Millions of Indian investors will be able to trade shares using their mobile phones after the South Asian nation approved the move and the Bombay Stock Exchange unveiled plans for the service.
Trading on mobile phones is catching on globally, especially in Asia, where mobile phone penetration is growing rapidly.
Interactive Brokers, one of the largest US-based brokers, launched trading on mobile devices in 2002, including in the US and Britain.
But the phenomenon’s arrival in India is a sign that Asia is taking the lead in opening up the capital markets to the masses.
Mobile phone trading has made inroads in Japan and South Korea, where the local stock exchange says it accounts for 3 per cent of trading volume.
Madhu Kannan, chief executive of the Bombay exchange, said on Friday it had received approval from the Securities and Exchange Board of India (Sebi), the market regulator, for internet-based trading via mobile handset.
“We’ll be launching very soon,” he told the Financial Times. “This is something very core to our technology focused strategy. We’re trying to bring more people close to the market.
“It has the ability to significantly advance the concept of financial inclusion and the penetration of capital markets throughout the entire country,” Mr Kannan said.
Vinay Agrawal, executive director at Angel Broking, said that Sebi’s approval of mobile trading would have a significant impact on his business “because mobile penetration around the country is very high.”
India is the world’s fastest growing large mobile market by user numbers and the upcoming introduction of third-generation cellular services could make it easier for investors to access the markets.
The country’s subscriber base was 652.4m users as of the end of July, with 17m users added that month alone, according to the Telecom Regulatory Authority of India.
The National Stock Exchange, India’s biggest exchange, is also expected to receive Sebi’s approval for mobile phone trading and has lined up about 800 brokerage houses to launch its wireless facility.
In South Korea mobile phone share trading is growing as more people use smartphones to trade stocks. But the portion is still small as smartphones were introduced in Korea relatively late with the adoption of the iPhone late last year.
Mobile phone trading amounted to Won5,619bn as of March, according to Korea Exchange. The industry predicts that the current 3 per cent share of all trading done by mobile phone could rise to around 10 per cent in a couple of years.
Most retail, or individual, investors still prefer trading at home on their personal computers.
Gerald Perez, London-based managing director at Interactive Brokers, said his company planned to offer mobile phone trading India shortly. In September last year it launched iPhone and Blackberry apps to allow customers to log into their account and non-customers to view free stock, option, futures and forex quotes around the world. “I think growth is pretty good especially in Asia, everyone has mobile phones and everyone is on the go,” he said.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Sunday, September 12, 2010
Suzlon turns to emerging markets growth
Suzlon Energy, the world’s third-largest turbine supplier, is embarking on a significant push for new business in emerging markets as it battles a depressed market in the developed world, where it built its reputation.
The group, with headquarters in Pune in India’s Maharashtra state, plans to refocus its business more sharply on the fast-growing emerging markets of its own country, China, South Africa and Brazil, amid a dismal outlook for wind turbines in the US and Europe.
A senior executive said on Monday the lossmaking company might position Repower Systems, Suzlon’s German subsidiary, to supply more developed markets such as the US, Europe and Australia, with an emphasis on offshore wind farms. The parent company would pursue high-growth opportunities in Asia, Africa and Latin America to build its order book quickly.
“We are aiming to break even by the end of the financial year,” said Nicholas Archer, global head of public relations. “If we can get some of the orders in then our fortunes should change pretty quickly.”
The tilt towards emerging markets comes as analysts predict slower than expected growth in wind power, particularly in the US and Europe, over the next two years. The short-term future for solar power, by comparison, is far rosier.
Last week, Barclays Capital, the UK-based investment group, cut its forecast for global wind power demand by 4 per cent for this year.
HSBC is also pessimistic. “Weak electricity demand resulting from energy efficiency measures and recessionary forces have made national wind installation targets easier to achieve ... This is bad news for wind turbine demand,” the bank said in a report.
Of particular concern is the US market, where proposed renewable energy laws have laid the ground for flat wind power growth over the next decade.
Suzlon, which has annual revenues of $5.5bn and commands 10 per cent of the global wind turbine market, plans to integrate Repower by raising its 91 per cent stake in the German engineering company to at least 95 per cent in the coming months.
The integration is expected to give management an opportunity to reinvigorate brands and streamline the corporate structure from almost 60 subsidiaries at present.
The company, headed by Tulsi Tanti, was at the forefront of India’s global acquisition rush in 2006-07. But its highly leveraged expansion at a time of high asset values came under severe strain in the financial crisis and led to a refinancing of $2.5bn debt last year.
Suzlon views Brazil, where a new government may embrace a 20 per cent renewable energy target by 2020, as having strong growth potential.
“We are really quite excited about the Brazilian market,” confirmed Mr Archer.
The group, with headquarters in Pune in India’s Maharashtra state, plans to refocus its business more sharply on the fast-growing emerging markets of its own country, China, South Africa and Brazil, amid a dismal outlook for wind turbines in the US and Europe.
A senior executive said on Monday the lossmaking company might position Repower Systems, Suzlon’s German subsidiary, to supply more developed markets such as the US, Europe and Australia, with an emphasis on offshore wind farms. The parent company would pursue high-growth opportunities in Asia, Africa and Latin America to build its order book quickly.
“We are aiming to break even by the end of the financial year,” said Nicholas Archer, global head of public relations. “If we can get some of the orders in then our fortunes should change pretty quickly.”
The tilt towards emerging markets comes as analysts predict slower than expected growth in wind power, particularly in the US and Europe, over the next two years. The short-term future for solar power, by comparison, is far rosier.
Last week, Barclays Capital, the UK-based investment group, cut its forecast for global wind power demand by 4 per cent for this year.
HSBC is also pessimistic. “Weak electricity demand resulting from energy efficiency measures and recessionary forces have made national wind installation targets easier to achieve ... This is bad news for wind turbine demand,” the bank said in a report.
Of particular concern is the US market, where proposed renewable energy laws have laid the ground for flat wind power growth over the next decade.
Suzlon, which has annual revenues of $5.5bn and commands 10 per cent of the global wind turbine market, plans to integrate Repower by raising its 91 per cent stake in the German engineering company to at least 95 per cent in the coming months.
The integration is expected to give management an opportunity to reinvigorate brands and streamline the corporate structure from almost 60 subsidiaries at present.
The company, headed by Tulsi Tanti, was at the forefront of India’s global acquisition rush in 2006-07. But its highly leveraged expansion at a time of high asset values came under severe strain in the financial crisis and led to a refinancing of $2.5bn debt last year.
Suzlon views Brazil, where a new government may embrace a 20 per cent renewable energy target by 2020, as having strong growth potential.
“We are really quite excited about the Brazilian market,” confirmed Mr Archer.
India growth story poses dilemma for investors
Few of the world’s stock markets have offered a haven from fears of a double-dip recession and Europe’s debt crisis. India, though, is one. Investors have sought sanctuary in its growth prospects and capital inflows have surged. The question now is whether Indian equities are overpriced.
Those who bet on a strong performance from India’s stock market this year have been rewarded. Indian equities have outperformed all their main rivals. The Sensex, India’s benchmark index, which hit a 31-month high on Monday at 18,560.05, has risen 6.27 per cent since January 1. The Shanghai Composite in China, by contrast, has dropped 17.7 per cent and Brazil’s Bovespa index has fallen 4.81 per cent.
Asia’s third-largest economy has offered an attractive combination of economic stability and almost double-digit growth for fund managers anxious about US and European fragility. Net total foreign investments in Indian equities to August 31 were Rs594bn ($12.7bn), up from Rs403bn during the same period in 2009, according to the country’s market regulator.
Foreign investors also bought a net Rs389bn of bonds from the start of the year to July 30, compared with a year earlier when investors sold a net Rs37.2bn in bonds in the same period – a sign that investors’ confidence in the government’s ability to rein in its ballooning public debt has increased. Many analysts expect foreign capital inflows in the equity market to overtake the record Rs17bn in 2007.
KN Sivasubramanian, head of Franklin Templeton’s India Equity portfolio management, says: “India is a largely domestic-driven economy and recent economic and earnings data has been encouraging. Overall, we are seeing both domestic and global investors recognise the [Indian] growth potential.”
Cameron Brandt, senior global markets analyst at EPFR, says: “There was a fair amount of attention being paid to the deterioration of India’s public finances and the risk that, when combined with food and energy-driven inflationary pressures, the central bank would be forced to tighten aggressively. That hasn’t really happened.
“Meanwhile, the nervousness about the strength of the recovery in the US, Europe and Japan has cast a favourable light on the strong domestic component of India’s story.”
But for investors the problem is that a lot of the good news is now in the price. Indian equities trade at more than 17 times forecast earnings for 2010, compared with a five year average of 16.2 times earnings. By comparison, emerging market equities in general trade on an average of 12 times 2010 earnings, while Russia trades at just 6.7 times forecast earnings. That is a hefty premium.
Philip Poole, global head of macro and investment strategy at HSBC global asset management says that, while there is a lot of momentum in the Indian market, he has India as an underweight mostly due to valuations. “Relative to past trading history, the Indian equity market looks fully priced. Within an emerging markets context it looks toppish.”
While India has potential, it also has risks. Indeed, inflation is running at the highest level in any leading emerging market – with nearly 11 per cent forecast for 2010, compared with about 3 per cent for China, 4.9 per cent for Brazil and 7 per cent for Latin America.
Indian economic policymakers have made big strides in recent years in developing consistency. But they have yet to establish the same long-term sustainable growth records as their counterparts in some other emerging markets, notably China and Brazil. “Indian growth is very strong, but that leads to inflation pressures. The authorities will need to act to slow the economy,” says Mr Poole.
“Inflation is a real concern and we expect yields for the [benchmark] 10-year bonds to come under pressure, as the Reserve Bank of India tightens the monetary policy,” says A Prasanna at ICICI Securities.
“India is certainly a longer-term story. Promised reforms and the efforts to boost rural incomes and productivity are not going to happen overnight,” says Mr Brandt. “There are more attractive destinations for ‘hot’ money at the moment.”
Duvvuri Subbarao, the governor of the RBI, told the Financial Times in July that growing risk aversion among foreign investors could have a negative impact on capital flows to India. “Such a slowdown in capital inflows will constrain domestic investment, which is critical to achieving and sustaining high growth rates,” he said.
Nevertheless, the fundamentals behind India’s growth story – abundant liquidity and strong domestic demand – are unlikely to disappear anytime soon, according to Rohit Kapur, at KPMG. “There is a lot of money on the sidelines ready to be invested in India ... people are here to stay and get what they can’t elsewhere: high returns.”
V Jayasankar, executive director at Kotak Investment Banking, says the private equity sector is likely to be a big player driving more money into the markets. “There are various estimates that show that about $25bn to $30bn are waiting to be invested in India by global private equity funds.”
As one veteran investor puts it: “Some bad news would be good news so that we can start getting back into the game.”
Those who bet on a strong performance from India’s stock market this year have been rewarded. Indian equities have outperformed all their main rivals. The Sensex, India’s benchmark index, which hit a 31-month high on Monday at 18,560.05, has risen 6.27 per cent since January 1. The Shanghai Composite in China, by contrast, has dropped 17.7 per cent and Brazil’s Bovespa index has fallen 4.81 per cent.
Asia’s third-largest economy has offered an attractive combination of economic stability and almost double-digit growth for fund managers anxious about US and European fragility. Net total foreign investments in Indian equities to August 31 were Rs594bn ($12.7bn), up from Rs403bn during the same period in 2009, according to the country’s market regulator.
Foreign investors also bought a net Rs389bn of bonds from the start of the year to July 30, compared with a year earlier when investors sold a net Rs37.2bn in bonds in the same period – a sign that investors’ confidence in the government’s ability to rein in its ballooning public debt has increased. Many analysts expect foreign capital inflows in the equity market to overtake the record Rs17bn in 2007.
KN Sivasubramanian, head of Franklin Templeton’s India Equity portfolio management, says: “India is a largely domestic-driven economy and recent economic and earnings data has been encouraging. Overall, we are seeing both domestic and global investors recognise the [Indian] growth potential.”
Cameron Brandt, senior global markets analyst at EPFR, says: “There was a fair amount of attention being paid to the deterioration of India’s public finances and the risk that, when combined with food and energy-driven inflationary pressures, the central bank would be forced to tighten aggressively. That hasn’t really happened.
“Meanwhile, the nervousness about the strength of the recovery in the US, Europe and Japan has cast a favourable light on the strong domestic component of India’s story.”
But for investors the problem is that a lot of the good news is now in the price. Indian equities trade at more than 17 times forecast earnings for 2010, compared with a five year average of 16.2 times earnings. By comparison, emerging market equities in general trade on an average of 12 times 2010 earnings, while Russia trades at just 6.7 times forecast earnings. That is a hefty premium.
Philip Poole, global head of macro and investment strategy at HSBC global asset management says that, while there is a lot of momentum in the Indian market, he has India as an underweight mostly due to valuations. “Relative to past trading history, the Indian equity market looks fully priced. Within an emerging markets context it looks toppish.”
While India has potential, it also has risks. Indeed, inflation is running at the highest level in any leading emerging market – with nearly 11 per cent forecast for 2010, compared with about 3 per cent for China, 4.9 per cent for Brazil and 7 per cent for Latin America.
Indian economic policymakers have made big strides in recent years in developing consistency. But they have yet to establish the same long-term sustainable growth records as their counterparts in some other emerging markets, notably China and Brazil. “Indian growth is very strong, but that leads to inflation pressures. The authorities will need to act to slow the economy,” says Mr Poole.
“Inflation is a real concern and we expect yields for the [benchmark] 10-year bonds to come under pressure, as the Reserve Bank of India tightens the monetary policy,” says A Prasanna at ICICI Securities.
“India is certainly a longer-term story. Promised reforms and the efforts to boost rural incomes and productivity are not going to happen overnight,” says Mr Brandt. “There are more attractive destinations for ‘hot’ money at the moment.”
Duvvuri Subbarao, the governor of the RBI, told the Financial Times in July that growing risk aversion among foreign investors could have a negative impact on capital flows to India. “Such a slowdown in capital inflows will constrain domestic investment, which is critical to achieving and sustaining high growth rates,” he said.
Nevertheless, the fundamentals behind India’s growth story – abundant liquidity and strong domestic demand – are unlikely to disappear anytime soon, according to Rohit Kapur, at KPMG. “There is a lot of money on the sidelines ready to be invested in India ... people are here to stay and get what they can’t elsewhere: high returns.”
V Jayasankar, executive director at Kotak Investment Banking, says the private equity sector is likely to be a big player driving more money into the markets. “There are various estimates that show that about $25bn to $30bn are waiting to be invested in India by global private equity funds.”
As one veteran investor puts it: “Some bad news would be good news so that we can start getting back into the game.”
Subscribe to:
Posts (Atom)