HSBC is one of the strongest franchises in Asia and despite its global mandate of cutting 30,000 jobs in line with saving $3.5 bln and getting Cost income ratios back to below 50%, its staff in Asia has been pretty optimistic and straightforward in its plans to grow in the region. HSBC therefore is probably recruiting nearly 15000 people in Asia this year As a close observer and follower of the bank I remain for example among probable candidates the bank and very few of its competitors can choose from while recruiting in Asia. Deutsche Bank in singapore and StanC and Citi in India and China remain other regional Top employers. DB and these others even recruit continuously for their offices in london New York and /or elsewhere in Asia from India not just internally but thur external hiring programs.

Despite the continuing strengths of Asian markets where a slow India and China still guarantee a near 8% growth for the region, many banks like StanChart , Citi and HSBC have found their own challenges with their 100 branch networks in India and even smaller ones in China. While new Chinese Yuan business for mainland companies and international investors has grown business in Hongkong nad somewhatin maniland China itself, Indian business for these banks has started in a renewed manner just last month with new focus on quality unsecured loan portfolios and continuing cash flow from Corporate Investment Banking businesses.

HSBC's competition comes from entrenched players in its strong suit of Investment Banking. StanChart for example is part of almost ever outgoing FDI business from India including the two latest purchases by GVK GVK is probably considering buying more of Bangalore Airport from Siemens for control of BIAL and is also getting ready to spend nearly Rs 100 bln on a purchase of Australian Hancock mines for assured coal supply to its power projects under GVK PIL However that is another tale to tell. 

HSBC also has achieved breakeven in its 50 branch retail operation and the investment in quality and service may yet return higher value towrds its 2013 goal of earning $1 bln from the region in profits. however, its 6000 employees may yet be on the chopping block and/or the bank may find it difficult to assimilate the army of private bankers and retail employees with its acquisition of ABN AMRO/RBS in India completing this year. 

The competition in india in retail is varied and diversified. For example Religare may lead in retail broking despite HSBC's big ticket acquisitions, Credit Suisse and Barclays still aggressively hiring in Research and investment Banking despite having been showing optimism on their emerging markets desk fror over 3 years and not cheiving probably as much as they wanted. HDFC Bank leads in Car loans from another era but the flight to quality may bring a new leader. ICICI Bank may no longer lead in retail high value mortgages but with a new Fixed / floating hybrid product it may yet walk a mile ahead of its competition in sales and as usual its skimping on spending on the service value chain for the customer may work as tactical strategy till quality issues sink it again. 

Citi is going to be starting at a disadvantage however and thus i doubt if Stuart Davies would be in a hurry t cut his well established team as the Indian market again readies itself for a battle in retail deposits and lending, this time for the pie that is profit and not just Sales. 

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The new licences for banks may finally see the light of day as the paper for new licenses has completed one year in circulation last week. New regulationso on which banks have ressted commenting include:

1. Limitation on voting stock for non banking promoters

2. Limitation on FDI to 49% for Banks till they complete 10 years of operation suggested by RBI

3. Initial Capital, we have pushed for Rs 2500 crores but likely more than INR 5 bln at INR 10 bln or more 

4. Takeovers may have  be cleared as valid under the new Takeover code

5. Industrial cross holdings and sale of dominan holdings may be additionally regulated by changes to the Banking Regulation Act first 

A good wait for Reliance, M&M and LIC Housing 

Again though, these regulations will be draft and according to ET, no. 5 above is a strong reason nothing would happen now as other strictures from RBI have not moved private owners of banks in the South

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India's Farming and livestock outputs leave much to be desired, still Cargill's long term presence in the sector in India is a good sign if it lasts. They have added Provimi to theoir portfolio as Dealcurry reports

Cargill has bought Dutch animal nutrition company – Provimi for $2.1 Bn from the PE firm – Permira.  Both Cargill and Provimi are present in the Indian market through their subsidiaries. It had sales of $2.28 Bn in 2010 and EBITDA of $123 Mn for the first half of this year.

Permira, based in London, bought Provimi in 2007 from PE firms CVC Capital Partners Ltd. and PAI Partners.   

Provimi had entered into the Indian Market during 1999 in alliance with Tetragon Chemie Private Limited. Provimi has five manufacturing units in India. The productline comprises of premixes, feed supplements and animal healthcare products for poultry and cattle.

Cargill India sells aquaculture and cattle feeds in AP, Orissa, West Bengal, Tamil Nadu, Haryana and Punjab.

This acquisition will help Cargill expand in the areas where Provimi operates.

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Seeding Regulatory confusion with "Qualified Foreign Investors"

Quoted from News based on SEBI releases

SEBI has allowed qualified foreign investors (QFIs) to buy up to $10 Bn in domestic equity schemes and an additional $3 bn in debt funds that invest in corporate bonds of infrastructure companies. However, SEBI notified that fund houses can accept subscriptions from QFIs only up to $8 bn in equities and $2.5 bn in debt schemes. The rest ($2 bn in equity and $0.5 bn in debt) would be auctioned by SEBI through bidding.

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Those of you who slept through Independence Day weekend should go oevr the "Foreign Banks in India: Looking cheerful again" profile for banks in August . Also RBI's data on Credit Cards outstanding was released on the weekend and we updated thus:

(HT)Spending through credit cards rose by 30% year-on-year to Rs22,128 crore during the April-June quarter of 2011-12 against Rs16,948 crore last year, according to data released by the Reserve Bank of India (RBI). Spending through debit or ATM cards, increased by 45% year-on-year to Rs11,691  crore during the April-June quarter compared to Rs8,065 crore last year.

Though Spending is up to $5.5 bln in the quarter the $22 bln annual rate is a mere 1-1.5% of the Indian GDP depending on what estimate of GDP you work with, the growth of 20% inline with GDP growth of 9% till March 2011

Number of outstanding cards was down, banks announcing aggressive strategies in August only in terms of HDFC Bank adding new customers to 25% of the mix up from 10% last year and Axis growing to more than half a million cards (690k) depending on existing bank customers) Citi is going to be making a fresh start in retail cards (unsecured loans) and HSBC may also start slowly yet only in Personal Loans and select card segments HSBC retail' slosses in India have been surprising wesp with the PIL product. Meanwhile debit cards have grown to 25.40 million or approximately 1/3rd of the mobile phone enabled population.

The growth has been 2.4 mln debit cards in May and June alone

Other tidbits:

Alongwith affordable housing segments in the next budget, banks have been extending Swabhimaan (in the public sector banks) initiative largely thru mobile banking to reach larger rural populaions and that will also be a payment interface /mechanism for the users sooner than later

Q3 will probably be an important spend season on both Credit and Debit Cards, Debit Cards though in numbers 10X the business are reponsible for only 1/3 rd of the payments hru the Card mechanisms at POS terminals and online. Cheque clearing systems in India deliver Rs 104 tln in transactions annually wih April 2011 posting Rs 8.66 Tln by cheques, 17% thru the Mumbai region and another 15% thru Delhi Online Transaction systems of NEFT, NECS, RECS (Ahd, Blr, Kol, Chn) and others have become equal in weight of late

Deposits oas of June 2011 grew 18% yeasr on year in Indian Commercial Banks to INR 2.8 Tln while Advances grew at nearly 20% despie rate hikes

More Data is being sdought for this report/analysis

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ET ascribes it directly to the new buoyancy in tax collections. There may have been other reasons too, like removing India's widespread economic backwardness outside the urban areas becoming imperative after the deficiencies were felt holding India back in the last few years. The fact is that social sector spending is going up in the 12th plan, starting from 2012-13 to FY2018. As a percent of GDP it will move from 6.6% this year to 8.1% of GDP as an average over the 5 plan years. 

India's GDP growth for the plan period has been cut to 8.5% from 9.5% in the proposed plan but Tax revenues as percent of GDP which were just 7.4% this current year (FY2011-12) will move to an average of 8.1% for the period till March 2018 to a peak of 8.9% in 2017-18. Plan execution will be monitored more publicly this time, with tracking online showing what allocations have been done and what are yet to be done, also tracking execution. 

Even with the new GDP growth estimates of 7.2% this year and 8% in FY2013 the growing tax revenues will be part of the plan and thus the spending. Of course long time observers of the Indian economy may not put that much faith by the fiscal deficit targets planned to go down to 3% esp as these spending imperatives apart from the $2.5 tln needed for Infrastructure negate any likelihood of pla spending being reduced. The DTC and GST regimes will be in place by the end of this fiscal year and thus the buoyancy is already fctored in. india has been growing its tax pie throughout the eleventh plan, including the dull years in 2007 and now FY2012 for which Q1 has reported 17% growth in Advance taxes tuill June

In the revised plan documents, the non plan spending over the next 5 years has been reduced to 7.4% by FY2017 from 9% in the first year i.e. FY2013

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Investors are fickle. After a $5 mln PAT performance to welcome the new Chairman Prateek Chaudhuri, SBI has actually grown to $395 mln quarter on quarter in Net Profits. Cnsolidated Net profits have even grown to more than $625 mln but the earnings report was pushed to the weekend and most reports and Friday trading did not seem to be expecting this much profit, concentratin gon the year on year fall from INR 33 bln to INR25 bln this year this quarter. The 46% drop in focus is a misnomer as Pension Liabilities and Loan Loss provisions policy has already been updated in Q4 2011 and with INR7.5 bln in provisions just for pension liabilities to continue till December 2011, the rest is easily expressed by the Loan Loss provisions SBI never made in the earlier years before the accepting of the modified RBI policy in Q4

Of note however is the increase in bad loans, Gross NPAs rising to 3.52% for the bank a full point ahead of ICICI Bank which is also 33% in Assets with SBI holding a book of INR 7.9 tln in advances, a GROWTH OF INR 1.6 TLN or 70% of ICICI Bank's Advances. A Bloomberg (Bloom'bg) list puts the public sector behemoth at #69 in the World's biggest lenders and probably in the Top 10 in Corporate Loans gone bad. Since Calendar 2010 SBI has stepped up its rates 11 times, using its NIM cushion to proportionately reward short term deposits in retail and catch up with Money market yields. Industry wide 45 day deposits are 33% lower yielding at near 4% while the MSR in the inter bank market has moved to 9.25%

Industry expected banks to put up more fee income on the table to catch up with revenue losses but SBI stuck to the tried and tested with a 35% jump in revenues to INR390 bln Net Income for the Quarter nearly $10 bln for a signle quarter from INR 300 bln in the year ago quarter. Toplines at most banks dropped or grew modestly. RBI has agreed publicl also that the high inerest rate scenario engenders a disproportionately higher risk of bad loans but the interest rate hikes have moe to come as commodities have not settled down yet to being down the inflation to a stable rate

Despite the low Tier I core Capital at 7.6%, the bank has not been able to set up a proposal to encourage the GOI to invest upto its mandated 55% in a rights issue or the bank.. Meanwhile the bank is raising International Capital. SBI's NIM shot up to 3.89% in Domestic Advances and 3.62% overall from a 3.33% Domestic and 3.16% overall in the preceding March quarter ( almost 106 bps above ICICI Bank) Interest Income on Advances in fact grew 36% but investors are likely to be slow to heed the same on Monday as markets continue their xit spiral, Portfolio investment exiting the country as opportunities run out in the widely acknowledged fairly priced/overvalued market in Asia The growth in Advances was a health 18.73% just above the Industry growth rate of 18% while the PLR increases of 185 bps year on year made up for the extraordinary rise. However QOQ incrreases interest Income also up 12% with Advances growing from March by 2.x% NII is up more than 20% sequentially

Staff xpenses remain the most part of Operating expense increases as a Wage revision is charged continually. The counter cyclical provisions esp for contingencies ( black swan events) are another Rs 550 crores or INR 5.5 bln. Advances to Large Corporates stand at INR 1.15 tln for the bank and the Retail book is INR 1.65 tln SME, Agri and International Advances are a Trillion each too. The Banks NII is up to INR 97 bln or $2,5 bln up from INR 81 bln in the March quarter nearly 25% QoQ from $2 bln 

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Yes, we said nop one should pick this market and hope for a bull run at these levels and well it is still below 5200 but the June IIPs first and foremost are certainly a case for rejoicing. The IIP estimated at 5.5% after a 10 year low in May at the same rate, shot up to 10% in manufacuring with the weights in Mining and Electricity holding the IIP at an overall 8.8%.

China's IIP at its lowest stayed above 7% as Q2 GDP had come in at 9.5%. However the slowdown is much a projection of July and now August and the slowdown in India may be fiscally more a disaster as China runs a surplus on its year-to-date Budget spening. India has drawn 40% of its expenditure budget for the year but has mainted more than the 18% buoyancy in Tax revenues to maintain a fiscal deficit within the target range for a 4.6% year. China has a budget surplus of CNY 1.93 Tln for the same period. China is also switching monetary policy in the scond half citing loosening of controls on agri and small business lending as the way to blank out the lag effects of a tight monetary policy Staying on China, affordable housing also is one of the thrust areas

The question of China crops up in comparison of the trade as well as India's July trade deficit again crossed from $7.55 bln in June to $10 bln. India maintains a great $360 bln run rate for exports at the end of July against a target of $292 bln but a fiscal deficit of $100 bln and more could queer the pitch even as fiscal spending gets tighter from here, though without challenges from tax revenues as Results season continues to deliver much more than expectations and retail consumption is strong without the inflation having exited. Commodities trundling down at a fast pace even as the Dollar adjusts to a new rebalancing means that your and RBI's investment in Gold is going to earn it a handsome dividendwhile Oil and basic goods inflation finally starts to come down in the August data in a week or so, 

India's debt to GDP ratio now another piece of dataeveryone wants is still less than 80% and the External debt(ET) $320 bln is still more or less covered by our Forex reserves itself

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Forced eating is also an Indian predilection. After families create wilful aggression in their children thru making them eat at all times of inconvenience ( fropm the child's point of view, definitely..)  thus the culture of everyone trying to force buy picks on the market and push that index above a technical level and just ensnare a willing investor who will then be bankrupted without any fault of his. With no fundamental basis, the refusal of the indices tom move down is at best a shotgun response to analyst broker calls for positive investment , the FI brokers leading the forced sale this time. As usual it will be a distress auction sale before anyone learns better.

Anyway, the aphorism is far from a professional opinion. As a professional I would just say 4700 is a good level for someone to fairly discover good value and till then the 2-3 mid cap stocks like Page Industries and Suven Life are good enough as they have a good business model, a great market not going to collapse in front of them and not dependent on going away subsidies or other regulation an dpublic support like Energy. the stock market is not the right forum to fight for India''s rights. It is a moneyed investment based on a value proposition inherent in the price. Real estate is a big no  no, but the fundamentals of India's economy are just getting fine with the commodities starting to unwind down. It has not already happened and our inflation is still 9.5%So, stay aware that your buys are for a long term and there is a lot of uncertyainty that can come in large chunks into the market at any time. Not a good time to listen to your broker advising a buy. Try the broker telling you don't do any business  with him right now. :D

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The mint piece in the morning was thought provoking reading. The market response much on expected lines. Last time in August 2008 we saw $15 bln of portfolio flows leaving, this year only $2 bln is the net addition till june,. However foreign fund managers would have to perforce liquidate over the next few weeks as they cannot stay in emerging markets with so much pressure on the US markets for most investors and speculators know better than to start to early

Goldman Sachs has already upgraded India citing weakness in Oil and good performance etc

As advised in a piece at http://advantages.us Global markets' correlation is upward of 70% this time across Turkey, Germany, india, China, The Dow and even the MIB that can affect the S&P Performance and that of the Sensex thence. Be careful.

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Though Bangalore remains buoyant and probably by extension Calcutta and Hyderabad, I would posit that Metropolitan megatrons of Delhi and Bombay have quit on Foreign bank custom esp after the derivatives market wound down and limits on Swaps created business in Credit warned by RBI in June. Of course at both StanC and HSBC CIB business has grown Even Indian Banks have pointed to recent growth (HDFC Bank) coming from Tier II and Tier II towns ( which woul dbe towns of 1- 5 lacs pop) 

Stanchart produces $17 mln lower CB results

The India business of SCB and that of HSBC talked of static consumer banking income and/or loan book sizes. Asia's GBP 6.8 bln ($10 bln) EBITDA for HSBC and $3.1 bln for StanC boasted of almost 80% Hongkong contributions in the profits for HSBC and the largest 25% for StanC with India coming in at $451mln (Op Profits) for HSBC and $378 mln for StanC 

India business will grow to $1 bln in Op Profits for HSBC by 2013 Hongkong business for SCB matched the groups overall growth in NII as China renminbi business grew on the islands of Hongkong for both the banks  with the India  CEO for HSBC Stuart Davis cautious in lending over growing NPAs 

SCB's deposits grew by 9% for the 6 months ended June 2010 Operating exepnses  in CB grew to $174 mln at a faster clip with continuing investments by the bank Op profit from India at $44 mln speaks volumes about the bank's challenges in their largest market so far

Stanchart doubles Offshore WB, HSBC builds fee income worth $375mln

HSBC relied entirely on the CIB business to produce profits, wth $393 mln from Investment Banking and Loan income doubled to $78 mln as the business staying with the bank would be amenable to cross product business and insensitive to rate increases, being a part of the corporate's business to banks and not the relationship as lead bank still in many cases. The Advances for HSBC are a mere $4.2 bln on its total loan book of $6.1 bln or INR 25000 Crores 

StanC doubled its offshore income from Wholesale Banking to $185 mln but operating income (Topline is static for H1 2011 at$760 mln over $770 mln in the second half of 2010 WB assets grew in India by 10% and India remains an important market to break open for both the Emerging markets dominant banks

Hiring

Even with 15000 new jobs in Asia,  India is unlikely to be a big growth market for HSBC, SCB stepping in to wean away the common DNA as HSBC drags on consolidating RBS business and looks to India and China out of their Top 5 businesses. all in Emerging MArkets like Mexico, Singapore and Malaysia

StanC's India costs have been growing due to the extra hiring planned for the India business where HSBC will be managing 300 new ABN AMRO staffers in Bangalore alone StanC also delivered a much healthier cost income ratio globally 

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Though the day had been very busy with the debt deal and HSBC and other results, it was wierd to hear these otherwise likely connected new items I am still not full in with. Firstly, India is likely to lose most of its portfolio inflow runrate from 2010 to $14 bln according to the EAC report by Sh C Rangarajan and the other apparently, in the middle of a decent credit growth season that Indian and Brazilian CDs has been rising after the debt deal fell through. Seems like a steep one coming tomorrow. Watch out!

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Exports jumped again to $29.2 bln for June and Year to date numbers for Fy2012 inched to $100 bln for India as the trade deficit for June came to as low as $7.66 bln despite Oil imports of over $10.18 bln

The headline for this series remians unchanged after India's deficit jumped and RBI bumped up interest rates by 100 bps in the last two actions in this fiscal.   

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Even as PMI nos drifted to a 20-year low in June, SIAM is ready for a downward forecast as RBI rate hikes scare manufacurers into pre-emptive action to manage inventories. The retail consumption is not ready to slow down that much though year on year Auto sales are nearly down 20% for Maruti Suzuki. Maruti still managed to increase Sales month on month from 66000 units to 75000 units in July 2011, despite 11000 lower Swift sales from a limited rollout of the new model and 6000 lower sales of Dzire attribued to shifting of production plans to the old plant in Gurgaon. 

Based on reports from TVS, it seems likely that Hero and Bajaj will report higher sales in July as well as consmption remains strong in high volume categories. Based on 20% growth in 2 & 3 wheelers, the market is nto all tha t bad even as interest rates have already risen by 300% in retail and the new increases will also be passed on 3 year and longer tenure loans

June Exports for India grew nearly 50% to $29.2 bln beyond targeted growth to $300 bln for the year, Oil imports of $10 oodd bln though caused the deficit to rise just imperceptibly to $7.66 bln on $36.87 bln in imports

Ford and VW have been growing on new models in he global car companies and Hyundai fairly stable at 50000 units in the same month last year. Still4 wheeler sales for the country will not cross 150,000 for July

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