Personal finance Monday

Deutsche MF launches DWS Hybrid Fixed Term Fund-Series 1; L&T Mutual Fund introduces new fixed maturity plan; DSP BlackRock MF unveils DSP BlackRock FMP-3M-Series 19; HSBC Mutual Fund revises exit load structure under two schemes; Birla Sun Life MF declares dividend under two schemes; ICICI Prudential Life launches iProtect

Deutsche MF launches DWS Hybrid Fixed Term Fund-Series 1

Deutsche Mutual Fund has launched a new fund called DWS Hybrid Fixed Term Fund-Series 1. The fund is a close-ended income scheme. The new issue opens on 23 August 2010 and closes on 6 September 2010. The new fund offer (NFO) price for the scheme is Rs10 per unit. The minimum subscription amount for the scheme is Rs5,000. The entry and exit load for the scheme is nil. The investment objective of the scheme is to generate income by investing in high quality fixed income securities maturing on or before the date of the maturity of the scheme. The scheme also aims to generate capital appreciation by investing in equity and equity related instruments.

L&T Mutual Fund introduces new fixed maturity plan

L&T Mutual Fund has introduced a new fund called L&T FMP- I (August125D A). The fund is a closed ended income scheme having a tenor of 125 days. The new issue opens for subscription on 23 August 2010 and closes on 25 August 2010. The new fund offer (NFO) price for the scheme is Rs10 per unit. The duration of the scheme is 125 days. The scheme offers two options-growth and dividend (payout) option. The minimum application amount is Rs5,000 and in multiples of Re1 thereafter. The fund seeks to collect a minimum target amount of Rs1 crore under the scheme during the NFO period. Entry and exit load charge will be nil for the scheme. The investment objective of the scheme is to achieve growth of capital by making investments in debt/fixed income securities maturing on or before the maturity of the scheme.

DSP BlackRock MF unveils DSP BlackRock FMP-3M-Series 19

DSP BlackRock Mutual Fund has unveiled DSP BlackRock FMP-3M-Series 19. The fund is a close ended income fund. The new issue opened for subscription on 20 August 2010 and will close on 25 August 2010. The new fund offer (NFO) price for the scheme is Rs10 per unit. The minimum subscription amount for the scheme is Rs10,000 and in multiples of Rs10 thereafter. The investment objective of the schemes is to seek capital appreciation by investing in debt and money market securities maturing on or before the date of maturity of the schemes.

HSBC Mutual Fund revises exit load structure under two schemes

HSBC Mutual Fund has revised the exit load structure under its two schemes-HSBC Ultra Short Term Bond Fund and HSBC Income Fund-Short Term Plan. As per the revision, HSBC Ultra Short Term Bond Fund will charge 0.25%, if the investment is redeemed within 15 days from the date of allotment of units. HSBC Income Fund-Short Term Plan will charge 0.25%, if the investment is redeemed within three months from the date of allotment of units. The revision is effective from 23 August 2010. Both schemes are benchmarked against CRISIL Short Term Bond Fund Index. 

Birla Sun Life MF declares dividend under two schemes

Birla Sun Life Mutual Fund has announced dividend under its two schemes namely Birla Sun Life MNC Fund and Birla Sun Life India Opportunities Fund. The quantum of dividend decided for Birla Sun Life MNC Fund is Rs5.25 per unit and for Birla Sun Life India Opportunities Fund is Rs1.25 per unit on the face value of Rs10 per unit. The record date decided for distribution of dividend for the schemes is 27 August 2010. Both the schemes are open ended equity schemes.

ICICI Prudential Life launches iProtect

ICICI Prudential Life Insurance Company Ltd has launched iProtect-an online term insurance plan. An individual can apply online for iProtect and the payment can be made either through his/her Internet banking account or credit card. The life cover commences as soon as the premium is paid. Upto a certain limit, the life cover can be bought immediately without the need for any medical tests. Above this limit also, the entire transaction can be finished online but the cover will start post a medical test. The policy can be bought online as no physical documentation is required. iProtect provides financial security to the family of the policy holder in the event of his untimely death. In case of such an eventuality, the nominee will receive the entire sum assured. The entry age for a customer is a minimum of 20 years and a maximum of 65 years with a minimum policy term of 10 years and a maximum of 30 years. The maximum age at policy expiry is 75 years.

 

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Developed market targeted M&A deals rise 25% in H1; India leads

New Delhi: Portraying a strong rebound in their deal-making confidence, emerging markets led by India saw a 25% rise in merger and acquisitions (M&A) deals targeted towards developed markets in the past six months, reports PTI quoting a study by global consultancy KPMG.

According to the latest Emerging Markets International Acquisition Tracker (EMIAT) report, 243 Emerging-to-Developed (E2D) deals were recorded in the first half of 2010, compared to 194 in the second half of 2009.

"The 25% increase in E2D deals was in no small part due to a resurgent India. After three relatively quiet six month periods, India recorded 50 deals — well up on the 21 of the previous six months," the report stated.

China was also up by nine deals to 39, while South East Asia jumped from 34 to 47 deals.

Although there has been a rise in emerging to developed market deals in the past six months, the number of deals from western markets targeting developing market firms' remains higher.

The report revealed that 748 Developed-to-Emerging (D2E) deals have been witnessed in the past six months showing a 9% increase over the previous six-month period.

"The findings suggest that deal-making confidence is returning far quicker in emerging economies than in developed market. In absolute terms, E2D deals still only equal to 32% of D2E deals in the past six months, but it is apparent that they have worked through their financial crisis hangover far quicker," KPMG chairman high growth markets practice in the UK, Ian Gomes, said.

"By contrast, I sense a degree of reticence amongst many of the developed economy trade buyers to get back on the M&A trail before all the nagging doubts over double-dip recessions and sovereign debt fall-outs have fully receded," Mr Gomes added.

The research analysed deal flows between 13 emerging economies, including India, China, Brazil, Russia, South Africa, Central & Eastern Europe and 15 developed economies such as US, UK, Canada, Spain, France, Japan among others.

Interestingly, an average of 202 Emerging-to-Emerging (E2E) cross-border deals per year have been witnessed since the start of 2003.

This represents 1,518 deals struck in 7.5 years driven by growing stature of emerging economy trade buyers.

On the E2E front, analysis of the numbers going back to 2003 reveals that South East Asia has been the most popular destination, registering 302 inbound deals.

China was the next most popular market with 197 deals, while India registered 167 deals.

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India will beat China says Morgan Stanley

By 2013-15, India will outpace China’s growth, predicts Morgan Stanley, basing its arguments on the same old demographic facts.

A Morgan Stanley (MS) report dated 13th August makes a bold statement: By 2013-15, India will start outpacing China’s gross domestic product (GDP) growth. Author Chetan Ahya (India & South East Asia economist at Morgan Stanley) is undoubtedly on the road meeting institutional clients and talking about the bullish stance of Morgan Stanley. Mr Ahya has been conservative about India’s prospects since 2004, highlighting the country’s fiscal deficit and current account deficit. So, it is interesting to see what arguments Morgan Stanley comes up with. Here is a gist of what the report says. This is the third in the series of reports titled "India and China: New Tigers of Asia", the first of which came out in 2004.

The key prediction that the report makes is that India’s growth will accelerate to a sustainable 9%-10% by 2013-15, after an average of 7.3% over the past 10 years. So, over the next 10 years, MS expects India’s growth to outpace China’s. Its chief economist for China, Qing Wang, believes that China’s growth will move towards a more sustainable rate of 8% by 2015, following the remarkable 10% average over the past 30 years. If these predictions come true, implications for asset allocation are huge.

MS says that India's current growth happened because of three key reasons — the ratio of its dependent population size to the working-age population size declined to 57% in 2009 from almost 69% in 1995. This was because the proportion of both elderly people and children to the working age population decreased. This led to higher savings and consequently investment. The second reason, MS believes, was reform, and the third, globalisation - "India’s savings to GDP has risen to 33%-36% from 24%-25%. Similarly, investment to GDP has risen to 35%-38% from 24%-25% and GDP growth has accelerated to a trailing five-year average of 8.5% in 2009 from 5.9% in 2000."

China, says the report, has reached an inflection point and the size of its dependent population will actually start rising from 2015. While India will see a further rise in investments to GDP, particularly in infrastructure, China will see a gradual rise in consumption to GDP — as it tries to reduce its dependence on exports.

The report says real GDP growth in China has averaged 10% annually over the past 30 years, compared with 6.2% in India. During this period, China’s GDP grew 16 times to $5 trillion whereas India’s rose seven times to $1.2 trillion.  China’s exports (including services) surged 65 times over this period to $1,330 billion while India’s exports increased 22 times to $250 billion. The reason China outpaced India was faster structural reforms and faster participation in globalisation.

Going by the MS report's assumptions, India will make great strides in education over the next decade or so. The report points out United Nations (UN) data, which shows that by 2020 India, will contribute an additional 136 million people to the global labor pool versus 23 million from China and 11 million from the US while Japan and Europe’s working populations are estimated to decline by 8 million and 21 million. However, since demographics alone is not enough, this workforce will have to be educated and skilled — leading to possibly great opportunities in education.

MS expects the pace of reforms to pick up over the next 12-24 months in seven ways — further measures to reduce subsidy burden, the goods and services tax (GST), direct tax reforms, meaningful divestment, cutting fiscal deficit, accelerating infrastructure spending — particularly for roads and power, and foreign direct investment (FDI) in retail marketing and distribution.

For these predictions to come true three things need to happen — the government needs to ensure that it delivers on execution of infrastructure development; for a structural rise in domestic savings and investments, reduction of the government’s revenue deficit would be critical; and labour law reforms would need to be prioritized.

The report is strangely not very articulate on agricultural reforms and the need to empower the farmer as a consumer. According to statistics available in the report, China's agricultural growth in the 1980s was at a peak of 5% plus, which has now settled at 4%. However, India's growth, which also peaked in the 80's at 4.6%, has actually come off to 2.7% in the 2000s. Incidentally, agriculture still has a 20% share in India's GDP against 10% for China.

The report does say that building a modern retail distribution system that could lead to a significant transformation in India’s SME manufacturing and farming segments. "This, coupled with rising infrastructure investments, could provide India with the opportunity to participate in the global export market for low-ticket manufactured goods." Could 'made in India' become the new 'made in China'?

The report throws up some very interesting facts. For e.g., it says that Indians are spending less on primary goods and more on organised sector products — "An average Indian spends about 62% on products other than food, beverages, and tobacco, compared with the average in China of 75%." However, India's share of food and beverages in its overall consumption is still high at 38% vs. 25% for China. Transportation, surprisingly, is also very high at 18% vs. 11% for China. The Chinese spend twice as much on leisure, education, clothing and footwear, health, and hotels as much as we do. Huge divergence in spending levels between China and India (where India is much lower of course) are also visible in shampoos, oral care, carbonated drinks, bottled water, skincare, and cars.

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