Randomly Noted

So at a time when financial markets are once again spooked by risky investments, it only makes sense that one of the hottest initial public offerings of the year was launched today by a company that is relatively new and has lost money each of the last three years.

Huh?

Make My Trip Ltd. priced it’s five-million share IPO at $14 each and it came darn close to doubling in price by the close of trading (it closed at $26.62). So why did investors go gaga over this IPO?  Think of it as the Priceline or Expedia of India and he potential for the travel business there when the country becomes wealthier.

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We can’t really call them capital controls, or even quasi-capital controls. Can we call them capital curbs? Capital management?
Perhaps we can call them Claytons controls, after the nonalcoholic drink that was popular in the 1970s and 1980s for its slogan: “The drink you have, when you’re not having a drink.”

Asian nations aren’t calling their recent actions “capital controls,” and the measures being taken certainly aren’t draconian; so far this year it’s mostly been rhetoric from authorities, about watching hot money flows, while there have been modest steps in Taiwan, South Korea and Indonesia to make it a bit harder for people to move money around.

But it is clear that authorities are growing more anxious about how fast money can come in–and out–of their countries.

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(This earlier ran on Dow Jones Newswires as a Money Talks column)

For all the talk about new world orders, new blocs, new spheres of influence and such we are yet to see the Group of 20 flex much muscle, or the BRICs (Brazil, Russia, India and China) manage to stay on message.

 This while European Union members wrestle publicly with how to deal with Greece–particularly how much money to hand over.

Governments still prioritize their individual needs over collective decision-making, and some groupings are proving a particularly fractious bunch.

That means, noise aside, we are unlikely to witness a sea change shift from the U.S. as a central decision maker or the U.S. dollar as the main global currency, or a major change in the phrasing and nature of world trade agreements; we are likely to also see a fair amount of protectionism persist.

The weekend meetings in Washington DC of the World Bank, the International Monetary Fund, the G-20 plus the G-7 were a classic exercise in maintaining the status quo. Only last year everyone was talking about how the G-20 would soon supersede the G-7/G-8, especially given the growing influence of China among the pack of the stronger developing nations.

That had implications for all sorts of things in terms of the balance of power, from emerging-market nations’ ability to negotiate things like trade, to what sort of currency should be the world’s dominant medium of exchange.

China and India, et al, are emerging powers. They are gobbling up more of the world’s resources and playing a bigger role as well in global politics.

But why presume the “south” is any more of a united grouping than the “north”? Emerging market nations may be just that, but they don’t necessarily have a lot else in common. Grouping them together and saying they will have the same agenda on trade, currencies and monetary policy is ridiculous.

Countries will act together, but only up to a point. Unions look less solid when their individual interests may be put at greater risk. That’s true for the G-7, G-20, EU and BRICs alike.

Witness the comments from officials from India and Brazil in recent weeks along the lines that it wouldn’t be a bad thing if China allowed its currency to rise. Are we seeing a crack in the BRICs?

Witness the German Foreign Minister Guido Westerwelle reminding everyone on Sunday that his country is “not ready to write a blank check” for Greece, after Athens appealed for an E.U. and IMF bailout.

 
We all like to bang on about a new world financial order. In reality, any change will be slow and incremental. The U.S. (with its outsize influence on the IMF and World Bank) and its currency will be top dog for a while yet.

A Facebook poll of users revealed some interesting differences about India’s global role as seen from inside and outside the nation.

Presented as part of a panel discussion about India at the annual meeting of the World Economic Forum here in Davos, a majority of global Facebook users, responding to the question of what the world should expect from India, said they want India to be a leader on climate change issues.

When Facebook users within India were asked what India should expect from the world, the largest portion – 42% – said a seat on the United Nations Security Council. The next biggest chunk – 28% – want the world to look after India’s security interests.

Anand Sharma, India’s minister of commerce and industry, protested that the global economic architecture and the U.N. stemmed from post-World War II realities and don’t reflect today’s world, including the role of India, the world’s largest democracy.

Robert Hormats, U.S. undersecretary of state for economic, energy and agricultural affairs, agreed that if the U.N. was created today the Security Council would look a lot different.

Hormats noted the rise of the G20 group of nations as a key policy group – supplanting the G7 – and India’s key role in the G20.

Three news developments highlight why the economies of China, India and Russia won’t expand as fast as they might, and also why investors in emerging markets will experience returns that are somewhat weaker than they could be. In China, the government’s revamped media strategy seems on the surface to represent a new opening of that industry to innovation and outside investment. But it turns out to be more about protectionism – eg protecting the interests of Chinese media interests – than about creating a regulatory and financial environment to spur development of a truly cutting-edge, lucrative industry. Have a look at a NYT piece on the issue. In India, land ownership issues remain so bolloxed up by politics and bureaucracy that Lakshmi Mittal’s ArcelorMittal may have to look elsewhere for expansion. Even if Mittal eventually manages to obtain land suitable to build its first two steel mills in India, the delays will have cost Indians jobs and revenues they might have had earlier. And then there’s Russia, where oligarch-backed Alfa group has reached a pact with Norway”s Telenor after far too many years of wrangling – mostly the result of legal peculiarities on the Russian side. The battle, which eventually pitted Norway itself against Russia, echoed other nightmarish foreign forays into Russia, including oil major BP’s very messy joint venture with TNK. It all adds up to three mighty emerging economies hampering their own prospects by engaging in nationalism, protectionism, short-term political wrangling, and oligarchic greed. All this said, overseas investors will keep playing in those markets – especially China and India, given Russia’s relatively more dysfunctional. And that’s probably wise as long as they go in knowing that in China, domestic interests will always come first and the security apparatus looms (as Rio Tinto has seen – three of its employees remain behind bars there, after all); and that in India, the lively but logjammed political environment will slow just about everything down – as will certain residual regulatory impediments to foreign ownership of Indian firms. One wishes China, India and Russia were able to recognize that their policies stymie their own prospects. Consider how China’s biggest steelmakers – by turning routine iron-ore price negotations into an ugly police case – have been forced to give up trying to wring discounts from the world’s biggest miners. Bad policy breeds bad results for all.

The protracted MTN-Bharti negotiations are over and done with. It’s a relief. On the surface, a tie-up between the big Indian and South African telecom firms made sense the way Daimler+Chrysler once did: Bring two mighty, complementary players together to create a ginormous entity with sparkling growth potential. MTN+Bharti would have instantly had 200 million subscribers and $20 billion in annual revenue with a vast span across continents and emerging markets. We all know how Daimler/Chrysler played out, leaving both firms in sorry shape, especially Chrysler. MTN-Bharti Airtel was heading in the same dubious direction, thanks largely to South African concerns about losing control of a national champion to a foreign buyer. As DJN colleague Robb Stewart recently wrote about the deal, which was scuttled Wednesday, “Cross-border telecommunications deals already have a poor history of success. Deals touted as mergers-of-equals tend to fare even worse.” You may recall that Daimler-Chrysler was also presented as a “merger of equals,” whereas reality soon proved otherwise. Ironically, over the years MTN itself benefited from the failure of a competitor to thrive amid convoluted ownership. As Robb wrote, “The companies may want to learn from Vodacom Group Ltd., a mobile venture that had been owned equally by South Africa’s Telkom SA ltd. and Vodafone Group PLC until the U.K. mobile giant bought control. Telkom managers have conceded that Vodacom was held back by its ownership structure and restrictions that prevented it from competing in marktes that were seen as belonging to Vodafone. The beneficiary of all this was MTN, which outgrew it.” Laissez-faire, anti-regulation types will wring their hands over the deal being effectively killed by politicians prioritizing South African corporate might over pan-markets industrial logic. I say: Don’t waste your time.

Talk about irrational exuberance! India’s stock markets have had to close for the day, thanks to equity investors’ outsize response to the weekend’s election results. As happened when Barack Obama was elected, the Congress Party now bears the weight of huge expectations. Seizing the goodwill and momentum, Prime Minister Singh’s top economic adviser has just now vowed to implement pension and insurance reforms, sell some state-owned companies, and free up foreigners to invest in more industries. If completed, the changes should channel many more rupees into equity markets. Check out DJN colleague Abhrajit Gangopadhyay’s  interview with Suresh Tendulkar, a top economic adviser to the Prime Minister: ”UPDATE: India Econ Reforms Easier Post-Election -PM Adviser.”  Continue reading…

How optimistic should one be about India in the wake of the Congress Party-led government coalition’s electoral success? Very, I say. But DJN colleague Ros Mathieson argues the United Progressive Alliance coalition has been “patchy when it comes to acting on promised reforms.” Among the UPA’s “unfulfilled promises ” Ros includes failure to open the banking sector to foreign direct investment or to allow pension funds to invest in the stock market.  Fair enough. Have a look at her “Money Talks” column this morning for more: “MONEY TALKS: India Govt May Not Capitalize On Reformist Mood” Continue reading…

Today’s robust victory for the Congress Party (and humilation of opposition BJP) should provide stability and clarity for India at just the right time. Its economic growth has slowed but Congress’s mandate will let the government continue – and hopefully speed up – vital industrial, bureaucratic and social reforms. Years from now one might look back at this period – leading to the elections and the aftermath – as a sort of economic golden age for India. Even the economic downturn hasn’t dented the country’s tremendous promise.