MUMBAI (Reuters) - Morgan Stanley expects to more than triple its clients at its India wealth management unit over the next four years as the U.S. money manager ramps up operation to tap the country's growing rich.
Himanshu Bhagat and Amitava Neogi, both executive directors at the Indian private banking unit, said a stock market surge and rising optimism about a global recovery have helped attract nearly 300 clients since launch last September.
"We target to get around 1,000 client families over the next 3-4 years," Bhagat told Reuters in an interview.
India is fast emerging as a magnet for global wealth managers because of its growing economy and rising income of a middle class that is larger than the population of the United States.
Canara Robeco Asset Management estimates India's middle class at more than 400 million people.
Consultant Celent forecasts Indian wealth industry to manage about $1 trillion worth of assets by 2012, an opportunity that has attracted the likes of Barclays, Societe Generale and Credit Suisse.
Morgan Stanley's private banking unit has 100 staff in India, including 36 relationship managers across four large cities such as Mumbai and New Delhi. It hopes to hire more than 50 people in the next three years.
"We are continuously hiring," Bhagat said.
The firm is also advising clients to buy foreign equities to diversify globally, a trend yet to pick up in India even though local regulations allow each individual to invest up to $200,000 overseas every year.
"There are emerging frontier markets like Vietnam, Sri Lanka which they should be looking at. There are also distressed opportunities in Europe and the U.S. We are advising our clients to evaluate this option," Bhagat said.
Morgan Stanley hopes to offer onshore wealth management services in Vietnam and China to boost Asia presence.
India's main stock index has surged almost 90 percent from its 2009 trough hit in early March, powered by nearly $9 billion of foreign fund inflows.
"We are overweight on Indian equity in our model portfolios and urge our clients to buy on the dips," Neogi said.
Better quarterly earnings have improved the case for India investment, he said, adding the market was nearly at 2003 levels after. Foreign funds that had whittled down their India holding to meet redemption pressures were now keen to build up exposure.
Bhagat said Indian clients were now more willing to take risk after a revival in markets.
The industry had suffered a blow last year as the number of rich in India fell by nearly a third to 84,000, the fastest drop in the world after Hong Kong, after a record 52 percent fall in local shares hurt the net worth of individuals.
Monday, August 10, 2009
AI, Kingfisher & Jet may go no-frills on most domestic routes
NEW DELHI: Amidst growing concern over the financial health of airlines, the top three carriers of the country—Air India, Kingfisher Airlines and Jet Airways—are planning to convert most of their domestic flights into no-frills services. This would result in more attractive fares for consumers, but may further pull down the yield of airlines.
Since the three airlines together control over 60% of the domestic market, the proposed move would significantly curtail full-service operations in the country while the market share of no-frills services would expand in a big way.
The move, which would cheer consumers, comes at a time when airlines are finding it difficult to improve the yield. According to an industry estimate, average passenger tariff has halved to Rs 3,000 in the last five years. The cost of operation of airlines has, however, gone up during this period resulting in a shortfall in revenue.
While Jet Airways has said it will increase the number of flights on its JetKonnect network to 160 by October out of its total 290 flights on domestic routes, Kingfisher has already shifted 70% its 365 domestic flights a day to the no-frills brand.
The country’s largest carrier by fleet size, Air India, has said it will gradually shift 75% of its domestic flights to its low-cost entity Air India Express. The increased supply of seats in the market may force airlines to sell tickets below cost.
“Service criteria between full-service carriers and low-cost airlines is shrinking. Full-service airlines, which have shifted capacity on low-fare brands, are doing away with business class, thus increasing seats. By doing this, airlines are putting pressure on the low-frills market. This will eventually hurt everybody,” Amadeus India managing director Ankur Bhatia said.
Domestic carriers are together estimated to have lost Rs 10,000 crore in 2008-09 mainly on account of high fuel price in the first half of the fiscal and excess capacity.
“There is still 20% additional capacity in the market. The industry needs to discipline itself and cut back capacity. We have been loudly telling people that we are cutting capacity. In the past one year, we have reduced 20% of our capacity,” said a Jet Airways official who did not wish to be identified said.
Excess capacity and intense competition force carriers to sell tickets below cost in order to fill seats. This reduces the yield per seat of the airline. For example, Air India’s yield in terms of returns per kilometre (RPKM) in 2007-08 decreased to Rs 3.13/RPKM from Rs 3.25/RPKM in 2006-07, notwithstanding an improvement in load factor.
In 2008-09, the airline’s yield stood at Rs 4.6/RPKM and Rs 2.99/RPKM for its narrow and wide-body aircraft, respectively.
In the last one year, air travellers have shifted to low-cost airlines with corporate houses trimming their travel budget. This has helped no-frills airlines SpiceJet and JetLite come out of the red and report profit.
SpiceJet reported a net profit of Rs 26.34 crore in the first quarter ended June 31 as against a net loss Rs 129.22 crore in the same quarter of 2008. JetLite (formerly Air Sahara) also posted a marginal profit of Rs 2.2 crore in the first quarter of the current fiscal.
Since the three airlines together control over 60% of the domestic market, the proposed move would significantly curtail full-service operations in the country while the market share of no-frills services would expand in a big way.
The move, which would cheer consumers, comes at a time when airlines are finding it difficult to improve the yield. According to an industry estimate, average passenger tariff has halved to Rs 3,000 in the last five years. The cost of operation of airlines has, however, gone up during this period resulting in a shortfall in revenue.
While Jet Airways has said it will increase the number of flights on its JetKonnect network to 160 by October out of its total 290 flights on domestic routes, Kingfisher has already shifted 70% its 365 domestic flights a day to the no-frills brand.
The country’s largest carrier by fleet size, Air India, has said it will gradually shift 75% of its domestic flights to its low-cost entity Air India Express. The increased supply of seats in the market may force airlines to sell tickets below cost.
“Service criteria between full-service carriers and low-cost airlines is shrinking. Full-service airlines, which have shifted capacity on low-fare brands, are doing away with business class, thus increasing seats. By doing this, airlines are putting pressure on the low-frills market. This will eventually hurt everybody,” Amadeus India managing director Ankur Bhatia said.
Domestic carriers are together estimated to have lost Rs 10,000 crore in 2008-09 mainly on account of high fuel price in the first half of the fiscal and excess capacity.
“There is still 20% additional capacity in the market. The industry needs to discipline itself and cut back capacity. We have been loudly telling people that we are cutting capacity. In the past one year, we have reduced 20% of our capacity,” said a Jet Airways official who did not wish to be identified said.
Excess capacity and intense competition force carriers to sell tickets below cost in order to fill seats. This reduces the yield per seat of the airline. For example, Air India’s yield in terms of returns per kilometre (RPKM) in 2007-08 decreased to Rs 3.13/RPKM from Rs 3.25/RPKM in 2006-07, notwithstanding an improvement in load factor.
In 2008-09, the airline’s yield stood at Rs 4.6/RPKM and Rs 2.99/RPKM for its narrow and wide-body aircraft, respectively.
In the last one year, air travellers have shifted to low-cost airlines with corporate houses trimming their travel budget. This has helped no-frills airlines SpiceJet and JetLite come out of the red and report profit.
SpiceJet reported a net profit of Rs 26.34 crore in the first quarter ended June 31 as against a net loss Rs 129.22 crore in the same quarter of 2008. JetLite (formerly Air Sahara) also posted a marginal profit of Rs 2.2 crore in the first quarter of the current fiscal.
Asian Stocks Advance on U.S. Jobs, Japanese Machinery Orders
Aug. 10 (Bloomberg) -- Asian stocks rose, led by automakers and consumer companies, after the U.S. jobless rate dropped and Japanese machinery orders increased, boosting confidence that the world’s two largest economies are emerging from recessions.
Japan’s Toyota Motor Corp., which gets 31 percent of its revenue from North America, gained 2 percent as the dollar strengthened against the yen after the U.S. jobs report. Bridgestone Corp., the world’s largest tiremaker, rose 6.5 percent in Tokyo after forecasting a profit. Hallenstein Glasson Holdings Ltd., a New Zealand clothing retailer, jumped 3.9 percent in Wellington after the country’s house prices rose.
The MSCI Asia Pacific Index climbed 1.4 percent to 112.28 as of 11:35 a.m. in Tokyo, following a 1 percent drop last week. The gauge has climbed 59 percent from a more than five-year low on March 9 amid speculation the global economy is recovering from the credit crisis.
“There’s a sense that the region is growing more quickly than other parts of the world,” said Mark Konyn, chief executive officer of RCM Asia Pacific Ltd. in Hong Kong, which holds $11 billion. “Valuations are not stretched, but the market’s moved a hell of a long way since the bottom. The question is whether or not we’ll see that follow through in economic improvement and I think you see it in the jobs numbers in the U.S.”
Japan’s Nikkei 225 Stock Average rose 1.3 percent to 10,545.90 as strategists at Nomura Holdings Inc. predicted the gauge may climb as high as 11,500 by the end of October. Mitsubishi Rayon Co., which makes fabrics and chemicals, surged 25 percent after the Nikkei newspaper reported the company may be bought by rival Mitsubishi Chemical Holdings Corp.
Beating Estimates
Hong Kong’s Hang Seng Index climbed 2.6 percent. Australia’s S&P/ASX 200 Index advanced 1 percent, led by real- estate trust Goodman Group, which surged 14 percent after a share sale eased concerns about the company’s debt levels.
Futures on the Standard & Poor’s 500 Index added 0.1 percent. The gauge climbed 1.3 percent on Aug. 7 after a Labor Department report showed the joblessness rate dropped to 9.4 percent last month from June, the first decline since April 2008. Economists had estimated the rate would rise to 9.6 percent.
Japanese machinery orders, an indicator of capital investment in the next three to six months, climbed 9.7 percent from May, the Cabinet Office said today in Tokyo. The median estimate of 22 economists surveyed by Bloomberg was for a 2.6 percent increase.
Toyota gained 2 percent to 4,170 yen. Sony Corp., which gets about a quarter of its sales from the U.S., climbed 3.3 percent to 2,785 yen. Komatsu Ltd., the world’s second-biggest maker of construction equipment, rose 3 percent to 1,634 yen.
Higher Forecast
Bridgestone jumped 5.7 percent to 1,787 yen after forecasting full-year net income of 6 billion yen ($62 million), compared with an earlier break-even prediction.
A weaker yen also boosted the outlook for Japanese export earnings. The Japanese currency depreciated to as much as 97.78 from about 95.43 at the 3 p.m. close of Tokyo stock trading on Aug. 7.
“The improvement in the U.S. job market will increase demand for risk assets globally, including stocks,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo. “Exporters will get an extra boost in that the yen is sufficiently weak to help raise their profits.”
Companies’ efforts to cut costs boosted investor confidence in the outlook for earnings, Nomura strategists wrote in a Japanese-language report. The analysts said the Nikkei 225 may rise as high as 11,500 by the end of October, lifting a previous estimate that ranged between 10,500 and 11,000.
Takeover Speculation
Hallenstein Glasson gained 3.9 percent to NZ$2.90. New Zealand house prices rose for the third month in July, advancing 0.7 percent from the previous month, according to Quotable Value New Zealand Ltd., the government valuation agency.
Mitsubishi Rayon surged 25 percent to 340 yen after the Nikkei reported Mitsubishi Chemical may pay as much as 200 billion yen to buy the company. Mitsubishi Rayon said it had no statement to make.
Mitsubishi Chemical wasn’t the source of the information, spokesman Yoshinori Nagayama said. The company’s shares added 5.4 percent to 446 yen.
Goodman surged 14 percent to 50.5 Australian cents. Institutional investors bought A$923 million ($773 million) shares for 40 cents each, the Sydney-based company said in a statement today, while retail investors are expected to buy A$355 million in shares.
“Some traders were wanting this capital raising to take place,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “It’s being taken positively because it will result in a stronger balance sheet, better liquidity and an impressive gearing.”
Japan’s Toyota Motor Corp., which gets 31 percent of its revenue from North America, gained 2 percent as the dollar strengthened against the yen after the U.S. jobs report. Bridgestone Corp., the world’s largest tiremaker, rose 6.5 percent in Tokyo after forecasting a profit. Hallenstein Glasson Holdings Ltd., a New Zealand clothing retailer, jumped 3.9 percent in Wellington after the country’s house prices rose.
The MSCI Asia Pacific Index climbed 1.4 percent to 112.28 as of 11:35 a.m. in Tokyo, following a 1 percent drop last week. The gauge has climbed 59 percent from a more than five-year low on March 9 amid speculation the global economy is recovering from the credit crisis.
“There’s a sense that the region is growing more quickly than other parts of the world,” said Mark Konyn, chief executive officer of RCM Asia Pacific Ltd. in Hong Kong, which holds $11 billion. “Valuations are not stretched, but the market’s moved a hell of a long way since the bottom. The question is whether or not we’ll see that follow through in economic improvement and I think you see it in the jobs numbers in the U.S.”
Japan’s Nikkei 225 Stock Average rose 1.3 percent to 10,545.90 as strategists at Nomura Holdings Inc. predicted the gauge may climb as high as 11,500 by the end of October. Mitsubishi Rayon Co., which makes fabrics and chemicals, surged 25 percent after the Nikkei newspaper reported the company may be bought by rival Mitsubishi Chemical Holdings Corp.
Beating Estimates
Hong Kong’s Hang Seng Index climbed 2.6 percent. Australia’s S&P/ASX 200 Index advanced 1 percent, led by real- estate trust Goodman Group, which surged 14 percent after a share sale eased concerns about the company’s debt levels.
Futures on the Standard & Poor’s 500 Index added 0.1 percent. The gauge climbed 1.3 percent on Aug. 7 after a Labor Department report showed the joblessness rate dropped to 9.4 percent last month from June, the first decline since April 2008. Economists had estimated the rate would rise to 9.6 percent.
Japanese machinery orders, an indicator of capital investment in the next three to six months, climbed 9.7 percent from May, the Cabinet Office said today in Tokyo. The median estimate of 22 economists surveyed by Bloomberg was for a 2.6 percent increase.
Toyota gained 2 percent to 4,170 yen. Sony Corp., which gets about a quarter of its sales from the U.S., climbed 3.3 percent to 2,785 yen. Komatsu Ltd., the world’s second-biggest maker of construction equipment, rose 3 percent to 1,634 yen.
Higher Forecast
Bridgestone jumped 5.7 percent to 1,787 yen after forecasting full-year net income of 6 billion yen ($62 million), compared with an earlier break-even prediction.
A weaker yen also boosted the outlook for Japanese export earnings. The Japanese currency depreciated to as much as 97.78 from about 95.43 at the 3 p.m. close of Tokyo stock trading on Aug. 7.
“The improvement in the U.S. job market will increase demand for risk assets globally, including stocks,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo. “Exporters will get an extra boost in that the yen is sufficiently weak to help raise their profits.”
Companies’ efforts to cut costs boosted investor confidence in the outlook for earnings, Nomura strategists wrote in a Japanese-language report. The analysts said the Nikkei 225 may rise as high as 11,500 by the end of October, lifting a previous estimate that ranged between 10,500 and 11,000.
Takeover Speculation
Hallenstein Glasson gained 3.9 percent to NZ$2.90. New Zealand house prices rose for the third month in July, advancing 0.7 percent from the previous month, according to Quotable Value New Zealand Ltd., the government valuation agency.
Mitsubishi Rayon surged 25 percent to 340 yen after the Nikkei reported Mitsubishi Chemical may pay as much as 200 billion yen to buy the company. Mitsubishi Rayon said it had no statement to make.
Mitsubishi Chemical wasn’t the source of the information, spokesman Yoshinori Nagayama said. The company’s shares added 5.4 percent to 446 yen.
Goodman surged 14 percent to 50.5 Australian cents. Institutional investors bought A$923 million ($773 million) shares for 40 cents each, the Sydney-based company said in a statement today, while retail investors are expected to buy A$355 million in shares.
“Some traders were wanting this capital raising to take place,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “It’s being taken positively because it will result in a stronger balance sheet, better liquidity and an impressive gearing.”
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