India Stock Market and Global Economy

A commentary by Lee Kachroo

Archive for the ‘Global Economy’ Category

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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USA and China, the two poles?

Posted by lpkachroo on November 9, 2008

Global: USA and China, the two poles?

Saturday, November 8, 2008

#fullpost{display:inline;}So much talk about the severity of this financial crisis and potential duration focuses on US and China.  If the near term future of the global economy is tied to these two poles then we are going nowhere fast.  Our public officials in India continue to try and paint a rosy picture.  I think the following quote sums up my view:

Former (and perhaps future) Treasury Secretary Summers has argued that “You can usually date the end of the crisis to the first moment when a public official makes a forecast that proves too pessimistic.” I don’t think we are there yet. The IMF’s latest forecast still strikes me as rather optimistic. I increasingly suspect that one indicator that the financial crisis has truly turned a corner will come when the Fed’s balance sheet starts to shrink …

This quote is taken from the excellent post Central bank reserve managers still are running away from risk and echoes my post  Central banks pushing on a string.

With respect to China, the debate is getting heated up.  Projections are all pointing down as in the article How severe a slump in China?

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