public Offering which is the function of the primary market. IPO is when a company wish to issue its shares to the general public for subscriptions for a price pre-determined by the company. Such shares subscribed by general public and allotted by the company based on criteria set by the issuing company thus get listed to the stock exchange for trading purpose of the investors or shareholders as they are rightly called.

Companies that wants to make a public appearance and wants to sell its shares for public have certain systems to stabilize their initial price movements. One such mechanism is the Green Shoe Option. A greenshoe is a clause or a condition added in the underwriting agreement of an initial public offering (IPO) that allows underwriters to buy up to an additional 15% of company shares at the offering price. This option is mainly exercised when the public demands for the shares of a company exceeds expectations and the stock trades above the offering price. In other words this option can be exercised once the share is over subscribed at the IPO stage but has a cap of 15%.

WHY THE NAME GREEN SHOE

The name "greenshoe" came from the Green Shoe Manufacturing Company (now called Stride Rite Corporation), founded in 1919. It was the first company to implement such a clause into their underwriting agreement on over subscription or exceeding public demand for the companies shares.

In a company prospectus, the legal term for the greenshoe is "over-allotment option", because in addition to the shares originally offered, shares are set aside for underwriters. This type of option is the only means permitted by the Securities and Exchange Board of India (SEBI)  for an underwriter to legally stabilize the price of a new issue after the offering price has been determined. The SEBI adopted this option from abroad and introduced this option into the Indian Capital Markets in the year 2003 so as to enhance the efficiency and competitiveness of the fundraising process for IPOs.


'Impact of Green Shoe Option in Indian Capital Market' is my final year research project for my Masters program in Finance.Many of the Indian corporate houses, Analysts and people involved with the Financial Markets are not aware of such an option.  In my next article we will see how the Green Shoe Option mechanism works which will give you a fair idea on its ability to stabilize the price movements. Keep Tracking.

FOOD FOR THOUGHT

"Real difficulties can be overcome.
It is only the imaginary ones
that are unconquerable."

~ Theodore N. Vail

FDI REPORT 2012

ASIA - PACIFIC

FDI into Asia-Pacific
India, China and Singapore attracted 57% of the projects in Asia-Pacific in the year 2011. Investment in India shows a significant double digit growth of 21% in FDI projects in 2011, the second highest being South Korea with 10% and Singapore with 7%. One of the fastest growing economy, China shares a fourth spot with Hong Kong at 6%. India's growth shows a remarkable rally following just 1% growth in 2010.

However in the Asia-Pacific region Japan and Thailand witnessed a sharp decline in FDI, the reason can be easily assumed as the impact of natural disasters that took place in both the countries. For the year 2011, Thailand and Japan shows a massive decline of -35% and -25% respectively. The top-performing country for attracting new jobs was China, which saw just over 340,000 jobs created as a result of inward FDI.


FDI out of Asia-Pacific
Analysing FDI overseas, Japan, India and China accounted for more than 60% of FDI projects from  Asia-Pacific countries in 2011. Japan remained the dominant outward investor, establishing more FDI projects overseas than India and China combined. Japan’s position is even more important when the size of projects is considered, with Japanese companies creating nearly 300,000 jobs overseas; 40% of total overseas job creation generated by Asia-Pacific countries.

Of the major investing countries, Hong Kong and Australia recorded the fastest growth in outward FDI projects, with percentage growth rates of 23% and 21%, respectively. In Thailand, flooding over the monsoon season seems to have encouraged domestic companies to invest overseas. In terms of capital investment overseas, Indian, Hong Kong and Vietnamese companies each increased their outward FDI by more than 70% in 2011.

TURN YOUR FINANCIAL LIFE AROUND

Why do so many women delegate their financial security to a spouse or significant other and allow divorce or death to plunge them into poverty? Why do so many women spend more than they earn and become mired in debt?
There is a direct correlation between a woman's personality, characteristics and her financial habits. Assertiveness, openness to change, and an optimistic outlook are the qualities that tend to lead to smart money choices.
Our problems with money are manifestations of problems in our life and relationships. Work on the money issues and many of the other problems will take care of themselves; or, work on the other problems and the money problems will take care of themselves.
For many people, money is an emotionally charged issue. It may represent power, or love, or control, especially in relationships. Our beliefs about money and our emotional attachments to it strongly influence the way we spend and handle money.
If you aren't where you should be financially, examine what drives you emotionally when it comes to money and try to figure out the psychological stumbling blocks that keep you from becoming financially independent. Here are ten of the most important things women can do for themselves and their financial future:

1) Don't rely on someone else, like a husband or boyfriend, for your financial security. Educate yourself about money management and investing. See Overcoming the Financial Gender Gap.

2) Set goals - it's key to financial success. See Building a Balanced Financial Plan and Setting Financial Goals.

3) Spend less than you earn - it's the secret to creating wealth.

4) Get an education. People with college degrees make on average significantly more money than those who don't have degrees.

5) Build an emergency fund. Without one, losing your job or incurring a large unexpected bill could force you to take on heavy credit card debt, and could put you into a financial hole that will be difficult if not impossible to dig your way out of.

6) Be involved in the day-to-day management of your family's finances, and talk about money with your spouse.

7) Don't take on your partner's or spouse's debt when you marry. Wait until you're both out of debt before tying the knot, or protect yourself with a pre-nuptial agreement. They're not only for the rich.

8) Don't let the fear of losing money, fear of failure, or fear of the unknown stop you from investing.
  
9) Learn from your money mistakes. Don't let them hobble you.

10) Your financial security is dependent on your attitudes and beliefs about money and your willingness to take your financial future into your own hands.

Analyzing India’s Competitiveness: Insights from the Global Competitiveness Index (Deloitte Analysis)

World Economic Forum (WEF) came out with The Global Competitiveness Report 2011-2012 as per which Switzerland continues to top the overall ranking in Global Competitive Index (GCI), characterized by an excellent capacity for innovation and a very sophisticated business culture. Singapore has moved ahead to claim 2nd position this year. Sweden, Finland and United States rounds up the top five. European economies continue to prevail in the top 10 with Germany, Netherlands, Denmark, Japan, and United Kingdom following suit.
India ranks 56th out of 142 economies in the GCI for the year 2011-2012, down five ranks from the previous edition.
India‘s performance remains quite stable but with a decline in score by 5 points. India‘s competitveness is based on its large market size and good results in more complex areas including financial markets, business sophistication and innovation. Up by one position to 26th place, China reinforced its position within the top 30. Brazil is at 53rd (as compared to last year of 58th). China and Brazil are the BRIC countries to improve its rankings this year. Russian Federation is at 66th positions (compared to last year of 63rd position). India and Russia have declined in their rankings this year.

MOST IMPORTANT ECONOMIC INDICATOR's

    Economic Indicators: Beige Book
    Economic Indicators: Business Outlook Survey
    Economic Indicators: Consumer Confidence Index (CCI)
    Economic Indicators: Consumer Credit Report
    Economic Indicators: Consumer Price Index (CPI)
    Economic Indicators: Durable Goods Report
    Economic Indicators: Employee Cost Index (ECI)
    Economic Indicators: Employee Situation Report
    Economic Indicators: Existing Home Sales
    Economic Indicators: Factory Orders Report
    Economic Indicators: Gross Domestic Product (GDP)
    Economic Indicators: Housing Starts
    Economic Indicators: Industrial Production
    Economic Indicators: Jobless Claims Report
    Economic Indicators: Money Supply
    Economic Indicators: Mutual Fund Flows
    Economic Indicators: Non-Manufacturing Report
    Economic Indicators: Personal Income and Outlays
    Economic Indicators: Producer Price Index (PPI)
    Economic Indicators: Productivity Report
    Economic Indicators: Purchasing Managers Index (PMI)
    Economic Indicators: Retail Sales Report
    Economic Indicators: Trade Balance Report
    Economic Indicators: Wholesale Trade Report
    Economic Indicators: Business Cycle Indicators - BCI
    Economic Indicators: Composite Index of Coincident Indicators
    Economic Indicators: Arms Index - TRIN
    Economic Indicators: Employment Cost Index (ECI)
    Economic Indicators: Producer Price Index (PPI)
    Economic Indicators: Consumer Purchasing Index
    Economic Indicators: Business Optimism Index
    Economic Indicators: Global Gender Gap Index