Moral Courage and India

A few more slaughtered in Syria this past week. Libya too. Yes some by Nato fire. The case was made to me this week that the reason India abstained in the UN resolution on Egypt was that the West were hypocritical, that they turn a blind eye to Bahrain, that they are acting in their own self-interest and why should India support that? Why should India support a UK sponsored UN resolution when the UK was wrong on weapons of mass destruction in Iraq? Why should India support the UK in the UN when they want regime change and just call it humanitarian relief?

Well, I wouldn’t worry, but this was put to me by a senior Indian Government official. I worry because if this is how India sees herself and reasons then she has no notion of who she is. God help India.

The West are hypocrites argument: It doesn’t matter. What matters is right and wrong when it comes to deaths in Syria at the hands of their Government, or in Egypt, or anywhere else. That the West are not intellectually consistent is a pathetic excuse by the morally uncourageous to actually protect their own self-interest because they don’t want the light of moral indignancy from a weapons rich West to be shone on their own internal affairs.

If India does not stand for Human Rights because the UK does not do something about human rights in Saudi Arabia, then India is worse than someone who does not think for themselves; they only think the opposite to someone who thinks for them. If India, the world’s largest democracy aspires for nothing more than this, then it has no moral courage, or moral backbone, and certainly no right at all to be on the Security Council of the United Nations. If it does not know its heritage, the land of Gandhiji, and it does not, then it may as well rank amongst the ordinary nations of the world for surely by its inactions it shall be judged.
The West were wrong on Iraq’s Weapons of Mass Destruction Argument: The immaturity of this level of thinking astounds me. So on that basis anything the West ever does must be wrong and the opposite right. No, actually the West went into Iraq based on a breach of UN resolution 1441. Iraq broke the law. The law they broke was NOT that they were concealing weapons of mass destruction. So it was not an illegal war. Read UN resolution 1441 and then come and talk to me.

The West are acting in their self-interest argument: Again, so what? Is it not in India’s interest to say, as the largest democracy in the world, we stand for the rights of the ordinary citizen. But India can’t do that. It would be the hypocrite. No corrupt Government, even a corrupt democratic one can say that. And that is why India abstained. It would be incredulous for India to say we stand for the rights of the Syrian people not to be slaughtered, and at the same time Indian officials robbing her own people blind.
The West want regime change argument: When a government slaughters its own people, regime change is right. Simple. If you think a government is more important than genocide, then you know nothing of the better values of what India can and should aspire to and the best parts of her heritage and I don’t have time for you.

So it occurs to me, it is India that is self-interested, hypocritical and sadly not the nation that bore the greatest generation ever of Indians. Maybe greatness comes in cycles not in straight lines. So maybe we wait another few hundred years for a Gandhiji or an Asoka. There were Indians who knew right from wrong and defined themselves according to their own values. Of which Indian would Einstein today say, ‘in years to come the world will scarcely believe one such as this of flesh and blood once walked this earth.’ Sonia Gandhi, Chidambaram, Sibil?

So it is, for all the charges you level against the West and the UK, they have the moral courage to go in and do something. Call their motives ill, but the outcome is better than sitting on the sidelines whining and cowering on the fringes of history. You want to know why you’re not getting the respect on the world stage you think money can buy? Now you know why. Arise oh Bharat, thou were once great, what has become of thee?

Alpesh Patel

India: UBS Report

India: Deeper curve inversion to come

The Reserve Bank of India’s “monetary policy stance remains firmly anti-inflationary, recognising that, in the current circumstances, some short-run deceleration in growth may be unavoidable in bringing inflation under control.” We continue to believe that such a policy stance suggests an inversion of the NDOIS curve. We keep our 2s/5s NDOIS flattener position in place while further lowering the target to -15bp. We revise our stop to +10bp.

The text of the RBI statement effectively states that the central bank stands ready to tighten again (the next policy review is in less than six weeks, on 26 July). In spite of that unequivocal guidance, the front end of the NDOIS curve does not anticipate much tightening at all: 1y NDOIS at 8% only suggests persistently tight liquidity conditions over the next 12 months, not more rate hikes. We continue to think this to be a mistake: despite rising global growth concerns, it is still too early to position for a RBI pause.

The RBI’s preferred measure of ‘core’ inflation (non-food manufactured products inflation) jumped from 6.3% April to 7.3% in May, well above their indicated 4.0%-4.5% comfort zone for the thirteenth consecutive month. As today’s statement highlights, this “suggests more generalised inflationary pressures; rising wages and costs of service inputs are apparently being passed on by producers along the entire supply chain.” Meanwhile, global commodity prices have experienced only a shallow correction in recent weeks, and the fiscal subsidy adjustments that the RBI expected have not as yet been delivered. Together, these factors suggest considerable upside risk to inflation and endorse the RBI’s continuing hawkishness. We believe inflation expectations are unlikely to ease materially until the domestic economic slowdown is more deeply established.

Further along the yield curve, several variables play important roles. Slower economic growth expectations, both external as well as domestic, are depressing long term yields, even as higher funding costs and the growing threat of fiscal slippage hurt the demand:supply outlook for government bonds. For now, the former effect is overwhelming the latter, which is understandable because the bond issuance schedule is fixed until end-September, but a poor auction could yet trigger a sudden bout of hedging in OIS. However, for the near-term we expect the growth dynamic to continue to dominate, especially if European sovereign concerns deteriorate further.

Although we are tempted to position via outright payers at the front end of the NDOIS curve, we recognise that elevated global market uncertainty tends to exacerbate volatility. Instead, we find that NDOIS curve flatteners continue to offer the best balance of risk:reward in the current environment. For the reasons outlined above (and those we outlined in our original trade note dated May 3, 2011), we persist with our 2s/5s NDOIS flatteners (initiated at +33bp on 3-May; currently +2bp). We revise our target level lower to -15bp, and lower the stop at our initial target level of +10bp).

Banque Privee Edmond de Rothschild Conference

1. Sell bonds, especially long dated US bonds, becuase the inflationary pressures bigger than realised so interest rates will rise and so bond prices fall. Ie Short bonds.

2. By end of year get out of equities because higher interest rates means net present value on dividend discount model diminishes.

3. Long Great Wall Motors (china). and short BYD Auto (china)

4. Long Yanzhou Coal (china) and short (China Coal Energy).

5. Long HTC (Taiwan) and short Mediatek (Taiwan).

All based on some simple analysis:

A. Relative P/E. B. Same sector so neutralise risk on sector by long one and short other.

Abu Dhabi Sovereign Wealth Funds Global Asset Allocations

Target Strategic Asset Allocation:
Asset allocation is used to help achieve the risk/return objectives of the total portfolio. The Strategic Target Asset Allocation Benchmark is designed to reflect ADIA’s (Abu Dhabi Investment Authority) vision of the world over the medium to long term. The on-going asset allocation is reviewed regularly by both the Strategy Committee and the Investment Committee.
By Region Range
North America 35.0% to 50.0%
Europe 25.0% to 35.0%
Developed Asia 10.0% to 20.0%
Emerging Markets 15.0% to 25.0%
By Asset Class Range
Developed Equities 35.0% to 45.0%
Emerging Market Equities 10.0% to 20.0%
Small Cap Equities 1.0% to 5.0%
Government Bonds 10.0% to 20.0%
Credit 5.0% to 10.0%
Alternative 5.0% to 10.0%
Real Estate 5.0% to 10.0%
Private Equity 2.0% to 8.0%
Infrastructure 1.0% to 5.0%
Cash 0.0% to 10.0%
ADIA uses a number of recognised independent benchmarks for its asset classes. For example:
Listed Equities S&P, MSCI and Russell Indices
Fixed Income JP Morgan Government Bond, Barclays Inflation Linked Bond Indices
Alternative Investments BTOP 50, MSCI World plus premia, regional real estate benchmarks.

UBS: Today’s Market Highlights

* GREECE: European Union and International Monetary Fund officials will today complete a review of Greece’s plan for €78bn in asset sales and austerity measures as they prepare the nation’s second bailout in little more than a year (BBG).
* US: U.S. Treasuries and the dollar fell as Moody’s said it may put the government’s Aaa credit rating on review for a downgrade if there is no agreement on increasing the debt ceiling(BBG).
* ASTRAZENECA: The company recently set the price of the Brilique blood thinner, which it hopes will become its next blockbuster drug, at 1.69 euros ($2.38) per pill in Germany. Whether it will be allowed to maintain that price in Europe’s largest drug market remains to be seen. (BBG)
* SIEMENS: Germany’s plans to exit nuclear energy could be an opportunity for German companies to export their renewable energy expertise and knowledge about energy efficiency to emerging countries. (FAZ)
* DEUTSCHE BANK: A group of creditors including a unit of Deutsche Bank and retirees sued former shareholders of Tribune Co, the bankrupt owner of the. Chicago Tribune and Los Angeles Times, alleging the company’s 2007 buyout was a “fraud” which forced the media owner to file for bankruptcy. (BBG)
* HOCHTIEF: The former chief executive of Australian contractor and Hochtief unit, Leighton Holdings, Wal King, said he had not been offered any position by Leighton nor was he seeking one, amid speculation about his possible return as a non-executive director. (BBG)
* INFINEON: The company expects half of its revenue to be generated in Asia by 2014 and is sounding out options for investments in the region. (FAZ)
* NEWS CORP: The company reached agreement in principle with U.K. regulators on a plan to remove the final hurdles to its bid for full control of BSkyB. (FT)
* IFG: The financial-services company said Peter Priestley, who is the appointed IFG board representative of major stakeholder Fiordland Investment Ltd., has temporarily absented himself from all board decisions. The Sunday Times reported May 22 that Fiordland had made a takeover approach for the company. (BBG)
* TELEFÓNICA: The company launched yesterday ‘Tafrifa 6’, the cheapest ever tariff in the mobile business, offering €0.06/min. TEF are looking challenge competition by releasing further reductions in other parts of its business. (Cinco Días)
* ABENGOA: The company in the very final stages of closing a deal to sell its Brazilian electrical network subsidiary to the state-owned electrics company Cemig from Minas Gerais (Brazil) for €430m. ABG holds 11 concessions in Brazil and manages over 4000km of electricity transmission lines in the country. (Cinco Días)
* PRISA: The company has announced it seeks to raise the size of its digital business revenue form 2% to 20% by 2015. (Cinco Días)
* MAPFRE: The president announced yesterday that the company aims to earn btw €1.4bn – €1.8bn this yr. If the latter figure is achieved, it will be a 25% increase on last yr. (Cinco Días)
* TULLOW OIL: The U.K. oil and gas explorer with the most licenses in Africa will be able to sell shares early next year in Uganda after it has completed the necessary paperwork, Elly Karuhanga, the president of Tullow’s unit in the country, told reporters. (BBG)
* UPGRADES: Coca-Cola Hellenic Bottling (Citi), Intesa (Bernstein).
* DOWNGRADES: ASOS (UBS), CIMB (DB), Intermediate Capital (CS).
* CORP. DIARY: Coca-Cola Hellenic Bottling Company S.A AGM, Ryanair May Traffic Statistics, International Airlines Group May Traffic Statistics, John Lewis Weekly Sales Data.
* MACRO DIARY: US – Nonfarm Payrolls, Unemployment Rate (13:30), ISM Non-Manufacturing Composite (15:00), UK – PMI Services, Official Reserves (09:30), Speakers – ECB’s Gonzalez-Paramo (15:15), FED (17:30 / 20:30).

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