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Chinese cyber agents rigging polls on RMB?

Here is an interesting case from FinanceAsia:

"Last week, we asked our readers what they thought about China's new currency flexibility and whether it would be sufficient to keep American politicians at bay. The early voting was close. Some readers thought it would not be sufficient, while others thought it was a bit more complicated -- it might keep Timothy Geithner at arm's length, but not necessarily for long.

Nobody voted Yes. At least, not until last Wednesday, when almost all of the Yes votes we received all week arrived in the space of a few minutes from a range of IP addresses that suggests a location somewhere in Mongolia. Or Costa Rica, we're not exactly sure.

For the record, the final voting ended up with a storming majority of 64% in the Yes camp, with the remainder split 20% for No and 16% saying it's complicated. A surprising result, to be sure.

If we can take anything from this vote (and we almost certainly cannot), it might be that the Chinese government is using FinanceAsia to subtly tip a nod to the market."

Gas, Government and Institutional Investors

The ruling by India's Supreme Court on Friday, ended the five-year long dispute between two rival firms owned by the Ambani brothers. The verdict may have caused far greater pain for the loser than gain for the winner.

The loser: Reliance Natural Resources (RNRL), a shell company that would have made big profits in the future, only if the SC had ruled in its favor. RNRL's stock crashed 23% on Friday and dropped another 9.5% on Monday morning.

The winner: RIL, India's largest company by Mcap.

 

Now, this is not our story. We will look at the bets placed by the so-called smart investors, or the institutional funds, on the climax of this high-profile case. India's domestic institutional investors - including the state-owned insurance behemoth Life Insurance Corp, the largest equity investor in Mumbai's markets - was steadily trimming exposure to RNRL since June 2009. As you can see in the chart below, some gullible foreign funds were gobbling the stock during the same period. 

RNRL stock ownership - last four quarters: DII - Domestic Institutional Investors, FII: Foreign Institutional Investors. source: Bombay Stock Exchange

This is where the DIIs re-allocated the capital. Gail is India's state-run monopoly in natural gas distribution.

Here is the past 1-year performance of Gail. Smart play!

And this is another stock that the DIIs accumulated in the past year, while FIIs continued to dump.

 

RNRL had locked horns with two Goliaths: India's government and its largest private corporation. In the second-half of 2009, Reliance ADAG, RNRL's parent, launched an aggressive campaign against India's Union Ministry of Petroleum and Natural Gas for allegedly joining hands with Reliance Industries for the benefit of state-run National Thermal Power Corp (NTPC). The campaign, advertised on all "mainstream" national newspapers, was the first of its kind in the country. It became an instant controversy and prompted both RIL and the government to react. 

The intensely dramatic, five-year long dispute finally ended without any surprise. But yes, some cowboy fund managers still lost money.

INR: Outlook Bright

India's currency and stocks rose as it kick-started the long awaited spectrum auction for 3G and Broadband Wireless Access (BWA) on Friday. Winners can roll-out next-generation mobile services -- in the world's fastest growing telecommunications market with around 600 million existing customers -- starting September 2010.

Three key points for investors -

1. INR appreciation may continue in the medium term as companies tap foreign lenders to fund/refinance their bids.

2. Portfolio funds likely to shift weights positively to play the currency rise and improved sovereign outlook, boosting equity valuations.

3. Competitive bids may further stretch the balance sheets of India's telcos. Strained debt levels could cap irrational bids.

India's largest player Bharti's debt-to-EBITDA level is greater than 2.5 times after its acquisition of Zain assets. Two other big players Vodafone and Reliance Communications already have $4bn of debt each.

From the Standard Chartered India team: "The rating agencies are closely monitoring the government’s efforts towards delivering on its fiscal consolidation promise, and therefore a successful execution of the 3G auction would bode well for the Indian rupee (INR) over the medium term. We expect this should lead to increased investor optimism about India’s sovereign outlook and give a fillip to portfolio inflows. The market also expects a pick-up in debt inflows, following the Reserve Bank of India’s decision in late 2009 to allow companies to raise external commercial borrowings (ECB) in order to bid for spectrum allocation. In fact, with the date of the auction nearing, the FX market has reportedly begun to position itself for a pick-up in ECB inflows."

Analysts at institutional brokerage India Infoline believes that imminent policy changes by the Telecom Regulatory Authority of India (TRAI), will cap aggressive bids. "We strongly believe that operators lining up to bid for 3G spectrum will consider that: 1) BWA offers a second chance. 2) the immediate requirement is additional spectrum for voice, for which 2G spectrum may soon also be available through trading or M&A (if the policy changes in the direction recommended by the May 2009 Spectrum report; this, we believe, will soon be announced, at least by TRAI. 3) intra-circle roaming. These factors should prevent bid values from rising to irrational levels, except perhaps in Delhi and Mumbai."

Lalit Modi's League

Stephen Allen Schwarzman, the billionaire chairman and co-founder of private equity giant The Blackstone Group, was found snacking at the sidelines of the ongoing World Economic Forum in Davos. This video was posted on some financial blogs recently. It is fun to watch an imposing Wall Street billionaire enjoying a banana break at the high-profile summit. What is less apparent in this clip is the growing global clout of Lalit Kumar Modi, the man in gray.

Modi is one of India's most astute businessmen. He is the president of Modi Enterprises, an industrial conglomerate with interests in diverse industries from tobacco to entertainment. To the world, he is better known as the brain behind the Indian Premier League (IPL) and the Champions League  -- international cricket league matches played in the Twenty20 format in the lines of the English Premier League and the UEFA Champions League.

Modi is also the vice president of the Board of Control for Cricket in India (BCCI), a cashcow that oversees the game in India. He was anointed to Indian cricket's top ranks by the heavyweight politician Sharadchandra Govindrao Pawar, who is the vice-president of the International Cricket Council and chairman of its World Cup Organizing Committee. Pawar owns a large Agriculture-related business empire and ironically, is India's Agriculture Minister. Pawar and Modi are today the two most important people associated with cricket, globally. While Modi's success in remodeling the colonial game is widely praised, there has also been allegations of a bit of underhand bowling.

Family ties augments his business profile. Modi is the nephew of Bhupendra Kumar Modi the billionaire chairman of Singapore-based Spice Group. Recently, Lalit Modi's elder daughter married one of the scions of the Burman family, which owns India's fourth largest FMCG products maker Dabur, apart from several other businesses and co-owns the Kings XI Punjab, an IPL team. Large conglomerates in India, including Mukesh Ambani's Reliance Industries Ltd, owns the nascent IPL franchises as strategic trophy assets. PE firms are keeping a close watch.

Billion-$ AUM Club

London is now home to 55 hedge funds that manage more than a billion dollars, compared to 65 last year, according to a survey of the global sector by Hedge Fund Intelligence, UK's Telegraph reported today.

The survey is old -- HF Intelligence had issued a press release with the findings on 5 October 2009 -- nevertheless, the facts are interesting. 

Worldwide, the number of billion-dollar hedge funds dropped from 395 in mid-2008 to 311 at the beginning of 2009. It plunged to 291 by mid-2009. London’s share of the global billion dollar club’s total assets reduced from over 17% to under 15%.

During the same period, New York's share of billion dollar hedge funds reduced from 123 to 118, however, it remained home to 47% of this species. Hong Kong and Singapore were among few cities that saw a rise.

Cheung Kong's war chest

Hong Kong's Cheung Kong Infrastructure could be a significant player in M&A tables this year. With a strong war chest of up to $3 billion - 50% in cash and 50% on project gearing, it could be looking for a series of fairly large deals involving low-risk Western utilities.

Additionally, if CKI were to leverage up its balance sheet to 65%, it could raise the ammunition to $6.5 billion, according to a recent report by Nomura International. "We believe CKI is on the lookout for acquiring low-risk and regulated utilities assets."

CKI today expressed its intentions in public, while announcing a 26% jump in its 2009 net profits, largely from asset sales. It will place a bid for the UK arm of Electricite de France SA, Europe's largest power generator. The HKSE-listed firm had increased its stake in UK's Northern Gas Networks from 75% to 88% for $128 million in mid-November 2009. 

The Nomura report said CKI may also be interested in buying assets in US and Canada and could be looking for gas, water and power assets. CKI's current gearing, or its owner's funds versus creditor's funds ratio, stands at 34% -- including off-balance sheet debts. The firm is owned by Li Ka-shing, East Asia's richest individual and the octogenarian chairman of Hutchison Whampoa.

Forbes: World's sixteenth richest billionaire, 2009. 

Sachin unites South Asia

Sachin Tendulkar slammed a double-hundred for the first time in the history of one-day cricket, against a formidable South Africa on February 24. As the Time magazine said -- "For the 1.5 billion people who follow cricket — making it, by some reckoning, the world's second most popular sport after soccer — it was a moment to match Roger Bannister's 4-min. mile in 1954."

Global media was generous in praising the genius batsman -- clearly superior to Donald Bradman -- and by some standards, greater than any other sportstar. Even then, the post on Sachin breaking Saeed's record by Pakistan's Dawn, the second largest newspaper in that country, is highly impressive. The previous record was held by Pakistan's Saeed Anwar. "Watching Tendulkar break Anwar’s record was surreal. It was also heartbreaking at times. But most of all, it was fantastic!"

The comments from Dawn's readers, both Indian and Pakistani, shows a warmth and unity of spirit, rarely enjoyed in public debate by the people from both sides of the sub-continent.

Schehzad Shah, (Pak) -- "Sachin is a legend and I am proud that he is from the sub continent and not Aussie." 

Mainik Chakrabarty, (India) -- "Sports and culture can bring us together. I hope it does. By the way, I am one of many Indians who feel we should have invited Pakistani players in the IPL. What happened was a mess."

Abdul Batada (Pak) -- "Well done Sachin. Great acheivement. I am happy that Saeed’s record broken by an Indian not and Australian or South African. Congrats to Indian nation and to Sachin."

Ajay Singh (India) -- "Fantabulous Dawn! Sachin is the jewel from Subcontinent."

Indeed, Sachin is South Asia's ultimate antidepressant!! :)

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Excerpts of a profile from Time's archives, floating on blogosphere: 

"When Sachin Tendulkar traveled to Pakistan to face one of the finest bowling attacks ever assembled in cricket, Michael Schumacher was yet to race a F1 car, Lance Armstrong had never been to the Tour de France, Diego Maradona was still the captain of a world champion Argentina team, Pete Sampras had never won a Grand Slam.

When Tendulkar embarked on a glorious career taming Imran and company, Roger Federer was a name unheard of; Lionel Messi was in his nappies, Usain Bolt was an unknown kid in the Jamaican backwaters. The Berlin Wall was still intact, USSR was one big, big country, Dr Manmohan Singh was yet to "open" the Nehruvian economy.

It seems while Time was having his toll on every individual on the face of this planet, he excused one man. Time stands frozen in front of Sachin Tendulkar. We have had champions, we have had legends, but we have never had another Sachin Tendulkar and we never will."

Anil Ambani goes hostile

Anil Ambani, the billionaire owner of India’s Reliance ADAG, has sparked a bidding war for Fame India, a film distributor in a country where hostile takeovers are rare.

Reliance MediaWorks has offered to buy 62 per cent of Fame, which had previously agreed to sell itself to local multiplex cinema operator Inox Leisure. In fact Inox now owns just over 50 per cent of Fame.

Reliance has now arrived with a cash offer of INR83.4 per share, pitched at a whooping 64 per cent premium to the existing terms on offer from Inox.

On Monday, Fame’s share price hit its permitted daily ceiling on Indian bourses, having already tripled this year. Meanwhile it emerged that Reliance Capital, the private equity wing of Mr Ambani’s empire, has been selling down its stake in Inox, with the Ambani holding now at 5.8 per cent.

Reliance already owns a film production and distribution business in India. It signed a $825 million deal with Steven Spielberg’s Dreamworks in 2008 and is seen in some quarters as a potential bidder for Hollywood’s Metro-Goldwyn-Mayer.

___________

Mr Ambani’s aggressive moves in the media and entertainment sectors have rather diverted attention from certain issues facing his other businesses.

Reliance Communications, which pulled out from a deal discussion with South Africa’s MTN in 2008, is awaiting a special audit report by India’s industry regulator for under-reporting revenues during 2007 and 2008. It is also facing investigations by the Institute of Chartered Accountants of India.

Meanwhile, Reliance Natural Resources is locked in a well publicised court battle with Reliance Industries, the rival family business controlled by Mukesh Ambani, the elder of the two estranged billionaire brothers.

Also, his Reliance Power business recently hit a roadblock at the Allahabad high court in Uttar Pradesh over its attempts to secure land on which Mr Ambani plans to build the world’s largest gas-based power plant.

Then there’s a probe being carried out by India’s Directorate of Enforcement in alleged share price manipulation in certain Reliance firms, supposedly though accounts in London.

Separately, in December India’s stock markets regulator Sebi suspended Barclays Bank from dealing in so-called participatory notes that enable offshore investors to trade Indian stocks. The regulator said there had been inaccurate disclosures on the identity of clients that had bought shares in Reliance Communication.

Mr Ambani has not had easy time of late. The market-savvy tycoon’s personal fortune declined a staggering $32 billion last year – pushing him from sixth place in the Forbes ranking of world billionaires in 2008 to thirty-fourth in 2009 — as the volatile Reliance stocks were hit hard during the credit crisis.

Read the full post -- FT Alphaville

Sino-Russian finance

A date for Asian diaries:

Event: Russia – Capital Raising and Investment Summit – Hong Kong

When: April 12 – 14
Where: The Four Seasons, HK

Keynote Speaker: Ronald Joseph Arculli, chairman of Hong Kong Exchanges and Clearing Ltd.

Goal: To attract a broad array of Asian financial market participants already active in, or interested in Russian financing and investments.

Apparently the forum will examine:

* The link that Hong Kong will play between Russia and China

* Capital markets opportunities: equity and debt
* Opportunities in Russian Distressed and Troubled Assets
* Exit strategies and liquidity in Russian investments
* M&A – outbound and inbound opportunities

Now, the big Russian/Hong Kong news recently was aluminum group Rusal’s big ticket IPO on the Hong Kong  bourse last month, where it raised $2.2 bn.

Russian oligarch Oleg Deripaska, who controls Rusal, is considering listing his electric power company En+ Power in Hong Kong too, in an effort to raise up to $1bn.

Putin and Deripaska -- Russian ‘Nexus’ of Organized Crime

That is despite the fact that Rusal shares fell sharply on their debut late last month. The stock has remained persistently weak, trading at HK$8.47 on Friday ahead of the Chinese new year holiday, against a flotation price of HK$10.80.

Maybe the intention with En+Power is to try and price the issue more accurately. Either that or find another group of investors happy to take 20 per cent haircuts.

With London now very much out in the cold as far as Russian IPOs are concerned, the appeal of Hong Kong would appear to be simple: access to Chinese capital.  Two Russian miners, Metelloinvest and SUEK, are also expected to sell shares in Hong Kong later this year.

This budding relationship in Sino-Russian capital markets, staged in Hong Kong, is interesting given recent claims by former US treasury secretary Hank Paulson that Russia proposed to China they both dump Fannie Mae and Freddie Mac bonds in 2008 to help foment the financial crisis.

Financial cold war anyone?

Read the full story here: FT Alphaville: Sino-Russian finance

Bangladesh: Asia’s Hottest Frontier?

Emerging market investors are weighing increasing their exposure to a tiny market: Bangladesh.

The country’s benchmark Dhaka Stock Exchange General Index has scaled new highs almost every week this year, after a stellar 62% gain in 2009.

Even in 2008, the year of the great liquidity crunch, the Bangladeshi benchmark bucked the trend, losing only 7%. In contrast, all other Asian markets slumped more than 40%, according to data compiled by Mark Matthews of Hong Kong-based Macquarie Capital Securities.

In short, Bangladesh appeared to be the only regional market “uncorrelated” with the Western markets – a significant fact considering that during the crisis, correlation amongst various asset classes and between equity markets had tended to one.

Year to date, the Dhaka Stock Exchange gained roughly 25%, crossing the 5,700 mark for the first time in its 56 year history.

Despite this outperformance, the Bangladeshi index “is on practically no one’s radar screens,” Macquarie’s Matthews said in a recent note to clients. As he put it: “but [it] should be”.

From the note:

* Foreigners are allowed to buy shares, but they only own 2% of the equity market

* The economy was totally unphased by the GFC. It grew by 6.3% in 2008, 6.1% in 2009, and is expected to grow by 5.7% this year and next

* Average daily turnover is 4x the Philippines, and not very far below Indonesia

The downside to this unprecedented asset boom is that Bangladesh –  historically been a victim of deep poverty and natural disasters — has not quite been able to cope with the influx of capital. Recall, after all, that 40% of its people live on less than a dollar a day, by IMF estimates

The pace of the asset boom has even led to Bangladesh’s market regulator tightening rules on bank lending to equity investors. As Matthews explained:

"Its economic cycle is completely different from that of any other in Asia, except perhaps Mongolia or Vietnam. It is on an African level of development, with a per capita income half India’s and a third Indonesia’s. But the portion of its 160m population that is moving from subsistence conditions to market economics is increasing exponentially, for several reasons which are discussed in this report. It should continue to be a high growth economy for many years going forward."

Worth noting, however, that the country’s rulers appear intent on improving its infrastructure. Tawfiq-e-Elahi Chowdhury, the energy and power adviser to Bangladesh’s Prime Minister Sheikh Hasina, said the country is seeking foreign investments to the tune of $7 billion in its power sector. In a recent trip to India last week, its industries Minister Dilip Barua, urged Indian companies to invest in Bangladesh.

Global investors first took note of Bangladesh, which has just about 230-odd publicly traded companies compared with more than 5,000 in Indian, when it appeared in the famous Next Eleven list.

Read the full story here --

FT Alphaville / Bangladesh: Asia’s hottest frontier?