Risk of Asia's food inflation due to El Nino overstated

El  Niño, by itself, is not  a generalised problem for Asia's food inflation, says Credit Suisse in a research note

Many observers overstate the risk of Asia's food inflation surge from the effects of El Niño. Over the past 20 years or so, only two out of four episodes have seen El Niño coincide with a significant surge in both global and Asia's food inflation. During these two episodes (2007-08, 2009-10), food price inflation was partly driven up by other factors, namely rice export bans by major food exporters and an oil price rebound in 2009-10. These are the observations made in a research note by Credit Suisse.


Co-relation between El Nino and Asia's food inflation problems over the past 20 years is shown in the chart below:


There are two conditions which need to be fulfilled for El Niño to be a critical and generalised problem for Asia's inflation: (1) the stock-to-use ratio for important commodities such as rice and wheat have to come down quite substantially, which could trigger major food exporters to impose export restrictions; and (2) stronger economic growth. These conditions do not exist today, says the research note.


One country which is perhaps more exposed to El Niño is India, says Credit Suisse. This is because its food prices are highly sensitive to weather-related disruptions and it has a sizeable weight of food in its CPI (consumer price index) basket (48%). In addition, certain commodities such as palm oil could also be affected, given its already low stock-usage ratio, as pointed out by Credit Suisse Malaysia equity strategist.


A comparison of food price weights in Asian countries is given in the table below:



New Fund Launches

Religare Invesco Mutual Fund launched an open-ended fund of funds scheme Religare Invesco Global Equity Fund. The new fund offer (NFO) closed for subscription on 28th April. It seeks to provide capital appreciation by investing in Invesco Global Equity Income Fund, a Luxembourg-domiciled fund that invests primarily in equities of companies worldwide.

L&T Emerging Businesses Fund is a  two-year closed-ended equity scheme with automatic conversion into an open-ended equity scheme on completion of two years from the date of allotment. As the name suggests, the scheme would invest in emerging businesses or, in other words, small-cap stocks. The scheme will invest at least 50% of the portfolio in small-cap stocks. Small-cap stocks means companies that are beyond top 200 companies based on the market capitalisation. The benchmark for the scheme is S&P BSE Small Cap

Birla Sun Life Emerging Leaders Fund - Series 1 will invest mainly in small- and mid-cap companies. With most small- and mid-cap schemes delivering double-digit returns over the past year, fund houses seem to be using this opportunity to attract investors. The scheme, which has a lock-in period of three years, would invest over 80% of it assets in equity of which, over 70% will be in small- and mid-cap stocks and the remaining would be other equities. The scheme would also have the flexibility to invest as much as 20% of its assets in debt and money-market instruments.


Alembic Pharmaceuticals FY14 net profit surges 43% to Rs235.50 crore

For FY14 , Alembic Pharmaceuticals net profit surged to Rs235.50 crore on robust growth of its international generic business

Alembic Pharmaceuticals Ltd reported a 43% higher net profit during its full year results due to 99% growth in its international generic business.

For the 12 months to end-March, Alembic Pharmaceuticals said its net profit increased 43% to Rs235.50 crore from Rs165.23 crore while its total revenues, including sales, grew 22% to Rs1,868.4 crore from Rs1,526 crore a year ago period.

During FY14, Alembic Pharmaceuticals' international branded business grew 32% to Rs73.60 crore while, international generic formulations business grew 99% to Rs468.4.

Alembic Pharmaceuticals said in FY14, its India branded formulations business grew 14% to Rs850.6 crore, however its Indian generic business fell 4% to Rs120.71 crore.

In its quarter to end-March Alembic Pharmaceuticals said its net profit grew 40% to Rs61.3 crore from Rs43.7 crore while its total revenues, including sales, grew 23% to Rs465.2 crore from Rs378.4 crore a year ago period.

During FY14 Alembic Pharmaceuticals filed four abbreviated new drug application (ANDA) applications taking its cumulative ANDA filings to 61. It received 8 ANDA approvals during FY14 taking its cumulative to 32 ANDA approvals.

Alembic Pharmaceuticals declared a dividend of Rs3 per share.

At 2.33pm Tuesday, Alembic Pharmaceuticals was trading 2.8% up at Rs288 on the BSE, while the 30-share Sensex was flat at 22,522.

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