India Stock Market and Global Economy

A commentary by Lee Kachroo

China and India, Hard times Ahead

Posted by lpkachroo on November 9, 2008

China, India: Hard times Ahead

These tables are courtesy Mish.

Nine out of the top ten economies are in recession.
All of the developed countries are contracting.

China and India are desperately opening the liquidity spigots and lowering interest rates. For China it is all to no avail…their customers (US and other developed countries) are contracting and over-capacity in China will lead to a Hard landing. There is no replacement for the export sector which by all estimates affects 80% of China’s GDP. Manufacturing is already contracting..this is a foretaste, expect worse numbers ahead. To contemplate the effect of a prolonged slump in developed nations will require a full disclosure of the leverage position of the Banking sector to the developers. That scenario is gaining weighting in any forward looking projection.

For India, we are have over-capacity in Realty and we are NOT an export driven economy except for IT. Expect the darwinian struggle in the IT sector to start soon. Our officials seem to think they are in charge of everything….no lay-offs, no retrenchment etc…These are the pronouncements of a government looking for votes not solutions. Expect reality to pound everyone not willing to face up to reality.
There is clear evidence in India that lending standards are being tightened which should nicely offset the effect of lower rates and lower reserve requirements.
Let the euphoria of the recent stock market rally pass; conserve your cash…time to invest will come.

At the G-20 meeting, hedge funds will be brought to heel…but I wonder if reality will be faced and articulated.


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