Srpm Economy Analysis_ Group-7

8/9/2019 Srpm Economy Analysis_ Group-7

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CIJIL -91014

HARSHDEEP -91023

SAMARTH -91047

SHEFALI-91050

SHWETA-91052


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AGENDA FOR THE PRESENTATION

World investment outlook.

Analysis of the Japanese Securities market.

Analysis of the Indian Securities market. Analysis of the Chinese securities market.

External factors for Investment.

Conclusion.


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WORLD

Agriculture, 6

Industry, 30.6

services, 63.4

Contribution to GDP

Agriculture

Industry

services


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Investment as % of GDP

China 45.2 %of GDP

Japan

20.6 % ofGDP

World

22.3% ofGDP

India32.3 % of

GDP


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FOREX RESERVES IN BN $

0

500

1000

1500

2000

2500

2006 2007 2008 2009 2010

151 199309 252 277

852 9091015 1018 1050

875

1202

1682

1952

2447

India

Japan

China


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COUNTRY RISK RATING


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WHAT MAKES INDIA WORST?

EXTERNAL SECURITY RISK

TERRORIST THREAT

STATE LEVEL DISPUTES THE POOR QUALITY OF PHYSICAL

INFRASTRUCTURE

SUFFOCATING LEVELS OF BUREAUCRACY,

FRAGMENTED MULTI-PARTY COALITION


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GDP GROWTH RATE-JAPAN


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CURRENT ACCOUNT VARIATION


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INDUSTRIAL PRODUCTION % CHANGE


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EXCHANGE RATE OVER THE YEARS


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INTEREST RATE VARIATION


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JAPANESE STOCK MARKET


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DIVIDEND YIELD OF DIFFERENT

SECTORS OF JAPAN


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INFLATION RATE VARIATION


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REASONS FOR DEFLATION

The return of deflation for the first time since August 2006 had

been expected but there is a fear that flat consumption and a

stagnant job market will strengthen the possibility of a double-dip

recession. In the 1990s, consumers stopped spending in the expectation

that prices would fall further.

Faced with falling profits, companies were forced to squeeze

wages, shed jobs and cut production.

This situation is again expected to come.


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BALANCE OF TRADE

VARIATION


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Confidence survey measures the level of optimism that

people who run companies have about the performance

of the economy and how they feel about their

organizations prospects.

Business confidence surveys can provide useful signs

about the current condition of the economy, becausecompanies often have information about consumer

demand sooner than government statisticians do.

BUSINESS CONFIDENCE VARIATION


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FII INDIA

FII in India are regulated by SEBI and RBI, highly

regulated.

India investment in Securities in primary and

secondary markets including shares, debentures andwarrants of companies, unlisted, listed or to be listed

on a recognized stock exchange in India.

In Indian spot market, FIIs will not be allowed to

issue P-Notes more than 40 per cent of their assets

under custody, at the rate of 5 per cent of their

assets.


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INDIA

Agriculture, 17

Industry, 28.2

services, 54.9

Contribution to GDP

Agriculture

Industry

services


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FII limits in India

For Government Bonds

100 % Debt Route US $ 1.55 billion

70 : 30 Route US $ 200 million

Total Limit US $ 1.75 billion

Normal FII (70:30 Route) 100% Debt FII

Total investment in equity and equity

related instruments shall not be less

than 70% of aggregate of all

investments.

100% investment shall be made in

debt security only.


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SEBI REGULATION ON FII

24% forIndian

company

20% in caseof public

sector bank

Can beraised upto

sectorialcap


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DISADVANTAGE OF HUGE

CAPITAL INFLOW?

Huge capitalinflow

Encouragingeconomic

growth

Localcurrency togain value

Underminethe exportindustry

Rise ininflation

Reducingdomestic

componentby selling

treasury bills


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INDIAN BOND MARKET

The government has set a ceiling of $5 billion for investment in government securitiesand treasury bills while for corporate bonds, the limit has been hiked to $15 billion

According to their estimates, just about $6 billion has only been invested so far by FIIsin bonds issued by local corporate

Officials reckon that the government debt market is still in a nascent stage and anymajor pullout of money by foreign portfolio investors could destabilise the market.

If a majority of these investors suddenly choose to take out their money, it could leadto spiking of bond yields which can have an impact on RBIs monetary policy.

No single entity can buy more than Rs 300 crore of the government debt investmentlimit in an auction. The minimum amount here was also brought down to Rs 50 crore


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% SHARE OF FII INVESTMENT

MARKET CAPITALISATION OF FIIS HOLDING (IN NSE LISTED COMPANIES) TO TOTAL

MARKET CAPITALISATION OF NSE -12.5


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TURNOVER IN F & O SEGMENT


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GROWTH RATE

-2

0

2

4

6

8

10

12

2005-06 2006-072007-08

2008-092009-10

9.5 9.79.2

6.7 7.2

5.2

3.7 4.7

1.6

-0.2

11.110.2 10.5

9.88.7

GDP growth rate Agriculture Services


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INFLATION RATE VARIATION

4.4

5.44.7

8.3

9.9

0

2

4

6

8

10

12

2005-06 2006-07 2007-08 2008-09 2009-10

Inflation Rate


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EXTERNAL DEBT VARIATION

0

100

200

300

2005-06 2006-072007-08

2008-092009-10

139.1 172.4 224.4 224.6 251.4

External debt( US$ bn)


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FII INFLOWS OVER THE YEARS

-15 -10 -5 0 5 10 15 20 25

2005-06

2006-07

2007-08

2008-09

2009-10

9.9

3.2

20.3

-15

23.8

FIIInflows(US$ bn)


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FII TAX INDIA


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Agriculture, 10.9

Industry, 48.6

Services, 40.5

Agriculture

Industry

Services

CONTRIBUTION TO GDP-CHINA


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CHINESE REGULATORS.

QFII-Qualified Foreign Institutional

Investors

State Administration of Foreign

Exchange (SAFE)

China Securities Regulatory

Commission (CSRC)

Peoples bank of China


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CHINESE SECURITIES MARKET

The Shanghai Stock Exchange (SHSE)established on Dec19,1990

Shenzhen Stock Exchange (SZSE) on July 3, 1991.

The Hongkong Stock Exchange goes back to 1871.

.

H-Share

B-Share

A-Share


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SECURITY EXCHANGES IN CHINA

Data updated on December 2009

SSE P/E Ratio of SSE SZSE P/E Ratio of SZSE HKEX

A shares 850 20.18 473 44.12

B shares 54 18.21 54 21.83

H-Shares 1241

Average/Total 904 20.11 527 46.01 34.51


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QFII IN CHINA A QFII invest in

(i) publicly listed shares on the Shanghai orShenzhen Stock Exchange other than Ashares;

(ii) publicly traded treasurybonds, convertible bonds and corporate

bonds;(iii) other financial instruments approved

by CSRC.

Regulation on QFII

(i) An individual QFII may not hold morethan 10% of the total outstandingshares of any single listed company

(ii) in any single listed company, sharesheld by all QFIIs may not exceed 20% ofthe total outstanding shares of the

listed company. 76 re d. FII in China


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INVESTMENT AND CONSUMPTION

Whether all investments

are capable earning a profit

to service there debt

financing. Private consumption still

weak

Dependence on world

economy.


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EXCHANGE CHANGE RISK

To protect their exporters.

Reminbi devalued at par

with dollars in theInternational market.

Exchange rate risk is least

incase ofQFII in china.


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0

4

6

8

10

1

14

005 006 007 008 009 010

10.411.6

13.01

9.05 8.74

10.5

GDP Growth

CHINA


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SSE COMPOSITE VARIATION OVER THE

YEARS


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CHINESE BOND

MARKET


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VARIATION OF INFLATION

RATE OVER THE YEARS


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HIGH INFLOW VIS-A-VIS LOW INFLATION

Any country experiencing very rapid productivity growth in the tradable goods sector

will see a rise in the real value of its exchange rate.

central bank does not intervene central bank intervene

net current account inflows should cause

excess domestic monetary expansion

Domestic prices must rise

Rapid money growth should have pushed

China into an inflationary spiral

total appreciation in the past decade hasbeen much less than the relativegrowth in productivity


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But this not the Case in China.

Low inflation because of Financial repression

the vast bulk of Chinese savings is in the form of bank deposits, and the

deposit rate is set at extremely low levels.

that monetary growth is channelled not into household demand but rather

into the production of more goods.

Financial repression leads to overinvestment, asset bubbles, and risingexcess capacity.


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FI I I

I I I

32.27%

31.85%

24.30%

2.81%

4.50%2.78% 0.36% 1.11% 0.02%

Government Bonds

Central Bank Bills

Policy Bank Bonds

Financial Instit tion Bonds

Corporate Bonds

Corporate Commercial

Papers

Assets Backed Sec rities


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VARIATION OF GOVT. BOND YIELD


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VARIATION OF CURRENT ACCOUNT


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VARIATION OF BALANCE OF

TRADE OVER THE YEARS


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INVESTMENT IN CHINA

The economic indicators in China indicates that there is a great deal ofuncertainty in this market.

On the positive side, investing in uncertainty can lead to richrewards. However, on the downside, it can also lead to largelosses. Thus, any Chinese investment to be an aggressive part of yourportfolio, and should be limited accordingly.

To Invest in China, one should also consider the political framework in thecountry which promotes capitalism , still ruled by communist party.


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Srpm Economy Analysis_ Group-7