Intellectual Thoughts by Sanjay Panda


Grey market Blues - Rpower

The debut of Reliance Power (RPL) shares on the Mumbai Stock Exchange (BSE) and the National Stock Exchange (NSE) was one of the most spectacular fiascos in recent times in the Indian primary market. It was hyped up so much that when the stock crashed below its offer price, even grey market investors felt the tremors.

Scores of investors are believed to have refused to pay up after buying RPL shares shelling out double the Rs 450 offer price as premium. Usually, operators do not lose money because shares invariably list at a premium to the last traded price in the grey market. Sometimes, if there is a marginal loss, the difference is settled through cash and the show carries on to the next IPO. However, the RPL stock is believed to have spawned a Rs 2,000-2,500 crore payment crisis in the unofficial bucket (dabba) shops most of which are in Gujarat centres such as Ahmedabad and Rajkot. That is because, it debuted at a 21 per cent premium to its offer price of Rs 450 but soon sank below it. It now trades at a discount of Rs 175 to the issue price.

With the other two big IPOs —Wockhardt and Emaar MGF —bowing out due to poor investor response, the below-the-ground operators are stuck for a while.

That brings us to the point, how to regulate this when-issued market. It’s difficult, but then, sources say that it is tough for that market to function without the connivance of the issuers and their investment bankers. Regulating them better could be the answer.

Americans prefer Indian products to Chinese

A majority of Americans are not averse to purchasing made-in-India products, but the opposite is the case for those made in China, according to a new survey conducted by renowned US-based business magazine Fortune.

In the wake of some of the American companies, including toymaker Mattel, recalling products they sourced from China due to high lead content, nearly three in five (57%) of the US citizens surveyed by Fortune said they were "less likely to buy a product if it is made in China."

As much as 52% of the survey respondents said such an incident would not affect their purchasing decision if the product was made in India.

In the survey, only 35% of Americans said they were "less likely" to purchase a product manufactured in India, while 11% said they were "more likely" to buy such goods.

For China-made products, 11% people said they were "more likely" to buy these products, while 30% said it did not matter to them whether goods were exported from the dragon country.

Fortune magazine, which surveyed 1,000 adults throughout America between January 14-16, said "where a product is manufactured does not impact Americans' purchasing decisions except when that product is made in China."

Nearly three-in-five (57%) Americans were less likely to buy a product if it was made in China. When products were manufactured in other areas, such as Eastern Europe (57%), Western Europe (55%), Canada (53%), India (52%), Africa (51%), Mexico (48%), Japan (47%), and South Korea (46%), nearly a majority said it did not matter, the survey found.

BS


Asia Seen Weathering Any US Recession

Asia would be able to weather any recession in the United States, analysts say, because rising trade and investment within the region make it less dependent on the U.S. economy than in the past. While a severe downturn in the United States would drag on Asian growth by eroding demand for exports, a rapidly growing middle class is fueling orders for automobiles, electronics and housing -- much of which will be supplied from Asia itself.

Voracious demand for oil, iron ore and other commodities to build roads, sewage systems, and office buildings -- especially in the booming economies of China and India -- will also help sustain the region through any U.S. slowdown.

The U.S. economy is not that important anymore. Excluding Japan, 43 percent of Asia's exports go to other nations in the region, Lehman Brothers calculates -- up from 37 percent in 1995.

China and India represent a bigger presence on the world stage than just a half dozen years ago. China, in particular, has "more it can bring to buffer whatever happens in the U.S.

A drop of 1 percentage point in U.S. economic growth would shave 1.3 percentage points from China's growth rate due to lower exports, Citigroup says.

Since China is growing so fast, that isn't likely to make much of a dent. China's economy will still expand 11 percent this year, slightly slower than in 2007, Citigroup projects. Lehman Brothers forecasts 2008 growth will drop to 9.8 percent.

But some economist cautioned that growth in China and India could not make up all the slack of a U.S. downturn.

Asian stock markets -- many of which had stellar runs last year -- have tumbled in recent weeks amid worries that a slowdown in the U.S. will hurt corporate profits.

AP