Readings: Derivatives salesmen, Commodities ban, Shipbuilding
- Economic Times: How derivatives were sold and bought
Banks made unsolicited offers to their clients and corporates eagerly bought these products with insufficient understanding. State-owned banks bought exotic products from foreign banks which were not appropriate for their customers. Some of the foreign banks are now moving away from selling these products to state-owned banks since the treasurers in these banks do not understand the complexity.
“In general I find clarity on the subject of risk reduction (i.e. hedging) and cost reduction lacking even in banks. The definition of speculation is deliberately taking risks to profit from price movements. How many CFOs understand the difference between hedging and speculation? There is no clarity in corporate and bank treasuries on strategies to reduce risk. With all due respects, CFOs of these companies did not understand what they were getting into,”
- Economic Times: NCDEX may see a 20% fall in turnover due to commodities ban
“The ban on four commodities announced by the Government is a big setback for us. It is a cause of concern as chana and soyoil contributes 20 per cent of our turnover. The volume of futures trading in rubber and potato is not very significant,” NCDEX’s Managing Director and CEO, R Ramaseshan, said in his first interaction with the media here.
The exchange daily volume is estimated at Rs 2,000 crore and chana and soyoil contributes around Rs 400-500 crore worth turnover.
The biggest shipbuilding boom in history collided with the largest credit-market losses ever, undermining forecasts for a plunge in freight rates. As much as $14 billion in ship orders is threatened by cancellations and delays, equal to 94 percent of annual revenue at Hyundai Heavy Industries Co., the largest shipbuilder.
The loss or delay in deliveries of about 250 cargo ships, or 10 percent of orders, will tighten the supply of vessels and support rates when demand from China and India for everything from soybeans to coal has never been greater. Based on the current orders for 2,561 new cargo ships, shipping rates are expected to decline 56% during the next three years, futures markets show.
The Baltic Dry Index, a measure of rates, has risen 58% in the last year as an index tracking the number of cargo ships under construction has fallen 21% in that time.
Note the recent relative strength of stocks in this sector: GT Offshore, Mundra Port, GE Shipping, Concor, etc.
