"The world depends on fungi, because they are major players
in the cycling of materials and energy around the world."
—E. O. Wilson (American, 1929)
Word for the day
Onomatopoeia (n)
The formation of a word, as cuckoo, meow, honk, or boom, by
imitation of a sound made by or associated with its referent.
Malice towards none
Surname "Gandhi" is nor an asset always.
Ask the poor fellow Varun Gandhi!
First random thought this morning
The market participants are seriously worried about Brexit, as
they were about Grexit a few years back. Someone has even termed it Lehman 2.0!
I wonder - Has the world ended post Lehman 1.0? or WWI or WWII or
Bretton Wood or anything else? Pakistan stock market that was shut down post
Lehman, is the best performing Asian market this year and has been included
back in MSCI.
Let me assure you, after Brexit, it will be Trump and then
something else. The world is not coming to end, neither markets. Caution is
good, paranoia is not.
Brexit & Me - 3
Referring to the specific queries of the readers
regarding my views on the impact of Brexit (see here), I may
offer my two cents as follows, for whatever worth it is.
1. Impact on Indian stock market
Regardless of the initial volatility and panic, Brexit may overall
have an positive impact on Indian economy and hence stock markets. For example—
·
Brexit may push the global yields further into
negative territory and also pressurize EM currencies (Including INR). This may
encourage global corporations to (a) invest in expansion of their operations
through LBOs; and (b) hike their stakes in India listed entities which offer
decent dividend yield. Microsoft's LBO of LinkedIn is latest example.
·
Brexit may send GBP & EUR lower with respect
to USD, JPY, CHF etc. This shall help the Indian corporations which have
borrowed in these two currencies (e.g., Tata Group entities).
·
Investors and businesses holding unhedged assets
in UK and EU may see erosion in book value of their investments.
·
Given the poor yields on most European, Japanese
and American bonds, and likely pressure on European stocks, the chances of any
material outflows in the medium term are low.
INR-GBP and INR-EUR
·
In near term, given the diverging inflation
expectations and consistent RBI intervention in Fx markets, I do not expect INR
to appreciate materially against major European currencies, despite the rising
differential in yields.
Indian exports to EU and UK
·
India is a net importer from Europe. A steady
INR vs. GBP & EUR shall help on aggregate basis, though the exporters may
suffer should the competing currencies weaken disproportionately vs. GBP &
EUR.
·
Indian IT sector could get another vista of
growth, similar to Y2K.
Gold prices
·
In immediate term Gold prices may firm up materially.
However, it will be a good opportunity to sell gold, in my personal eccentric
view. I believe gold is in a secular bear market and shall be much below the
current price 2 decades later. Will write more on this later.
Immigration and VISA policies of UK & EU
·
Brexit, in my view, will force both EU and UK to
liberalize immigration and VISA policies for skilled workers. Indian workers
& businesses may get to compete at par with European workers &
businesses looking for opportunities in UK and also the UK businesses and
workers looking for opportunities in EU.
·
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