From its meeting with CEOs and CFOs of 13 financial companies recently, HSBC has found there's a consensus that liquidity will ease only after April 2011; Basel III, IFRS are key variables for 2013; micro-finance losses are tangible; there are no worries over bribery cases or the 2G scam
HSBC has gathered from its interaction with the heads of several financial companies that the situation for banks may not be too good over the next 4-5 months.
Here are some consensus observations that emerged from HSBC's meetings.
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife.)
The Tata group chief has replied to the open letter written by promoter of BPL Mobile and Rajya Sabha MP in a very hard-hitting manner, something unheard of from the group. But in the end, Mr Tata has also pulled the BJP-led NDA regime into the 2G spectrum allocation controversy
Industrialist Rata Tata has in a hard-hitting response said that the open letter written by Rajeev Chandrashekhar, member of parliament (MP), is nothing but the current trend of attempted character assassination through widespread media publicity, couched in pain and concern for upholding ethics and values. The reply by Mr Tata and a counter-reply by Mr Chandrashekhar has ignited a new public debate that everyone, including the media, is keenly watching.
In a letter (a copy of which is with Moneylife), Mr Tata said," Your (Mr Chandrashekhar's) letter is based on untruths and distortion of facts and l feel compelled to place the real facts, as bluntly as possible before you. l hope this will also be broadly disseminated to the same audience as your letter. l am of course well aware that some media houses will choose not to publish or air my response in deference of their owners, who are the real gainers in the telecom sector, with whom you have unfortunately aligned to provide a massive diversion of attention away from the real culprits in the telecom space."
"Your (Mr Chandrashekhar) affiliation with a particular political party is well known and it appears that their political aspirations and their endeavour to embarrass the Prime Minister and the ruling party may well have been the motivation behind your letter and the insinuations which you make," the Tata group chairman said in the letter.
He further said Mr Chandrashekhar approached him to sign an appeal to the then prime minister Atal Bihari Vajpayee, then deputy prime minister Lal Krishna Advani and then finance minister Jaswant Singh, not to allow fixed mobile service providers to provide mobile services. Mr Tata said," l am also enclosing a copy of my letter to Mr Vajpayee dated 12 January 2001, in which l advocated an open, transparent process giving all parties a chance to be heard-a stance that I have not changed till date. This had angered you and the other operators who were not interested in a level playing field and lobbied aggressively through COAI to ensure that a technologically agnostic environment would not come to pass." (COAI stands for Cellular Operators Association of India.)
In his reply today to Mr Tata's letter, Mr Chandrashekhar said, "I am only disappointed, but no longer surprised, that in sharp contrast to my efforts to go out of the way to keep this debate relating to facts and policy discussions-your letter is intensely personal, attributes feeble motives (including amusing political ones) and is most unbecoming of the House of Tatas. I can only think that this is a lapse in good judgment. I particularly find your self-appointed defence of the Prime Minister and Government very irrelevant."
The whole episode of allegations and counter-allegations erupted when the Niira Radia tapes were leaked and published by sections of the media. In some tapes, it is reported that Mr Tata was discussing some issues with Ms Radia, who is known as a lobbyist. Incidentally, it is Ms Radia's firm, Vaishnavi Corporate Communications, which handles all public relations (PR) for the Tata group.
Defending the decision to appoint an external agency as PR service provider, Mr Tata said that about 10 years ago the group was under attack in a media campaign to defame its ethics and value systems and it was instituted and sustained through an unholy nexus between certain corporates and the media through selected journalists.
"As Tatas did not enjoy any such 'captive connections' in this environment, the Tata Group had no option but to seek an external agency focused at projecting its point of view in the media and countering the misinformation and vested interest viewpoints which were being expressed. Vaishnavi was commissioned for this purpose and has operated effectively since 2001," the Tata group chief said.
Calling the present situation in the telecom industry and political scenario as a "smokescreen", Mr Tata said, "When the present sensational smokescreen dies down, as it will, and the true facts emerge, it will be for the people of India to determine who are the culprits that enjoy political patronage and protection and who actually subvert policy and who have dual standards. I can hold my head high and say that neither the Tata Group nor l have at any time been involved in any of these misdeeds."
"The selective reporting and your (Mr Chandrashekhar's) own selective focus appear to be diversionary actions to deflect attention away from the real issue which plagues the telecom industry, in the interest of a few powerful politically connected operators. Perhaps it is time that you (Mr Chandrashekhar) and members of the media do some introspection and soul searching as to whether you (Mr Chandrashekhar) have been serving your masters or serving the general public at large," the Tata group chairman added.
Click here to see the letter written by Mr Ratan Tata to Mr Rajeev Chandrashekhar.
There hasn’t been much change in the demand, but increasing raw material costs is putting pressure on steel producers to hike prices
Indian steel makers may go for another price hike as surging raw material--iron ore and coking coal-prices will pressurise steel mills to increase product prices, according to industry experts.
"It looks like prices will go up. Steel prices will move upwards keeping in mind that coking coal prices are being finalised at a higher level for the January-March period and iron ore prices are also moving up. So there will be severe cost pressure on steel mills which will lead to a price hike in January," Sharad Mahendra, vice president, sales and marketing, JSW Steel told Moneylife.
"Some steel makers are planning to increase steel prices by end-December or early January. Though globally steel prices are at an improved level, it's purely because of high raw material prices and there is no significant rise in demand. To protect margins and grab the better demand-supply scenario in the fourth quarter, steel companies are preparing to increase prices," a Mumbai-based analyst said.
Recently, state-run Steel Authority of India (SAIL) increased prices of long products by Rs300 to Rs37, 500 per tonne, citing good demand for long products as construction activity is likely to pick up in the coming quarter. JSW Steel has raised hot rolled coil prices by 1-1.5%.
According to the analyst, steel prices may increase between Rs1,000 to Rs1,500 per tonne. Mr Mahendra said, "It's difficult to predict the exact hike as coking coal contract prices are in the last stage of finalisation, but in terms of percentage it could be between 3% and 6% per tonne. It's just a guess now."
China is the largest steel producer, so whenever raw material prices go up either they have to shut down units or hike prices, added the analyst.
Now, the Chinese steel industry is coming back on track. Some market experts feel that threat of cheaper Chinese imports into the country may restrain domestic players to go for a large price hike.
However, Mr Mahendra said, "Even though the Chinese steel industry is coming back on track, we do not see it as a threat as the input costs in terms of iron ore and coking coal are very high, so the Chinese mills are not able to export their products at lower prices. Secondly, after capacity shutdowns, which were taken place because of the Chinese government's energy rationalisation policy, Chinese steel demand is forecast to be very good. So I don't think China's increasing steel production will impact the Indian market in the near term."
Supply of coking coal and iron ore would be another concern for steel makers as supply would be less amid higher demand from China and India.
"China's average steel production is 50 million tonnes per month. In September, steel production stood between 46 million tonnes and 47 million tonnes, however, the country managed to produce more than 50 million tonnes of steel in October and for this monthly rate of production the requirement of iron ore and coking coal is huge," said the analyst.
"Weather predictions in Australia, from where majority of coking coal comes, are very bad. It may impact shipments and movement of coking coal from Australia to the rest of country. In India, very few mines are working right now and production of iron ore has come down," added Mr Mahendra.