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Coal India Limited: Cashing in on Indian coal demand; initiating with Hold
[Manish Saxena]
Coal India (CIL), with possibly the world’s largest extractable reserves/production,
finds itself in a sweet spot in which customers fund its working capital and
government levies. Thanks to India's seemingly insatiable coal fired energy needs,
its low cost of operations and negative operating assets, CIL has significant cash
accretion, implying higher returns on net operating assets than peers. Yet with
c30% return post-listing and possible consensus downgrades on prospective
volume disappointment, we see the shares as fairly valued. Hold.
Banks: Takeaways from meetings with HDFC Bank & Axis Bank [Dipankar
Choudhury]
** High deposit rate increases by State Bank of India have taken the system by
surprise and sparked concerns of a deposit rate war, according to HDFC Bank.
Considering SBI’s size, other banks could be forced to match the rate in another
round of deposit rate increases soon. ** SBI’s reluctance to raise lending rates is
also causing HDFC Bank some frustration, particularly the 8% special home loan.
** HDFC believes that as long as liquidity remains tight and loan demand soft,
asymmetric rate increases are a reality.
Indian Auto Sector: Maruti & Hero Honda meeting notes: Robust demand
outlook [Srinivas Rao]
Our recent meetings with Maruti and Hero Honda have underlined the strong auto
demand trends in the medium term. Key takeaway from both meetings was the
continued strength of urban demand after its revival since the credit crisis. This
has also been corroborated by our recent checks with dealers and finance
companies. While Maruti already faces capacity constraints, Hero Honda will likely
by 1QFY12. Our ladder of preference among the Indian OEMs is Mahindra &
Mahindra, Tata Motors, TVS, Maruti, Bajaj, Hero Honda and Ashok Leyland.
Global Credit Outlook: 2011: Think the Unthinkable...? [Jim Reid]
2011 will be the fifth year where the effects of the financial crisis will be felt
across the globe. If the authorities have already used their last bullets in this crisis
then 2011 will likely be a bad year for all risk assets. The recent renewed Euro
problems are proof to us that the financial system remains very fragile.
Market Update: FX Strategy Weekly [Mirza Baig]
The ebb and flow of Asian currency appreciation pressures in 2010 was mostly a
capital flow story. But the policy mix that local central banks chose to deal with the
inflows became a key differentiator of returns across markets. In our FX special
"Flexibility, intervention or capital controls?" we take a stab at predicting what
policy mix each country will adopt next year.
Global Economic Perspectives: US Scene: Good news and bad [Peter
Hooper]
Our offering on the US economy this week touches on three issues: some reason
for hope in an impending US fiscal crisis, a moderately negative outlook for the US
external deficit, and why a skewed distribution of wealth in the US should not
keep the positive effects of QE2 on the stock market from giving consumer
spending a lift.
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