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Recovery could take 10 years

Mar 9, 2009

British high on nationalisation
Asian markets have opened this week in the negative, led by losses in Hong Kong (stocks down 1.2%), Singapore (down 1.9%) and Japan (down 0.8%). Meanwhile, news of failure of financial companies and their nationalisation continues to flow in. In one such instance, the UK government will be raising its stake in Lloyds Banking Group to as much as 77% while guaranteeing the bank's toxic assets worth 260 bn. Nationalisation of Lloyds thereby leaves just Barclays and HSBC as the only major British banks not controlled by the government, following last month's bailout of Royal Bank of Scotland. "If we and other countries don't fix our banking systems we won't fix the rest of the economy," says the British finance minister. We won't disagree with him.

In the meanwhile, as the world economy continues to falter, a slew of dire predictions also continues to flow in. "I don't see the US economy getting better for a long time," says the legendary investor and commodities guru Jim Rogers. "I hope the US recovers in two years. That will be good news. It could be 10 years," says Rogers.

Pre-election rally in Indian stocks?
"A rally in Indian stocks will depend on the outcome of a general election in the South Asian nation this year as government spending is needed to bolster economic growth amid the global recession," says Morgan Stanley. While the BSE-Sensex had gained about 15% in the four months prior to polls during the previous four elections, the chance of a rally this time around seems low. This is given that there is immense uncertainty at the global level as also with respect to who will form the next government in India. Morgan Stanley adds - "Investors need to be most wary of a third-front government. The country has had three instances of third-front governments. The economic performance during those short-lived governments was not something to write home about."


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