Thursday, July 8, 2010


The world’s population of high net worth individuals (HNWIs1) grew 17.1% to 10.0 million in 2009, returning to levels last seen in 2007 despite the contraction in world gross domestic product (GDP). Global HNWI wealth similarly recovered, rising 18.9% to US$39.0 trillion, with HNWI wealth in Asia-Pacific and Latin America actually surpassing levels last seen at the end of 2007.

For the first time ever, the size of the HNWI population in Asia-Pacific was as large as that of Europe (at 3.0 million). This shift in the rankings occurred because HNWI gains in Europe, while sizeable, were far less than those in Asia-Pacific, where the region’s economies saw continued robust growth in both economic and market drivers of wealth.

The wealth of Asia-Pacific HNWIs stood at US$9.7 trillion by the end of 2009, up 30.9%, and above the US$9.5 trillion in wealth held by Europe’s HNWIs. Among Asia-Pacific markets, Hong Kong and India led the pack, rebounding from mammoth declines in their HNWI bases and wealth in 2008 amid an outsized resurgence in their stock markets.

The global HNWI population nevertheless remains highly concentrated. The U.S., Japan and Germany still accounted for 53.5% of the world’s HNWI population at the end of 2009, down only slightly from 54.0% in 2008. Australia became the tenth largest home to HNWIs, after overtaking Brazil, due to a considerable rebound.

After losing 24.0% in 2008, Ultra-HNWIs2 saw wealth rebound 21.5% in 2009. At the end of 2009, Ultra- HNWIs accounted for 35.5% of global HNWI wealth, up from 34.7%, while representing only 0.9% of the global HNWI population, the same as in 2008.

To read the full report: WWR


All markets were extremely focused on the EuroZone situation in Q2, even though FX had been looking at this problem since the Euro downtrend really took off in December of 2009. The difference towards the end of Q2 versus earlier was that the EuroZone sovereign debt issue was finally judged to be critical enough to affect risk appetite across all markets and around the
world, rather than in FX only. This was remarkably similar to the way in which the market obstinately tried to contain the subprime issue as a US-only problem until well into 2008, even as Bernanke cut rates for the
first time in September 2007.

As we ponder the landscape for FX in the quarter ahead and beyond, we suspect that the main theme currently occupying a significant portion of the market’s bandwidth of attention – the EuroZone situation and its effect on risk appetite generally – will remain important. But we also suspect that this theme is occupying far too much of the market’s attention relative to other macro themes that could come to the fore in the coming quarter. Below we have a look at three of these themes.

Commodity currency countries – not just about risk anymore

In economic boom and bust cycles, the market expects the commodity currencies to act as high beta plays on global risk appetite and global growth, with the assumption that they will see the highest growth rates and interest rates during good times and appreciate the quickest on capital flows and carry trading, but will likewise see the fastest decline rates on the downside of the growth cycle as capital flows reverse due to quickly contracting interest rate spreads and as key
commodity prices fall and see a contraction in key domestic export industries. Most of these elements were in play in the boom and subsequent 2008-09 bust in commodity currencies. As global growth was suddenly in doubt in 2008, AUDUSD (to take a popular example) tumbled from a 25-year high to a five year low in the space of a couple of months..

To read the full report: MARKETS

>Economic and Steel Market Outlook 2010-2011

In the first quarter of 2010, the EU economy continued to move forward at a snail’s pace, growing by just 0.2% quarter-on-quarter. Export growth and inventory replenishment remained the main drivers of the still hesitant recovery. While so far this year also government expenditure contributed positively, internal momentum lost further strength, reflecting sluggish private consumption and investment, particularly in construction.

At the country level there were marked differences in growth performance. Italy surprised on the upside compared with other large EU countries, whereas Sweden and Portugal outperformed
the smaller member states. GDP growth in most countries appears to be stuck in slow motion.
Industry is clearly showing the strongest dynamics of all economic sectors during this stage of the recovery. Supported by the marked improvement in international trade and particularly the rapid rebound of the Asian emerging countries, orders have been improving across a wide range of manufacturing sectors. Output is steadily recuperating from the deep fall in industrial activity in 2009. The rebound in production had been signalled by the improvement in industrial confidence indicators from Q2-2009 onwards. Since late last year, the pick-up in activity appears to have shifted into a higher gear.

Meanwhile, confidence surveys and other forward looking indicators for the industrial sector such as the EU Purchasing Managers’ Indexes point to activity forging ahead in the coming months. EU manufacturing looks well positioned to benefit from business opportunities opening up abroad given its strong position in those industrial sectors where customer focus, high service and skill levels are determining factors. Further support to the competitive position of EU industry in the international export markets is provided by the further depreciation of the Euro during the 2nd quarter.

To read the full report: STEEL MARKET


Deliveries behind schedule: PDL has disappointed on its delivery target in FY10, delivering ~1.8msf against the target of ~5.1msf. Of the ~1.83msf delivered, ~87% has been delivery of plots. In terms of new sales in FY10, PDL has sold 2,371 units in FY10 comprising an area of 5.33msf against our expectations of 7.4msf.

However, sales momentum and improved execution to drive revenues
In FY10, PDL launched 7 new projects across 3.89msf - key projects being La Tropicana, Delhi (1.97msf), Elite Floors, Dharuhera (0.7msf) and Parsvnath Technica IT Park, Gurgaon (0.7msf). Execution on these and certain other projects (Palacia – Gr. Noida, Privilege – Gr. Noida, Exotica – Ghaziabad and Gurgaon are expected to drive revenues for FY10-FY12E at a CAGR of 32%.

Net debt to ~halve to INR 9.8bn by FY12E as compared to peak
PDL’s net debt had increased from INR 6.2bn in FY07 to INR 18.2bn (net D/E: 0.92x) in Q3FY09. However, post a QIP of INR 1.7bn and asset monetization (INR 3.35bn) net debt has reduced to INR 15bn in FY10 (net D/E: 0.66x). We expect the net debt to reduce further to ~INR9.8bn in FY12E (net D/E: 0.4x) through operating cash flows.

Asset monetization/stake dilution in FY10 a key positive
PDL has been aggressively monetizing its’ non-core land assets, by way of sale / return of land to developers/government agencies. During FY10, PDL has monetized INR 3.35bn, of which the company has received INR 2.07bn with balance money of INR 1.28bn receivable in FY11E.

Outlook and valuations: Execution to pick up, Maintain ‘BUY’:
We value PDL based on SOTP valuation. We have valued PDL’s real estate business on a DCF basis for its’ land bank of 97 mn sq ft and its’ DMRC rental assets of 2.52 mn sq ft at an average rental of INR 90 per sq ft and a cap rate of 12%. PDL’s 6 hotel projects have been valued at an EV of INR 3.4 bn. Adjusting for balance sheet items, we estimate the fair value of PDL at INR 151 / share or 1x FY11E P/BV. We maintain a ‘BUY’ and rate it ‘Sector Performer’ on a
relative return basis.

To read the full report: PDL


Nahar Spinning Mills Limited is a Ludhiana based company operating in the textile industry. The company was incorporated in the year 1980. The company basically operates in two segments: yarn and garment segment.

Key Highlights

  • The company is the best company among its peers as it is available at attractive P/E of 5.92.
  • The company exports its T-shirts to international brands such as GAP, Arrow, Van Heusen.

Future Outlook
At Current market price of Rs 92 , the stock is available at P/E of 6.20 of its FY10 earnings,
and P/E of 4.41x of its FY11. Fairwealth Research Desk recommend BUY with target price of
Rs 115 , given that company’s future shows potential.

To read the full report: NAHAR SPINNING

>Indian Meteorological Department (IMD) Forecasts Normal Monsoon in 2010

IMD continues to expect ‘normal’ rains this year: According to the second stage forecast for the 2010 monsoon released by the Indian Meteorological Department (IMD) on June 25, rainfall for the country as a whole is likely to be 102% of the Long Period Average (LPA) with a model error of ±4% compared with 98% of LPA estimated in April earlier. In terms of spatial distribution, IMD expecting aggregate rainfall as follows: North-east India (103% of region’s LPA), North-west India (102% of region’s LPA), South Peninsula (102% of region’s LPA), and Central India (99% of region’s LPA), respectively. In the press release, IMD mentioned that ‘there is very high probability (about 60%) for the La NiƱa conditions to develop during the monsoon season, which favors stronger than normal monsoon’.

However, actual rainfall is tracking below normal: The total countrywide rainfall weighted by cropped area was 21% below normal for the week ended June 23, compared to 8% below normal for the week ended June 16. According to IMD, on an all-India area-weighted basis, cumulative rainfall was 11% below normal up to June 23 compared to 5% below normal in the previous

Northern and Eastern regions are getting below normal rains: Cumulative rainfall in the Western region was 3% above normal up to June 23. However, the Southern, Northern and Eastern regions received 2%, 19%, and 22% below normal rainfall up to June 23, respectively. The cropped area affected by below-normal rainfall was 55.1% as of the week ended June 23. This compares with 82.8% during the same period in 2009.

To read the full report: MONSOON UPDATE