Download The Word from Hansard - Alliance Partnership

The Word from Hansard
China - China's economy has slowed for a seventh quarter as problems in Europe and
the U.S. dented demand for its goods. The annual rate of growth was 7.4% in the third
quarter, down from 7.6% in the previous three months.
However, there are signs that the world's second-largest economy is now stabilising and
rebounding.
That would be good news for China, which is facing a leadership change, and the rest of
the world, which has benefited from its recent boom.
"Clearly, concerns over continued slowdown can now be put to rest," said Dariusz
Kowalczyk, senior economist at Credit Agricole. "The last month of the quarter brought
acceleration of industrial output, retail sales and fixed asset investment in year-on-year
terms, highlighting the fact that improvement of momentum of the economy was
particularly strong in September."
Japan - Japan's Prime Minister, Yoshihiko Noda, has ordered his cabinet to draw up
fresh stimulus measures in a bid to spur economic growth.
Japan's growth has suffered due to falling demand for its exports amid a slowdown in
key markets such as the U.S., eurozone and China. At the same time, domestic
consumption in Japan continues to remains subdued.
Mr Noda ordered the stimulus package to be compiled by next month, but did not give
details on how big it would be.
"Considering what the government and the central bank are forecasting, I doubt we can
simply stand by and let the economy continue as it is," Finance Minister Koriki Jojima
said.
U.S. - New homes were constructed at the fastest pace since July 2008 in September,
official figures show.
The Commerce Department said single family homes and apartments were started at a
seasonally adjusted annual rate of 872,000 in September, which was up 15% from the
previous month, but it is still well below the 1.5 million seen as a healthy 'pre-recession'
figure.
The big U.S. banks reporting third-quarter results in the past week have referred to a
housing market recovery. JP Morgan Chase chief executive Jamie Dimon said last week:
"Importantly, we believe the housing market has turned the corner."
Applications for building permits, which are an indicator of future building activity,
jumped 12% to an annual rate of 894,000 in September.
Germany - The German government has slashed its forecast for economic growth in
2013 from 1.6% to 1%. "We are still talking about 1% growth [for 2013], so there's no
talk about a crisis for Germany," said Economy Minister Philipp Roesler.
The economy ministry also raised its forecast for 2012 to 0.8% from the 0.7% it
predicted in April. The cut brings the government in line with a group of four leading
think tanks, which cut their forecasts last week.
"Although growth of 1% is weak in absolute terms, it still leaves Germany outperforming
the rest of the euro area," James Ashley, European economist at RBC Capital Markets
said.
Spain - Spain sold EUR4.6bn of bonds on Thursday, slightly higher than its maximum
target and at a lower cost to the treasury, as investors positioned themselves for widely
expected central bank intervention in the country's bond market.
Spanish borrowing costs have tumbled since the European Central Bank said it would
intervene in the sovereign bond market of any eurozone country that applied for aid and
accepted the conditions attached.
The rally was given further impetus by Moody's unexpected decision to affirm Spain's
investment-grade rating, when a downgrade to "junk" had been widely expected.
Commodities - Gold traded flat on Thursday, retaining gains from the previous two
days, as investors looked for fresh leads from a European Union summit after shrugging
off data showing China's economy slowed for a seventh quarter, as expected.
"In the short term, the $1,730 support level will continue to feel a lot of pressure as
investors focus on the euro zone summit, but beyond that, gold's outlook is still bullish
thanks to support from the easing measures by central banks." said Chen Min, an
analyst at Jinrui Futures in China.
Spotlight on: Good news for India-focussed funds
Sanjiv Duggal, senior portfolio manager, India equities, at HSBC Global Asset
Management, takes a look at the recent announcement from the Indian government &
its' likely impact for investors that allocate their portfolio to the emerging market.
The Indian government surprised the markets with a series of new reforms in September
2012. It is hoped that the reforms will encourage foreign direct investment to the
country, which has been accused in the past of being closed to the outside world.
The government sharply raised prices of diesel (a heavily subsidised transport fuel),
capped cooking gas subsidies, and opened up its Retail, Aviation and Power Exchange
sectors to foreign direct investors. Divestment in various government-owned entities has
also been announced. Most significantly for India's critical infrastructure story, a National
Investment Board has been proposed, which should speed up decision-making for
projects above USD200m and bring it directly under the supervision of the Prime
Minister. Unlike Great Britain which punched well above its weight in the recent
Olympics, India has been performing well below the levels it needs to perform at, in the
crucial infrastructure sector. The Prime Minister estimates India's infrastructure needs at
least USD1tn in spend over the next five years. A starting point is the USD90bn DelhiMumbai Industrial Corridor, India's largest ever project, which could help in transforming
infrastructure in India.
These measures were particularly significant, as they marked India emerging out of its
'INDertIA'. Since October 2010, India has faced questions involving the Commonwealth
Games, telecom spectrum and coal mine allocation amongst others. A newly activist
national auditor looked at pricing policies on 2G telecom spectrum and now more
recently, on coal mine allocations, and alleged that these had been mispriced. While the
higher level of transparency to processes and policies should be beneficial in the longer
term, they were initially greeted by a paralysis in decision making.
This inaction over an almost two-year period, persistently high inflation over the past
two years, coupled with a very weak start to the monsoon season, brought the
pessimism on India to a head - until now.
These moves - a mix of structural reforms and urgent ad hoc measures - have awed the
markets, and should restore investor confidence. These steps are a starting point to
address the important issues of the fiscal deficit (reducing the subsidy burden), inflation
(global retail giants are expected to lower cost to the consumer) and currency weakness
(more foreign investor inflows should boost the strength of the Rupee). The government
has already implemented some of its recent decisions, in contrast with its record over
the past couple of years. We expect more measures in the next few weeks as India
attempts to maintain its investment grade sovereign rating.
Meanwhile, long-term investors continued to bring capital into India. BP, Coca-Cola,
Ikea, Nippon Life, Starbucks are amongst the names which have committed investments
towards India. Institutional investors too brought in funds in 2012, bringing in USD
12.4bn (to 31 August).
In the market, we see domestic cyclicals in a sweet spot. Cyclicals are at a 12-year low
compared to defensives. The government's announcements in the second week of
September coincided with the heaviest rains this year, and now the 2012 monsoon
season is forecast to be near-normal. The central bank has made supportive noises and
we expect rate cuts in the coming months to support the re-rating of India. When it
rains, it does indeed pour.
The HSBC GIF Indian Equity (MC101S2) is available for investment via Hansard's new
investment bond, Vantage, in both Hansard Europe Ltd & Hansard International Ltd.
Hansard has a range of savings and investment products linking to unit funds that can
assist you and your clients in their financial planning, whether your clients have a
conservative, balanced or adventurous outlook. To find out more about any of our unit
funds please contact your Hansard Account Executive, who will be able to assist you
further.