Srpm Economy Analysis_ Group-7
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Transcript of Srpm Economy Analysis_ Group-7
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CIJIL -91014
HARSHDEEP -91023
SAMARTH -91047
SHEFALI-91050
SHWETA-91052
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AGENDA FOR THE PRESENTATION
World investment outlook.
Analysis of the Japanese Securities market.
Analysis of the Indian Securities market. Analysis of the Chinese securities market.
External factors for Investment.
Conclusion.
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WORLD
Agriculture, 6
Industry, 30.6
services, 63.4
Contribution to GDP
Agriculture
Industry
services
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Investment as % of GDP
China 45.2 %of GDP
Japan
20.6 % ofGDP
World
22.3% ofGDP
India32.3 % of
GDP
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FOREX RESERVES IN BN $
0
500
1000
1500
2000
2500
2006 2007 2008 2009 2010
151 199309 252 277
852 9091015 1018 1050
875
1202
1682
1952
2447
India
Japan
China
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COUNTRY RISK RATING
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WHAT MAKES INDIA WORST?
EXTERNAL SECURITY RISK
TERRORIST THREAT
STATE LEVEL DISPUTES THE POOR QUALITY OF PHYSICAL
INFRASTRUCTURE
SUFFOCATING LEVELS OF BUREAUCRACY,
FRAGMENTED MULTI-PARTY COALITION
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GDP GROWTH RATE-JAPAN
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CURRENT ACCOUNT VARIATION
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INDUSTRIAL PRODUCTION % CHANGE
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EXCHANGE RATE OVER THE YEARS
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INTEREST RATE VARIATION
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JAPANESE STOCK MARKET
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DIVIDEND YIELD OF DIFFERENT
SECTORS OF JAPAN
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INFLATION RATE VARIATION
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REASONS FOR DEFLATION
The return of deflation for the first time since August 2006 had
been expected but there is a fear that flat consumption and a
stagnant job market will strengthen the possibility of a double-dip
recession. In the 1990s, consumers stopped spending in the expectation
that prices would fall further.
Faced with falling profits, companies were forced to squeeze
wages, shed jobs and cut production.
This situation is again expected to come.
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BALANCE OF TRADE
VARIATION
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Confidence survey measures the level of optimism that
people who run companies have about the performance
of the economy and how they feel about their
organizations prospects.
Business confidence surveys can provide useful signs
about the current condition of the economy, becausecompanies often have information about consumer
demand sooner than government statisticians do.
BUSINESS CONFIDENCE VARIATION
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FII INDIA
FII in India are regulated by SEBI and RBI, highly
regulated.
India investment in Securities in primary and
secondary markets including shares, debentures andwarrants of companies, unlisted, listed or to be listed
on a recognized stock exchange in India.
In Indian spot market, FIIs will not be allowed to
issue P-Notes more than 40 per cent of their assets
under custody, at the rate of 5 per cent of their
assets.
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INDIA
Agriculture, 17
Industry, 28.2
services, 54.9
Contribution to GDP
Agriculture
Industry
services
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FII limits in India
For Government Bonds
100 % Debt Route US $ 1.55 billion
70 : 30 Route US $ 200 million
Total Limit US $ 1.75 billion
Normal FII (70:30 Route) 100% Debt FII
Total investment in equity and equity
related instruments shall not be less
than 70% of aggregate of all
investments.
100% investment shall be made in
debt security only.
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SEBI REGULATION ON FII
24% forIndian
company
20% in caseof public
sector bank
Can beraised upto
sectorialcap
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DISADVANTAGE OF HUGE
CAPITAL INFLOW?
Huge capitalinflow
Encouragingeconomic
growth
Localcurrency togain value
Underminethe exportindustry
Rise ininflation
Reducingdomestic
componentby selling
treasury bills
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INDIAN BOND MARKET
The government has set a ceiling of $5 billion for investment in government securitiesand treasury bills while for corporate bonds, the limit has been hiked to $15 billion
According to their estimates, just about $6 billion has only been invested so far by FIIsin bonds issued by local corporate
Officials reckon that the government debt market is still in a nascent stage and anymajor pullout of money by foreign portfolio investors could destabilise the market.
If a majority of these investors suddenly choose to take out their money, it could leadto spiking of bond yields which can have an impact on RBIs monetary policy.
No single entity can buy more than Rs 300 crore of the government debt investmentlimit in an auction. The minimum amount here was also brought down to Rs 50 crore
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% SHARE OF FII INVESTMENT
MARKET CAPITALISATION OF FIIS HOLDING (IN NSE LISTED COMPANIES) TO TOTAL
MARKET CAPITALISATION OF NSE -12.5
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TURNOVER IN F & O SEGMENT
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GROWTH RATE
-2
0
2
4
6
8
10
12
2005-06 2006-072007-08
2008-092009-10
9.5 9.79.2
6.7 7.2
5.2
3.7 4.7
1.6
-0.2
11.110.2 10.5
9.88.7
GDP growth rate Agriculture Services
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INFLATION RATE VARIATION
4.4
5.44.7
8.3
9.9
0
2
4
6
8
10
12
2005-06 2006-07 2007-08 2008-09 2009-10
Inflation Rate
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EXTERNAL DEBT VARIATION
0
100
200
300
2005-06 2006-072007-08
2008-092009-10
139.1 172.4 224.4 224.6 251.4
External debt( US$ bn)
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FII INFLOWS OVER THE YEARS
-15 -10 -5 0 5 10 15 20 25
2005-06
2006-07
2007-08
2008-09
2009-10
9.9
3.2
20.3
-15
23.8
FIIInflows(US$ bn)
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FII TAX INDIA
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Agriculture, 10.9
Industry, 48.6
Services, 40.5
Agriculture
Industry
Services
CONTRIBUTION TO GDP-CHINA
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CHINESE REGULATORS.
QFII-Qualified Foreign Institutional
Investors
State Administration of Foreign
Exchange (SAFE)
China Securities Regulatory
Commission (CSRC)
Peoples bank of China
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CHINESE SECURITIES MARKET
The Shanghai Stock Exchange (SHSE)established on Dec19,1990
Shenzhen Stock Exchange (SZSE) on July 3, 1991.
The Hongkong Stock Exchange goes back to 1871.
.
H-Share
B-Share
A-Share
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SECURITY EXCHANGES IN CHINA
Data updated on December 2009
SSE P/E Ratio of SSE SZSE P/E Ratio of SZSE HKEX
A shares 850 20.18 473 44.12
B shares 54 18.21 54 21.83
H-Shares 1241
Average/Total 904 20.11 527 46.01 34.51
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QFII IN CHINA A QFII invest in
(i) publicly listed shares on the Shanghai orShenzhen Stock Exchange other than Ashares;
(ii) publicly traded treasurybonds, convertible bonds and corporate
bonds;(iii) other financial instruments approved
by CSRC.
Regulation on QFII
(i) An individual QFII may not hold morethan 10% of the total outstandingshares of any single listed company
(ii) in any single listed company, sharesheld by all QFIIs may not exceed 20% ofthe total outstanding shares of the
listed company. 76 re d. FII in China
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INVESTMENT AND CONSUMPTION
Whether all investments
are capable earning a profit
to service there debt
financing. Private consumption still
weak
Dependence on world
economy.
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EXCHANGE CHANGE RISK
To protect their exporters.
Reminbi devalued at par
with dollars in theInternational market.
Exchange rate risk is least
incase ofQFII in china.
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0
4
6
8
10
1
14
005 006 007 008 009 010
10.411.6
13.01
9.05 8.74
10.5
GDP Growth
CHINA
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SSE COMPOSITE VARIATION OVER THE
YEARS
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CHINESE BOND
MARKET
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VARIATION OF INFLATION
RATE OVER THE YEARS
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HIGH INFLOW VIS-A-VIS LOW INFLATION
Any country experiencing very rapid productivity growth in the tradable goods sector
will see a rise in the real value of its exchange rate.
central bank does not intervene central bank intervene
net current account inflows should cause
excess domestic monetary expansion
Domestic prices must rise
Rapid money growth should have pushed
China into an inflationary spiral
total appreciation in the past decade hasbeen much less than the relativegrowth in productivity
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But this not the Case in China.
Low inflation because of Financial repression
the vast bulk of Chinese savings is in the form of bank deposits, and the
deposit rate is set at extremely low levels.
that monetary growth is channelled not into household demand but rather
into the production of more goods.
Financial repression leads to overinvestment, asset bubbles, and risingexcess capacity.
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FI I I
I I I
32.27%
31.85%
24.30%
2.81%
4.50%2.78% 0.36% 1.11% 0.02%
Government Bonds
Central Bank Bills
Policy Bank Bonds
Financial Instit tion Bonds
Corporate Bonds
Corporate Commercial
Papers
Assets Backed Sec rities
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VARIATION OF GOVT. BOND YIELD
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VARIATION OF CURRENT ACCOUNT
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VARIATION OF BALANCE OF
TRADE OVER THE YEARS
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INVESTMENT IN CHINA
The economic indicators in China indicates that there is a great deal ofuncertainty in this market.
On the positive side, investing in uncertainty can lead to richrewards. However, on the downside, it can also lead to largelosses. Thus, any Chinese investment to be an aggressive part of yourportfolio, and should be limited accordingly.
To Invest in China, one should also consider the political framework in thecountry which promotes capitalism , still ruled by communist party.
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