Ackman on HKD in September
So back on Sept 15 2011 Ackman gave a presentation outlining his thesis on the future of the Hong Kong Dollar entertaining a couple of different scenarios but overall arguing that Hong Kong was a perfect economy aside from the inflation caused in large part by the peg to the U.S. dollar. Morgan Stanley Responded last week in their Global Economic Forum, and Ackman did not mention last week on CNBC more below.
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50% of the worlds GDP is having political transition this year, but Eurasia Group‘s Ian Bremmer says this year political transition won’t be that significant, but the headlines leading up to that transition could cause a bumpy ride for one another. The largest rhetorical claim in the report issued the first week of the year is that the 9/11 era is done. Politics and financial markets are probably more correlated this year than ever before, so if this report ever did matter its this year.
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Zero hedge responded to Bloomberg’s Nov. 16th article on Jim O’Neil’s 2012 predictions by scathing the BRIC naming economist…
Safe to say they are not huge fans…
On December 15th Morgan Stanley, on its Global Economic Forum, announced that they are revising their Indian 2012 GDP growth estimate from 7.4% to 6.9%(close to 2009 GDP growth of 6.8%) amid a host of concerns primarily pertaining to the global economic slowdown stemming from Europe and affecting all of the G-10 countries. Some of the causes for the revision cited in the note are decreased government spending, higher inflation eroding purchasing power, and less investment into the labor force. to quote
“Coming Growth Slowdown to Be Almost as Deep as During the Credit Crisis.”
So that was bad news but let’s not forget the most amazing economic characteristics of India:
Hueshar Prasad from Cornell University was on Bloomberg News this week responding to recent news that the Reserve Bank of India announced a host of reforms, provided an interesting analysis of the headwinds facing India.
Although India has averages 7% yoy average GDP growth since 1997, inflation as a fraction of growth could continue to increase.
Rupee
The Rupeee is 12% off its may high and inflation continues to be a lasting and material risk despite the Reserve Bank of India’s raising of rates 13 times since early 2010. These attempts at tightening have met considerable opposition from India’s Entrepreneurial class with claims that inflation is a result of supply chain underdevelopment and external monetary policy. Food prices for the most part have subsided, but overall inflation remains high. Regardless the RBI still hold the coolest Logo
Debt to GDP ratio
India’s public debt accounts for 60% of GDP. Although this seems extremely stable compared to Western Economies such as those in Europe (Greece, Italy, Germany considered good) and the United States his is still significantly higher than those of China.
Food prices have come down but overall inflation stays high combined with a Current Account deficit at about 1% of GDP (demonstrating its dependence on foreign nations), and a Political Environment preventing reforms.
The Key Factors Necessary to Overcome:
2011 and 2010 were tough times for India with growth falling 7 consecutive quarters and 2012 doesn’t look much better. Green shoots are everywhere as entrepreneurs tend to come from the middle class, and India has the largest middle class in the world with a population of 300 million (as big as the entire United States), the largest population of young people of any country throughout the world, and 700 million agricultural-based Indian who do not have access to the internet, let alone electricity.
Take a look at all of the startups that are coming out of India.
Now the question posed to foreign investors: has India bottomed out? Is this a good time to enter into a carry trade on Indian Retail, or Real Estate? Is it time to be greedy when others are fearful? Check out our articles on Indian equities and real estate….
