Financial crisis presents opportunity for Asia: Jeffrey Sachs

The global economic crisis should be viewed by Asia’s policymakers as an opportunity to expand investment in "desperately" needed public goods, economist Jeffrey Sachs told an ADB audience.

Professor Sachs, director of the Earth Institute at Columbia University and a special advisor to UN Secretary General Ban Ki Moon, was speaking at ADB Headquarters today as part of the Distinguished Speakers Program.

In a lecture titled "Achieving Global Cooperation on Economic Recovery and Long-Term Sustainable Development", Prof. Sachs said that with the drop in external demand for Asian exports, the region will "have to rely on public spending," such as infrastructure, health, education and energy reforms.

"Asia needs all of that desperately," Prof. Sachs said. "This is still the region of the world with the fastest urbanization, with the most dramatic need for pollution control, for cleaning up the energy sector, for cleaning up the rivers, for sustainable urban development, for accommodating the migration of hundreds of millions of people from rural areas to urban areas. I like to view this crisis as an opportunity for Asia given the chronic underinvestment in public goods. Public spending has a very high social return and also has a very high macroeconomic purpose right now."

He said that with around $4 trillion in foreign exchange reserves, large current account surpluses and low inflation, Asia is well placed to expand public spending.

Global HNI wealth up 9.4% yoy

The combined wealth of the world’s high net worth individuals (HNIs ) increased 9.4% to US$40.7 trillion in 2007, according to the 12th annual World Wealth report, released by Merrill Lynch and Capgemini. The increase was largely driven by market capitalization growth in emerging economies. India was the world’s fastest-growing HNI market with a 22.7 % gain to 123,000, followed by China which saw a 20.3 % increase to 415,000.

The number of HNWIs in the world rose 6% in 2007 to 10.1mn, while the number of ultra high net worth individuals (Ultra-HNWIs ) increased by 8.8 %. For the first time in the history of the Report, the average assets held by HNWIs exceeded US$4 million.

In Asia Pacific, the HNWI population rose 8.7% from a year earlier to 2.8mn. The region’s HNWIs had combined wealth of US$9.5 trillion, an increase of 12.5 %.

Asia was home to some of the world’s fastest-growing markets by HNWI population, taking five spots out of the global top 10 for the third consecutive year. China also surpassed France as the fifth-largest HNWI population in the world. Also included in the world’s fastest-growing markets were South Korea, where the HNWI population increased 18.9 %, Indonesia at 16.8 % and Singapore at 15.3 %.

In India, the number of HNWIs rose 22.7 % during the year to 123,000. The growth was primarily led by market capitalization and real GDP growth.

"In India, wealth is being created at an unprecedented rate. We are in the midst of a multi-year growth trajectory in terms of the number of HNWIs as also their combined wealth," said Pradeep Dokania, head of Global Private Client at DSP Merrill Lynch Limited. "Notwithstanding the recent dislocation in global markets, the robust economies in Asia, as well as in India, are increasingly being driven by the domestic consumption story and continue to spur wealth creation in the region."

Ban on steel exports to drag India in courts overseas

A blanket ban on export of steel items will have serious repercussions as the industry will not only lose international market and dent country’s credibility, but will attract huge litigations in courts overseas.

The ban, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM), Indian exporters on one hand would have to be spending huge amount of money to fight litigations, on the other massive stocks of inventories be piling up of materials already produced specifically for export purposes. Their will be no domestic market or consumption, says the industry body.

The Chamber President, Venugopal N. Dhoot said, its ironical that we continue to export freely the very important raw materials "iron ore" with a nominal export tax and the end-product `steel’ is being banned from export.

The Chamber said, the total percentage of exports of steel at the moment are not more than 6-8% of the total production. A significant part of the exports of steel consist of products which do not have a domestic market or are surplus to domestic requirement. A blanket ban on the export of steel items will put a strain on the existing manufacturers who have imported and established steel mills to convert raw steel into exportable product. With a blanket ban on exports, what happens to the material which necessarily has to be produced or to the equipment already established which will be rendered idle and in fructuous.

The Chamber Chief said the export markets are established with considerable efforts and long term investment. If exports are banned abruptly, international buyers would seek other markets and India would lose its export markets on a very long term basis. It will take years for India to regain export initiative once again.

The major steel manufacturers have already given an assurance to the Steel Ministry on 26th March 2007 that they will be voluntarily controlling exports and exercise self-restraint. Naturally, such self-restraint would not be at the cost of dishonouring existing long term export contracts or failing in their obligations under EPCG to the government and thereby committing an offence.

Government of India has already withdrawn the benefits/incentives given under sovereign assurances to the steel industry to encourage exports through the earlier national trade policies. The effects of these withdrawals are yet to be seen as they have happened only in the last week or so. The exporters have not been given reasonable time to adjust their exports to these withdrawals.

Urging the government to review the iron-ore exports policy, Mr. Dhoot said high and medium-grade iron ore reserves would not last more than 19 years, even if exports of these grades are frozen at the current level and if the targets set out in NSP 2005 are to be met. This necessitates computation of depletion premium for ion ore to carry out economic analysis. The depletion premium works out to US$10.18 for a steel producer located within the state. No such depletion premium has been applied for coking coal, as the prices did not exhibit any trend prior to the recent steep price hike.

India tops Asia PE sweepstake in 2007

For the first time, India has topped the Asian Private Equity chart in terms of deal value. India saw PE inflows to the tune of US $9.9bn from 290 deals in 2007, says the the Centre for Asia Private Equity Research (CAPER). China is second in the list with total PE amount of US $9.5bn, followed by Taiwan at US $5.8bn.

In Asia (including Japan), India has been fourth in investment volume for the 2004-2006 period. Incidentally, Japan which has been No.1 since 2003 except for last year when Australia topped the charts, dropped to sixth place with PE deals worth US $3.2bn, according to the CAPER data.

In 2007, the Asian private equity industry saw a rising number of Asia-based limited partners, says the CAPER. An additional US$36.4bn of fresh capital came into the market, but the deal value declined by 21% to US$42.2bn, it adds.

"The industry also witnessed a new high in divestment activities, with US$17.3bn of realised capital being returned to investors' coffers during the year," according to the regional PE research tracker.

Institutional Investors

• 292 institutional investors were known to have made allocations
• corporate investors dominated, accounting for 20% of the known allocations, followed by government agencies at 11%

Funds

• US$36.4bn of fresh capital was recorded during 2007, an increase of 28.3% compared to that for 2006
• venture capital funds recorded the biggest growth at US$7.1bn, an impressive 64.7% surge compared to US$4.3bn for 2006
• buyout funds accounted for US$15.1bn, while funds for growth/expansion situations amounted to US$12.3bn
• China led in recording the largest pool of fresh capital at US$6.9bn, followed by India with US$5.3bn of fresh capital

Investments

• US$42.2bn in aggregate deal value recorded, a decline of 21%
• average deal size has declined by 32.4%, to US$61.1 million
• for the first time since 2005, companies in growth/expansion stage attracted the lion's share of private equity capital, accounting for 50% of the US$42.2bn
• commitments to buyouts slipped to US$20.1bn, a far cry from the US$37.4bn for 2006
• India led in recording the largest aggregate deal value, at US$9.9bn, a fraction ahead of the US$9.5bn garnered by China

Divestments

• 380 divestment processes known to have been initiated, double that for 2006
• US$17.3bn of realised capital recorded
• Medium IRRs for realised capital surged to 67%, compared to 51% for 2006
• South Korea led in divestment performance, where investors were able to realise US$4.8bn, representing 27.7% of the returned capital.

UPA performance more than satisfying: ASSOCHAM

As 2007 comes to its closure, Indian Inc. rated the performance of UPA Government under Prime Minister, Dr Manmohan Singh "more than satisfying" in the last three and half years, particularly under compulsion of coalition politics, both on internal and external front, giving it 7 marks out of 10 and describing its Business Confidence Index as investment-friendly to fair extent.

The just conducted assessment carried out by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) on UPA Government's performance in the last three and half years is based on a random Opinion Poll in which nearly 400 CEOs and MDs of large, medium and small size industries participated. It concludes with 70% of these head honchos feeling that the Government's performance was good in terms of keeping average GDP growth at around 8.3%.

Exports registered a growth of 18-20% despite rupee appreciation and savings rates grew at over 31%, further felt the 70% lot of the CEOs. According to them, inflation however remained a prime concern for the Government in the past three and half years which despite its best effort, stayed at 6% and caused a great deal of criticism for the UPA Government, said ASSOCHAM President Venugopal N. Dhoot.

35% of the CEOs and MDs have rated the current government performance, describing it just an average, arguing that neither employment increased substantially nor reforms in labour market were introduced and therefore, the growth rate cannot be termed as `inclusive’.

85% of CEOs, however, felt that Dr. Singh did all humanly possible ever since he took over as the Prime Minister on almost all front under coercion of coalition politics and particularly in maintaining an excellent foreign policy with equally balanced approach towards economies of scale and those of developing countries. FTA’s performance and foreign exchange reserves were appreciated by 85% of CEOs.

Nearly 30% of CEOs and MDs have hailed the leadership of Dr. Manmohan Singh in handling the nuclear issue with United States of America without any offensive and belligerent approach to some of its nuclear partners, saying that such a delicate issue was handled with much more maturity and statesmanship and at times, the government faced embarrassment on this issue because of domestic political reason.

Nearly 70% CEOs said that Dr. Singh’s leadership deserves only 7 marks out of 10 because prices of agricultural commodities showed a sharp rise in the 3 and half years of the UPA rule primarily due to stagnating production and rising demand. Commodities prices like pulses, wheat and edible oil have seen a jump of 40-100% thereby contributing to overall inflation.

Majority of the CEOs appreciated the allocation of UPA government towards education. Compared to 2001-02, financial outlays for the Sarva Shiksha Abhiyan increased fifteen-fold from Rs6.65bn and stood at Rs106.71bn in 2007-08.

The CEOs also appreciated the launch of Bharat Nirman programme of UPA government with a massive public-private partnership that envisages providing infrastructural amenities with the collaboration of private sector. While the performance of Dr. Singh government in the power sector has been dismal – just about 50% of the targeted 41,000 MW was added in the 10th plan period – it can take credit for paying open the nuclear door for India.

Over 80% of the CEOs complimented the UPA government for taking the Sensex to all time high heights of 20,000 marks, the credit for which goes to the Finance Minister and the UPA government in particular as the capital market maintained almost a good pace in the last 3 and half years and the pace accelerated substantially in latter part of 2007.

As many as 90% of the industry leaders agreed that the buoyancy in the steel, cement, banking, metals, construction material is a result of the boost given to the infrastructure and housing sectors apart from a global firmness in prices.

With big time investments taking off in the construction of roads, bridges , ports and railway, many of the infrastructure companies like Larsen and Toubro and Hindustan Construction have been re-rated among the investment bankers and the stock market. The performance of railways have also been appreciated by 95% of CEOs, complimenting the Rail Minister, Mr. Lalu Prasad for railway’s turnaround.

The corporate results show that despite certain sectoral glitches, the companies have been maintaining a net profit growth ranging between 15 and 20%. Corporate firms in most of the sectors, be it steel , cement, fast moving consumer goods, real estate, manufacturing, retailing, banking , infrastructure finance, hospitality or aviation have remained beneficiaries of the booming conditions in the demand-driven markets. In fact, in certain sectors like aviation, the Indian picture is quite different from the rest of the world.

However, there are challenges as well and the government along with the Reserve Bank of India have to remain extremely cautious about some of the global developments which could have a damaging impact on the Indian economy which is well integrated and not free from the international economic architecture.

The Wireless Revolution

Special Report on Wireless Revolution

Monetary policy review: Sharekhan Special dated April 24, 2007

Monetary policy review

The Reserve Bank of India (RBI) has kept the key interest rates, like the reverse repo rate, the repo rate and the bank rate, as well as the cash reserve ratio (CRR) unchanged in its Annual Monetary Policy for the year 2007-08. The policy is in line with our expectations. It continues to remain focused on maintaining price stability and anchoring inflation. However the importance of growth is once again visible in the RBI's statements and that is the key positive takeaway from this policy. The salient features of the policy are given below.

• The reverse repo rate and the repo rate have been kept unchanged at 6% and 7.75% respectively.
• The bank rate has been kept unchanged at 6%.
• The CRR has been kept unchanged at 6.5%.
• The risk weightage on residential housing loans has been reduced to 50% from 75% for home loans up to Rs20 lakh.
• The non-resident Indian deposit rate on foreign currency non-resident bank deposits and non-resident (external) rupee account deposits has been reduced by 50 basis points as per expectations. However the apex bank has made capital account outflows more relaxed for all categories, from corporates to individuals.

Monetary policy review: Sharekhan Special dated April 24, 2007

Monetary policy preview: Sharekhan Special dated April 19, 2007

Monetary policy preview

• The market is currently not expecting another 50-basis-point cash reserve ratio (CRR) hike and we also don't expect the same. The reason why we don't expect any further tightening is because we feel the RBI has already taken action on March 30, 2007, which was completely unexpected, by increasing the repo rate by 25 basis points and the CRR by 50 basis points.
• Further the inflation is expected to moderate going forward and the non-food credit and money supply growth have also shown some moderation, which favour a status quo. If the RBI goes ahead and hikes the CRR again it could be a setback for the markets.
• Liquidity management will remain high on the agenda for 2007-08, with the policy rates such as the repo rate, the reverse repo rate and the bank rate likely to remain unchanged.
• The gross domestic product (GDP) growth estimates for FY2008 could be in the range of 8-8.5% while the target zone for inflation may remain unchanged at 5-5.5%.
• A curb on foreign flows through the lowering of the NRI deposit rates to make them less attractive and lowering the external commercial borrowing limits may be undertaken to control capital inflows at least in the short term as long as the inflation is above the RBI's comfort zone.
• Some mention on the credit and fund flow to sensitive sectors like the commercial real estate may find its place in the policy, as the RBI is very concerned about the escalating real estate prices, which could lead to an asset price bubble.
• We feel the RBI should avoid excessive tightening so that concern over the economic growth potential in the next fiscal doesn't come under serious scrutiny.

Monetary policy preview: Sharekhan Special dated April 19, 2007

Q4FY2007 Capital Goods earnings preview: Sharekhan Special dated April 17, 2007

Q4FY2007 Capital Goods earnings preview

The Working Group on Power for the 11th Five-Year Plan has envisaged an addition of around 69,000 megawatt (MW) of power generation capacity during the plan period (FY2007-12) and an additional capacity of 86,500MW during the 12th Five-Year Plan. Looking at the current status of the 10th Five-Year Plan's (FY2002-07) capacity addition programme, these targets looks quite aggressive since the government had planned a capacity addition of 41,110MW during the 10th Plan period whereas the actual achievement is likely to be around 25,000MW (only 61% of the target). Out of this about 17,995MW of capacity had already been commissioned till December 31, 2006. However the fact that a total of 31,345MW of capacity is already under construction gives the panel's plan a lot of credibility.

Looking at the huge power generation capacity addition programme of the government (totaling to around 155,000MW in the next ten years), the order flow momentum for the capital goods companies engaged in the power sector, such as Bharat Heavy Electricals Ltd (BHEL), Crompton Greaves, Bharat Bijlee, Indo Tech Transformers, KEI Industries and Genus Overseas, is expected to be robust. Going by the recently announced provisional results of BHEL, wherein its order flow for the full year ended March 2007 registered an increase of 88% to Rs35,633 crore and the order backlog stood at an all-time high of Rs55,000 crore, the time ahead for power ancillary companies appears even more promising.

Q4FY2007 Capital Goods earnings preview: Sharekhan Special dated April 17, 2007

Q4FY2007 Banking earnings preview: Sharekhan Special dated April 16, 2007

SHAREKHAN SPECIAL

Q4FY2007 Banking earnings preview

We expect the interest income on advances in the last quarter to show a strong growth on the back of above 28% year-on-year (y-o-y) credit growth and the full impact of the hike in the prime lending rates (PLRs) effected by the banks in the fag end of December 2006 or early January as well as in mid-February 2007.

However, the cost of funds may have an upward bias, thereby putting some pressure on the margins of the banks with lower current and savings deposit account (CASA) balances as the deposit costs, especially the bulk deposit rates, have moved up sharply. However, the one-time cash reserve ratio (CRR) income that banks are expected to get in this quarter with retrospective effect should help them to tide over the increased deposit costs.

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Q4FY2007 FMCG earnings preview: Sharekhan Special dated April 12, 2007

Q4FY2007 FMCG earnings preview

Key points

• Backed by a pick-up in rural demand, the fast moving consumer goods (FMCG) sector has seen the volume growth getting better every quarter. The revenue growth for the current quarter is likely to be driven by volume growth as well as improved pricing power.
• Rising input prices is a concern for the industry. Palm oil prices have increased by around 20% in the last three months but LAB prices continue to remain steady. Price increases as well as cost savings would help the companies to maintain their margins.
• We expect the profit of Hindustan Lever Ltd (HLL), the market leader in the segment, to grow by 18.8% year on year (yoy) backed by a strong growth in the home and personal care (HPC) segment and price increases in key products. We expect the margin to improve from 11.8% in Q1CY2006 to 12.8% in Q1CY2007, which would be primarily due to the price hikes taken in many of its products as well as improved product mix.
• ITC's profits are expected to grow by a strong 24% yoy. We expect the growth to be broad-based with the magnitude of losses in the non-FMCG business coming down. The imposition of the value-added tax (VAT) is having a dampening effect but we believe any decline is a good opportunity to buy.
• The long-term potential of this sector appears favourable with higher disposable incomes and increased spending. We believe with strong free cash flows, high return on capital employed (RoCE) and sustainable growth the sector still looks attractive.
  


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Q4FY2007 IT earnings preview: Sharekhan Special dated April 04, 2007

Q4FY2007 IT earnings preview

The street expectations have toned down considerably in terms of both Q4 performance and the annual guidance for FY2008, and the recent underperformance of the tech stocks indicates that the same has already been factored in the valuations. This essentially means that the negatives have been priced in, leaving limited scope for downside. But positive surprises, especially in terms of higher than expected annual guidance by Infosys, are not ruled out. However, the continued strengthening of the rupee and seasonal weakness in Q1 (due to wage hikes and additional visa related cost) would continue to influence sentiments on tech counters in the short run. We believe that any further weakness would be an opportunity to accumulate the front-line tech stocks and prefer Infosys and TCS.

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SPECIAL STORY

Sugar Incentives - A positive move in the short term

Government support for the sector positive in the short term

Government has reportedly announced a series of measures to provide short term support to the sugar industry. These measures include:

ü A subsidy of Rs1.35/kg for coastal states like Maharashtra, Tamil Nadu, Karnataka and Gujarat while a subsidy of Rs1.45/kg for north based mills.

ü Creation of a buffer stock of about 2mn tons

ü With an estimated sugar inventory of about 8mn tons by September 2007, the buffer stock would lower the cost of holding for the companies which would be borne by the government.

Beneficiary Companies

Companies with sizable re-export obligations are expected to take advantage subsidy schemes to partially liquidate their inventories accumulated as a result of bumper cane crop in the current seasons.

For instance, Sakthi Sugars, one of the largest exporters, has an obligation under the Advance License Scheme (ALS) of about 200,000MT to be exported by December 2007. The average import price of raw sugar was about US$200/ton while the company expects export realizations of about US$310/ton which would translate into domestic price of Rs13.2/kg which, coupled with the export subsidy of about Rs1.35/kg, would lead to net export realization of about Rs14.5/kg

No Impact On Larger Players

Larger sugar companies like Bajaj Hindustan, Balrampur Chini Mills and Triveni Engineering and Industries do not have any obligation under ALS hence would remain unaffected by any such scheme. These companies may, however, look at fresh exports if domestic prices tumble further since this would help them liquidate mounting stocks albeit at lower international realizations.

Railway Budget 2007-08: Sharekhan Railway Budget Special dated February 26, 2007

Railway Budget 2007-08

Railway minister Lalu Prasad Yadav continues to guide the Indian Railways (IR) on a profitable growth path. Announcing his fourth budget for the IR today, he indicated that the capital expenditure (capex) binge of IR would continue. In a move to boost IR’s key revenue stream (ie freight), the minister also extended major concessions on the freight rate front. He also reduced the passenger fares in a bid to increase the passenger traffic. The other salient features of the Railway Budget 2007-08 are an impressive reduction in the operating cost of IR, significant policy shifts to turn around the loss-making businesses of the national carrier, continued freight rationalisation and an increase in the capex of IR to make the railways more competitive.

The major beneficiaries of these moves are likely to be Texmaco, Kalindee Rail Nirman Engineers (Kalindee Rail) and Stone India. A few days back, in our special note “Turnaround Express going strong”, dated February 22, 2007, we had mentioned how we expected companies like Hind Rectifiers, Simplex Casting, Stone India and Texmaco to show a healthy growth in their earnings on the back of the growing capex of IR.

Besides these companies, oil refiners, cement, steel and iron ore companies would benefit from the railway budget due to the reduction announced in the freight rates, though the impact on earnings is expected to be marginal.

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Turnaround Express going strong: Sharekhan Railway Budget Special dated February 22, 2007

RAILWAY BUDGET SPECIAL

Turnaround Express going strong

Indian Railways (IR) could be one of the best Indian turnaround stories of recent times. Last year in our special report on Union Railway Budget, we had told you how after coming very close to a financial crunch the loss-making national carrier managed to turn around its operations. The good news is IR continues to impress us with its performance. Thanks to the buoyancy in the freight rates, euphoric growth in the gross domestic product (GDP) and steady rise in passenger traffic, the total traffic receipts of the IR are expected to have grown by 15.5% in FY2006 and are estimated to grow at 9.6% in FY2007. With the leverage effect coming into play, the top line of IR too is growing at a good pace, leading to strong operating cash flows and higher capital expenditure (capex).

The man who is responsible for the magical transformation of IR, Union Railways Minister Lalu Prasad Yadav, is all set to present his fourth Union Railway Budget on February 26. The event is keenly awaited by the stock market since any proposal to increase IR's capex in the forthcoming railway budget would bode well for the capital goods companies. In this report we shall tell you which companies stand to benefit the most from a possible hike in IR's capex.

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SPECIAL STORY

Money managers less bullish on China, India

With concerns about overheated economic growth and monetary squeeze tightening fund managers are cutting their exposure to high-performing emerging markets like China and India, says a report by Merrill Lynch.

Money managers are instead stepping up their investments in Taiwan, Korea and Thailand, according to the latest monthly survey of Pacific Rim fund managers by the Wall Street giant.

"Within the region, the most notable shift is from China to other North Asian markets, as investors anticipate further Chinese tightening measures after the lunar New Year," says Willie Chan, a strategist at Merrill Lynch.

According to the survey, 23% of investors expect the Chinese economy to get a little weaker over the next 12 months, while 58% expect it to stay the same. On the other hand, Taiwan has become the favorite market in the region. A net 25% of fund managers say they would increase exposure to Taiwan, up from 21% in January. Taiwan and South Korea both recorded more than US $1bn in foreign net inflows last month.

Investors have reduced their exposure in Indonesia and Singapore, and have instead put US $620mn into Southeast Asia's big laggard - Thailand, says Merrill Lynch. Only 3% of managers say they would reduce exposure to Thailand, down from 21% in January.

Only 15% of investors say they would increase exposure to Singapore, down from 24% in January. Eleven percent of managers also say they would reduce exposure in Indonesia. In contrast, in January 3% of managers said they would increase exposure to the nation.

India is the only Asian market to record net foreign selling last month, says Merrill Lynch. The US investment bank expects higher inflation and more tightening in India this year. A net 5% of fund managers say they plan to increase exposure to markets like Vietnam and Pakistan, over the next 12 months.

Run-up to Budget 2007-08: Sharekhan Budget Special dated February 15, 2007

Run-up to Budget 2007-08

It's that time of the year again when wish lists are drawn by all and sundry and expectations are high that at least some of the wishes will be granted in the Union Budget. Yes, in about two weeks from now, the incumbent United Progressive Alliance (UPA) government will present its last but one budget before it goes to general parliamentary elections in CY2009. Needless to say investors will be hanging on every word of P Chidambaram when he presents the budget for FY2008 on February 28, 2007. That's because they will be eager to see if the finance minister uses the opportunity to push forward fiscal reforms and announce well-directed spending on infrastructure, education and the farm sector. With the budget around the corner, we take this opportunity to present our pre-budget report.

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Q3FY2007 earnings review: Sharekhan Special dated February 07, 2007

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Special Story

Freest economies...HK, Singapore top again

Hong Kong, Singapore and Australia topped the list of the world's freest economies. The three are ranked No.1, No.2 and No.3, respectively in the Index of Economic Freedom survey for the year 2007 conducted by the Wall Street Journal and the Heritage Foundation.

However, China and India, two of the world's fastest growing economies, have been ranked way down at 104 and 119, respectively.

Hong Kong and Singapore finished 1st and 2nd in the rankings for the 13th straight year with a score of 89.3% and 85.7%. Australia jumped from 9th to 3rd, giving Asia a sweep of the top three spots and, with New Zealand at No. 5, four of the top 10.

The US came at No.4. Europe had four countries in the Top 10, including the UK, Ireland, Luxembourg and Switzerland. Rounding off the Top 10 is Canada. For the first time 'Americas' has been listed as a separate region.

North Korea remains the world’s least-free economy with just 3 points.

The move toward greater economic freedom worldwide stalled over the last year, according to the 13th annual Index of Economic Freedom. The 157 nations rated in the new Index received an average economic freedom score of 60.6 on a scale of 1-100. That’s down slightly (0.3%) from the previous year’s average, but still rates as the second highest level of freedom in Index history.

SLR flexibility to be RBI's new tool: Sharekhan Special dated January 12, 2007

SLR flexibility to be RBI's new tool

The Union Cabinet on January 11, 2007 approved the promulgation of an ordinance to amend the statutory liquidity ratio (SLR) for banks to ensure greater credit flow to the industry. To achieve this, the government intends to empower the Reserve Bank of India (RBI) to set lower SLR floors from the existing 25% on the net demand and time liabilities ie deposits.

The average yield on the advances for public sector undertaking (PSU) banks is above 9% after the prime lending rate (PLR) hike while the current yield on investments is in the range of 7.2-7.5%. For private banks the average yield on the advances is in the vicinity of 10% while the average yield on investments is below 7%. This provides a significant opportunity for the banks in the longer term to improve their earnings based on a small realignment of their balance sheet composition as we don't expect the RBI to cut the SLR at this point of time

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