The Banking and Strategy Initiative

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Asia Wednesday 9 am: Rupee weakness predates another correction of the US Dollar

JP Morgan is of course sitting pretty on the best outcome of yesterday’s vote with a 68% vote agreeing with Jamie Dimon’s exemplary record and granting him no interruptions from institutional shareholders Blackrock apparently did not vote for the resolution. even thus, Other bank AGMs this week will likely be low key affairs in the fourth estate and for the bank investors with the Q2 pick me up in business frittered away in a slow May, retail sales and inflation in the US crossing into dangerous territory before today’s expert testimonies by Ben Bernanke and Jack Lew. As US Treasuries and 10 Y sell off continues despite China and Japan holding on, the JGB sell off the RBA rate cuts and the weakness in China and trade in Europe ensure that the Euro and the Yuan continue to gain while the Aussie and the Yen could bring back a stronger dollar only if the sell off in those currencies becomes bound again and not a little subdued at 0.98 and 102.7 respectively.

The impact on India – unnecessary though – and imputed by the same banks with big business in Transaction Banking in the Rupee – seems to be a quasi subsidy transaction trying to average back the 2013 rates of the rupee by letting the rupee easily slide in the window before the Dollar weakness comes back and thus the rupee is now smarting towards 56 levels and may likely slide further to 57 before its rise against the dollar thus caps the upside to 54

Being a non free market adjustment trade, the weakness in the rupee obviously has failed to entice the bears and those looking to match the correlation between fx and equities should even ignore this week’s data as equities continue to climb.

Qatar continues to focus on the opportunity tio extend its stakes in larger financial plays globally buying stakes in VTB and Deutsche Bank even if GS commentators’ lack of oratory skill on Indian television could trace back to their losing control in the region’s growth stories. The exit for Goldman Sachs from ICBC would now run into some headwinds as Asia progresses from a story of Frontier markets to a large play for global financials across the trade strories from malaysia, Thailand, Singapore Indonesia, Korea and India, even Turkey and the Middle east growth story where local investment bankers like HSBC and even CIMB hold sway and JPMorgan, Nomura, Goldman Sachs UBS and even Stanchart investments have yielded squat.

Meanwhile midcap traders like Ashwini Gujral and SS (TV18) continue to look for the elusive IT comeback in Infosys or exit Lupin even though the rally in Sun pharma seems to be at an end ( and would seem to be that 5% of market which has completed with honors in the run to 6200 and are twiddling thumbs) before the shift to infracos which offer deep value

Earnings growth in this results season was again led by private banks and Yes Bank and ICICI Bank remain great values. HDFC is a little bit near its edge at 900 with not many FIIs allowed to add tot hat exposure and J&K Bank being in ‘uncharted territory’ I agree is a risky trade though a great fundamental value for an institutional portfolio. The buzz around CAPITAL GOODS makers Crompton Greaves, L&T and BHEL is probably out to emulate that of unethical operators in PSU banks and so should be a big AVOID esp as turnkey project pipelines have been showing the weakness in PMIs and the weakness in Capital Goods trade data wreaking havoc on Japan globally

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