Posts Tagged ‘India’
Monday, November 17th, 2008
Donald Coxe
Donald Coxe, Chief Investment Strategist, BMO Capital Markets has just released his latest instalment of Basic Points, “Capitalism Faces its Greatest Challenge” for November, 2008.
Mr. Coxe is best known for his highly read monthly newsletter, “Basic Points,” as well as his bi-weekly conference calls. His convictions that we are in the midst of the biggest long-term commodities bull market have been severely tested during the most recent months since this past summer, when he launched the Coxe Commodity Strategy Fund, but he remains convinced that the thematic fundamentals are in tact.
Here, we summarize his November 14, 2008 recommendations:
- Its too late to sell losing stocks, and too soon to do more than nibble at bargains. This is a time for investors to be opportunistic about investing, and stocks are available at prices that will look incredibly cheap in a couple years’ time.
- When conditions resume for rebuilding equity positions, buy banks and diversified financial sector stocks.In a global recovery, these should perform well, considering the mostly new management teams.
- Buy commodity oriented stocks. They have been totally oversold beyond all expectations. When there is a global recovery, they will be the winning asset group.
- During the waiting period, start accumulating convertible bonds of quality corporations. A sharp contraction in the near-record yield spread between investment grade companies’ bonds and comparable treasuries, could trigger a major equity rally.
- Buy Emerging Market bonds from China, India, and Brazil, whose economies are fundamentally sound. Avoid Eastern European bonds.
- Business-oriented tech-stocks should also be included when once again accumulating stocks as these will participate in the global recovery. comparatively, consumer-oriented tech stocks may take quite a while.
- Railroad stocks benefit from lower energy costs and the savings may offset the reduction in top-line revenues during the recession. Upon exiting the recession, these should be core investments.
- Gold has been disappointing. Though it has outperformed stocks since the peak in the S&P 500, this has not yet been reason enough to own it. As deflation fears diminish, it will once again regain its lustre.
You can download the complete report here.
Source: Donald Coxe, BMO Capital Markets, Basic Points, “Capitalism Faces its Greatest Challenge,” November 14, 2008
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Tags: Basic Points, BMO, Brazil, China, Commodities, Donald Coxe, Eastern European, Gold, India, Recession, S&P 500
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Tuesday, November 11th, 2008
Is this a buyer’s market or what?
Look at Russia; although most folks aren’t interested (but should be) Russia is not only off by -64.5%, its valuations have compressed to 4.3 times trailing earnings. China stocks are down -64.3% is fetching 14.55 times trailing earnings. India stocks are down -48.1% and priced at 10.7 times. Canada’s TSX 60 is down 29.4% and PE has contracted to 10.9 times earnings.
Oddly, US Stocks, down -36.4% year-to-date, have experienced a slight expansion in P/E from 20.11 times to 20.54 times. Hmmm? Does this suggest that there is more downside in US stocks, given that there has been no compression in valuation? Tunisia, Bahrain, and Switzerland are the only countries out of 84 to join the US in this phenomenon of rising P/E. For the US, it appears that earnings have gone down in lockstep with the stock market, perhaps more than stock prices themselves.
click to enlarge
For those countries whose P/E ratios have gone down the most in this tumultuous year-to-date, high P/E compression suggests relatively strong earnings fundamentals versus very poor technical considerations.
Only three countries, Ghana, Tunisia, and Ecuador, out of 84, have had positive results this year.
Below are the comparisons of China stocks vs. US stocks, and China P/E vs US P/E. China’s market has had a much larger correction than the S&P 500, but look at the valuations. Chinese stocks are now far less expensive than US stocks. China’s earnings are in tact, while its stock market has been liquidated as a result of deleveraging.
Charts: Bespoke Investment Group
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Tags: Canada, China, compression, India, P/E, Russia, Switzerland, TSX 60, US Stocks
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Thursday, October 30th, 2008
Alex Patelis, Head of Global Economics, Merrill Lynch discusses the strength of BRIC (Brazil, Russia, India, China) countries in the midst of the global credit crisis, and how well suited they are to recover strongly.
Patelis points out that close to 90% of global GDP growth will come from emerging markets economies in 2009, and goes one step further saying that he would not be surprised if global growth would come exclusively from emerging markets. They are underlevered, strong domestic economies, where consumption growth is being fuelled by income growth, and strong savings rates. In particular, he favours China and India.
Click image to watch video
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Tags: Brazil, BRICs, China, Credit, Credit Crisis, Economics, Emerging Markets, GDP Growth, India, Markets, Russia, Savings Rate, Video
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Wednesday, September 17th, 2008
September 17, 2008 - The fall in the price of oil during the past two months may not have surprised everyone, but its dramatic nature and swiftness was unexpected. One analyst who got it right was Rob Fraim of Mid-Atlantic Securities. With crude down by almost 40%, a new report on energy has just been published by Rob.
This report is worth perusing for two reasons: (1) Rob has a good long-term track record in this sphere, and (2) a common-sense approach and findings with which I mostly concur. Here are some excerpts from his current report.
Today I will tackle one of the (many) issues with which market participants are grappling. And I will have a sector recommendation that has “hero or a goat” implications for the writer of this missive.
I am cogitating on the disruptions and disasters in the financial sector – and the implications for the broad market. At some point you will hear from me on that subject as this mess unfolds and I feel that I have actionable thoughts to share.
Today though – we talk energy.
I’ll probably get tons of e-mail taking exception to my conclusions and citing multitudinous arcane bits of Economist World data. And I will gladly receive these and will appreciate the input. But that doesn’t have to mean that I will necessarily agree or find reason to change my conclusions.
I am approaching this … and I don’t want to use the word “gut feeling” – given that I believe that I have sound reasons for my opinion on this – but there is a certain amount of “feeling” involved in the process and conclusions. What I see in market action, what I hear from clients, what I sense in the mood of market participants, what I observe in the market’s reaction to events. And with all due respect to economists, the market is often more art than science. So I don my proverbial beret, pick up my figurative brushes and paint, and present my art project. Some fact, some feel, lots of opinion.
What a bleak mood in the energy patch. What a sickening slide. What the h*** happened? What an … opportunity?
Back on June 10, in a piece I wrote entitled “Oil – Whither Goest Thou? ”I gave the opinion that crude oil – then at $136 a barrel was overextended and due for a correction. I said that the $100 or so area looked about right. Of course oil promptly rallied to $147 or whatever it was and I was a stoopie-head for a little while. But since then, well … hey, hey what a genius, huh?
You don’t believe that I actually got something right? OK, you force me to quote/copy/paste. Here is an excerpt from the June 10 flash in which I recommended lightening up on energy stocks:
“Do I think that oil is going to $50? Not a chance? Not $50, not $60, not $80. But I do think that there is a better than average chance that we are going to revisit $100-ish and stabilize there for a while.
“This being the case I am suggesting that reaping some profits and reducing energy positions a bit might be a wise move – at least on a trading basis. Keep a core holding for the long-term, but lighten up. Sell some stuff. Write some covered calls. Hedge a bit. Maintain the core but trade with part of your energy investments. Do something other than get whipsawed.
“… It would not surprise me to see $100-105 oil by the end of the year. That probably equates to gasoline in the $3.50-ish area.”
Of course after that I went on to elaborate brilliantly (oh all right it wasn’t that brilliant, but I did elaborate) on the reasons why I was – at that time, in June – becoming cautious on energy. Recapping (sans the details) the reasons for the selling recommendation were:
a) Demand destruction resulting from changing consumer and transportation industry driving habits and vehicle choices
b) The potential for a rise in the US dollar
c) Slowing demand for China with the Olympics build-out winding down
d) Modest production growth – specifically from Russia
e) Comments from the Saudis saying that there was no justification for the rise in oil prices that had occurred.
Hmm … not too shabby on those points if I do say so myself.
And then I stated the following:
“When the crowd is virtually all leaning in one direction on a sector, you have to take advantage of it at some point. You just have to. Right now everybody says that financials are garbage and energy is gold, and we of course know all of the reasons for both. But just you wait and see… 12 months, 18 months out – when quality banks have risen 30% in price – the analysts will fall in love with them again. And if energy stocks go down 20% the cries to sell will erupt. We have to take the opposite side of the masses sometimes. We. Just. Have. To.”
So as it turns out I was reasonably on target with those comments and the call to reduce energy holdings for a while. (You know what they say about even a blind squirrel finding an acorn every now and then.) Now the burning question on the minds of my readers is this: “What now, Rob?” Well, again, I don’t know how many minds are burning and hearts yearning to hear the answer, but I’ll take a crack anyway.
I don’t expect a huge rally in oil in the near term, but I do believe the correction has just about run its course. Recently when crude approached $100 on the way down, OPEC began the “defending” process by announcing some production cutbacks – hoping to maintain $100 as floor of sorts. But now with the disruptions across all segments of the market, oil prices have moved right through that level – particularly yesterday as panic hit all markets, trading below $92 as I write this. I would not be surprised to see OPEC coming back with more production curtailments.
I am somewhat more bullish on natural gas prices than many analysts I have read, more based on seasonality, but also because of increased focus on natural gas use. (We’ve all seen the Boone Pickens/Aubrey McClendon ads. And we are approaching an election – what politician is going to badmouth natural gas? Heck, Nancy Pelosi said that it isn’t even a fossil fuel. As to the seasonality play, I have had some success through the years in buying natural gas stocks in the fall prior to our entering the heating season for a trade out as spring approaches.
So, I’m kind of reasonably positive on oil itself – the commodity – for the short term. I’m growing more bullish on natural gas – against the opinion of some smart people who feel otherwise.
The key point though is that I am getting significantly more interested in the stocks of the energy companies. Why? Because it doesn’t take $140 oil for the energy companies to make a lot of money. They do very nicely at $100 and the resultant decline in gasoline prices (once we get past this hurricane pricing anomaly) will calm down some of the finger-pointing and windfall profit-espousing by the politicians.
And the prices of the energy company stocks – oil and gas producers, drillers, coal companies, energy trusts, MLPs, alternative energy … the whole bunch of them – have just absolutely plummeted over the last couple of months and it (again I hate to use the word but here I go) feels like a bit of a selling crescendo taking place.
I have made the comment to a number of people the last few days that it seems that we have margin clerks running billion dollar portfolios. We know there was a liquidation of a large energy-focused hedge fund recently. The sector action of late feels/smells/acts like there is more forced selling taking place. And as one astute observer pointed out to me, in addition to the margin clerks, you have to factor in the risk management people at the funds. Forced selling of another sort. On top of that there seem to have been some significant fund redemption requests at hedge funds – particularly by fund-of-fund groups, which are notoriously fickle and prone to pull out.
So now that everything energy-related has been hammered we hear all of the after-the-fact cautionary/bearish thoughts: China doesn’t want any energy anymore … all commodities are going to fall another 50% they say … the economy is going to totally destroy energy demand … we’re all going to bike to work and cook on campfires … we’re going to be awash in cheap oil … blah, blah, yadda, yadda.
We’ve heard it all lately. I’m just not totally buying it. I’m not convinced that the big picture has shifted totally.
I believe that the stocks of energy companies have more than discounted the decline we have seen and then some. 50% declines in stock prices have not been out of the ordinary. I don’t think you have to be a raging, snorting bull on the commodities themselves to believe that the producers of energy products and services will be very nicely profitable – even at today’s lower-than-before prices for oil and gas.
And my very astute friend Jeffrey Saut at Raymond James (who has been spot on about energy and who has become more bullish of late) pointed out something very interesting yesterday. Evidently China – the previous “buyer at the margin,” the force that kept sopping up all supply for so long, which contributed to the big rise in energy before – has been pretty much out of the energy markets for a couple of months. The reason: pollution concerns during the Olympics and the Paralympics (the games for those with disabilities.) Many factories and industries were shut down and idled during that period so as to improve air quality during a time of so many visitors and so much world attention being focused on China. (We know China is image-conscious. Just ask the little girl who was not considered pretty enough to sign the anthem live and was replaced by a more attractive lip-syncher.)
The Paralympics end on September 17, and this means that China may very soon reopen manufacturing and transport – particularly so since there is a massive earthquake rebuilding to be done. And they could well be back in the energy market as buyers almost immediately – like on the 18th. The implications for the energy commodities are positive and a psychology shift in those markets could quickly spill over to the beaten up stocks of the energy companies.
Big picture, let’s not forget a few key energy points:
1. Production in many places is peaking or has peaked. Mexico appears to have peaked and Russia – a recent source of supply and the currently the 2nd largest oil producer – is doing things in a way that is short-term profitable for them, but long-term counterproductive. They are investing very, very little in new exploration (the capital intensive part of the business) – opting instead to try to squeeze out production from existing fields. That’s cheaper production for them in the short run, output has peaked and they are depleting those fields. Ultimately, they stand to be left with played out reserves and few new prospects – since they are skimping horribly on cap-ex and exploration now. It’s like the landlord who spends all the rent and doesn’t maintain the building. Eventually it catches up to him as the structure falls apart. Or the pharmaceutical company that does no R&D even though patents are expiring. Russia is milking the cow but not feeding it.
2. The low-lying fruit in the oil business has been picked. The potential “super giants” being explored and developed now – Brazil’s Carioca/Sugarloaf and the Bakken formation in the US for example, while exciting are also challenging and very expensive to produce on a per barrel basis. Same with the huge Canadian tar sands projects. Tar sand fields have been known of for years, but until oil reached high prices it was economically impractical to extract oil there.
There is still plenty of oil out there, but it is not the cheaply available, “poke a stick in the ground and watch it flow” type of oil. Prices will have to remain high to justify development.
3. While the world got a bit “China and India crazy” there for a while as regards energy consumption, the basic premise remains valid. As these huge populations become more urban and industrialized in nature – with cars, the need for electricity, etc. – there will be growing demand for the foreseeable future. Oh there will be the month-to-month ups and downs of course and everybody will obsess about that. But big picture – demand grows.
4. Alternative energy sources – and look, I’m a big believer that we have to develop new ways to provide power – are a long way from meeting our energy needs. And while they may do so one day, for now those needs must be met from both traditional (fossil) and progressive (alternative) sources. I believe that we need to break the oil addiction via new sources. But that is a process over a generation of time, not an immediate reality. For now, to quote Mr. Pickens, we have to drill, drill, drill.
5. We need more electrical power. Badly. Some experts say as many as 30 new power plants are needed ASAP. We might be oil addicted, but we are electricity junkies of the first magnitude. Computers, multiple TV sets, cell phones, iPods, recessed lighting all over the house, floodlights in the yard, plug-in cars on the way, so many appliances and gadgets in every home that it would have seemed like The Jetsons to a 1960s observer. And what runs power plants? While it might be alternative sources as time goes on, right now and for a good while to come, it’s fuel of the old-style. Natural gas and coal mostly.
6. And speaking of natural gas, I like Pickens’ idea of automobile conversion. We have lots of natural gas produced domestically and it is comparatively clean and certainly readily available. And what does that mean for the future price of natural gas? The same natural gas that runs the power plants being used to run our cars? Not too hard to figure out.
7. If this financial system mess puts pressure on the US dollar that has the obvious effect of causing oil prices to rise, all other things being equal, as it will take more dollars to exchange for one barrel.
By the way, I recently talked to a coal industry contact – a coal broker – who said that although the stock market doesn’t indicate it, the coal business is not bad at all. Pricing is off of the peaks, but still pretty strong and holding. He said that a lot of buyers – utilities in particular – have been playing a waiting game, looking for lower prices. But with winter approaching they don’t have much time left to get their supplies locked in. Some of the buyers have tried to play hardball with him – saying that they would just buy cheaper from someone else. But there isn’t much of “someone else” out their. Demand season is coming up and there’s not a lot of excess.
Additionally, people forget that most coal is sold under long-term contracts, not in the spot market. So the stock market got spooked about falling oil and gas prices and extrapolated that to coal – when in fact these short-term energy market gyrations have less impact on earnings than they do in other energy areas. Heck, lower fuel prices actually kind of help the coal companies in one regard since they are big fuel users for their equipment.
Coal got nutty a few months back and stock prices were way overdone to the upside as hot money chased the relatively small market cap of the whole sector. But after 50% to 60% declines across the board for the coal stocks over the last little bit? Getting very interesting I think.
Oil, coal, natural gas, alternative energy sources, E&P companies, drillers and service companies, energy trusts, MLPs…all have their own particular appeal in a portfolio. I cannot discuss specific companies here, but if you would like to know which stocks I like in which areas, drop me a note or give me a call.
I thought about finishing up this little blurb and sending it out earlier today, but it has been busy – for obvious reasons with the whole Lehman/Bank of America/Merrill Lynch/AIG/Washington Mutual/etc. etc. mess today. And as it turns out it was just as well, since the energy sector (using oil as a proxy) and the market in general have clearly been weak. Some will attribute the $4 drop in crude today to economic weakness and upcoming lower demand. I tend to believe that it is more a function of forced selling, an aversion to risk in the markets, and the old “sell what you can not what you want to” phenomenon. I don’t know exactly where oil bottoms, nor would I be likely to be correct in pronouncing an exact moment for the general market decline.
But I am intrigued enough by energy sector valuations and energy sector prospects to recommend “re-loading” positions starting right now.
As always, I hope that I’m right in the first minutes and days after such a call. But I probably won’t be. However for the weeks and months ahead … I have a good level of confidence in the ultimate success of the idea.
Source: Rob Fraim, Mid-Atlantic Securities, September 16, 2008.
Courtesy: Investment Postcards
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Tags: Banks, Brazil, China, Commodities, Crude Oil, Dollar, Economy, energy, energy sector, energy stocks, Financials, Focus, Gold, India, Investment Postcards, jeffrey saut, Market Cap, Markets, Mexico, Mid-Atlantic, Natural Gas, Oil and Gas, Oil Prices, pickens, Rob Fraim, Russia, The Big Picture, Trading, US Dollar
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Wednesday, September 10th, 2008
Equity markets across the world have been reeling lately, and our trading range charts for indices of 22 countries highlight the carnage. Countries to recently take big hits include Brazil, Canada, South Africa, and of course, Russia. Any time the price moves below the green shading, it is trading more than 2 standard deviations below its 50-day moving average. Below the green shading is considered extreme oversold territory, and prices don’t typically stay that oversold for extended periods of time.
The one positive chart might be India’s Sensex index that has moved back above its 50-day moving average recently and formed a short-term uptrend.
Courtesy: Bespoke Investment Group
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Tags: Brazil, Canada, Chart, China, France, Germany, India, International, Italy, Markets, Mexico, Russia, Sensex, South Africa, Spain, Sweden, Taiwan, Trading, UK
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Monday, September 8th, 2008
This past year’s declines in local and international markets have had their beginnings at different points in time. This chart below, produced by the fine folks at Bespoke, pays no attention to their timing. Its not a pretty picture, but the perspective sure is useful. Often, we are subjected to guided reporting, where issuers or promoters use numbers and moving averages that “soften” the real numbers.
Canada comes out on top!
Here below is what most investors really want to know; How did they perform from peak until now, irrespective of timing?
After declining 4.25% on Wednesday, 3.94% yesterday, and 3.75% today, Russia’s RTS index is now 41.19% below its 52-week high. These declines put it second to last behind China when looking at recent equity market returns for 22 major countries. As shown, China has fallen 64% from its 52-week high last October! The declines recently in global equity markets have really been astounding. Japan, Spain, Brazil, India, Italy, South Korea, Singapore, Sweden, Taiwan, and Hong Kong all join China and Russia with equity markets off at least 30% from their 52-week highs. North American countries rank 1,2,3 as far as countries holding up the best. International exposure has never hurt so bad.
Courtesy: Bespoke Investment Group
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Tags: Brazil, Canada, Chart, China, EFU, Hong Kong, India, International, Italy, Japan, Markets, Miscellaneous, Russia, Singapore, South Korea, Spain, Sweden, Taiwan
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Monday, August 25th, 2008
August 25, 2008 - Courtesy: Bespoke Investment Group - The MSCI World index, which measures global equity market performance, is now up just 68% (not total return) since its bottom on March 12, 2003. After analyzing the performance of various country indices since then, we found some interesting results.
Since the 3/12/03 global market bottom, Brazil, India and Mexico all have total returns of more than 400%, with Brazil leading the way at 427%. Germany has been the best performing Western European country with a total return of 187%. At the bottom of the barrel is Japan, with a gain of 68%, but unfortunately the US ranks second to last at 77%. So while much has been made of how well the US has held up during this downturn, it still lags behind pretty much everyone else when looking at the last bull and the current bear. The most surprising performance number comes from China. After its bubble and bust from 2005 to present, China’s performance is pretty much right inline with the US at 79%. With so much focus on China’s growth this decade, one would think its equity markets would be at the top of the performance ladder with other BRIC countries.
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Tags: Brazil, BRICs, China, Euro, Focus, Germany, India, Japan, Markets, Mexico
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Monday, August 11th, 2008
Here are Bespoke’s unbeatable trading range charts for 22 key equity markets around the world. The light blue shading represents one standard deviation above and below each index’s 50-day moving average. The green shading represents between one and two standard deviations below the 50-day, and vice versa for the red shading. Most countries continue to trade into oversold territory, but some have been getting hit extra hard while others have rallied off of their lows. Some countries that failed to bounce off the July lows include Brazil, China, Hong Kong, Malaysia, Mexico, Russia and South Africa. On the other hand, India, most of Europe, and the US have come off their lows and are testing their 50-day moving averages.
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Tags: Brazil, Chart, China, Euro, Hong Kong, India, Malaysia, Markets, Mexico, Miscellaneous, Russia, South Africa, Trading
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Monday, August 4th, 2008
The other night TVOntario re-aired the incredible documentary, Edward Burtynsky’s Manufactured Landscapes, the story behind the landmark series of photographs taken by Burtynsky, displaying both the accomplishments and by-products of industrialization and globalization in China and India. If you missed it on TV, here is your chance to see this film, in its entirety. It is fascinating.
If the Google video doesn’t load, you may link to it here:
Edward Burtynsky: Manufactured Landscapes (Google Video)
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Tags: China, globalization, India, Video
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Tuesday, July 1st, 2008
July 1, 2008 - The first half of this year has been chaotic and confusing for investors given the Subprime fiasco and rapid deterioration of fundamentals in the Banking and Finance sectors, the secular selloff in stocks globally, recession in the US, and soaring oil and commodity prices.
US Global Investors, an American mutual fund company, founded by Toronto native, Frank Holmes, interviews Dr. Marc Faber, author of the Gloom, Boom, and Doom Report, for 1:15 hrs in this highly informative webcast (courtesy of Investment Postcards) aptly titled, “Where is the Boom, Gloom and Doom?”
Please click here to listen to the webcast.
Source: US Global Investors, June 27, 2008.
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Tags: BRICs, China, Commodities, Emerging Markets, energy, Frank Holmes, GDP Growth, globalization, GloomBoomDoom, India, Infrastructure, Marc Faber, urbanization
Posted in Agriculture, BRIC, Brazil, China, Commodities, Credit Markets, Eastern Europe, Emerging Markets, Financials, India, Markets, energy | No Comments »
Tuesday, June 24th, 2008
June 24, 2008 - Courtesy of Bespoke Investment Group - The recent selloff in equities has really spared no one. As shown in our trading range charts below of 22 major country indices, the trend has been down across the board in recent weeks. Even Brazil, Mexico and Russia, who had all held up relatively well this year, have sold off quite a bit. Currently, 19 of the 22 countries are trading in oversold territory (Canada, Japan and Russia are neutral). European countries like France, Germany and Italy have really taken it on the chin, while China and India remain the biggest losers in 2008. After forming short-term uptrends off of the March lows, global equity markets have now lost most of their gains and are looking to move back into downtrends.
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Tags: Australia, Bolsa, Brazil, CAC 40, Canada, China, DAX, France, FTSE, Germany, Hong Kong, HSI, IBEX, India, International, Italy, Japan, KLSE, KOSPI, Kuala Lumpur, Malaysia, Markets, Mexico, MIB 30, Nikkei 225, OMX, Russia, Russian Trading System, Sensex, Shanghai Composite, Singapore, SMI, South Africa, South Korea, Spain, Straits Times, Sweden, Switzerland, Taiwan, Top 40, TWSE, UK
Posted in Brazil, China, Emerging Markets, India, International Markets, Latin America, Markets, Russia, US Stocks | No Comments »
Saturday, May 31st, 2008
In his recent speech at Yale Class Day, Tony Blair had the following to share with students. The speech is well worth reading on many fronts, but if you’re an investor, then you’ll be interested in knowing what one of the great leaders of the free world has to say about what this century holds for both the West and the East.
For the first time in many centuries, power is moving East. China and India each have populations roughly double those of America and Europe combined.
In the next two decades, these two countries together will undergo industrialisation four times the size of the USA’s and at five times the speed.
We must be mindful that as these ancient civilisations become somehow younger and more vibrant, our young civilisation does not grow old. Most of all we should know that in this new world, we must clear a path to partnership, not stand off against each other, competing for power.
The complete speech can be read here:
The Office of Tony Blair - Yale Class Day Speech
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Tags: China, India, Markets, philosophy, tony blair, wisdom, Yale Class Day
Posted in BRIC, Brazil, China, Economy, Emerging Markets, Geo-political, India, Infrastructure, Markets | No Comments »
Wednesday, April 30th, 2008
April 30, 2008 - CIBC World Markets Chief Strategist, Jeff Rubin, says that Oil will eventually reach $150/barrel in 2010 and over $200/barrel by 2012. He cites among the leading reasons, the advent of cheap cars from India and China, or rather Tatas and Cherys, that will enable millions of middle class Asians who couldn’t previously afford a car, to do so, Take these developments and place them agaisnt the backdrop of peak oil and a decline in oil exports from key suppliers, Saudi Arabia, Russia and Kuwait, and we are in the midst of a long term supply/demand imbalance. Here are couple of excerpts:
Whether we are already at the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity.
Our latest review of probable supply suggests oil production will hardly grow at all, with average daily production between now and 2012 rising by barely more than a million barrels per day (see pages 4-7). Despite the recent record jump in oil prices, the outlook suggests that oil prices will continue to rise steadily over the next five years, almost doubling from current levels.
While global oil supply is not growing, global gasoline demand is, and will continue to grow as cheap cars from Tata and Chery dramatically cut barriers to car ownership in the developing world. Millions of new households will suddenly have straws to start sucking at the world’s rapidly shrinking oil reserves.
Car purchases in Russia, for example, are exploding as US sales stagnate (Chart 2), while in India the advent of the Tata Nano, a car that will sell for as little as US$2,500 will allow millions of households in the developing world to own automobiles when they otherwise could not. It is the savings necessary to buy a car, not the price of gasoline that poses the greatest obstacle to fuel demand growth in those countries. But between rapidly rising domestic incomes and rapidly falling car prices, that obstacle is becoming more and more surmountable.
To read the complete report, click here:
StrategEcon: The Age of Scarcity, CIBC World Markets, April 24, 2008
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Tags: Asia, Chery, CIBC World Markets, Economy, energy, India, Jeff Rubin, Middle Class, Russia, Scarcity, Tata
Posted in Agriculture, Banks, Brazil, CPI, China, Commodities, Credit Markets, Crude Oil, Economy, Emerging Markets, Financials, Geo-political, Gold, India, International Markets, Latin America, Oil & Gas, Russia, energy | No Comments »
Thursday, March 27th, 2008
Mar. 27, 2008 - In November 2008, Goldman Sachs’ Chief Global Strategist, Jim O’Neill, and associates, who coined the “BRICs” term, have followed up with a complete updated report on the fundamentals for each of Brazil, Russia, India and China. The report goes on to cover the markets of the Next 11 frontier markets. Click the following link to download the complete report, BRICs and Beyond (Goldman Sachs).
Here are some excerpts:
India’s rising growth potential
…We argue that there has been a structural increase in India’s potential growth rate since 2003 on the back of high productivity growth. In this paper, we explain why productivity (by which we mean total factor productivity, or the manner in which all inputs are combined to achieve more output) has surged, and why we think this is likely to continue over the next decade.
… Industry is increasingly becoming an important growth driver, contrary to conventional wisdom that growth in India is only services-led. A quarter of services are directly linked to industry, in sectors such as trade, transport, electricity and construction.
…In India, labour is nearly four times more productive in industry and six times more productive in services than in agriculture, where there is a surplus of labour. Economic theory tells us that as labour moves from low-productivity sectors (such as agriculture) to high-productivity sectors (such as industry or services), overall output must improve.
…In absolute terms India will remain a low-income country for several decades, with per capita incomes well below its BRIC peers. But if it can fulfil its growth potential, it can become a motor for the world economy and a key contributor to generating spending growth.
…India’s imminent urbanisation process has implications for demand for housing, urban infrastructure, location of retail and demand for consumer durables. We expect the coming onstream of major highways (especially the Golden Quadrilateral) to drive growth in the transportation sector, spur demand for vehicles, increase real estate values along the corridor and potentially boost construction of suburban homes as people escape congested cities. The SEZs hold out substantial investment opportunities in all spheres of activity.
Russia: A smooth political transition
…There are signs that investment has begun to accelerate over the last 12 months, with capital expenditures up over 21%yoy in 2007H1. Private investment growth may suffer a brief interruption due to the recent troubles in the local credit markets. But public investment may make up some of the shortfall: after repairing its balance sheet and accumulating a substantial ‘rainy-day’ fund, the government has announced ambitious plans to invest over $1-trillion over the next ten years in roads, rail, ports, pipelines and other infrastructure projects.
…The BRICs dream is not even a best case scenario in fact, Russia’s recent performance has been considerably better than projected in the original BRICs papers. But it does assume that the necessary conditions for long-run growth are in place, conditions that we have tried to capture in our Growth Environment Scores (GES). Russia scores well above the emerging market mean on education, government deficit and external debt; marginally above average on openness and life expectancy; lower but still above average on technology (phones, PCs and internet access per capita); and somewhat below average on inflation, which is now in the high single digits.
…Our equity strategists’ favourite themes are the consumer, telecoms and retail sectors, as well as steel and pipe companies, and other names poised to benefit from the state’s infrastructure spending. They also see opportunities in domestic restructuring stories, such as power generation and gas. With significant segments of the economy still private, we see considerable opportunities in direct investment.
China: Will China grow old before getting rich?
…China’s unrivalled economic growth over the past quarter-century has surpassed all records and created a new standard in the history of economic development. With an average annual real GDP growth rate of 9.6% from 1978 to 2004, China’s pace of growth is faster than that achieved by any East Asian economy during their fastest-growing periods.
China’s investment strength is sustainable
…One of the most widely-held misconceptions about China is that the economy contains an over-investment time-bomb, which will soon result in a sharp correction in both investment and GDP growth, resulting in rising non-performing loans (NPLs) and in deflation. The reasoning behind this theory is that fixed asset investment (FAI) is growing at above 20% year on year, while the investment-to-GDP ratio is already above 45% (higher than the levels reached by Asian economies before the 1997 crisis). Furthermore, this investment boom is financed by misallocated bank credits and generates few returns.
Although this is a popular view, we believe it is wrong for two reasons. First, the conclusion is based on macro data that is deeply flawed, leading to a substantial overstatement of the investment-to-GDP ratio. Second, a high investment-to-GDP ratio is consistent with China’s rapid growth. The fact that the return on capital is high and generally has been climbing over the past decade supports our thesis that Chinas investment strength is sustainable.
The “B” in BRICs: Unlocking Brazil’s growth potential
We remain confident about Brazil’s growth potential, at least in terms of what we have envisaged in our BRICs studies. The main reason for Brazil’s underperformance is that, until now, the government had been in the process of implementing a stabilisation programme, with a view to achieving macroeconomic stability. This is a key precondition for growth. Thanks to these adjustment efforts, macroeconomic conditions are more favourable now than they have been for decades. The large balance of payments surpluses have been used to prepay external debt and accumulate reserves, while a credible central bank (BACEN) has reduced inflation to 3.0% in 2006.
We believe that the Lula II administration will sustain sound macroeconomic policies and make some progress on structural reforms. Stability should allow real GDP growth rates to move gradually towards Brazil’s potential rate of about 3.5%, which is near our BRICs potential growth rate of 3.7%.
We also believe that Brazil could grow much faster, perhaps at a secular growth rate of about 5.0%. For this to happen, the government will have to tackle four difficult structural problems:
· Brazil saves and invests too little. To address this issue, the government will have to deepen and improve the quality of the fiscal adjustment.
· The economy should be opened to trade.
· The government must improve the overall quality of education.
· The government should implement structural reforms to improve institutions, with a view to increasing total factor productivity.
We do not believe that the Lula II administration and Congress will be ambitious enough to implement this politically difficult agenda. Therefore, while Brazil has the potential to grow at or above 5.0%, this is unlikely to happen during the next four years.
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Tags: BRICs, China, Emerging Markets, India, Markets, Russia
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Wednesday, March 26th, 2008
Courtesy: PriceWaterhouseCoopers
March 25 /CNW/ - Long-term growth prospects for China, India and other so-called ‘E7′ economies (Brazil, Mexico, Russia, Indonesia and Turkey) remain upbeat. However according to a new report from PricewaterhouseCoopers (PwC) an additional 13 emerging economies also have the potential to grow significantly faster than the established OECD countries. This rapid growth creates both challenges and opportunities for Canada.
The report, The World in 2050: Beyond the BRICs: a broader look at emerging market growth prospects, suggests that China could overtake the US by 2025 to become the world’s largest economy and will continue to grow to 130% of the size of the US economy by 2050. The Indian economy could grow to almost 90% of the size of the US economy by 2050. Brazil seems likely to overtake Japan by 2050 to move into fourth place, while Russia, Mexico and Indonesia all have the growth potential to surpass the economies of Germany or the UK by the middle of this century. The most impressive economic growth could be realized by Vietnam, with a potential growth rate of almost 10% per annum in real dollar terms. This rapid growth could propel the Vietnamese economy to around 70% of the size of the UK economy by 2050.
Interestingly, Nigeria has the long-term potential to overtake South Africa as the largest African economy by 2050. This assumes that non-oil based growth policies implemented in recent years are sustained in the long-run, something that may prove to be a challenge.
“As the economies of emerging nations grow, Canada’s share of the global economy is projected to diminish,” says Edward Mansfield, an associate partner with PwC’s statistics and economics group. “To maintain our competitive position, Canadian businesses will have to differentiate through innovation and technological progress. This will req
