|»5 Minute Wrap Up by Equitymaster|
On This Day - 6 SEPTEMBER 2011
Are we to see a repeat of the 2008 global crisis?
In this issue:
---------------------------------------------- Video on Demand ----------------------------------------------
Our most recent WebSummit - Stock Market: Where to from here - is now available on demand!
It will be available only for the next few days... So we recommend you view this Free Video right away!
The problem is that banks in developed countries are not yet completely out of trouble. This means that if the crisis deepens many of the countries would not be able to rescue them because of their own deficit problems. What is also hindering matters is a political deadlock. This was amply evident in the US over the issue of raising US' debt ceiling. And is being seen in Europe as well, as members such as Germany are not too enthused about bailing its lesser fortunate peers while many others favour it.
Little wonder then that stock markets across the world have been jittery. It is very obvious that any recovery for the US and European economies will be painful and will take a long time. With the kind of debt that these countries have piled on to their books, a faster recovery looks highly difficult. The governments have their hands tied and higher debt means that they have no room to spend on developmental activities and spur the economies. Pumping pointless money into the system with the hope that citizens will begin consuming again is a futile philosophy to depend on. Emerging market economies, which staged a remarkable recovery post the crisis have also once again begun to feel the heat due to high inflation and tepid demand overseas. Although they are overall still in a better shape as compared to the West. Indeed, it has been three years since the crisis, and the outlook for the global economy does not look any better.
The reason for this is the ridiculous norms for mergers and acquisitions (M&A) that currently prevail in the sector. The restrictions on the bandwidth and number of subscribers make it unattractive for any one company to even think about acquiring another. Therefore, the welcome news for them is that the telecom regulator of India (TRAI) has stated that the new M&A rules would be out by December 2011. Funnily this is the nth time that the regulator and/or telecom minister has promised this to the sector. But the rules still remain elusive. Whether or not it will actually get formulated is a big question. And if the rules do come out, a bigger question is whether the rules would be attractive enough for companies to go ahead with consolidation. Considering the government's past record in telecom policies, this probability unfortunately appears to be very low.
However, a slowdown in growth does not worry the China Premier Wen Jiabao. As per China's five year plan ending 2015, the economy is expected to grow at an average of 7% over the period. Rather than slowing growth, China, like India is more concerned with rising inflation. Hot money into emerging markets has helped drive asset prices much beyond reasonable levels. This issue needs to be addressed before it is too late.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement
Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407