Banks' pecking order, FMCG & more - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Banks' pecking order, FMCG & more

Feb 8, 2008

  • The fact that the supremacy of the US economy is in doldrums is amply evident from the fact that some of biggest US financial behemoths, which dominated the global financial landscape for most of the past century, have started losing their status. It was just a year ago that Citigroup was the world's biggest bank by market capitalisation and Industrial & Commercial Bank of China (ICBC) was beginning its fourth month as a publicly traded company. As recently as 2003, there were 13 American banks ranked in the top 20 and not a single Asian rival. However, the collapse of the subprime mortgage market wiped out almost US$ 100 bn of value from the three biggest US banks in the past six months. There is now a new world order for banks, and the Chinese, for the first time, are the biggest, with a market capitalization that has made the perennial number one Citigroup Inc. a distant seventh, also behind China Construction Bank and Bank of China.

    Today, Beijing-based ICBC is the largest financial-services firm and Citigroup has tumbled to seventh on growing concerns that the 196-year-old bank is no match for a bank based in the world's fastest-growing major economy that has more customers than the combined populations of France, Spain and the UK. Chinese banks are now among the most expensive in the world relative to earnings, assets and revenue. The reversal of fortunes is the clearest sign that the shareholders are betting on banks in the emerging markets rather than the US institutions. Investors are paying 28 times estimated full-year profit for ICBC shares in Shanghai and 19 times in Hong Kong (as per Bloomberg). That compares with about 11 times for New York-based JP Morgan and 10 times for HSBC. Having said that, while the NPA problems of the Chinese banks are currently being ignored, they may have to bow down to the Indian banks that are scaling up in size, have economies of scale and are better off at the delinquency levels.


  • The finance ministry's proposal of raising the minimum portion of public shareholding to 25% in all listed firms will open a floodgate for public offers in the Indian equity markets, which are already expecting more than Rs 750 bn worth of public floats in 2008. The focus is now on the nation's primary market infrastructure, and market participants are debating whether it can support so many issues. According to Thomson Financial's primary market tracker, India is one country saving the ailing global market for initial public offering (IPO) with US$ 3.3 bn worth of proceeds from eight deals, making it the largest IPO market in the world so far this year. India, in fact, accounts for 49.1% of global IPO proceeds in 2008.


  • FMCG and food companies across the globe are vying for a larger share of the Indian consumer's wallet. The increasing share of disposable income of the Indian consumer has led to intensified competition in this space. Unilever, which sells soaps to more than 500 m Indians (through HUL), may see its global revenue growth slow down by 2010 as Procter & Gamble and ITC step up marketing in Asia's third-biggest economy.

    The world's second-largest FMCG player has relied on accelerating shipments of Surf Excel detergent in India to make up for sluggish sales in Europe. Now Procter & Gamble is stocking Indian stores with Olay skin-care products after nearly halving the local prices of Ariel and Tide detergents in 2004. Asia and Africa, which make up about a third of Unilever's worldwide sales, is expected to see their share of the company's growth fall to 2% in 2010 from 3.3% in 2007. Rising prices of raw materials have made it more difficult for consumer-goods makers to pass on higher costs. The price of palm oil for example, used to make soaps and food, has surged 70% in the past year. The Indian packaged-food industry estimated at US$ 14 bn is also seeing competition brewing, as companies see potential in the unpackaged sales of US$ 275 bn.


Equitymaster requests your view! Post a comment on "Banks' pecking order, FMCG & more". Click here!

  

More Views on News

India's Drone Revolution is a 4x Profit Opportunity (Profit Hunter)

Sep 30, 2020

My research on India's leading defence companies brought me to one major player in drone manufacturing.

The Gold and Silver Bull Market is Not Over (Fast Profits Daily)

Sep 29, 2020

The last few days have been nerve-racking for bullion traders. Stay calm. The bull market still has a long way to go.

Earned Short Term Capital Gains on Shares? Here's What You Need to Know While Filing ITR (Outside View)

Sep 29, 2020

PersonalFN explains CBDT's clarification regarding scrip wise disclosure in ITR in case of short term capital gain.

This Smallcap is a Must Have Stock in Your Portfolio (Profit Hunter)

Sep 29, 2020

Investing in this smallcap could open doors of huge, long-lasting wealth.

Why the Market May Rally for a Few Days (Fast Profits Daily)

Sep 28, 2020

Why I think the market can rise for the next few days.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 30, 2020 11:43 AM

MARKET STATS