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Archive for September, 2008

80 killed in temple stampede near Jodhpur

Posted by Yogesh on Tuesday, 30 September, 2008

Chamunda Devi temple stampede

Bystanders help stampede victims at Chamunda Devi temple. (TimesNow)

JODHPUR: At least 80 people have been killed and more than 100 people injured in a major stampede in the Chamunda Devi temple at the start of Navaratra festival on Tuesday, according to police officials.
According to TV reports, rumours of a bomb in Mehrangarh near Jodhpur area led to the stampede.

More than 30 bodies were brought to Mahatma Gandhi Hospital and at least 10 to Mathura Das Hospital here, Divisional Commissioner Kiran Soni Gupta said.

The devotees in huge number, especially women, had gathered at the temple from early Tuesday morning in view of the Navratra festival starting from Tuesday.

The toll is feared to go up. Source Times of India

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Tata Motors rights issue opens, shares fall

Posted by Yogesh on Monday, 29 September, 2008

MUMBAI, Sept 29 (Reuters) – Shares in India’s Tata Motors fell as much as 6.6 percent as volatile markets raised concerns that investors may stay away from its 41.5 billion-rupee ($885 million) rights issues, which opened on Monday.

At 0752 GMT, Tata Motors shares were down 5.3 percent at 353.40 rupees, just above a more-than-four-year low of 339 rupees hit earlier this month. The benchmark stock index , which has lost more than a third of its value so far this year, fell more than 4 percent on the day.

“There are no new concerns, but the overall market sentiment is very poor,” said Sandep Shenoy, a strategist at PINC Research, who expects investors may wait for a week or two for the market to settle before subscribing to the rights issue. Read the rest of this entry »

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India’s ICICI: UK unit has no US subprime exposure

Posted by Yogesh on Monday, 29 September, 2008

MUMBAI, Sept 29 (Reuters) – ICICI Bank, India’s second-largest lender, said on Monday its UK unit had no exposure to the U.S. subprime credit and 98 percent of its non-Indian investment was rated investment grade by rating agencies.

The unit had a total balance sheet size of $8.5 billion, with $3.5 billion constituting its non-India investment book, it said in a statement.

The statement came after ICICI shares fell as much as 13.9 percent to a two-year low on Monday on foreign fund selling and worries about how the global credit problems would affect the bank. Read the rest of this entry »

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Big banking crises since the 1980s

Posted by Yogesh on Sunday, 28 September, 2008

The United States is grappling with a banking meltdown that has been described as the worst economic crisis since the Great Depression of the 1930s.

The Bush administration has proposed a $700 billion bailout on top of billions already spent or pledged to limit the damage from a series of big-name collapses on Wall Street.

As officials try to navigate the crisis, many are looking to the past for guidance. Following are synopses of four major crises since the 1980s.

CHINA WHAT HAPPENED
China’s banking problems were a legacy of state-directed lending that left banks saddled with a mountain of non-performing loans (NPLs) made on political not commercial grounds.

THE RESPONSE

Starting in 1998 China hived off the NPLs into four bad banks (asset management companies) and recapitalised three of the four big banks. The fourth, Agricultural Bank of China, is still awaiting restructuring.

China brought in foreign firms as investors, not so much for the cash as for the cachet ahead of possible listings, as well as for the management expertise they promised.

The cost of the bailout to date is estimated at $400-500 billion. The political nature of the problem and the degree to which China’s financial system is monopolised by state-owned banks mean the lessons for the United States are minimal.

JAPAN WHAT HAPPENED
Japan’s banks went into a tailspin in the 1990s after the country’s asset bubble burst. The Nikkei share average had more than doubled in two years to the end of 1989, then lost more than 60 percent over two years. Land prices peaked in 1991-1992, when it was said Japan’s land was worth more than the whole of the United States.Bad loans at Japanese banks snowballed as real estate values tumbled. In total, the banks have written off nearly 100 trillion yen ($944 billion) of bad loans from 1992 to 2007.

THE RESPONSE

The government injected some 12.4 trillion yen public funds to boost banks’ capital from 1998. In addition, Japan also spent 10.4 trillion yen to guarantee deposits and debentures of failed banks. The financial sector grew healthier after the government bailed out Resona Holdings, the country’s fourth-largest bank, by injecting almost 2.0 trillion yen in 2003. A stronger global economy supported the sector’s recovery.

SWEDEN WHAT HAPPENEDA decade of high inflation followed by banking deregulation led to a rapid surge in lending and a property price bubble. In the early 1990s, an attempt to defend Sweden’s currency led to a spike in interest rates, which at one point reached 500 percent. A real estate collapse left banks saddled with huge loan losses and the government was forced to step in.

THE RESPONSE

The government guaranteed deposits and bank debts, lending money to some banks and taking over others. Firms that were taken over were later privatised, although the state still owns 19.9 percent of Nordea, the region’s biggest bank. The government separated non-performing loans and asset holdings, hiving them off to management companies. These were sold off as the market recovered.

The crisis also led to an overhaul of fiscal and monetary policy, including the adoption of an inflation target. The government initially pumped in about 70 billion Swedish crowns ($11 billion) to the banking system. Estimates for total costs range from about 2 percent to 4 percent of gross domestic product. Some say the solution paid for itself in the long term.

UNITED STATES WHAT HAPPENEDIn 1980-1982, in an effort to make savings and loan institutions more competitive, the government allowed the so-called “thrifts” to enter new lines of business. Deposit insurance limits rose and thrifts were allowed to make consumer loans, issue credit cards and invest in commercial real estate loans. Tax incentives fuelled a construction boom while bank supervision was scaled back.

The industry took off, notably in Texas and California. In the mid-1980s, after declines in energy and real estate, many thrifts became insolvent though they were allowed to remain in business. By 1986, the thrift deposit insurance agency itself was insolvent. Government officials were reluctant to acknowledge public funds were needed, delaying a recovery.

THE RESPONSE

Congress at the end of the 1980s passed a law to bail out the industry, created the Resolution Trust Corp to resolve insolvent institutions and launched the Office of Thrift Supervision. From 1986 to 1989, the government closed or assisted 296 institutions with assets of $125 billion as many became insolvent because of unsound real estate and commercial loans.

More than 740 institutions were later closed or consolidated by the Resolution Trust Corp between 1989 and 1995, and their assets were liquidated, often for pennies on the dollar. The FDIC estimates the crisis cost some $153 billion, with taxpayers footing the bill for $124 billion. Other estimates have been as high as $300 billion.

Source Economic Times

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World Economy: Six Investing Pointers during a Volatile Market

Posted by Manish Agrawal on Friday, 26 September, 2008

The recent turmoil in the markets has left investors unsure what to expect and how to react. The six points in this piece provide a rational approach to investing during such turbulent times.

1. In the short term, things are very volatile, yesterday (this morning, Singapore time), the oil spiked a record $16 jump in a day while the USD dropped and the Dow Jones Industrial Index sank – all this because people have doubts about Paulson’s plans being able to pass through Congress. This is quite the opposite of last Thursday and Friday’s trading session where everybody was euphoric about the banking rescue plan.

How should we think and react to the market conditions? I am talking strictly in terms of the stock market, not the overall macro picture and the global impact.

2. In my last article (World Economy: Market Troubles can be seen as Opportunities), I compared the current market conditions against historical valuations, this of course, is predicated on the concept of “Reversion to the Mean,” meaning that markets like a pendulum will swing between excessive fear and excessive greed. And this overreaction will continue to occur around an invisible line known as the intrinsic value, and in this case, of the markets. Read the rest of this entry »

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Credit Crisis: Opportunities & threats for India Inc

Posted by Manish Agrawal on Friday, 26 September, 2008

The jury is out. India can weather the global financial storm and will help the world economy come out of it.

An eye for opportunity

Indra Nooyi

Chairman & CEO, PepsiCo

From her position at the helm of an American MNC,Pepsico chairman and CEO Indra Nooyi has had a ringside view of Wall Street’s recent trauma. So the 200 top-notch business leaders and policymakers that had gathered got an insight into the heart of the crisis.

Ms Nooyi said inflation had increased input costs, which trickled down to higher prices in stores. At the same time, the troubles of the financial services sector had dried up the available money supply, making exchange rates more volatile. Real estate values have fallen, so consumers are being hit by a double whammy: a decreasing cash flow and a dip in the value of assets on the household balance sheet.

Ms Nooyi suggested that the way out of economic difficulty was through the creativity and the ingenuity of small businesses as they had the ability to create employment and reinvent processes in all kinds of economic conditions. In the end, she was eager to know how firms would spot the opportunities that came with economic threats. “For those who bear the difficulties and remain sanguine, assets suddenly look cheaper. Again, it’s not something I wish on any of us but an eye for opportunity is part of the skill.” Read the rest of this entry »

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Bailout in chaos, WaMu is largest US bank failure

Posted by Manish Agrawal on Friday, 26 September, 2008

A rescue for the US financial system unraveled on Thursday amid accusations Republican presidential candidate John McCain scuppered the deal, and Washington Mutual was closed by US authorities and its assets sold in America’s biggest ever bank failure.

As negotiations over an unprecedented $700 billion bailout to restore credit markets degenerated into chaos, the largest US savings and loan bank was taken over by authorities and its deposits auctioned off. US stock futures fell by more than 1 percent. Read the rest of this entry »

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IFC lends $100 mln to India’s Idea Cellular

Posted by Yogesh on Wednesday, 24 September, 2008

MUMBAI, Sept 24 (Reuters) – IFC, an arm of the World Bank, said on Wednesday it had loaned $100 million to India’s Idea Cellular Ltd to help expand availability of affordable mobile telephone services in the country.

The loan will help strengthen Idea’s network in its existing markets and enable extension of services to Bihar, one of the few states in India without a well-developed telecommunications network, the IFC said in a statement.

“IFC’s investment will provide the much-needed long-term funding that many companies in India find difficult to access, while helping expand the local telecommunications infrastructure,” Sanjeev Aga, managing director of Idea, said.

Idea, India’s fifth-largest mobile operator, last month launched services in Mumbai and also provides services in 11 of India’s 22 telecoms service areas.

The extension of services in Bihar will help increase telephone penetration in the eastern state to more than 20 percent by 2012 from less than 8 percent in 2008, IFC said.

IFC and Idea are developing a project to deliver mobile phone-based communications and other services to rural communities and the urban poor in India, it said. Source Reuters

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Another devil in the financial crisis

Posted by Yogesh on Wednesday, 24 September, 2008

You may not understand derivatives, but you could eventually feel the effects of these arcane investment tools: slower growth, higher interest rates and a weaker dollar.

By Jim Jubak

Bet you haven’t seen this on a bumper sticker lately: “Save the derivatives market.”

Hardly catchy. Especially since almost no one actually knows what a derivative is. And it sure goes against the emotions of the crowd right now. Read the rest of this entry »

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Bollywood’s ‘Hari Puttar’ wins ‘Harry Potter’ suit

Posted by Yogesh on Tuesday, 23 September, 2008

MUMBAI, India – Move over Harry Potter. Make way for Hari Puttar.

“Hari Puttar” is set to hit cinema screens this week after an Indian court rejected a Warner Bros. suit claiming the name was too close to its Harry Potter series.

The court said in its ruling Monday that people who have watched the Harry Potter movies and read the books would know the difference between that and an Indian Punjabi film called “Hari Puttar — A Comedy of Terrors. ” Read the rest of this entry »

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