Archive for January 22nd, 2008

Enter the Dragon

Tuesday, 22nd January, 2008

The Elephant’s slow but steady march has been noted by the dragon. A realistic, noneuphoric appraisal of Manmohan Singh’s visit to China suggests that Beijing is more amenable to treating New Delhi on an equal footing than ever before. The political benchmark for judging Sino-Indian relations has been a visit-by-visit assessment ever since Rajiv Gandhi’s ground-breaking trip to China in 1988. Singh’s visit marks a major step-up in endeavour: India and China are now gearing up to act in bilateral concert on a global scale.

thesummit

Asked why India-China ties were improving, the Prime Minister said at the end of his three-day visit that the world respected the strong, not the weak. ‘If India is strong economically, politically, socially, [the] world will respect us more… and take note of our concerns,” Singh stressed. In essence, the PM said the Chinese had recognised India’s strengths as a nation and were now ready to do business with us on a range of issues from trade talks to climate change.

Sinophobia afflicts a large number of strategic thinkers in India, a fear generated by the crushing defeat that the Indian morale suffered ill 1962. Many of our China pundits lived through that war and believe that Beijing is not to be trusted. New India has now the right to depart from the old phobia and engage China not with fear or suspicion, but through the prism of equality of exchange. Speaking in Delhi in November 2006, Chinese President Hu Jintao tried to put India in its place when he said New Delhi was Beijing’s largest trade partner in South Asia. It was interpreted as gently pointing to India’s mere ‘South Asian’ status. But the real sub-text of Sino-Indian ties - the fantastic increase in bilateral trade - has changed the locational setting of India for the Chinese. Addressing a business meeting with the PM during his visit to Beijing, Chinese Vice-Premier Hu Langyu pointed out that India was China’s tenth largest trading partner globally. The ‘South Asian’ context, this time, was significantly absent.Even before he left for China, Singh also sent out a loud and clear message to the party leadership in Beijing: India was not playing any ‘contain China’ game and the quadripartite dialogue between the United States, Japan, Australia and India was as good as dead.

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A close look at the vision document reveals indirect Chinese concerns about the quadripartite dialogue.’The two sides favour an open and inclusive international system and believe that drawing lines on the’ ground of ideologies and values, or on geographical criteria, is not harmonious to peaceful and harmonious coexistence,’ it said. The quadripartite dialogue was supposed to be a dialogue of elected democracies, which specifically excluded China on grounds of ideology and values. Very similar language was used in Ottober 2007, when the Foreign Ministers of India, China and Russia agreed that ‘drawing lines on the grounds of ideologies and values is inconsistent with the trends of the times and does not help solve various global issues facing the international community’. But if you thought that only China had its way, take a look at this formulation: ‘The two sides hold that the right of each country to choose its own path of social, economic and political development in which fundamental human rights and the rule of law are given their due place, should be respected.’ The reference to fundamental human rights and rule of law is something that only the Indian side could have insisted on including, given that this is a stick that the West often uses to beat China with.

The story, however, of the Manmohan Singh visit is a different one. It is about India and China believing that they can work together to resist a purely Western shape of the world by speaking, on occasion, in one voice on issues of concern like climate change. India and China want a fair international energy order, want to cooperate in the civil nuclear energy arena, want to step up cooperation in regional organisations and help build a pan-Asian economic architecture. The two countries, in the vision document, also stated their relations were not ‘targeted at any country, nor will it affect their friendship with other countries’. That’s pretty unprecedented language in a joint statement.

India and China, which are in the early stages of a strategic and cooperative partnership, and have solid relations with the US, want to assure the world that they are not ganging up against anyone. It’s also unlikely language for countries that are engaged in resolving a massive unresolved border dispute. Despite all the talk of border incursions, the two countries have put in place a solid system of dealing with situations when their troops come face-to-face with each other. Since 1988, they have put in place a number of confidence-building measures. Top Indian officials have stated that Tawang was not on the table in discussions with China. They also clarified that India did not envisage any transfer of settled populations, in line with the April 2005 guiding principles towards a border accord. In fact, officials also point out that India and China would have the tough job of selling an eventual border settlement, one based on give and take, to their people. Any formal accord would necessarily mean a compromise without any victory.

Singh’s visit actually had India and China talking Pakistan, Iran and Myanmar, with the PM revealing that Hu Jintao had been shocked by the assassination of Benazir Bhutto. The Chinese cannot but be aware that a weak, violence-wracked Pakistan is no foil to India. If Indian and Chil:lese leaders display an appetite to sustain this vision, the world will benefit. India-China relations are a work in progress. And, the world is watching every brush.

BEARS HUNTING BULLS

Tuesday, 22nd January, 2008

SOUTH-BOUND- What happened in just 7 days? A quick recap:

Investors lose over $300 bn in six days.

The total m-cap stood at Rs 59, 53,525.87 crore at the end of Monday’s trading against Rs 71, 38,810 crore before bourses began business last week on Jan 14.

Investors lost a whopping Rs 6, 63,975 crore in just one trading session from market cap of Rs 66,17,501.33 crore on Friday last week.

Investors had lost over Rs 5, 21,310 crore in the five trading sessions last week.
The 30 stock account for over Rs 2,19,717.74 crore in the total loss with their combined market cap falling to Rs 24,63,139 crore on Monday.

Reliance Industries has lost over Rs 37,110.72 crore, taking its market value to Rs 3,69,837.28 crore from Rs 4,06,948 crore on Friday.

  

Liquidity Concerns loom large as foreign fund flows reverse and with large chunks of rupee funds locked up in the Reliance Power issue (Rs 1, 15,000 crore subscription money).

  bears hunting bulls on dalal street

Bears went bull hunting on Dalal Street on Monday, January 21, 2008.

As the global economy reacted to a potential US recession and foreign funds sold heavily, the Sensex recorded its biggest ever single-day drop of 1,408.35 points, and investors lost notional wealth worth Rs 6,63,975 crore. Trading halted on the Bombay Stock Exchange for a few minutes as a circuit limit of 10 per cent got wrongly activated instead of the 15 per cent limit specified by regulators.

  

Prime Minister Manmohan Singh moved to cool the mood at the end of a heart-wrenching day. “Orderly growth of the capital market is a priority concern… Considering that fundamentals of our economy are elementarily strong, I am confident market will grow in an orderly manner. I would like to assure the Indian public that sustained orderly growth for capital markets is a priority concern,” he said.

  

The Sensex lost 2,062 points intraday to hit a low of 16, 951, before recovering about one-third of what it lost to close at 17, 605.35, down 7.41 per cent. The National Stock Exchange Nifty lost 496.50 points or 8.70 per cent to close at 5208.80. 

Market capitalisation on the BSE was Rs 59, 53,525.87 crore at the end of Monday’s trading, a mind-numbing drop of Rs 6, 63,975 crore in just one trading session. Rs 5, 21,310 crore in notional wealth was lost over five sessions last week.

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Amid weak stock markets across the globe and heavy foreign institutional selling in the last four sessions (FIIs dumped Indian equities worth Rs 9,118 crore), panic gripped the funds-starved bourses for the third time in the last nine months and stock prices tumbled triggering margin calls imposed on traders by brokers. The big-bang Rs 1l, 600-crore IPO of Reliance Power has attracted 74 times more than what it could absorb, siphoning off huge money from the markets.

  

A margin call is the requirement to cough up additional money to compensate for the decline in value of shares one has bought with borrowed money (broker’s money). With the indices opening lower and sliding rapidly, brokers were forced to sell their clients’ partly paid holdings as bourses demanded more margin money.

There was a flurry of margin calls as stocks plummeted, which resulted in forced selling that aggravated the fall. The sub-prime factor, which played the villain in May 2007, triggered the crisis this time too.

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It is the steepest fall for the Sensex; especially from the peak of 21,206 it scaled on January 10 to touch an incredible low of 16,951.50 on Monday. A heart-wrenching day’s trade wiped off the Sensex market capitalisation alone by Rs 2, 19,717 crore in a single session. The total market cap has eroded Rs 11, 85,285.46 crore since the market downturn started last week, wiping off over 20% of Sensex gains.

  

No one is talking of buying cheap yet as the day was consumed by panic and worries about margin payments and the payout of Tuesday. Foreign funds turned net sellers yet again on Monday, Rs 3,296.73 crore, according to the provisional figures available on the National Stock Exchange website.