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E.g., 19-02-2020
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    Gavekal Research

    India Pays The Price For Reform Backslide

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    Gavekal Research

    Hard Yards For Emerging Markets

    Emerging markets have been hit by the combined effect of a stronger US dollar, tighter international liquidity and rising trade tensions, causing their currencies to fall more in the last few months than in the 2013 “taper tantrum”. The big fear for EMs is that the end of easy money globally creates a giant margin call. As a firm, we have tended to be upbeat on their prospects in this cycle, and it may be that a huge buying opportunity has...

    2
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    Gavekal Research

    India's Prickly Politics Of Recovery

    India’s GDP growth fell to 6.1% in 4Q11, mining the depths it hit during the global financial crisis. This is probably a cyclical trough, but the growth pickup in coming quarters is likely to be weak. With inflation running on the high side and the oil price rising, the Reserve Bank of India has little room to cut rates to boost growth. So it is up to the government to revive languid private investment by cutting its budget deficit and pushing...

    2
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    Gavekal Research

    Demographic Dividend Or Demographic Nightmare?

    Among the Herculean challenges facing the government of India, job creation ranks first. Simply put, the number of new jobs is not keeping up with economic growth—a huge problem in a country where half the population is aged below 25. India needs to create roughly 8mn new jobs every year to absorb new entrants into the labor force. In addition, it needs to create more opportunities both for farmers seeking better-paying non-agricultural work and...

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    Gavekal Research

    Not All Bank Recaps Are Created Equal

    A month ago, India outlined a US$32bn plan to fix its publicly-controlled banks’ bad debt problem, sparking a more than 30% rally in their share prices. The plan remains under wraps, but the “round tripping” approach will see deposits lent to the government as recapitalization bonds and then injected back into banks as fresh capital. The question is whether India’s effort is credible enough for banks to both write off debt and have enough...

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    Gavekal Research

    India’s Great Leap Forward

    India, finally, is on course to become a genuine economic power. Calling it a “Treaty of Rome” moment goes too far, but India’s Goods and Services Tax could prove nearly as significant as the agreement that created the European common market. India has been a strong political state for nearly 70 years, but its fragmented economy prevents goods and many services from moving freely within its borders. The GST promises to create a genuinely common...

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    Gavekal Research

    Why To Buy India’s Battered Banks

    India’s central bank surveyed the landscape and yesterday painted an upbeat picture. It argued that the investment cycle may be turning, while inflation, the sub-continent’s constant bugbear, is becalmed. With Indian equities off -6% in 2018, this would seem a decent reentry point. The problem is public sector banks, for even as a US$32bn recapitalization is rolled out and bad debt is cleaned up, investors remain spooked by an outlandish scandal.

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    Gavekal Research

    Can India Get The Lay Of The Land?

    On the ladder to economic development, India missed the first rung. The transformation from an agricultural to an industrial economy is the essence of development, so the process must begin on the farm. But where northeast Asian countries implemented land reforms to boost productivity and rural savings, India balked. And where Japan, Taiwan, Korea and China enhanced the benefits of land reform with the right public investments and private...

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    Gavekal Research

    The Enemy Of My Enemy Is My Friend

    The British prime minister was not the only one thwarted by a vote last week. Despite Narendra Modi’s personal efforts and heavyweight backing from Washington, India failed in its attempt to join the 48-country Nuclear Suppliers Group. It was a bruising setback for Modi, who has spent two years energetically trying to boost India’s global clout. Yet the result itself was less significant than the US support for India in the face of Chinese...

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    Gavekal Research

    EMs And The Oil Syndrome

    Having fallen more than -10% from their late January peak, emerging markets are looking shaky. Higher yields, a stronger US dollar and rising oil prices have all contributed to a tough environment. In the face of big current account deficits, Turkey and Argentina look properly imperiled, with some saying that their troubles point to a bigger problem for emerging economies. I disagree. Not all headwinds are created equal, and what matters for EMs...

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    Gavekal Research

    India's Not All Doom And Gloom

    India’s RBI cut policy rates by 50bp yesterday, and, to our knowledge, not a single newspaper or brokerage reported this news in a positive light. True, the cut is marginal and will probably not cause a significant uptick in growth given poor sentiment, high inflation and commodity prices, and an incontinent fiscal policy. But it is important to keep things in perspective. Indian growth estimates still range around 7%. Structurally, India is...

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    Gavekal Research

    India’s Economic Funk

    India’s economy is in a cyclical funk, weighed down by rising bad debt, anemic credit and falling private investment. Growth is at its slowest for three years after weakening for five successive quarters to 5.7%, with little sign of an imminent pick up. Even foreign portfolio investors, who have poured more than US$26bn into India this year betting on its strong macro fundamentals, are beginning to waver. With the general election in 2019 now on...

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    Gavekal Research

    India's Borrowed Reserves and Other Headaches

    With its twin deficit status, India has seen the worst equity and currency performance of any major Asian country so far this year. One would expect that its foreign reserve position would reflect this disfavor, but in fact India’s foreign international reserves have expanded by nearly +7% in the past year, to $319bn, even as its trade deficit widened. How can we explain this conundrum?

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    Gavekal Research

    Notes On An Indian Scandal

    As most emerging equity markets have clawed back a good portion of the losses they suffered in early February’s risk-off, there has been one notable exception. Far from rebounding, Indian stocks have taken another leg down following revelations of a US$1.7bn fraud at Punjab National Bank, the country’s second-largest state-owned lender. The scale of the fraud—roughly twice the amount promised to the bank by the government in the first tranche of...

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    Gavekal Research

    The Cost of Onions, and Money, in India

    India is obviously not sitting pretty at the moment. Like all emerging markets, its CPI and WPI are very sensitive to rising energy and food prices, as reflected in the political fallout over soaring onion prices, which has led to raids on “hoarders,” strikes by onion traders and opportunistic sit-ins staged by the opposition BJP (which protested wearing onion garlands—see picture). And unlike some emerging markets, India’s pain is not offset by...

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    Gavekal Research

    Software: China tries the India thing

    This document is part of our old archive. It was published on 2001-03-01.You can download it here: 0082_ceq2001q1_sec3_03software.pdf

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    Gavekal Dragonomics

    Dangerous Dealing Along The Belt And Road

    In countries involved with China’s Belt-and-Road Initiative, there is a growing realization of the risks to signing up for the scheme. As debt has mounted and fears of economic dependence have increased, a backlash has begun. But as Tom explains, the lure of easy Chinese capital is a dangerous habit that many countries will struggle to kick.

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    Gavekal Research

    India’s Quiet Revolution

    Last week India announced a partial liberalization of its debt and currency markets, which should open up the economy to more long term foreign capital. Such money is sorely needed to finance an estimated US$1trn of infrastructure spending over the next five years. While India has a fairly open equity market, debt issuance has been tightly controlled and banks account for some 80% of total financing across the economy. The issue is whether banks...

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    Gavekal Research

    Calling Time On Indian Outperformance

    Indian equities have been on a tear this year with their 22% currency-adjusted gain only bested among emerging markets by Poland. This is not surprising given that India has strong fundamentals and a reform-minded government that still enjoys popular support. Yet, while long term positive drivers for the Indian market remain intact, equities have run ahead of themselves by pricing in a swift return to robust earnings growth.

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    Gavekal Dragonomics

    The 5G Dream Will Not Be Denied

    Now that the US has backed away from putting crippling sanctions on Chinese telecom-equipment firm ZTE, China looks well-placed to achieve its dreams for 5G, the next wave of mobile technology. Huawei and ZTE may be effectively blocked from the US market, but they are well-placed to grab a significant share of the global market for 5G.

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