I normally do not buy charts like this; I like to buy strength most times, not weakness. But I am hoping a double bottom is being formed with mid March lows in both these names. Further, in the "No Indian Bank Left Behind" program, I am almost obliged to throw these guys a bone. I've not treated these 2 stocks as buy and holds, but more of trading vehicles and the layer in/out approach has actually worked wonders with these two since we have nice profits. I am upping HDFC Bank (HDB) to 1.1% and ICICI Bank (IBN) to 1.2% so this is a mini basket of 2 names of which I am "up" to 2.3% weighting. Not that much really of a portfolio due to my general caution of the market AND the potential for some pain in Asian economies as commodity prices soar. Plus if these names break below their March lows, the potential for much lower prices lies ahead (which is why I don't usually buy these sort of charts)
Folks, what is happening is India is they have this small thing called inflation. So the central bank there is doing the traditional thing, which is to raise interest rates. Banks usually don't like an increasing rate environment. See this is very unlike the United States when, when you have an inflation problem, you hide it under government reports, and say you have no inflation. Then your central bank can have the latitude to cut interest rates from 5.25% to 2.00% (as opposed to holding firm like Europe or raising rates). So you sacrifice the lower and middle class to the dragons of inflation while smiling and saying there is no inflation and even if there was it would "dissipate" in the 2nd half of 2008.
However, even with this gift, our banks which should be benefiting from these lower rates are so mired in the twin pillars of credit debacle and housing debacle that they are still stinking up the joint (remember we hate regulation here in America - and we basically allowed these guys to self police themselves - yee haw Cowboy). These banks are flat lining even with all the King's horses and all the King's men delivering interest rate cuts to them (license to print money for banks). Ah well, such is the socialistic system we live in - rob from the poor, give to the rich. In India they still have old fashioned notions I suppose... and their banks are suffering for it. But we're still talking about 2 giants in the country (they are beginning to open US branches by the way as the "East" continues to eat up the "West"), in homelands that will be growing exponentially for the next 20-30 years.
Long both names in fund; no personal position
2 comments:
I just picked up a little HDB yesterday, but I was hesitant to buy too much. I'm concerned that with food prices, etc. so high, it will severely limit the amount of money, if any people will have to put into a bank. A battle between growth and inflation doesn't seem like an ideal environment for a bank to grow. Any thoughts?
You have to segment India's society, the disparity between rich and poor is extreme, like in Brazil, like in China, like in Russia. The "poor" in America would be "middle class" in many of those countries so you have a limited segments of society you are talking about. Large portions of Indian poor don't have electricty yet so this is what I mean about segmentation.
If nothing else I know ICICI can start picking up some Americans to offset their Indian base - they just started opening branches here.
Developing markets are going to be a great battle - high inflation and high growth. No one knows which will win out but its going to be a matter of degree. There is no "yes" or "no" answer to your queries, just like the US has segments of economy doing well (natural resources, railroads, ports, Apple, medical) there will always be winners and losers in an economy. Even if India growth falls in half its still 4% which is 4% more than the US. So it's all relative.
Post a Comment