Monday, November 09, 2009

Barclays, Bank of America, JPMorgan Vie for India Stock Sales

Bloomberg reports on government run PSU's being put on the block. MBA students should look to India for jobs as these companies should keep hiring for a while. This stock sale is going to suck the liquidity from the system, similar to what the Reliance Power IPO did in Jan 2008. Now unless you are an institutional investor, chances on getting onto the IPO bandwagon are almost zero, unless you open gazilion demat accounts under ficticious names as done in Gujarat and Rajasthan. Soon we will see real estate shrills pumping the Mumbai market that I-Bankers have returned to claim their piece of the most expensive land in the India.

By Subramaniam Sharma

Nov. 10 (Bloomberg) -- Bank of America Merrill Lynch, Barclays Plc and JPMorgan Chase & Co. are competing to sell shares for state-run companies in India as the government plans the biggest sell-off in at least five years.

Robert Morrice, Barclays Capital’s Asia-Pacific chairman, plans to double the London-based firm’s investment banking team in India as it vies to sell stock. JPMorgan hopes for a “slew of disinvestment” by state-run companies, said Kalpana Morparia, the New York-based bank’s chief executive officer in India.

Prime Minister Manmohan Singh’s government pledged last week to reduce its holdings in profitable state-owned companies to 90 percent, accelerating a fund-raising program that languished for five years. While government offers present a “big opportunity,” they typically pay lower fees than private- sector sales, according to Bank of America.

“The competition for this business is always extremely fierce,” Kevan Watts, country head for Bank of America, said in an interview. “It is prestigious business. It is not a very profitable business because the government, understandably, is not prepared to pay very high fees.”

Indian share sales will add to an IPO rebound in Asia as record-low interest rates and economic stimulus packages fuel a revival in demand for new equities. China Minsheng Banking Corp., Sands China Ltd., Malaysia’s Maxis Bhd. and India’s Emaar MGF Land Ltd. will lead more than $14 billion of sales in the region.

More

17 comments:

Anonymous said...

India - Welcome to the boom and bust club.

Anonymous said...

Everything in India seems to boom now. They may boom for another few months before the bust cycle.

Anonymous said...

true..this song and dance should yield amusement and one needs to be patient for a couple of months. But in a way its a signal of topping. This excess mopping of liquidity through ipo's would mean the rest of the market might go down or stay constant...

shailesh said...

SocGen's Top Analyst Sees Market Lows Next Year

HONG KONG (Reuters) - Albert Edwards, a top analyst with French bank Societe Generale, expects global markets to hit a new low in 2010, adding that he would not be surprised if the global economy enters another recession next year.

Edwards said he expected that at some point China would go into recession, calling people's excessive faith in growth stories a "sick joke."

I think India will not be far behind after China. Though I am true supporter of India's growth and prosperity, sometimes the Media stories seem like big hype. Like there is story on Economictimes few days ago, saying 20% of all homes in Manhattan are bought by Indians !!! WTF !!! First of all I don't buy the number 20%.

Secondly, Are these indian's coming with India rupees and buying homes, are these NRI's who essentially made their money working in US. If it's second group, then this is truly not India success story, more of immigrant success story.

I was just reading another article which said 50% of families in Mumbai earn less then Rs 3000 per month. How can the country prosper and become developed nation where most are not even able to support their basic needs properly.

shailesh said...

Indians account for close to 20% of all realty sales in Manhattan

Prices of residential apartments in Manhattan have slipped 20-25% off their peak in end-2007. Mr De Niro says he is currently negotiating with several Indian buyers who are public figures in India. Sales pitch for a typical Manhattan condo begins at Rs 3 crore-Rs 4 crore, less than what a South Mumbai apartment or a Mehrauli farm house comes for. Average price per square feet for a Manhattan East side condo is $1,249 while that for a South Central Mumbai apartment is $1,319.

Mr De Niro, a former actor and son of Hollywood star Robert De Niro, however, wouldn’t confirm any of the names that he is dealing with. According to realty firm Brown Harris Stevens, a luxury condo in Manhattan can be bought for $1.65-3.93 million, while a similar apartment in Mumbai will cost $3.3 million-$6 million. “Add to that the fact that the rupee has strengthened against the dollar, and you could have a killer on hand,” says a Delhi-based rice trader who claims to be negotiating a deal.

Mr Lalwani says he has got 20 serious enquiries from India over the past 3 months of which 10 have been converted. “The remaining buyers are in varying degrees of decision making. Indians are looking for value, location and resale potential. There are a lot many more enquiries but many of them are just doing homework,” he says.

What a bunch of BS!!! ET do some homework. Can't you get list of actual transactions and see if 20% are really Indians?

Anonymous said...

People who are counting on bust, beware. Between 1970 & 1980 US home prices went up by approximately 4-6 times and everyone expected a bust when US increased interest rates to 18% in the beginning of 1980s. But prices barely budged. Bust comes when everybody expects prices to NEVER fall, and not the other way. Do not hope for a bust. Watched pot never boils.

Anonymous said...

Anon above:
Prices have stayed close to inflation adjusted. The houses that were selling for $50K in 1970, should be approximately 200% more than 50K adjusting for 4% inflation.
If this house was selling for $150-180K in 1998-98, it is not a boom.

Now, this house went to 450K by 2006-7. This was a boom and by 2009 it is back to 200-225K. It is again going back to inflation adjusted dollars.

Our watched pot boils. If you think prices will not fall, please go ahead and buy some more RE.

Do you know what is actually going on in the world economy. What the G20 is doing to keep the house prices propped up. Do you know how much corrupt banks and politicians are today. But they will not be take the world hostage. They can prolong it but bust has to come.

Anonymous said...

The article below talks about housing bubble in 5 countries going on right now which is ready to pop.

http://seekingalpha.com/article/172279-will-asia-s-real-estate-bubble-burst-soon

A MUST READ.

Anonymous said...

The countries in massive bubbles are:
China
India
Australia
Hong Kong
Singapore

shailesh said...

Will Asia's Real Estate Bubble Burst Soon?

India

The real estate market in India is a huge bubble and continues to show no sign of slowing down. Property prices, especially in the major cities, have shot up many fold over the years and are beyond the reach of ordinary middle class folks. The euphoria of the India growth story and the availability of cheap credit has propelled property prices to astronomical levels. Working with their highly powerful political friends, developers in India maintain artificially high prices defying the logic of supply and demand. During the last few years when the Indian economy took off, property prices soared and in the credit crunch last year, prices barely fell. Home prices in many cities are reaching or exceeding pre-crisis levels.

The supply side of the equation is fairly high now since in addition to local money, foreign investors are pouring money into the market via private equity deals. Astonishing profits in real estate have lured all types of investors into the market leading to speculation in many local markets. The growth in real estate also poses a huge risk to the Indian banking industry since they provided huge loans to developers and buyers alike. Prices in most cities are expensive with an average looking 2 BR apartment costing $150K or more. In many projects, basic infrastructure such as drinking water, sewage systems, roads, etc. are not developed to match global standards. Despite these issues, home prices have increased by double digit percentages in some cities just in the first half of this year alone.

Anonymous said...

Shailesh,
That $150K price tag will come down to $60K price when all this unwinds. It takes time for people to come out of denial and greed. But when it comes to reality, a lot of pain is ahead for India and all this emerging markets story as all this bust will happened simultaneously in all these 5 countries as mentioned above by someone.

shailesh said...

"Realistic" Emerging Economies

The World Bank and the International Monetary Fund are worried about asset bubbles building in Asian markets. Do you see that happening, and if so, what policies are to blame for that?
There is a risk of asset bubbles everywhere in the world at the moment, simply because money is so cheap. The bubbles in a sense may look higher in Asia relative to what we're seeing in the West, but what really matters with a bubble is not the absolute level but the degree to which there is a disconnect between asset prices and the underlying level of economic activity supporting those asset prices. That is a danger both in the West and in Asia. The upward price on assets is driven by the massive provision of liquidity put in place to mitigate the impacts of the crisis and to support the financial system. So the dilemma facing central bankers is how to avoid asset inflation on one hand but not undermine the recovery on the other.

shailesh said...

Asia Risks Bubble of 'Mind-Boggling Size': Economist

Anonymous said...

Second round of the crisis is around the corner. The zombie "BANKS" are the main culprits.

Charlie Gasparino: Job Losses Could Trigger Round 2 of Banking Crisis
Posted Nov 10, 2009 07:30am EST by Peter Gorenstein in Newsmakers, Banking

The unemployment rate now stands at 10.2%, yet stocks are at a 2009 high. The bulls will tell you not to worry; the unemployment rate is a lagging indicator. True as that may be, Charlie Gasparino author of The Sellout, has a word of warning: the jobs data may be a leading indicator when it comes to the health of our banking system.

Why?

~ If unemployment ticks higher, more consumer loans are likely to go into default and banks may have problems covering the additional loan losses.

~ Banks may find it difficult to raise more capital after already taking billions from the government

~ Toxic assets still infect the banking industry. Gasparino says $7 trillion in derivatives isn't a problem that goes away overnight

Anonymous said...

I think the world Governments are wanting to have a good Christmas 2009 and after that they will let the stimulus fade away.

Venkateswaran K Iyer said...

I could't agree more. Govts are waiting for the holiday sales to get over, before fading out an unsustainable stimulus and an unsustainable tax drain.

Venkat ND

rajni sharma said...
This comment has been removed by the author.