Chillin' out till it needs to be funded
India Morning Report: My right shift key doesn’t work. Will the right UBS please step up! on the India Investment Blog on Post
The McDonald Happy meal is still Rs 20/- and the $5 Big Mac Meal still under INR 200 all taxes paid ( Large fries and coke), so it is not PPP. However, Bhanu(UBS)’ target of 68 is very near and there are no buyers in the currency yet, thus the new Box from 70 to 78-80 should be in play in the coming week. That should also see the traditional Exports rise because of depreciation an import spending goes down finally proving true before the policy implemented is taken seriously by those still trying to understand India from an investment point of view starting from Ford which began in India in the first wave of reforms and is still unable to use it as an export base or get a competing model up against Suzuki.. but the three traditional arguments above hold no water because of the vast difference between reported statistics and trend forming prices, markets and the still unexplored new CPI barely a year old.
Bond markets have traditionally neglected volatility especially in Valuations and recovery LGD models from KMV to other modified Merton and non Merton / non Fama-French models. Domestic consumption is firmly isolated from the one fifth of GDP that is Exports as long as oil prices stay south which looks likely as even $15 Bln less in buying is hardly to be noticed except for the improbable hysteria still not shown by markets. one would probably see Fed buying reduced by half by the end of 2013 in the strongest such scenarios and the markets have broken trends enough to stand tall in that event nullifying any tail risk or God events as a result. Such rabid unnecessity aside, Indian commentators are not expecting a recovery in the currency, and with Foreign interest likely to return in to the investment cycle and in ETF inflows to India and the EMs in the next two months, 80 thus could be my ventured level for the currency, 60 being overshot long ago.
A long recovery trade in the Rupee could in fact still be impossible at those levels and any attempt to recover the 60 levels might not even be theoretically feasible right now. UBS of course has lost all pretentions to Investment Banking and its PPP valuation of 78 is probably a non starter even if they receive 100% of revenues in bonuses as a stay away handshake from the European Private Banking Management. credit Suisse is still due for a hole in the shoe quarter as its ROE calculations seem to suggest this quarter and th Euroean trend t increase bonus percentages flares the remaining investment bankers to a quick relapse of their own holes. Traders at Deutsche bank of course would have ore room to create a new stand in Asia after having completed restructuring and HSBC may not have deprioritised the same as well. Stanchart does well with a long term view so it may be planning to sit out further bullish rupee moves too.
While other Asian currencies will cover any intermediate levels gained at the expense of the rupee on the downside at will, MAS in Singapore may now find it easier with this prolonged bout to offer cheap options to not just Chinese property buyers or Electronics and transaction pass thru exports but also other sectors of the Economy as its Monetary policy maintains a 100% relation to its levels to the Dollar and other Asian currencies. Koreans will again be looked at suspect as its All share index continues nose down for its dollar terms with no effective hedge from its Chinese and Japanese custom.