Newsletter
Dec, 2010
-Global Risk News
-Indian Commerce
-Industry Circle-Indian Defence Industry
-Major Economic Indicators
Caston Corporate Advisory Services
6/5, Didar House Building, DLF Industrial
Area, Moti Nagar, New Delhi-110015
91.11.25161294
91.11.25104252
[email protected] Global Risk News
China Hong Kong Yuan Bond Sale 10 global debt crisis that triggered the financial
Times Oversubscribed: China’s turmoil in 2008, and it is possible that other
government attracted orders worth 10 times the countries could in time face similar problems
5 billion yuan ($750 million) of bonds it offered (Greece is actually an outlier in this regard, in
to institutional investors in Hong Kong, that the root cause of its fiscal problems lies in
reflecting growing global demand for the the unsustainable--and, until recently, hidden--
currency. debt accumulation of its public sector, rather
The 1 billion yuan of 10-year debt will pay a 2.48 than its private sector). It can come as little
percent coupon, compared with a yield of 4.01 surprise that the process of governments
percent for September 2020 bonds traded in transferring substantial losses from private-
Shanghai. The 2 billion yuan of five-year sector bank balance sheets to sovereign balance
offshore notes offer investors 1.8 percent, and sheets (and thus taxpayers) has resulted in a
the 2 billion yuan of three-year notes will pay a 1 global banking crisis morphing steadily into a
percent coupon sovereign debt crisis.
Investors outside of the mainland are hungry for
yuan assets after deposits of the currency in Source: GARP
Hong Kong more than doubled to 149 billion
yuan in the six months through September, Irish bailout gets lukewarm
according to the city’s central bank. That
compares with less than 41 billion yuan of bonds market response: The euro67.5 billion
denominated in China’s currency that have been ($89.4 billion) bailout of Ireland has done little
sold offshore, prior to China’s latest offering, to assuage investor concerns that Europe has
according to data compiled by Bloomberg. finally got a grip on its debt crisis, with
European stocks trading mostly lower Monday
Source: Bloomberg and the euro hitting a fresh two-month low.
The FTSE 100 index of leading British shares
Europe financing: Breaking up was down 3.25 points, or 0.1 percent, at
hard to do: The euro area sovereign debt 5,685.45, while Germany's DAX fell 28.98
crisis is threatening to escalate at a frightening points, or 0.4 percent, at 6,820. The CAC-40
pace, as liquidity and solvency concerns index in France was 17.11 points, or 0.5 percent,
continue to weigh on peripheral member states. lower at 3,711.54.
The Economist Intelligence Unit's central
forecast is that Portugal will have to follow Wall Street was poised to open higher - Dow
Ireland and Greece in requesting emergency futures were up 31 points, or 0.3 percent, at
EU/IMF funding, but that Spain will not and 11,061, while the broader Standard & Poor's 500
that the euro area will continue to hold together. futures rose 3.9 points, or 0.3 percent, to
1,187.30.
Greece and now Ireland are on external financial
life support, enduring an open-ended period of The focus in the markets, at least in Europe,
painful fiscal austerity with no guarantee that remains on the debt crisis, which led to Ireland
either economy will return to a position--in the being bailed out Sunday by its partners in the
absence of additional external support and/or European Union and the International Monetary
some form of debt restructuring--in which it is Fund.
able to meet its huge debt-servicing
commitments
The EU's finance ministers agreed in an
emergency meeting in Brussels to give Ireland a
This is the reality now facing two of the euro euro67.5 billion bailout to help it survive its
area's peripheral economies, with doubts also massive banking crisis, and sketched out new
persisting in the markets over the ability of other rules for future emergencies to restore faith in
economies in the region to generate sufficient the euro currency.
nominal growth to sustain their mounting
private and public debt piles. Teetering
sovereigns such as Ireland's are the outcome of Source: GARP
policy responses adopted in response to the
Caston Mailinks
Indian Commerce
CWG Scam: The noose appears to be parties refused to withdraw demands for a cross-
tightening around Suresh Kalmadi with the CBI party investigation in a massive telecoms graft
arresting top Commonwealth Games official, M scandal.
Jeychandren , for his alleged role in the Queen’s
Baton Relay scam. Jeychandren, as joint The alleged scam, which is estimated to have
director-general of finance and accounts, was cost the country up to 40 billion dollars, has led
part of the empowered committee that finalized to paralysis in the national parliament as the
the controversial deal with London-based AM opposition has blocked all business for 13 days.
Films.
Two other members of that committee – Sanjay Source: Indiatoday
Mohindroo and T S Darbari – have been
arrested and are believed to have implicated Banking Scam: India's reputation as a place to
Jeychandren. The CBI has seized laptops and do business has taken another hit after the
documents from Jeychandren’s office and scandal-tainted government charged top public
residence. sector bankers of accepting bribes worth
hundreds of millions of dollars. The banking
CBI to quiz Kalmadi after his return from China scandal is one of the biggest to taint India,
potentially harming the image of Asia's third-
The CBI is also questioning Sudhir Verma , largest economy as destination for foreign
deputy director general (communication ) of the investors, especially as it comes a few days after
Games Organizing Committee and part of the Prime Minister Manmohan Singh has had to
empowered panel that picked AM Films to defend his government in another graft scandal
install video screens at the venue at exorbitant involving telecoms licenses sold at rock-bottom
rates. Jeychandran will be produced in the CBI prices.
court on Monday, where the investigators might
seek his remand to unearth the money trail in CBI on Wednesday arrested five officials from
the CWG scam, CBI officials said. state-run listed companies, including the chief
executive of LIC Housing Finance, for taking
bribes to facilitate large corporate loans.
Source: economictimes
Three senior executives from a listed private
Telecom Scam: Calling it the largest scam company were also arrested on charges of
in independent India, the Bharatiya Janata Party handing out the bribes.The government and one
has alleged that there were irregularities in of the companies whose executive was arrested
allotting wireless radio spectrum and licences by said the alleged corruption were of an individual
the telecom ministry to nine private operators in nature.
2007.
Source: businessworld
The government had in 2007 recommended an
'open licence regime'. Deutsche Postbank Said to Near
Sale of Indian Unit: Deutsche Post Bank
'Applications for telecom licences were invited AG, the German lender being acquired by
setting Oct 1, 2007, as the deadline. An artificial Deutsche Bank AG, is close to selling its Indian
cut-off date, Sep 25, 2007, was created and operations for about 11 billion rupees ($240
applications received between Sep 25 and Oct 1 million), according to a person with knowledge
were summarily rejected. Rules of the game were of the matter.
changed after the game had begun,' the BJP
charged.
Dewan Housing Finance Limited, based in
Mumbai, is the front- runner to buy Deutsche
The BJP alleged that 'all friendly applicants,
Postbank Home Finance Ltd. and the talks are at
mostly real estate companies, had been advised
an advanced stage, said the person, who
to put in their applications before Sep 25'.
declined to be identified before an
announcement. Dewan shares rose.
The Indian government Tuesday failed to end a
long parliamentary deadlock as opposition
Source: Bloomberg
Caston Mailinks
Industry Circle: Indian Defence Industry
India is one of the largest global military required less advanced technological know-how
spenders. In the Union Budget 2010-11, and India’s mature manufacturing and
expenditure is of about USD 32.03 billion has engineering sector is able to strongly compete.
been earmarked for national defence, which has
been increased from USD 29.62 billion revised
Projected Expenditure by each service
estimates for the last year. The total defence
budget has increased by 8.13 % and out of which division (USD Million)
budget for capital acquisition of USD 13.04
billion has been increased by 25.46 % from last Year Army Navy Air Total
year. Outright purchase and upgradation and Force
maintenance of the existing equipment for
modernisation will continue to provide immense FY11 6948 2098 4064 13110
opportunities to the industry in the coming FY12 7643 2307 4471 14421
future as well. FY13 8407 2538 4918 15863
Following the Kargil conflict in 1999, India was FY14 9249 2792 5410 17450
confronted with the recognition that much of its FY15 10173 3072 5950 19195
Soviet-era equipment was outdated and
obsolescent compared with its regional rivals.
Total 42421 12806 24812
Source: Indian thirteenth finance commission report,
India faces the theoretical prospect of a war on
dec, 2009
two fronts, one with a major power rival (China)
and the other with a powerfully-armed middle
power that poses potential threats to its
homeland security (Pakistan). Both China and Year Imports Indigenius
Pakistan have significantly expanded their
military capabilities in the past decade.
FY01 54% 46%
FY02 52% 48%
In this context, India has embarked on a major FY03 62% 38%
defence acquisition program, aimed at
increasing the size, capability and self-reliance of FY04 62% 38%
its Defence Armed Forces FY05 54% 46%
FY07 5% 95%
Its acquisition plans include a substantial
procurement program for the Army, Navy and FY08 23% 77%
Air Force. Realising that the Revolution in FY09 46% 54%
Military Affairs (RMA) effectively passed India
by in the 1990s, the government is seeking
Average 45% 52%
to develop a flexible, mobile and networked Source: Reliance on imports in defence
defence force with substantial power projection
capabilities. Many of the assets India is Forecast growth of imported Vs Indeg. Production
acquiring are at the leading edge of technology,
including 180 Sukhoi Su-30MKI aircrafts, FY11 FY12 FY13 FY14 FY15
Scorpene class submarines, advanced Russian T-
90 main battle tanks and state-of-the art -2.57% -4.19% -6.3% -9.13% -13.16%
information and communication systems. More
than USD 42 billion in total defence expenditure
is targeted by 2015, of which approximately USD
19.20 billion would be expected to be spent on
capital equipment for the Defence Armed
Forces. 39.33% 33.16% 29.13% 26.30% 24.19%
Up until 2005, India still procured most of its
defence force equipment from international Import Growth
suppliers. Even in recent times India has
struggled to lift indigenous production above 50 Indigenous Growth
per cent of the total cost of the acquisition. It has
had the greatest success in naval and land Source: Indian thirteenth finance commission report, dec,
acquisitions, where large platform builds have 2009
Caston Mailinks
Major Economic Indicators
Economy Current Value Previous Value
Inflation 8.58 8.62
IIP 5.6 7.1
Banking
CRR 6% 6%
Repo Rate 6.25% 6%
91 Day T-Bill 6.94% 6.85%
10 Year G-Sec Yeild 8.09% 8.09%
Forex Reserve-USD bn 298 295
Currency
USD 45.09 44.54
Euro 59.63 61.81
Markets
Nifty 5862 6117
Nifty PE 23.39 24.71
Bullion & Crude
Gold $/Oz 1395 1362
Silver $/Oz 28 24.89
Crude $/barrel 87.79 81.84
Caston Mailinks
