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30 Brazil CPI % Change 7 6.5 6 5.5 5 4.5 4 1/1/2008 3/1/2008 5/1/2008 7/1/2008 9/1/2008 11/1/2008 1/1/2009 3/1/2009 5/1/2009 7/1/2009 9/1/2009 11/1/2009 1/1/2010 3/1/2010 5/1/2010 7/1/2010 9/1/2010 11/1/2010 Source: Reuters, NB Research Beyond Market 04th Feb ’11 Brazil CPI Emerging economies like India, China and Brazil have been affected the most due to the rise in prices of essential commodities, forcing their respective governments to initiate steps to control price hike and, thus, inflation. China has already initiated monetary tightening measures. Brazil too raised its interest rates by 50 bps taking it to 11.25% currently. India, on the other hand, is expected to follow suit. This step would increase input costs, thus directly impacting margins and reducing profits of businesses. In addition to this, less credit offtake will affect the overall growth of the economy, resulting in a slowdown in the emerging nations. Chinese Monetary Tightening Measures China has undertaken a series of steps to control rising inflation since the past few months. It increased its bank reserve requirement ratio (RRR) – the seventh time in recent months and for the fourth time in the past two months - to restrict money supply in a bid to curb the spiraling rate of inflation. Following the hike, major banks in China will now have to set aside 19% of their reserves, while small and medium banks will have to maintain 15.5% reserve, a record high for the country’s financial institutions. World Bank On China The World Bank has predicted a slowdown in China’s economic growth. It says: “China’s GDP growth is set to slow down this year and the next, to below 9% and the key challenge for the economy is to ensure that anti-inflationary measures do not ‘significantly’ reduce economic growth.” The World Bank has also stated that the growth rate in China will be 8.7% for this calendar year as against 10% in 2010. China’s Copper Consumption China is the highest consumer of copper in the world and accounts for nearly 27% of the total global consumption. The historical relationship between Chinese GDP growth rate and copper prices for these periods, states that there is almost an 80% positive correlation between Chinese GDP growth and the growth in the price of the red metal. China GDP And LME 3M Copper 13 10000 12 9000 11 8000 10 7000 9 6000 8 5000 7 4000 6 3000 % Change 12/31/2008 3/31/2009 Source: Reuters, NB Research 6/30/2009 9/30/2009 12/31/2009 3/31/2010 6/30/2010 9/30/2010 12/31/2010 China GDP Growth LME Copper 3M Source: China Academy Of Social Sciences, XAN SABARIS / CHINA DAILY US $ / Tonne Rising Property Prices – A Matter Of Concern in China Owning a house in major metros in China is getting costlier by the day. In Beijing and Shanghai alone, property prices have gone up by almost 40% from the previous year. The National Bureau of Statistics in China states that despite the steps taken by the Chinese government, property rates in major Chinese cities grew by 6.4% in December ’10 as compared to November ’10. Property Price Rise in Chinese Cities Wuhan Shenzhen Beijing Shijiazhuang Lanzhou Tianjin Qingdao Nanning Hangzhou Fuzhou 0.00% 20.00% 40.00% 60.00% 80.00% Percentage Rise The above graph shows percentage rise in the prices of houses in major Chinese cities in the year 2010 as compared to the year before that. It’s simplified...
Hence, over the past year, Chinese officials have undertaken measures like hike in RRR and interest rates, to curb speculation in property markets, while sucking up excess liquidity too. The Chinese government is also considering of levying new real estate tax, on a trial basis, in major metros to tackle the stubborn rise in property prices. The new tax policy is expected to be levied on high-end residential properties. This measure is likely to put short-term breaks on the construction sector. Hence, less credit offtake and low construction activity are likely to directly impact the prices of major metals, including copper. Refined copper output by Chinese smelters saw a 12% rise between January and November of 2010 as against the corresponding period in 2009. It was the highest monthly production in the past two years, in November, adding fresh copper cathodes in the Chinese markets. China Refined Copper Output Tonnes 500000 450000 400000 350000 300000 250000 10/31/2008 12/31/2008 Source: Reuters, NB Research 2/28/2009 4/30/2009 6/30/2009 Beyond Market 04th Feb ’11 8/31/2009 10/31/2009 China Re�ned Copper Output 12/31/2009 2/28/2010 4/30/2010 SHORT-TERM OUTLOOK 6/30/2010 8/31/2010 10/31/2010 China Refined Copper Imports Tonnes 400000 350000 300000 250000 200000 150000 100000 50000 Source: Reuters, NB Research 0 11/30/2008 1/31/2009 3/31/2009 5/31/2009 7/31/2009 9/30/2009 China Re�ned Copper Imports As far as Chinese refined copper imports are concerned, there has been a 9% decline from January ’10 to November ’10 as against the corresponding period in the year 2009. This has been mainly due to the closure of the profitable arbitrage window between copper prices on the London Metal Exchange (LME) and the Shanghai Futures Exchange. In 2009, Chinese traders made fast cash by capturing the difference in the prices of copper. But this phenomenon did not prove successful for them in the second half of 2010. Also, many end users have refrained from making fresh buys in Chinese markets due to the record high prices of copper in recent months. The introduction of new copper supplies in the Chinese markets and slowing imports of the red metal could narrow down the demand-supply gap, thus affecting copper prices in the near term. We find copper getting caught between the QE2, which has been doled out to support economic recovery in the US, and the monetary tightening measures initiated by China. Thus, a short-term halt in the recent rally of copper is likely. Despite signs of recovery in the western world, the ongoing problems in the emerging markets could drag the prices of the red metal loweR. an apple a day keeps the doctor away regular investments keep worries away Your financial health is our concern. At Nirmal Bang, it’s a relationship beyond broking... EQUITIES | DERIVATIVES | COMMODITIES | CURRENCY | MUTUAL FUNDS | IPOs | INSURANCE | PMS | DP SMS ‘BANG’ to 54646 | e-mail: contact@nirmalbang.com | www.nirmalbang.com 11/30/2009 1/31/2010 3/31/2010 5/31/2010 7/31/2010 9/30/2010 11/30/2010 It’s simplified... 31
Page 1: For Private Circulation Volume 1 Is
Page 4 and 5: 4 Halted In The Tracks While most c
Page 6 and 7: 6 Macro economic management is quit
Page 8 and 9: 8 Beyond Market 04th Feb ’11 The
Page 10: 10 ment in the past couple of month
Page 13 and 14: In the last one year, shares of inf
Page 15 and 16: SURVIVAL INSTINCT Right from increa
Page 17 and 18: ase. As a result, these players cho
Page 19 and 20: India is one of the few countries i
Page 21 and 22: GUIDELINES ON STEM CELL RESEARCH
Page 23 and 24: While IRDA has stated that the laps
Page 25 and 26: Niche Product Segment: Orchid Pharm
Page 27 and 28: Nirmal Bang in association with Zee
Page 29: the economy has led to higher liqui
Page 33 and 34: Fortnightly Outlook For Currencies
Page 35 and 36: e-way a To Mutual Funds Beyond Mark
Page 37 and 38: SMS ‘BANG MF’ to 54646 e-mail:
Page 39 and 40: If a CPF is a three-year, close-end
Page 41 and 42: TECHNICAL OUTLOOK FOR THE FORTNIGHT
Page 43 and 44: BULK DEALS Bulk deals take place fr
Page 45 and 46: MOVERS AND LAGGARDS IN MUTUAL FUND
Page 47 and 48: UK Sinha, the successor to SEBI chi
Page 49 and 50: A Wake-up Call Beyond Market 04th F
Page 51 and 52: EQUITIES | DERIVATIVES | COMMODITIE
Page 53 and 54: Come February and all eyes shift fo
Page 55 and 56: LEARN THE ART OF COMMODITY INVESTIN
Page 57 and 58: Kunal Shah Head of Commodity Resear
Page 59 and 60: 1.6603 in

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