Readings: Asian de-coupling, Mutual funds lag (as usual), Manufacturing growth
The correlation between the growth in intraregional Asian exports and U.S. non-oil imports has increased sixfold in the past 25 years or so, Rosgen’s analysis shows.
Ditto for the flow of capital: Stock indexes in Asia are more linked with U.S. — and European — benchmarks now than they have been in 30 years.
The current technological cycle won’t make Asia a new economic powerhouse; it may set the stage, but the spark will have to come from within. What that innovation might be remains unknown. However, after it does arrive, it will be seen — with the benefit of hindsight — as a new 20th wave, or K-20.
Cool names: Kondratiev wave, Fibonnaci wave, Elliott wave, etc. - if nothing else.
- Financial Express: Sensex creating 5 times more wealth than MF route
An analysis of three-year performance of 12 MF schemes investing in Sensex or Nifty stocks shows that their returns is just one-fifth of that given by the two benchmark indices themselves in the same period.
Somewhat weak article, since it lacks stats on how many MFs have trailed the indices each year; but I think most MF investors are throwing away money by paying heavy loads & management fees.
- Business Standard: Different strokes
. . . an important difference in the way the Nifty and the Sensex are calculated. The Nifty takes the full market cap of all 50 stocks and calculates weights accordingly. For example, on November 23, the Nifty had a total market cap of about Rs 33,28,000 crore and Reliance with a market cap of about Rs 404,000 crore had the highest weight of 12.2 per cent. Unitech receives full value for its market cap in the Nifty.
The Sensex weights companies on the basis of free float- that is, the shares not held by the promoter or institutions and hence, freely available for trade. DLF only has a free-float factor of 0.15, which translates into a free market cap of about Rs 22,000 crore (Unitech has a free-float of 0.3 or about Rs 16,500 crore).
Anyway, without getting into theoretical arguments about the merits of free-float versus full-cap, we can say that DLF is likely to experience a boost in trading and experience a short term bull-run now that it is an index constituent.
Related Posts:
November 26th, 2007 at 7:16 pm
Goldman Sachs had predicted in 2003 that GDP of BRICs will expand by 50% by 2015. But those estimates are already reached 8 years ahead.
It was then considered too optimistic by Western Experts.
Now the decoupling is again dismissed by US centric economists.
Will events prove also this to be wrong? I think so. The dynamism seems impossible to stop.
November 26th, 2007 at 9:29 pm
There is a major problem with the article in Financial Express, and the reporter should actually be fired for gross incompetence.
It quotes the best index fund Tata Nifty return at 46%, and misinforms the reader that this 46% is the return over 3 years. IT IS 46% CAGR (or per annum compounded). If you had Rs 100 at the beginning of 3 years, this works out to (100 x 1.46 x 1.46 x 1.46) = 311%, giving a return of (311 - 100) = 211%. This makes sense since its an Index fund, and the indices returned 213%. Index funds have to match the Indices (barring minor differences in fund manager performances), otherwise the fund is deviating from its “index” mandate. The reporter should have realized that 46% and 213% are worlds apart, and one would have hoped this would have signaled to him that there was something wrong in his analysis. Also, this article is only a comparison of Index funds. There are a number of funds like Reliance Diversified power, DSPML Tiger, JM Basic, UTI Infra, Magnum Contra etc that have returned an absolute of 250 to 400% in 3 years.
I do agree there are all kinds of “exotic” MFs being dreamed up today. AMCs are getting drunk on Entry loads and Fund fees. In fact, if you look at the portfolio companies of many of these MFs, they mirror 75 to 80% of some other existing MF by the same AMC. In fact, many AMCs have the same Fund manager for several MFs. I think this is totally unacceptable, but it happens a lot. MFs have caught the attention of the mass market, and AMCs are milking that opportunity..
Hari -
November 27th, 2007 at 10:49 am
Hari,
Good catch.
As for AMCs getting drunk, I think they are doing what any rational incentive-driven beings would do.
The problem is that we (the customers of these AMCs) don’t stop & wonder why we are paying them exorbitant fees. We get seduced and/or confused with all the data they throw at us. And in a market that returns 40%+ a year, few people are going to worry about giving up 3-4% to these fine folks.
November 30th, 2007 at 3:38 am
he he he …
I too though so and bough DLF CALL for 26 bucks a lot 3 days just three days after its listing it fell from 950 to 820.
What should I say bad luck ?