China's Ghost Towns: 

Over-development in the 

Real Estate Market

22 August 2011. Some say that the best expression of excess capacity and overdevelopment in China is its real estate market. With nominal interest rates going at a pittance, stringent capital controls and volatility in China's equity markets, there seems to be no real alternative outlets for the nation of savers (China saved 50 percent of its GDP in 2010) and it is therefore no huge wonder that investors have turned to real estate as investment options. Click here to continue reading.


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ome say that the best expression of excess capacity and overdevelopment in China is its real estate market. Shanghai, for example, is a prime instance of the property boom that the country has experienced in the past decade. In key cities such as Beijing, property prices has already increased by more than 140 percent, making it unaffordable for a massive majority of homebuyers.
Negative real interest rates for savers are at the heart of what many believe is a burgeoning property bubble. With nominal interest rates going at a pittance, stringent capital controls and volatility in China's equity markets, there seems to be no real alternative outlets for the nation of savers (China saved 50% of its GDP in 2010) and it is therefore no huge wonder that investors have turned to real estate as investment options.
Away from the bright lights of glitzy urban centers like Beijing and Shanghai, newly built city centres, such as those in Zhengzhou and Tangshan, have popped up on maps, in a race to join in the building boom.


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akshintala.Dharmendra
http://nsemantra.blogspot.com/


  1. It is quite possible that you believe that the U.S. public debt is quite large. You may even think that it is dangerously large, as in 'unsettling financial markets.' If you harbour these beliefs it may come as a surprise that the public debt is not very large, and by any rational calculation the 'burden' it imposes is tiny.
    b537 The Size Of The U.S. Public Debt: Are The Rating Agencies Fools or Knaves by Prof. John Weeks
    Demonstrating the validity of these apparent heresies requires a branch of advanced maths, known as arithmetic. To make the proof even more difficult, I shall begin by invoking a bit of common sense. The common sense consists of three general rules. The first is that a debt is a potential problem if it is owed to someone else. Indeed, it could be said that a debt you owe yourself is not a debt.
    Second, there is a difference between a debt that was contracted for an asset and one contracted for immediate consumption. For example, when one borrows to purchase a home, the debt (mortgage) has an asset whose value compensates in part or whole for the debt. Thus, the net debt of a person or household equals what is owed to others minus the assets of the household or person.
    Third, the cost or burden of a debt is what a person or household must pay to others in interest and to reduce the original value of the debt. To keep to the mortgage example, its running cost is not the amount of it, but the periodic interest and repayment of principle ('debt service').

    Common Sense Applied to the U.S. Government

    This same common sense can be applied to the U.S. government, and this is done in the table below. At the end of 2010, the federal public debt of the United States was just over fourteen trillion dollars, equivalent to about 96 per cent of gross national product for that year. Forty per cent of this debt was owed by the federal government to itself or to institutions under its control. That is, forty per cent of the debt was owed by the federal government to the federal government, and the interest payments involved a shift of funds from one pocket to another. Even more, much of this shift had the positive purpose of funding the social security system. All of the U.S. debt in the social security trust fund is an asset for the beneficiaries of the social security system, generating their retirement income.
    Next, the liquid assets of the U.S. government, gold reserves, holdings of foreign currencies, bonds, etc., should be subtracted out to obtain the netdebt. By the international standard methodology of the Organization of Economic Cooperation and Development (OECD), the net debt of the United States was just over six trillion dollars at the end of 2010, well less than half of the nominal total of 14 trillion. In other words, take out what the government owes itself, take out government liquid assets, and the debt was just over forty per cent of GDP, not close to 100 per cent.
    But that's not the end of the story. The major reason that the press and politicians carry on about the debt is the terror of the merciless 'financial markets.' So, how much of the debt, gross or net, is held by these gnomes of finance? This is difficult to estimate precisely, but there are obvious candidates for exclusion, beginning with state and local governments. This portion of the federal debt, which includes public employee pension funds, was five per cent of the total in 2010. This brings the maximum possible 'financial market debt' down to about 7.5 trillion gross and barely six trillionnet.
    U.S. Public Debt, End of 2010
    Ownership categories US$ bns % of total % of GDP
    Total federal public debt 14,206 100.0 95.7
    owed to itself 5,656 40.3 38.6
    owed to others 8,370 59.7 57.1
    Net debt to others 6,017 42.9 41.1
    Non-financial owners
    State & local gov'ts 706 5.0 4.8
    China 1,160 8.2 7.9
    Everyone else*, gross 6,504 46.4 44.4
    Everyone else*, net 4,677 33.3 31.9
    *Maximum possible value for debt entering 'financial markets.'
    Sources: U.S. debt: gross, Economic Report of the President 2011; net, OECD (OECD Economic Outlook 89 database).
    Then, there is all that debt owed to China, $1.1-trillion at the end of 2010. Whatever nefarious plans the Chinese government may or may not have for its debt holdings, they do not include financial speculation. Nor is there any safer liquid form in which the Chinese government could hold its massive foreign exchange reserves. When we make the reasonable subtraction of the Chinese debt from the total, the maximum gross debt potentially vulnerable to speculation falls to $6.5-trillion, considerably less than half of GDP. The net equivalent drops to less than a third of GDP.
    To summarize, when we take out what the federal government owes itself, the U.S. public debt is a smaller proportion of GDP than the same debt measure for any other major developed country. Indeed, it is so low that it is no problem. When other obvious calculations are made, net instead of gross, public bonds held by local and state governments, you have to think, where is the problem?

    Servicing the Debt

    Ah, but the problem is not the size of the debt, say the neo-Scroogians. The problem is servicing it, paying the interest. Not much of a problem for the United States, I fear, as the table below shows clearly. Of the five largest developed countries, payments on the gross debt as a percentage of GDP was higher only for Japan. By contrast, putatively frugal German government paid out considerably more than the United States Treasury, and France and the United Kingdom were far above. Even more, the interest on the netdebt was just one per cent of U.S. GDP in 2010.
    Interest Payments on Public Debt
    Percentage of GDP, 2010
    United Kingdom 2.6
    France 2.3
    Germany 2.0 net
    USA 1.6 1.0
    Japan 1.4
    Source: OECD Economic Outlook 89 database.
    Not-so-fast, argue the 'deficit hawks' (vultures, more like it), now down to their last argument: if 'financial markets' take fright, they will drive up interest rates and that little one or 1.6 per cent will go through the roof and be unsustainable. But, how can 'financial markets' drive up interest rates when at most they have access to less than half of gross debt? Even, more, how would they do it when any new borrowing by the U.S. government can be from itself (e.g., the Social Security Trust Fund) or the Chinese government? The answer is obvious and requires no expertise in economics: 'financial markets' cannot drive up U.S. interest rates. Quite the contrary, the bizarre 'downgrade,' by creating international economic instability, increased the demand for U.S. government debt, putting downward pressure on U.S. interest rates.
    The U.S. government is not and never has failed to meet its debt obligations. The obligations it has flagrantly failed to meet are providing for the education and health of its population, repairing the country's public infrastructure, and preventing state and local governments from going bankrupt, thus reducing or eliminating their ability to do their social duty. The false claims of federal default are the mechanism by which the rich and powerful, aided by the rating agencies, will further enforce the real default on social and economic justice for people in the United States of America. •

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             Gold to peak at $1,900/oz in next six months: GFMS





Gold could hit USD 1,900 an ounce in the next six months, driven by buyers seeking an investment safe from global economic problems, but a further rise to USD 2,000 looks unlikely, metals consultancy GFMS said on Thursday.

"Gold will be muddling through to peak at USD 1,900 (an ounce) as US data points have been ambiguous, the action on the fiscal and monetary front is also ambiguous," said Paul Walker, global head of precious metals at GFMS, which was acquired by Thomson Reuters recently.

Gold extended record highs above USD 1,825 an ounce on Thursday after poorly received US jobs data hurt assets seen as higher risk, such as stocks, while boosting interest in nominal safe havens such as gold.

"In the timeframe, we really need exceptionally dramatic news to push gold above USD 2,000 and this is not our base case." said Walker. "This is highly unlikely."

He said there was a high probability of India's gold imports crossing 1,000 tonnes this year -- up four percent on 2010 -- as expectations were for prices to gain further.

The World Gold Council in a report on Thursday said Indian gold jewellery buying was up 17% in the second quarter and that signs of strength in the market remained.

"People are getting accustomed to this kind of a benchmark (price) even though it is at incredibly elevated levels. Everybody who is involved in the value chain in the Indian gold market thinks prices will go up," said Walker, ahead of a conference in Kerala.

Silver prices could extend gains to USD 50 an ounce in the next months from around USD 40.6 an ounce now, he added.

"It will follow gold up ... It will move towards USD 50, but it is going to be a hell of a lot more volatile," said Walker.
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Regards,
akshintala.Dharmendra
http://nsemantra.blogspot.com/

India will become a $5.6 trillion economy by 2020, according to research firm Dun & Bradstreet, which has predicted a three-fold jump in the country's GDP from $1.7 trillion last fiscal on the back of rapid investment and growing consumer expenditure.
"Indian economy will become a $5.6 trillion economy by fiscal 2020, at current market price, from the $1.73 trillion in fiscal 2010-11," Dun & Bradstreet India Senior Economist Arun Singh said.
The rate of investment, consumer expenditure and infrastructure spending will be the driving force behind the country's economic growth over the next 10 years, he said, adding that these conclusions are part of a D&B report titled, 'India 2020', which is scheduled to be released tomorrow.
The share of discretionary spending is projected to increase considerably to 72 per cent of private consumption expenditure from around 60 per cent in FY'10. Besides, the share of the services sector is expected to surge from 57.3 per cent of the GDP in FY'10 to 61.8 per cent in FY'20.
Another major contributor to the growth would be rapid investment in the infrastructure area. Infrastructure sector spending is expected to rise to 12.1 per cent of the GDP by FY'20 from around 7 per cent of the GDP in FY'11.
In terms of regions, eight states —— Maharashtra, Gujarat, Andhra Pradesh, Bihar, Madhya Pradesh, Rajasthan, Orissa and Uttar Pradesh —— would contribute 71 per cent of the total GDP in the next 10 years, as compared to 66 per cent in FY'10.
Further, the report said Maharashtra, Gujarat and Andhra Pradesh will be amongst the most developed states in the country by 2020 and would together contribute 32 per cent to the overall GDP.
The BIMAROU states (Bihar, Madhya Pradesh, Rajasthan, Orissa & Uttar Pradesh) are also expected to contribute significantly to India's growth story during the current decade. The contribution of BIMAROU states will be about 24 per cent of the GDP by FY'20, as compared to 21 per cent during FY'10, Mr Singh said.

.  - Tree House Education & Accessories Ltd

Tree House is entering in the capital markets with an initial public offering, IPO of 8,432,189 Equity Shares of Rs 10 each. The price band for the issue will be decided at least two working days prior to issue opening date. CRISIL has assigned an IPO Grade 3 to Tree House Education IPO. This means as per CRISIL, company has 'Average Fundamentals'.

Tree House Education is one of the leading educational services providers in India. As per CRISIL report, they operate the largest number of self-operated pre-schools in India. They have 177 pre-schools under the brand name of "Tree House" across 23 cities in India.

The issue opens on Aug 10, 2011 and closes for subscription on Aug 12, 2011. The equity shares of the issue are proposed to be listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

Visit Tree House Education IPO page for Tree House IPO Detail, Tree House Education IPO GMP, Tree House IPO Premium and Tree House Education IPO Reviews.

2. Upcoming IPO - SRS Limited

SRS Limited is entering in the capital markets with an initial public offering, IPO of 35,000,000 Equity Shares of Rs 10 each. The price band for the issue will be decided at least two working days prior to issue opening date.

SRS Limited is engaged in the business of Cinema Exhibition, Food & Beverages, Retail and Manufacturing & Retailing of Jewellery operations. Company operates 23 retail stores, 15 food courts and 30 cinema screens in North India. The company also operates five jewellery retail and wholesale outlets and a jewellery manufacturing unit in Delhi.

The issue opens on Aug 23, 2011 and closes for subscription on Aug 26, 2011. The equity shares of the issue are proposed to be listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).


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Regards,
akshintala.Dharmendra
http://nsemantra.blogspot.com/










US Treasury holdings rise in June

Purchase of $5.7 billion shows options are limited
BEIJING / NEW YORK - China purchased another $5.7 billion of US Treasuries in June,


 aninvestment described by one expert as "the best of a bad bunch", amid growing calls for 


thecountry to diversify its foreign reserves.







L&T Finance IPO was open on Jul 27, 2011 and closed on Jul 29, 2011. IPO was oversubscribed by 5.34 times (9.61 times in retail) on closing day.

Visit http://www.chittorgarh.com to check your application status.

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Regards,
akshintala.Dharmendra
http://nsemantra.blogspot.com/





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akshintala.Dharmendra
http://nsemantra.blogspot.com/





About Company

THEAL is one of the educational service providers in India, which mainly operates in pre-school segment and provides educational services to K-12 schools in India. As of 15th June 2011, the company have 223 pre-schools (149 – self operated and 74 thru franchisee) spread across 33 cities under the brand name of "Tree House". As of 31st March 2011, the company's self operated pre-schools has 5000 students in the age group of 1.5-6 years and has team of 370 teachers with teacher to student ratio at 1:14. In K – 12 segment, as of 31st March 2011, the company provides educational services to 12 schools, which has over 5000 students, in 4 cities in India.

• Issue-open date:10th Aug 2011 & Issue-close date:12th Aug 2011
• Retail Discount: Rs 6/share

Valuations

At the lower price band of Rs 135/share, the stock is trading P/E of 37.1x and 49.5x (based on FY11 earnings) on pre-issue and post-issue capital respectively. At upper price band of Rs 153/share, the stock is trading P/E of 42.1x and 56.1x (based on FY11 earnings) on pre-issue and post-issue capital respectively. Even, if we assume the PAT to grow at 100% in FY12E, the stock will trade at P/E of 24.7x FY12E earnings on post-issue capital and lower price band. Although, the business model is good with stable earnings profile, we believe in current uncertain environment, such higher valuation is unjustified. We believe investors will get an opportunity to buy the stock cheaper post listing and therefore recommend AVOID to the issue. (Since, we don't have subscribe rating on the stock, we will not issue detail note). 
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akshintala.Dharmendra
http://nsemantra.blogspot.com/


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