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Big retailers are back... - Views on News from Equitymaster
 
 
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  • Nov 18, 2009

    Big retailers are back...

    ...but with tighter fists. If you want to see signs of green shoots emerging in the US and Europe, you will not be required to go there. In fact, they are very much available here in India. As per a leading daily, the who's who of the global retailing industry are once again making a beeline for India in an effort to increase sourcing from the country. "There are more enquiries. We see some movements on orders for deliveries in the January-March quarter", the CEO of the one of the largest apparel manufacturers in India is believed to have said. The mood in a lot of other companies across India is not any different.

    However, before one uncorks the bubbly and starts celebrating, there is also a sobering fact. While volumes may show signs of easing up, realizations are likely to remain under pressure. Since there is still a widespread fear amongst consumers in the developed markets, they have resorted to down-trading and hence, cheaper goods are finding more demand as compared to mid-priced and higher good brands.

    Thus, the overall impact on the revenues of a firm exporting from India may not be that significant. And its not just apparels. Even exotic fruits are finding very few takers with people buying more of bananas, apples and oranges. Looks like the celebrations may to have to wait for some more time.

    US small banks to have communist owners
    Now, this is one move that will make the Chinese extremely happy. After all, some use had to be made of the near US$ 1 trillion that the dragon nation has invested in US treasuries. And what better use of it than scooping up corporate assets on the cheap in what is still the wealthiest nation on earth. We are referring to a pact that is being negotiated between the Chinese and US regulators whereby Chinese financial institutions will be given the permission to buy into small and medium sized banks in the United States.

    Life has indeed come a full circle for the Chinese. It was only a few years back that they were snubbed by the US authorities when its home grown oil giant CNOOC made a bold US$ 19 bn bid to acquire the California based US oil giant Unocal. But that was 2005 and this is 2009. While four years may not appear too much, a lot has indeed happened on the global financial landscape. The Empire of debt that was the US has seen its power erode considerably and at the same time, China, the largest holder of its debt has gone from strength to strength. Also, with voices getting louder in the US to stop forking out any more taxpayers' money to bail out ailing banks, it only makes sense that they get acquired by bigger entities. But since most US financial institutions in the US are not in the best of health themselves, the cash rich Chinese banks obviously seem as one of the best fit.

    By inviting China, the US authorities are trying to kill two birds with one stone. Helping turnaround the sick banks and at the same time sending out the message to the communists that they are indeed not averse to see a red flag fluttering at the headquarters of few of their financial institutions. After all, now is not the time to peeve one of your biggest lenders.

     

     

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