Archive for the 'World stock markets' Category

World Matrix-Destruction of capital worldwide has made the rest of it shy away

October 25, 2008

Friends,

Bernanke’s team may announce lowering of bench-mark rate to 1 pc, it will be lowest since May 2004. His other tools would be to purchasing securities directly from treasury and that way injecting a dose of cash in to economy. Fed balance sheet size will grow at good pace as it has been lending and buying assets(absorbing risks too).

Japan had to fight, only a decade or so back, deflation and banking collapse and its Central Bank saw the balance sheet size growing to more than 30 pc of GDP.

Bernanke has, for the first time since 1930s, made loans available to investment firms(it rescued AIG and Bear Stearns) while he lowered interest rates to 1.5 pc from 5.25 pc.

The world write down of 659 billion dollars have made the firms also raise 642 billion dollars of capital. The rescue package of 700 billion dollar should help the situation a great deal together with other measures.

Now, I have to tell you some thing of importance. The destruction of capital worldwide has made the rest of it shy away. The result is the prices of assets falling. This is making stock markets to tumble. The govts are filling the gap left by the absenting capital to let the economies not derail. The absentee capital will become bolder with stability returning and will want itself to work rather than remain shy and unproductive for long. The tide will have turned then. This is the time when markets have become unhooked and float in the direction of push without an opposing force controlling the movement.

The fact of the matter is why would the capital go for making itself in to a receivable, in times of low interest rates. It has to prefer its conversion in to assets directly, such assets may be productive or unproductive or be rights in to natural resource pool of the world. Equity shares therefore qualify best from the angle of ease of transfer, tax relief, no nursing, yield through dividend and no costs involved in holding. It is a good asset, only if bought at right price. This situation has arrived.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

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World Matrix – Deliver the financial system of America out of woods

October 14, 2008

Friends,

Finance Secretary Paulson and FED Chief have been on air declaring that they have commitment to deliver the financial system of America out of woods. The President’s team has no confusion and it is showing too. The DOW futures index is up by good 300 pts. DOW would be in the vicinity of 10000, an unthinkable figure only a few days back. Back home, the leading indices went up and came to last days level. The bears seem to still be nursing their bias and why not because there were no big company results announced today. Here, the effort is also are some what mis-directed. We should be readying ourselves for the possible bad winds blowing, well in time.

It is, however comfort enough that the opinion today is not entirely negative. Also, the rest of the world including Asia is demonstrating through markets that the fear is on the wane as they have all been up for the second day today. Crude is trading at 82 dollars (up 2 dollars). The injection of liquidity so far and further doses in pipe line are bound to have salutary effect, once the multiplier effect has done the trick. Dollar demand from the funds liquidating stocks must have gone down as the rupee is further up by a slight margin and a dollar trades for 48.18 rupees just now.

I would like my readers to contribute freely their own frank opinion through the comments box.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – The fear factor in markets

October 13, 2008

Friends,

The fear factor is responsible for the 50 pc of slide in markets since the position exactly an year back for most markets in the world. The down turn in industrial fortune accounts for 25 pc of the slide and the rest 25 pc is on account of the turmoil in financial markets. Now have look at which market slid how much over one year and half of this bound to cover back when the normalcy returns and the tempers get cooled:

DOW lost 36 pc at 8451.
FTSE lost 39 pc at 3932.
BOVESPA lost 44 pc at 35609.
CAC lost 43 pc at 3176.
DAX lost 43 pc at 4544.
NIKKEI lost 46 pc at 8276.
HANGSENG lost 47 pc at 14797.
TAIWAN lost 40 pc at 5130.
KOPSI lost 35 pc at 1241.
STRAITS TIME lost 44 pc at 1948.
JAKARTA lost 47 pc at 1452.
SHANGHAI lost 62 pc at 2001.
SENSEX lost 44 pc at 10528.
NIFTY lost 40 pc at 3280.

So, now, you may see the movements in light of above in coming time. The world has got unified at least in respect of emotional mack up or we may say the FII hold the cue to trading and hence this situation. Further, the coming year will stand the basically stronger market apart from the basically weaker markets ie markets representing stronger economies and weaker economies. The time has come for the delink in the markets because the future stock picking will be on the basis of company and economy related developments. Isn’t it surprising that while nothing substantial has happened in some of the economies and the slide has been more or less similar. The USA has been the eye of storm but seems to have still kept more balanced closing. The 7 pc jump in leading indices has set the pace of future expectations.

Nothing happens ordinarily and nothing extra-ordinary stays.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – Advantage India

October 11, 2008

Friends,

The US President announced last day from the public platform and in no uncertain terms that the financial crisis will be set right, come what may. He meant to convey that the govt is besieged of the problem and has planned to take comprehensive action along with the G7 nations and also under consultation with G20 (India included). The G7 finance ministers have arrived in US, our FM has dropped plan to go there.

We have had trouble on our bourses due to portfolio investments by FIIs who have just one thing in mind and that is to get whatever they can for the stocks held as the need to meet obligation at home is over-riding (you may recall my warnings at the peaking market time last year that the FIIs exit is not normally done, it is done in a rush). When the exit is without evaluation of the item being sold, the panic naturally sets in. The settlements going smoothly in such scenario is for some to praise and the withstanding of the such windy times by the Indian banking and financial universe is going to make it a more preferred centre of financial exchange.

You may also recall that the shadow of the crisis was there last year itself and I had reported it while also admitting that the extent and the timing is difficult to judge. However, I maintain that troubling times in west will eventually have no bearing on India and if at all some thing happens it is going to be accelerating economic development of India and more particularly its being a nation worthy of absorbing the world’s saving surpluses which found no ‘safe parking places’ in developed nations of the world. The forced parking of such funds by the investment bankers is the root cause of trouble. When it will be analysed as to who got hurt the most, it will be noticed that while the investment banks got out of business and equity holders of the same institutions got nothing for their share-holding in some cases and got some pittance for the transfer of equity to the bailing out entity (govts included). The group suffering the most would be the ones who placed their money for management to these investment bankers who would get what ever is salvaged after making the borrowers (mortgage holders) some concessions and after suffering the loss on transfer of investment to new buyer (at current lower rates) after the market is established by the injection of funds by central bankers. These owners of funds under management kitty of the investment banker belonged to savers (the savings for future consumption). Such times came for the world order and did not allow the savers of yesteryear to have claim on future production of goods and services to the extent expected/desired or planned for (remember the adage ‘Laxmi is Chanchalaa’ ie riches are nimble footed). The greed to not only preserve value for the future consumption but also to grow it more on the strength of high interest albeit at high cost had to and did boomerang. The investment bankers created faulty atmosphere of optimism and all in the interest of earning hefty commission and fees by promising to increase wealth through sheer foolhardy and speculation.

The other cross current was that the world represented by two big ancient nations ie China and India had woken up to have their rightful share in world’s mineral wealth and and retaining their own for self use by increasing productivity of labour and capital and through benefits flowing on account of size of market domestically. Isn’t India ready to be the hub of export of vehicle of every size and use in a span of fifteen years. It is the result of optimum level of production achievable here. This advantage is not going to go away and would increase so the slow down fears are basically un-founded in India. However, China may go with some years of adjustments and pains due to the need to organise the markets more based on natural exchanges and make them more free. There is only a muted resentment for its controlled exchange regime which will be openly decried by USA and the rest. We Indians have therefore an edge over every body else. The shot in arm has come in the form if the Nuke freedom is used for peaceful uses. There is an immense scope for absorption of world’s saving as every unit of capital invested here in infrastructure projects (like railways, roadways, air-ports, dams, power projects,sea terminals and the tourist sites related) at nominal rate of interest (not high) which will be generating surplus to be shared by all the stake-holders. It is for this reason that FDI has not slowed down even in face of such crises, the world over. Indian markets for the goods and services are not going to shrink due to millions in villages. It is going to form the buyers’ universe as opposed to city centres based demand. There may be a slow down like in 1998 and 2001 but it will only be for creating some gap for breathing after running at high pitch. This would not be bad for a marathon running spree.

Now, visualise that the sellers in markets were coming perforce and were selling willy-nilly while the buyer was coming reluctantly due to the atmosphere confusing him. Has there ever been such a grand opportunity for making an entry. Haven’t you wondered that more than the real decline in earnings it is possibility of slower growth that is weighing heavily on minds of people. Further, the crisis at hand of the world economies has created an atmosphere of sudden impulsive growth due to increase in money stock. As the normalcy will return, the case of too much money chasing too few goods and investibles will follow suit. Again I would say that the inflation in India is working as friend of investor not otherwise. The welcome gesture finally to happen is the lowering of bench-mark interest rates by RBI. Didn’t you read earlier that increasing money supply is easiest of task for the govts, it is taxing every pocket without having to collect it effort fully. When this is may save economies why would they think twice, no body is going to blame them for this for it will be for a noble cause.

Now, one thing is clear that we have to have central bank of the world and a world currency which should have some controlled issuance and which should be currency for international trade and local currencies may have there own conversion rates under guidance from the local central bank. Why do we need to base international trade in currencies of countries who have fragile financial systems themselves.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – Markets have demonstrated as if they have an umbilical cord

October 8, 2008

Friends,

The world markets have demonstrated as if they have an umbilical cord attaching them with USA. As if the nutrition used to come through this and now the infection is coming through it.

The markets round the world since morning have tumbled because DOW was lighter by 500 points yesterday. All the Asian markets are down between 2 pc to 4 pc at the moment. India did not dip yesterday but would it hold under such psychological assault from all over.

Now when the rationality has been given good bye, there are two ways to weather the storm. First, you may stay put and not do a thing. Second, you may convert your cash resources in to buying in to companies of your preference, of which you have full idea and know more than a common investor. This will be transfer of a valuable asset to someone who has value perception from someone who is skeptical because he does not know. Such transaction will abound and the fool this time will not soon part with money but with valuable asset.

Sticking to your areas of knowledge is the key today and rewards would be plentiful. So, don’t look at market rather look at specific companies. Its a time when you could buy three rupee worth of stock for just one.

Large pools of money are being released in to the ocean of world money. After it is noticed that the level has risen , there will fear that it will swamp the shores with furious waves and some will be caught unawares. I think , I told you that its not gold standard that is in place today , it is simply a system where the central banks do the balancing act between inflation , interest rates and look after needs of govts which have to borrow to meet budget deficites. This way any time the money supply may be increased or decreased. With more money as with more water people would splash and not store. However, this painful process is creating havoc with people , staying deliver aged is the need of the hour.

Look at Tata’s, they are in process of putting up new car plant, have they not seen if there is any sort of danger on the industrial road ahead. No, they could have seen, they have not been able see because there is none. Financial sector today revolves around the stock exchange hub, here also our Premji of Wipro has found it fit to pick up 5 pc stake in NSE for no small a sum, it is 100 million dollars.

Speaking at a business leadership award function PC told that India would clock 9 pc growth next year against 8 pc this year. Being FM, he should know. He also told there is nothing to fear but the fear itself. He confirmed that India has agile regulators and they would stand by public. Not stopping here, he further said that indirect tax revenues are growing by 14 pc.

Have you noticed that the gloom is there just before the results are going to come. This is the darkest hour before the sunrise, would any body question the sun rise! One can however say when it will rise the sky would be overcast, again does sky remain overcast all time to come.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market