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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.
Asia Economics Daily: India exports rise by 26.8%yoy in November, trade
deficit narrows [Kaushik Das]
Exports rose at a faster pace in November (26.8%yoy, USD18.9bn), compared to
21.3% growth reported in October and was stronger than our expectation of
20.0%. Imports growth also improved in November (11.2%yoy, USD27.8bn), up
from 6.8%yoy in October. As a result of stronger exports growth, trade deficit
narrowed to USD8.9bn in November, from USD9.7bn in October.
India Upstream: Incorporating Brent oil price forecast revisions [Harshad
Katkar]
Deutsche Bank has raised its oil price outlook for CY10-14 by 1.1-9.4% on a
stronger oil demand outlook but kept the long-term forecast unchanged at
US$100/bbl. This leads to a 1-1.4% increase in the valuations of Indian upstream
oil companies ONGC, OIL and CAIL to INR1540, INR1620 and INR365 per share,
respectively. We maintain Buy on ONGC and OIL and Hold on CAIL. ONGC
remains our top pick in the sector, as it looks well poised to benefit from diesel
deregulation and in our view, offers the best risk/ reward on reforms.
The Asia Investor Letter: EM Convergence & EM Carry - Where Next? [Brad
Jones]
Emerging market stocks have outperformed their developed market brethren in
nine of the past ten years, by an average 16%p.a. The past two years have also
seen an unprecedented net inflow into EM equity funds and net outflow for the
US, Europe and Japan, a trend which has driven a sharp relative re-rating in EM
valuations. Against this backdrop, the contrarian instincts in us are stirring. It’s not
surprising that we also find our asset allocation clients questioning whether
conditions are now ripe for a trend reversal back to developed markets.
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.
EM 2011 Outlook: A Delicate Rebalancing [Drausio Giacomelli]
Policymakers will face the challenging task of striking a delicate balance between
stimulus and the required exit preparations to secure sustainability. Markets will
likely continue to test politicians and authorities' resolve to tackle the required
rebalancing and markets will likely remain tense as growth consolidates
throughout the year. EM should continue a destination of portfolio inflows as a
source of diminished yet attractive returns.
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