I am not sure what to do with the India situation right now. On the pro side we could argue that India (and China) markets have been beaten to a pulp and are due for a rebound. On the negative side as inflation rises or stays high at least, the Indian central bank most likely will continue to raise rates to fight inflation (for Americans who are used to Uncle Ben who cuts rates during rising inflation that's not normally how it works). And higher rates are not generally a good thing for banks.
So frankly I will admit this could go either way - I could make a case for these stocks continuing a rebound from these levels or I could make a case for a long period of sideways action. I do like the Indian story for the long run, but have some concerns in the near term. So lacking conviction I'd rather have the cash and redeploy it into names I have a better feel for in terms of earnings, and the market is completely crushing. I know I don't have conviction in these 2 because if I was sure this was a great buying opportunity I would be adding here.
ICICI Bank (IBN) was a 0.8% position which we started on day 1 of the fund, and HDFC Bank (HDB) was a 1.0% stake that we started on day 1 of the fund. So these are 2 long time holds for us - and we've raised the equivalent of 1.8% cash with these sales. You can see it's been a wild ride since last August and without trading around these positions we'd have some serious losses. Once more I think these are great investments for the very long run, and this could very well be the bottom but my vision for the next 6-9 months in these names is cloudy with all the cross currents I outlined above. For someone with a 5 year time frame these are great prices. I unfortunately have to outperform the other 10,000 mutual funds to showcase I am worthy of your investment so I don't have the luxury of that time frame. ;)
No positions
4 comments:
wow..CHK ceo again bought good chunk..750,000 shares..wow..
this guy may know that street is stupid.
Well he has been buying for years, high, low and medium
We posted that in the comment sections of yesterdays post "Bookkeeping: A few Energy Purchases" :)
Aubrey is like a bank ATM.
25% of ICICI bank loan book is international - they are the ones funding all these global acquisitions by Indian cos. And they dont have a deposit base internationally. So they have borrowed heavily in the short-term markets, so their CDS has blown apart. HDFC bank is a much better bank than ICICI - not least because their deposit base is higher. ICICI is like Citi - whenever there is trouble, they will get hit. Good underwriting is not in its DNA.
The only good thing about Indian banks right now is - they all raised money last year at the height of the bull market, not like their western counterparts raising money now when stocks have fallen 70%.
Gaurav, thanks for the insight. I saw ICICI is actually opening US branches now as well.
I appreciate the data on the differences... there is such a dearth of Indian stocks for US investors I've been using these 2 as a proxy for India. There have been a few newer Indian ETFs launched in the past half year which might be better but right now everything Indian is being demolished.
HDB has held up far better than ICICI so your breakdown makes a lot of sense.
American banks have little insight and a lot of risk taking to expand EPS - when your compensation system for executives is built on "beating the number" you take as much risk as possible and only worry about the short run. You dont raise capital when it would be prudent thinking for the long run.
So much goes back to our compensation system but no one will ever touch it - they just claim free markets dictate salaries and shut up about your complaints. :) Heads we win, tails we still win compensation...
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