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Utilities: Merchant tariffs to remain firm [Manish Saxena]
We are surprised to see all the India power generation data in April. While the generation volumes have dropped by 2.5% MoM as expected (as the first leg of busy season ended on March 31), interestingly the spot prices have now risen to INR 4-5/kWh (from INR c2.5/kWh a few weeks back). As per the CERC forward rates, it looks like spot tariffs would rise to INR 4.91/kWh in May and fall to INR 3.79/kWh in June with onset of monsoons. Overall, we continue to find constraints in energy availability, which we note is seasonal due to (a) low domestic coal production,(b) absence of buyers from India in the sea-borne thermal coal markets,(c) railway wagon shortage and (d) reduced availability of natural gas. Accordingly, we estimate that spot markets are likely to remain tight around INR 3.75-4.25/kWh and continue to prefer long-energy players i.e. Coal India, Adani Power (coal resources in Indonesia owned by the parent) v/s non integrated ones such as NTPC.
India Equity Strategy: Rural prosperity set to continue [Abhay Laijawala]
According to the Government of India’s recently released third advance estimates, India’s food grain production is likely to touch a new record in FY11, rising by an estimated 8% to 236mn tonnes. Production of wheat, pulses, oilseeds and cotton is expected to touch a record high in FY11. Increasing production of foodgrains remains critical to India where rising rural prosperity (particularly at the bottom of the pyramid) has resulted in surging demand for foodgrains.
Asia FX Strategy Notes: MAS does not disappoint the market [Mirza Baig]
The key change announced by the MAS today was a re-centering of the policy band "below the prevailing level of the SGD NEER". There were no changes to the slope or band width. This raises a slight confusion about the extent of the revaluation. If the announcement was of re-centering "to the prevailing level" of the SGD NEER, then it would be safe to assume a 3% revaluation. However, the "below the prevailing level" remark leaves some room for ambiguity. Given the fairly hawkish tone of the policy statement (and the historical experience of previous re-centerings), we believe the mid-point of the policy band has been shifted up by 2%. The chart below shows how the SGD NEER now looks in the context of the new policy band.
US Daily Economic Notes: Memo to Fed: Do not ignore commodities [Joseph LaVorgna]
Mr. Bernanke and other members of the FOMC (namely, Dudley and Yellen) have made it clear that as long as inflation expectations remain stable, the Fed can be slow in removing ultra-accommodative monetary policy. After all, we note the Fed is still falling short on its dual mandate of maximum sustainable growth and low/stable inflation: Unemployment is high at 8.8% and core inflation is below the Fed's implicit 2% target. These members have also said that the run-up in commodity prices is likely to be temporary. We believe a couple of points are worth making. One, inflation expectations are set according to trends in the headline CPI, not the core. This is why consumer price expectations are rising appreciably. For example, the University of Michigan's median 5-year expected inflation rate jumped 0.3% in March to 3.2%, the highest reading since May-June 2008. We get preliminary data this morning for April, and we think we could see another such jump, thereby taking inflation expectations up to 3.5%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Utilities: Merchant tariffs to remain firm [Manish Saxena]
We are surprised to see all the India power generation data in April. While the generation volumes have dropped by 2.5% MoM as expected (as the first leg of busy season ended on March 31), interestingly the spot prices have now risen to INR 4-5/kWh (from INR c2.5/kWh a few weeks back). As per the CERC forward rates, it looks like spot tariffs would rise to INR 4.91/kWh in May and fall to INR 3.79/kWh in June with onset of monsoons. Overall, we continue to find constraints in energy availability, which we note is seasonal due to (a) low domestic coal production,(b) absence of buyers from India in the sea-borne thermal coal markets,(c) railway wagon shortage and (d) reduced availability of natural gas. Accordingly, we estimate that spot markets are likely to remain tight around INR 3.75-4.25/kWh and continue to prefer long-energy players i.e. Coal India, Adani Power (coal resources in Indonesia owned by the parent) v/s non integrated ones such as NTPC.
India Equity Strategy: Rural prosperity set to continue [Abhay Laijawala]
According to the Government of India’s recently released third advance estimates, India’s food grain production is likely to touch a new record in FY11, rising by an estimated 8% to 236mn tonnes. Production of wheat, pulses, oilseeds and cotton is expected to touch a record high in FY11. Increasing production of foodgrains remains critical to India where rising rural prosperity (particularly at the bottom of the pyramid) has resulted in surging demand for foodgrains.
Asia FX Strategy Notes: MAS does not disappoint the market [Mirza Baig]
The key change announced by the MAS today was a re-centering of the policy band "below the prevailing level of the SGD NEER". There were no changes to the slope or band width. This raises a slight confusion about the extent of the revaluation. If the announcement was of re-centering "to the prevailing level" of the SGD NEER, then it would be safe to assume a 3% revaluation. However, the "below the prevailing level" remark leaves some room for ambiguity. Given the fairly hawkish tone of the policy statement (and the historical experience of previous re-centerings), we believe the mid-point of the policy band has been shifted up by 2%. The chart below shows how the SGD NEER now looks in the context of the new policy band.
US Daily Economic Notes: Memo to Fed: Do not ignore commodities [Joseph LaVorgna]
Mr. Bernanke and other members of the FOMC (namely, Dudley and Yellen) have made it clear that as long as inflation expectations remain stable, the Fed can be slow in removing ultra-accommodative monetary policy. After all, we note the Fed is still falling short on its dual mandate of maximum sustainable growth and low/stable inflation: Unemployment is high at 8.8% and core inflation is below the Fed's implicit 2% target. These members have also said that the run-up in commodity prices is likely to be temporary. We believe a couple of points are worth making. One, inflation expectations are set according to trends in the headline CPI, not the core. This is why consumer price expectations are rising appreciably. For example, the University of Michigan's median 5-year expected inflation rate jumped 0.3% in March to 3.2%, the highest reading since May-June 2008. We get preliminary data this morning for April, and we think we could see another such jump, thereby taking inflation expectations up to 3.5%.
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