Wednesday, January 12, 2011
Tuesday, January 4, 2011
Rogoff expects currency chaos in 2011
01-04-2011 16:17
Armageddon can wait
By Kenneth Rogoff
CAMBRIDGE ― Where are global currencies headed in 2011? After three years of huge, crisis-driven exchange-rate swings, it is useful to take stock both of currency values and of the exchange-rate system as a whole.
And my best guess is that we will see a mix of currency wars, currency collapses, and currency chaos in the year ahead ― but that this won’t spell the end of the economic recovery, much less the end of the world.
Let’s start by acknowledging that the modern system of floating exchange rates has, on the whole, acquitted itself remarkably well. True, given complex risk factors and idiosyncratic policy preferences, it has been particularly challenging of late to divine the logic underlying big exchange-rate swings. For example, even though the United States was at the heart of the financial crisis, the dollar initially soared.
But, even if exchange rates work in mysterious ways, their cushioning effect is undeniable. The sharp depreciation of the euro after the crisis helped sustain German exports, thereby keeping the eurozone afloat.
Emerging markets’ currencies also collapsed, even in economies with huge foreign-exchange reserves and relatively little debt. Since then, most emerging-market currencies have rebounded sharply. In hindsight, these exchange-rate swings mirrored the initial collapse and subsequent rebound in global trade, helping to mitigate the recession.
By contrast, the financial crisis was hardly an advertisement for expanding the scope of fixed exchange rates. The eurozone’s peripheral countries, including Greece, Portugal, Ireland, and Spain, found themselves pinned to the mast of the common currency, unable to gain competitiveness through exchange-rate depreciation.
The intellectual father of the euro, Columbia University’s Robert Mundell, once famously opined that the optimal number of currencies in the world is an odd number, preferably less than three. It is hard to see why right now.
Perhaps when we have one world government, it will make sense to have one world currency. But, even setting aside the equilibrating benefits of flexible currencies, the prospect of a single, omnipotent central bank is not particularly appealing. Witness the vitriol and hysteria that accompanied the U.S. Federal Reserve’s policy of so-called “quantitative easing.” Imagine the panic that would have ensued in a world where gold, storable commodities, and art were the only ways for investors to flee from the dollar.
But the continuing success of the floating exchange-rate system does not imply a smooth ride in 2011. For starters, we can certainly expect a continuation of the so-called currency wars, in which countries strive to keep their exchange rates from appreciating too rapidly and choking off exports. Asian governments will probably gradually “lose” their battle in this war in 2011, allowing their currencies to appreciate in the face of inflationary pressures and threats of trade retaliation.
As for currency collapse, the most prominent candidate has to be the euro. In an ideal world, Europe would deal with its excessive debt burdens through a restructuring of Greek, Irish, and Portuguese liabilities, as well as municipal and bank debt in Spain. At the same time, these countries would regain export competiveness through massive wage reductions.
For now, however, European policymakers seem to prefer to keep escalating the size of bridge loans to the periphery, not wanting to acknowledge that private markets will ultimately require a more durable and sustainable solution. No risk factor is more dangerous for a currency than policymakers’ refusal to face fiscal realities; until European officials do, the euro remains vulnerable.
The dollar, on the other hand, looks like a safer bet in 2011. For one thing, its purchasing power is already scraping along at a fairly low level globally ― indeed, near an all-time low, according to the Fed’s broad dollar exchange-rate index. Thus, normal re-equilibration to “purchasing power parity” should give the dollar slight upward momentum.
Of course, some believe that the Fed’s mass purchases of U.S. debt poses an even bigger risk than Europe’s sovereign debt crisis. Perhaps, but most students of monetary policy view quantitative easing as the textbook policy for pulling an economy out of a zero-interest-rate “liquidity trap,” thereby preventing the onset of a sustained deflation, which would exacerbate debt burdens.
As for China’s renminbi, it is still supported by a highly political exchange-rate regime. Eventually, China’s rapid growth will have to be reflected in a significant rise in its currency, its domestic price level, or in both. But, in 2011, most of the equilibration will likely take place through inflation.
Finally, currency chaos is the safest bet of all, with sharp and unpredictable swings in floating exchange rates around the world. During the mid-2000s, there was a brief window when some argued that currencies had become more stable as a corollary of the “Great Moderation” in macroeconomic activity.
Nobody is saying that now. The floating exchange-rate system works surprisingly well, but currency volatility and unpredictability look likely to remain an enduring constant in 2011 and beyond.
Kenneth Rogoff is professor of economics and public policy at Harvard University, and was formerly chief economist at the IMF. For more stories, visit Project Syndicate (www.project-syndicate.org).
Armageddon can wait
By Kenneth Rogoff
CAMBRIDGE ― Where are global currencies headed in 2011? After three years of huge, crisis-driven exchange-rate swings, it is useful to take stock both of currency values and of the exchange-rate system as a whole.
And my best guess is that we will see a mix of currency wars, currency collapses, and currency chaos in the year ahead ― but that this won’t spell the end of the economic recovery, much less the end of the world.
Let’s start by acknowledging that the modern system of floating exchange rates has, on the whole, acquitted itself remarkably well. True, given complex risk factors and idiosyncratic policy preferences, it has been particularly challenging of late to divine the logic underlying big exchange-rate swings. For example, even though the United States was at the heart of the financial crisis, the dollar initially soared.
But, even if exchange rates work in mysterious ways, their cushioning effect is undeniable. The sharp depreciation of the euro after the crisis helped sustain German exports, thereby keeping the eurozone afloat.
Emerging markets’ currencies also collapsed, even in economies with huge foreign-exchange reserves and relatively little debt. Since then, most emerging-market currencies have rebounded sharply. In hindsight, these exchange-rate swings mirrored the initial collapse and subsequent rebound in global trade, helping to mitigate the recession.
By contrast, the financial crisis was hardly an advertisement for expanding the scope of fixed exchange rates. The eurozone’s peripheral countries, including Greece, Portugal, Ireland, and Spain, found themselves pinned to the mast of the common currency, unable to gain competitiveness through exchange-rate depreciation.
The intellectual father of the euro, Columbia University’s Robert Mundell, once famously opined that the optimal number of currencies in the world is an odd number, preferably less than three. It is hard to see why right now.
Perhaps when we have one world government, it will make sense to have one world currency. But, even setting aside the equilibrating benefits of flexible currencies, the prospect of a single, omnipotent central bank is not particularly appealing. Witness the vitriol and hysteria that accompanied the U.S. Federal Reserve’s policy of so-called “quantitative easing.” Imagine the panic that would have ensued in a world where gold, storable commodities, and art were the only ways for investors to flee from the dollar.
But the continuing success of the floating exchange-rate system does not imply a smooth ride in 2011. For starters, we can certainly expect a continuation of the so-called currency wars, in which countries strive to keep their exchange rates from appreciating too rapidly and choking off exports. Asian governments will probably gradually “lose” their battle in this war in 2011, allowing their currencies to appreciate in the face of inflationary pressures and threats of trade retaliation.
As for currency collapse, the most prominent candidate has to be the euro. In an ideal world, Europe would deal with its excessive debt burdens through a restructuring of Greek, Irish, and Portuguese liabilities, as well as municipal and bank debt in Spain. At the same time, these countries would regain export competiveness through massive wage reductions.
For now, however, European policymakers seem to prefer to keep escalating the size of bridge loans to the periphery, not wanting to acknowledge that private markets will ultimately require a more durable and sustainable solution. No risk factor is more dangerous for a currency than policymakers’ refusal to face fiscal realities; until European officials do, the euro remains vulnerable.
The dollar, on the other hand, looks like a safer bet in 2011. For one thing, its purchasing power is already scraping along at a fairly low level globally ― indeed, near an all-time low, according to the Fed’s broad dollar exchange-rate index. Thus, normal re-equilibration to “purchasing power parity” should give the dollar slight upward momentum.
Of course, some believe that the Fed’s mass purchases of U.S. debt poses an even bigger risk than Europe’s sovereign debt crisis. Perhaps, but most students of monetary policy view quantitative easing as the textbook policy for pulling an economy out of a zero-interest-rate “liquidity trap,” thereby preventing the onset of a sustained deflation, which would exacerbate debt burdens.
As for China’s renminbi, it is still supported by a highly political exchange-rate regime. Eventually, China’s rapid growth will have to be reflected in a significant rise in its currency, its domestic price level, or in both. But, in 2011, most of the equilibration will likely take place through inflation.
Finally, currency chaos is the safest bet of all, with sharp and unpredictable swings in floating exchange rates around the world. During the mid-2000s, there was a brief window when some argued that currencies had become more stable as a corollary of the “Great Moderation” in macroeconomic activity.
Nobody is saying that now. The floating exchange-rate system works surprisingly well, but currency volatility and unpredictability look likely to remain an enduring constant in 2011 and beyond.
Kenneth Rogoff is professor of economics and public policy at Harvard University, and was formerly chief economist at the IMF. For more stories, visit Project Syndicate (www.project-syndicate.org).
Monday, January 3, 2011
Paradigm shift: Now they're worrying about the US economy overheating!
This morning's Wall Street Journal has an article with the title "Investors' Forecast: Sunny With Chance of Overheating." Too hot is described as economic growth of 4%, which isn't that hot in today's world. But still, it is a paradigm shift.
http://online.wsj.com/article/SB10001424052748703384504576055950354533470.html?mod=ITP_pageone_0&mg=com-wsj
http://online.wsj.com/article/SB10001424052748703384504576055950354533470.html?mod=ITP_pageone_0&mg=com-wsj
Thursday, December 30, 2010
US state and local tax revenues improving sharply
Some states have revenue increases in the 20%-30% range.
From today's Wall Street Journal:
Combined state and local tax revenues rose 5.2% to $284.3 billion in the third quarter of 2010 from the same period a year ago, the Census Bureau reported Wednesday. That was a big reversal from the third quarter of 2009, when tax revenues fell by 5.4% from the year-earlier period.
States in the Red
"Revenue wise they're turning the corner," said William Fox, an economics professor at the University of Tennessee who specializes in state and local taxes. But, he said, "fiscal stress is likely to continue in many states because spending is still out of line with lower revenues."
http://online.wsj.com/article/SB10001424052970203525404576049901002799880.html?mod=ITP_pageone_1
From today's Wall Street Journal:
Combined state and local tax revenues rose 5.2% to $284.3 billion in the third quarter of 2010 from the same period a year ago, the Census Bureau reported Wednesday. That was a big reversal from the third quarter of 2009, when tax revenues fell by 5.4% from the year-earlier period.
States in the Red
"Revenue wise they're turning the corner," said William Fox, an economics professor at the University of Tennessee who specializes in state and local taxes. But, he said, "fiscal stress is likely to continue in many states because spending is still out of line with lower revenues."
http://online.wsj.com/article/SB10001424052970203525404576049901002799880.html?mod=ITP_pageone_1
Wednesday, December 29, 2010
Will Beijing die of thirst?
Perhaps it will have to shrink:
Beijing Preparing For Latest Arrival Of Snow In 22 Years.
Xinhua (12/29) reports Chinese meteorologists believe "Beijing will witness the latest arrival of snow in 22 years as the previous record of late-arriving snowfall being on Dec. 28, 1988." Beijing "The city has been without rain or snow for nearly two months, and the precipitation during the flood season from Jun. 1 to Sept. 15 this year was 273 millimeters, the lowest since 1960," Guo Wenli, director of the climate center under the Beijing Municipal Bureau of Meteorology. Furthermore, "underground sources supply over two thirds of Beijing municipality's needs, and since 2004 the city has also begun drawing on 'karst' groundwater supplies 1 km or deeper below surface. Those deep underground sources, stored in porous rock, were originally set aside for use only in times of war or emergency." The city currently has projects in the work to divert water from the south to help relieve the problem.
Beijing Preparing For Latest Arrival Of Snow In 22 Years.
Xinhua (12/29) reports Chinese meteorologists believe "Beijing will witness the latest arrival of snow in 22 years as the previous record of late-arriving snowfall being on Dec. 28, 1988." Beijing "The city has been without rain or snow for nearly two months, and the precipitation during the flood season from Jun. 1 to Sept. 15 this year was 273 millimeters, the lowest since 1960," Guo Wenli, director of the climate center under the Beijing Municipal Bureau of Meteorology. Furthermore, "underground sources supply over two thirds of Beijing municipality's needs, and since 2004 the city has also begun drawing on 'karst' groundwater supplies 1 km or deeper below surface. Those deep underground sources, stored in porous rock, were originally set aside for use only in times of war or emergency." The city currently has projects in the work to divert water from the south to help relieve the problem.
Thursday, December 23, 2010
Government revenues/GDP lowest in 20 years OECD-wide
Fears of tax rises as government revenues near 20-year low, says OECD
From The Telegraph Dec 23, 2010.
Governments' tax revenues are close to a 20-year low, according to the Organisation for Economic Cooperation and Development (OECD), raising the prospect of widespread and painful tax rises.
The OECD estimates that between 2008 and 2009, tax revenues measured against economies' output fell, on average, more than one percentage point.
By Emma Rowley 6:30AM GMT 16 Dec 2010
The think-tank estimates that between 2008 and 2009, tax revenues measured against economies' output fell, on average, more than one percentage point across the 34 developed nations it covers.
The unprecedented drop dragged nations' average tax to gross domestic product (GDP) ratios - the "tax burden" - to less than 34pc, a level not seen for almost two decades.
"This is the lowest average tax burden since the early 1990s," said the OECD, blaming businesses' falling profits and tax cuts made to soften the effects of the recession.
The Paris-based body warned that many countries would now try to boost their tax revenues over and above the levels enjoyed before the financial crisis.
"These are figures that we have not seen in peacetime," said Jeffrey Owens, director of the OECD's tax policy centre, following the annual report's release.
He warned: "Any package to solve the current deficit situation in most countries will require an increase in taxation, and in many it will require tax increases that go beyond the level prior to the crisis."
In the UK, the tax-to-GDP ratio has now fallen for three consecutive years, to stand at just over 34pc in 2009, close to the region's average, according to the OECD.
Denmark last year had the highest tax burden, at more than 48pc, while Mexico had the lowest at below 18pc, preliminary figures show.
In Spain, which is struggling under huge debt, the tax burden slumped by seven percentage points of GDP from 2007 to 2009.
The OECD wants members to move away from taxes on income and profits, which could distort economies, towards taxes on consumption, such as VAT, and environmental taxes.
Despite reforms, "green" taxes to discourage pollution make up a smaller proportion of average GDP now than they did 10 years ago, according to the think-tank.
Separately, Chancellor George Osborne on Wednesday tried to play down expectations that UK taxes will be cut before the election planned for 2015. The VAT rise to 20pc coming in January was "not temporary", he said in an interview. "It can't be," Mr Osborne said. "We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit."
From The Telegraph Dec 23, 2010.
Governments' tax revenues are close to a 20-year low, according to the Organisation for Economic Cooperation and Development (OECD), raising the prospect of widespread and painful tax rises.
The OECD estimates that between 2008 and 2009, tax revenues measured against economies' output fell, on average, more than one percentage point.
By Emma Rowley 6:30AM GMT 16 Dec 2010
The think-tank estimates that between 2008 and 2009, tax revenues measured against economies' output fell, on average, more than one percentage point across the 34 developed nations it covers.
The unprecedented drop dragged nations' average tax to gross domestic product (GDP) ratios - the "tax burden" - to less than 34pc, a level not seen for almost two decades.
"This is the lowest average tax burden since the early 1990s," said the OECD, blaming businesses' falling profits and tax cuts made to soften the effects of the recession.
The Paris-based body warned that many countries would now try to boost their tax revenues over and above the levels enjoyed before the financial crisis.
"These are figures that we have not seen in peacetime," said Jeffrey Owens, director of the OECD's tax policy centre, following the annual report's release.
He warned: "Any package to solve the current deficit situation in most countries will require an increase in taxation, and in many it will require tax increases that go beyond the level prior to the crisis."
In the UK, the tax-to-GDP ratio has now fallen for three consecutive years, to stand at just over 34pc in 2009, close to the region's average, according to the OECD.
Denmark last year had the highest tax burden, at more than 48pc, while Mexico had the lowest at below 18pc, preliminary figures show.
In Spain, which is struggling under huge debt, the tax burden slumped by seven percentage points of GDP from 2007 to 2009.
The OECD wants members to move away from taxes on income and profits, which could distort economies, towards taxes on consumption, such as VAT, and environmental taxes.
Despite reforms, "green" taxes to discourage pollution make up a smaller proportion of average GDP now than they did 10 years ago, according to the think-tank.
Separately, Chancellor George Osborne on Wednesday tried to play down expectations that UK taxes will be cut before the election planned for 2015. The VAT rise to 20pc coming in January was "not temporary", he said in an interview. "It can't be," Mr Osborne said. "We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit."
Monday, December 20, 2010
Forecast 2011: Oppenheimer is hugely positive on India
Forecast 2011: Oppenheimer is hugely positive on India:
December 14, 2010 06:04 PM |
Munira Dongre
New York-headquartered full-service investment company says the Indian equity market is among very few around the world that looks poised to advance on a long-term bull phase over the next 5-10 years
Oppenheimer & Co has in a report dated 7th December made out a very positive case for investments in India’s equity markets. Its key arguments are pretty standard—“demographics, a sound medium- and long-term earnings outlook, a vastly improved policy backdrop and India’s allure at a point in history where its growth premium is most likely bound to reset at higher levels.” Another important factor it says is “the vast under-owned status of Indian equities, both at the domestic and international levels (retail and institutional).”
The US-based investment company, which also has operations in India, believes that “the Indian equity market holds the potential for annualized returns in the vicinity of 12-18% in rupee terms, and 15-21% in US dollar terms over the next 5-10-year horizon.” Oppenheimer supports its forecast, saying it expects an improvement in the inflation scenario (but the report does not state how) leading to a fall in the risk premium, and a revaluation of the rupee versus the dollar. The firm also expects a stable government, with the Congress-led UPA at the helm until 2014, to implement policy reforms.
Among other positives, Oppenheimer mentions India’s lower vulnerability to global economic shocks due to high local demand and low exports. “India is considered primarily a domestic economy—its share in world trade is a measly 1.1%, with exports constituting only 21% of its GDP.” Of course, it is debatable if at 1/5th of the GDP, exports can be considered ‘low’.
Oppenheimer bets on the usual suspects, including favourable demographics, which means a high working age population and declining dependent population. It makes a good point when it says that since there are “limited investment options (globally) for overseas investors”, India, which is one of the few economies growing at sustainable 6%+ levels, makes a good investment bet.
Oppenheimer is counting on the wallet-share shift of the Indian consumer from basic necessities to discretionary items. It cites McKinsey’s estimates which predict that discretionary spending of the Indian consumer is expected to rise to 70% of the total spending by 2025, from 52% in 2005.
Contrary to the general belief that things are going to be tough for banks going forward, Oppenheimer is quite positive on the banking sector. “We expect further loan growth pickup due to the following factors: 1) working capital requirements are likely to rise on the back of increased industrial activity and rising inflation, and 2) capital expenditure related requirements are likely to increase on account of better confidence levels. Better loan growth is likely to be positive for bank margins and asset quality.”
Oppenheimer is also upbeat about the Indian IT industry. “Even though India has a 51% market share of the off-shoring market, there is tremendous headroom for growth as the current off-shoring market is still a small part of the overall outsourcing industry. Significant opportunities exist in core vertical and geographic segments of BFSI and US, and emerging geographies and vertical markets such as Asia Pacific, retail, healthcare and government respectively. Development of these new opportunities can triple the current addressable market, and can lead to Indian IT-BPO revenues of $225 billion by 2020.”
It is also positive on the education sector, citing the large young population as the reason for this. “India ranks second in the world in population. Of India’s population, 44% is below the age of 19, making it the youngest nation in the world. This bodes extremely well for the education sector. Demand for education will continue to increase over the next decade at surprising speed, we think.” It also points out that the education sector is recession-proof.
It must be said that while education remains a foreign investor favourite thematic investment, very few stocks have given any returns. A year ago, Educomp was at Rs730 and it now trades at Rs515. NIIT, which trades at Rs53 now, was at around Rs70+ levels a year ago. Only Everonn Systems seems to have given good returns—the stock was at Rs400 levels a year ago and now trades at Rs600.
On the retail business, Oppenheimer believes that “Indian retailers also need to go through two-three more business cycles, before they achieve meaningful stability.” It remains positive on media companies since low advertising spend as a percentage of GDP means good potential. However, with huge competition, only those players with deep pockets and quality content will survive. It is positive on the auto sector as well, but expects the cost of finance to rise sharply. It believes that domestic players (Maruti, Tata Motors, Mahindra and Hyundai) are better placed than new entrants.
Oppenheimer likes the Indian travel market, which it believes “is poised for growth, given a strong domestic economy, the growth in the LCC market and a highly-fragmented lodging industry.” However, Thomas Cook, Taj GVK Hotels, Indian Hotels, Hotel Leela Ventures have given poor annual returns. Only Cox & Kings has given decent returns.
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author’s own and may not necessarily represent those of Moneylife.)
December 14, 2010 06:04 PM |
Munira Dongre
New York-headquartered full-service investment company says the Indian equity market is among very few around the world that looks poised to advance on a long-term bull phase over the next 5-10 years
Oppenheimer & Co has in a report dated 7th December made out a very positive case for investments in India’s equity markets. Its key arguments are pretty standard—“demographics, a sound medium- and long-term earnings outlook, a vastly improved policy backdrop and India’s allure at a point in history where its growth premium is most likely bound to reset at higher levels.” Another important factor it says is “the vast under-owned status of Indian equities, both at the domestic and international levels (retail and institutional).”
The US-based investment company, which also has operations in India, believes that “the Indian equity market holds the potential for annualized returns in the vicinity of 12-18% in rupee terms, and 15-21% in US dollar terms over the next 5-10-year horizon.” Oppenheimer supports its forecast, saying it expects an improvement in the inflation scenario (but the report does not state how) leading to a fall in the risk premium, and a revaluation of the rupee versus the dollar. The firm also expects a stable government, with the Congress-led UPA at the helm until 2014, to implement policy reforms.
Among other positives, Oppenheimer mentions India’s lower vulnerability to global economic shocks due to high local demand and low exports. “India is considered primarily a domestic economy—its share in world trade is a measly 1.1%, with exports constituting only 21% of its GDP.” Of course, it is debatable if at 1/5th of the GDP, exports can be considered ‘low’.
Oppenheimer bets on the usual suspects, including favourable demographics, which means a high working age population and declining dependent population. It makes a good point when it says that since there are “limited investment options (globally) for overseas investors”, India, which is one of the few economies growing at sustainable 6%+ levels, makes a good investment bet.
Oppenheimer is counting on the wallet-share shift of the Indian consumer from basic necessities to discretionary items. It cites McKinsey’s estimates which predict that discretionary spending of the Indian consumer is expected to rise to 70% of the total spending by 2025, from 52% in 2005.
Contrary to the general belief that things are going to be tough for banks going forward, Oppenheimer is quite positive on the banking sector. “We expect further loan growth pickup due to the following factors: 1) working capital requirements are likely to rise on the back of increased industrial activity and rising inflation, and 2) capital expenditure related requirements are likely to increase on account of better confidence levels. Better loan growth is likely to be positive for bank margins and asset quality.”
Oppenheimer is also upbeat about the Indian IT industry. “Even though India has a 51% market share of the off-shoring market, there is tremendous headroom for growth as the current off-shoring market is still a small part of the overall outsourcing industry. Significant opportunities exist in core vertical and geographic segments of BFSI and US, and emerging geographies and vertical markets such as Asia Pacific, retail, healthcare and government respectively. Development of these new opportunities can triple the current addressable market, and can lead to Indian IT-BPO revenues of $225 billion by 2020.”
It is also positive on the education sector, citing the large young population as the reason for this. “India ranks second in the world in population. Of India’s population, 44% is below the age of 19, making it the youngest nation in the world. This bodes extremely well for the education sector. Demand for education will continue to increase over the next decade at surprising speed, we think.” It also points out that the education sector is recession-proof.
It must be said that while education remains a foreign investor favourite thematic investment, very few stocks have given any returns. A year ago, Educomp was at Rs730 and it now trades at Rs515. NIIT, which trades at Rs53 now, was at around Rs70+ levels a year ago. Only Everonn Systems seems to have given good returns—the stock was at Rs400 levels a year ago and now trades at Rs600.
On the retail business, Oppenheimer believes that “Indian retailers also need to go through two-three more business cycles, before they achieve meaningful stability.” It remains positive on media companies since low advertising spend as a percentage of GDP means good potential. However, with huge competition, only those players with deep pockets and quality content will survive. It is positive on the auto sector as well, but expects the cost of finance to rise sharply. It believes that domestic players (Maruti, Tata Motors, Mahindra and Hyundai) are better placed than new entrants.
Oppenheimer likes the Indian travel market, which it believes “is poised for growth, given a strong domestic economy, the growth in the LCC market and a highly-fragmented lodging industry.” However, Thomas Cook, Taj GVK Hotels, Indian Hotels, Hotel Leela Ventures have given poor annual returns. Only Cox & Kings has given decent returns.
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author’s own and may not necessarily represent those of Moneylife.)
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