Investeurs chronicle 18


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Investeurs chronicle 18

  1. 1. May 2011, Volume: 18  Sensex 18518.81 Nifty 5551.45 Dollar 44.79 Gold 21685 Silver 57700 Crude Oil ($) 108.42   Investeurs Chronicles   INSIDE  Cover Story –Talent Retention~ Talk of Town  Open Forum -Learn to Live with New Normal  Outlook –Japanese Yen  News Chronicles  In Focus – Osama Bin Laden     Investeurs Consulting P. Limited  S‐16, U.G.F, Green Park Ext. New Delhi‐110016,   
  2. 2.     “The loss of a good empl ployee can poten entially cost a c company four to five t times his o her salary, be or because the cost of hiring a rep t placement cand didate will inclu ude substantia investment on training, p al particularly sin a ince person on starts delive nly ering after at le a year in th company. And if east the A its a top-l level executive the cost may be much more Senior people who e, e. le are the fac of the comp ce pany have a lot of intangible v t values attached and d, their sudd exit can imp a company market capi den mpact nys pitalization, inv vestor, employee and even client confidence.” nt As per the recent survey c conducted by D Deloitte, two out of three emplo t oyees’ at large com mpanies are loo oking for the Ex Sign. The pro xit oblem of attritio has on become m more acute with top IT compan nies like Infosy reporting rat ys tes as high as 13.4% in 2009-10 and 17% in 2010-11. Tata Cons sultancy Service last es reported it attrition rate as 14.4%. The I sector has al seen conside ts IT lso erable churn with a slew of k h key people qu uitting, includin former Min ng ndTree chairman A Ashok Soota, fo ormer Wipro join CEOs Suresh Vaswani and Girish nt h Paranjape, and now Pai - Infosys. At present we are living in a world wher each generat t, re tion in the work kforce has vastly different goal expectations and desires. Reflecting con y ls, s, ncerns about talen crunch, senio executives ac nt or cross many Asia countries fee that an el companies will be focusin more on ret s ng taining people this year. Empl loyers need to ta ailor and target their strategies to satisfy each employee group t from baby boomers to mil llennial. 
  3. 3. Cover Story Talent Retention- Talk of the Town Is talent shortage a sudden occurrence or was it very much there but we didn’t notice? I guess it was always there but yes not prominent. Today, we see companies going above and beyond to spot the precious future brainpower, lure them with all the goodies and reel in the catch – but what happens later? After the first days of sweet honeymoon with ‘new hire orientations’, fancy status symbols and back-patting, the shiny brochures start wilting, the warm words of welcoming encouragement fade and reality kicks in – and sometimes hard. It’s not enough to bring in the ‘top talent’ when you can’t get the most out of your staff effectively and consistently long- term. To drive innovation and game-changing business models to their full potential, we cannot relinquish the expertise and insight of people familiar with the company or flourish on ideas from newly hired staff alone. When true ‘on-boarding’ fails the wedding is short-lived. Good people are easy to move again to find their next job somewhere else and leaving the company behind with an unproductive vacant position. New employees may also soon pick up on limiting or meager career prospects that they soon will share with their not-so-new-anymore co-workers that were not granted the opportunity to develop and ‘grow’ into the open position. Then, the costly investment in the new hire went down the drain while the company still needs to fill the vacant position with another candidate to be snatched from the competition at a cost… On the other hand, what is the effect on the more seasoned employees that ever hiring new staff has over the transfer and development seasoned staff? They see the influx of fresh blood affecting (and sometimes disrupting) the established company’s culture as well as limiting their own career opportunities. When will the veteran staff feel they are no longer valued and find it is time to make a move and be courted by a new employer that values their talent more?  
  4. 4. Cover Story Talent Retention- Talk of the Town   Should HR perspective change from talent acquisition to talent retention? This new age economy, with its attendant paradigm shifts in relation to the     human capital, in terms of its acquisition, utilization, development and     retention, has placed a heavy demand on today’s HR professionals. Today HR is expected to identify potential talent and also comprehend, conceptualize and implement relevant strategies to contribute effectively to achieve organizational objectives. Hence, a serious concern of every HR manager in order to survive this ‘War for Talent’ is to fight against a limited and diminishing pool of human resources. With retention becoming a big challenge, even MNCs are re-looking at this in their India offices. Global paint and specialty chemicals company AkzoNobel is planning to move its top 20% of Indian talent at the mid- and senior levels, to other group companies and global positions for six months to three years. It has also drawn up a deferred bonus component linked to their stay in the company for top performers. "The challenge is more now since people are constantly looking for change, not just in compensation but also growth and   roles," says AkzoNobel India HR head Sangeeta Pandey. An organization is hurt the most when talent quits at the levels of director, finance, marketing or HR head; president, VP, business and even regional heads. The best way to tackle attrition at these levels is to give them autonomy, leadership roles and, if possible, split the organization into various divisions so that each one of them is managing big profit centres. Amidst predictions of critical talent shortages globally and knowledge-driven industry, clear and actionable strategies can be implemented to deliver leading talent programs and keep talent committed to their jobs, excited about their career prospects, and confident in their corporate leadership. New age employers should focus on delegating responsibilities at early stages of career and provide variety of exposure and diverse experiences.
  5. 5.      Indian economy watchers (including this paper) have advised Reserve The risk is that if domestic demand conditions remain somewhatBank of India (RBI) Governor D Subbarao to do some straight talking. robust, manufacturers will try and pass these on to consumers asInstead of obsessing about the need to return to the “old normal” of a 5 higher final product prices in a bid to protect their margins. Thus, theper cent inflation rate, he has been counseled to prepare markets for a prospect of an inflationary spiral that feeds off rising input costs and“new normal” in which the inflation rate will remain considerably higher then nourishes output prices looms large. The only policy action thatthan 5 per cent owing to a bunch of local and global factors. That, could work at this stage is to try to stifle demand and curb pricinghowever, does not imply that the RBI can afford to wash its hands off power.inflation. Even if the new normal were to prevail, the RBI needs to give its While these forces and factors will play out in the domestic economy,best shot to lower inflation from the double-digit level to which it their roots lie in international markets and economy. For one,threatens to climb by the middle of the year to a more “reasonable” level commodity prices are riding on a combination of supply disruption (orof 7 or 8 per cent. In short, greater monetary tightening is warranted. The fears of supply disruption) and surplus liquidity created by westerncorollary, going by simple economic principles, should be lower growth. central banks which continue to grapple with the aftermath of theThus, an integral part of the new normal is the acceptance of a lower rate financial crisis of 2008. While the supply dynamic of theseof growth perhaps for a couple of years. commodities are difficult to understand and predict (who knows, forThe risks and challenges for the RBI on the domestic front are now well instance, how things in West Asia will pan out), the liquidity cycle is aknown. High crude prices have meant that under-recoveries on diesel and little more predictable.petrol now stand at roughly Rs 16 and Rs 7 a litre, respectively, and a In fact, a major change in the global liquidity regime is due in Junefairly hefty increase in their prices seems overdue. Given the political when the US Fed finishes with the last tranche of its quantitative easingeconomy of how these things work in India, one could safely assume that programme (QE2). For the uninitiated, under this programme, thethese increases will be announced after the state election results are central bank was to buy back $600 billion of bonds from the marketsannounced in mid May. That is likely to add quite a few basis points to between November 2010 and June 2011, releasing cheap dollars in theheadline inflation. A whole bunch of other commodities is putting process. The question then is: Will the end of this massive liquiditypressure on inflation. Input price inflation (going by some estimates) was infusion lead to a reversal in commodity prices and make life easier fora whopping 11.5 per cent in March while output price inflation was a the RBI and other emerging market central banks that are battlingrelatively meagre 5 per cent. inflation somewhat unsuccessfully?The risk is that if domestic demand conditions remain somewhat robust, My sense is that it might be somewhat naïve to depend on thismanufacturers will try and pass these on to consumers as higher final excessively to cure commodity price inflation. For one, as Fedproduct prices in a bid to protect their margins. Thus, the prospect of an Chairman Ben Bernanke emphasized in a recent press conference, theinflationary spiral that feeds off rising input costs and then nourishes event is well anticipated. Markets tend to “price in” the impact of an
  6. 6. expected   event well ahead of its actual occurrence. The fact thatcommodity prices haven’t cracked yet suggests that prices will not fall off     The global odds seem to be stacked against the RBI and a sharp sell-off ina cliff in July. It is useful to remember that the actual commencement of commodities doesn’t seem quite likely. There are two things that could tiltthe QE2 was a bit of a damp squib. Its effects were priced a good couple of the balance. One would be a comprehensive resolution of the crisis in Westmonths before the actual event and the prices of an array of so-called Asia and North Africa. The other, and the more long-winded, processrisky assets – commodities, emerging market stocks and bonds, and so on through which commodity prices could correct is when high prices (and– ramped up in anticipation. When the bond buy-backs physically started the resultant high interest rates) themselves set off a palpable slowdownin November, these asset prices hardly moved. One could expect a similar in emerging economies like India and China which constitute the bulk ofphenomenon when the scheme winds down. global demand for energy and materials. Until then, the RBI will have toBesides, the US economy is not quite out of the woods yet. Growth rate for continue to raise rates.the first quarter slumped to 1.8 per cent and both labor and housing Source: Business Standardmarkets remain sluggish. The Fed seems to be going out of its way toassure the markets that though QE2 will technically end, the easy moneyregime will continue. One way to ensure this is for the Fed to keepreinvesting the maturing debt proceeds to keep the size of its balancesheet constant. The central bank is also likely to keep policy rates on holdat least until the first quarter of 2012. To cut a long story short, theimpact of the end of QE2 on financial markets could be extremely muted.The other event that could put the brakes on commodity prices would be asovereign crisis in Europe. This would increase risk aversion and couldtrigger a sell-off in so-called risky assets. Again, the probability of thathappening is low. Two things have been happening on this front. First,markets have learned to digest periodic news of fiscal or banking systemstress in the smaller economies on the eurozone periphery like Portugal orGreece. Second, the risk of a large economy like Spain defaulting on itsdebt seems to have abated with major reserve-holders like China splurgingon Spanish government bonds.
  7. 7. Outlook on Japanese Yen Based on every measure, the Japanese Yen was the world’s best performing major Outlookcurrency  in 2010. It notched up gains against each of its 16 major counterparts, and wasthe only G4 currency to appreciate on a trade weighted basis. Against the US Dollar, it     Call Rates as on 6th May 2011  3.50% - 7.25%rose 10%, and touched a 15-year high in the process in 2010. CommoditiesThe Japanese Yen continued its rally against US$ in 2011, with the exchange rateslipping to a fresh monthly low of 81.08 during end of April, but the near-term rally in Aluminum (1 kgs) 122.70the low-yielding currency is widely speculated to taper off now as talks about currency Copper (1 Kg) 406.40intervention resurface. Zinc (1 kg) 98.65Another dimension to expectations to slip in the currency is the real economy facing a Steel L(1000kg) 30700strong downward pressures following the slew of natural and nuclear power disasters. As on 6 th May 2011Hence, Bank of Japan had to resort to stimulus package of JPY 1 trillion in one-yearloans bearing a 0.1 percent interest rate in an effort to aid the rebuilding process. ForexAfter holding rates steady, the central bank has further pledged to take additional steps Forward Rates against INR as on 6th May, 2011 Spot Rate 1 mth 3 mth 6 mthto shore up the economy if conditions warrant a further expansion in monetary policy, US 44.85 45.14 45.66 46.45but with inflation increased to 0.7% in 2011, compared with the 0.3% projection from Euro 64.14 65.5 66.14 67.06 Sterling 73.63 74.07 74.86 76.04earlier this year, appropriate measures are warranted to tackle this risk as well. Yen 55.87 56.24 56.9 57.92Depressing news continue to pour in for the country. As Standard and Poor’s lowers it Swiss 51.42 51.76 52.37 53.3 Franccredit outlook for the region to negative, the Bank of Japan may face increased pressures Source: Hindu BusinessLineto underwrite public debt as Prime Minister Naoto Kan tries to push a JPT 4 trillion Libor Rates as on 6th May, 2011stimulus package to aid with the relief efforts, and controlling inflation will turn into a Libor % 1 mth 3 mth 6 mth 12 mth US 0.20 0.26 0.42 0.74cumbersome task should the central bank embark on government bond purchases. The Euro 1.20 1.37 1.65 2.11Group of Seven may take additional steps to aid the ailing economy. The Bank of Japan Sterling 0.62 0.82 1.11 1.58expects the region to return to moderate growth once the rebuilding efforts get Yen 0.14 0.19 0.34 0.56 Swiss Franc 0.14 0.18 0.26 0.54underway. Forward Cover % as on April 8, 2011Nevertheless, as carry trade interest gathers pace, the Japanese Yen may continue to lose 1 mth 3 mth 6 mthground against its major counterparts, but the USD/JPY may buck the trend given the US 7.87% 7.32% 7.23%bearish sentiment underlying the U.S. dollar. In turn, the dollar-yen may be put to the Euro 25.80% 12.65% 9.23% Sterling 7.27% 6.77% 6.64%test especially in the near term, and speculation for a Yen intervention is likely to spark Yen 8.06% 7.48% 7.44%increased volatility in the exchange rate as the pair continues to retrace the sharp Swiss Franc 8.04% 7.49% 7.41%rebound following the coordinated measures taken by the G7. Source: Hindu BusinessLine  
  8. 8. Exports for FY11 surge to record growth of News Chronicles A$ 1.8 billion (Rs 9,000 crore). The port has two Jyothy buys 51% in Henkel India37.6% mechanised berths. MPSEZ aims to build another Jyothy Laboratories will pay Rs 162.6 crore toIndias exports surged to record high growth   two in the next five years. The port has a buy out Henkel India from its German parent.of 37.6% in the fiscal year 2010-11, as demand   In a deal approved by its board, it proposes to capacity of 50 million tonnes. It is using 20soared for engineering goods, oil products     million tonnes at present. Adani plans to fund acquire 59.3 million equity shares, or 50.97and gems manufactured in Asias third-largest the deal through debt and sale of some equity in per cent stake, at Rs 20 a piece, aggregating Rseconomy.Indias monthly exports have MPSEZ. 118.7 crore. It will refinance the existing debtnotched double-digit growth for much of the Coal Min to cancel 15 blocks of PSUs including of Henkel India and buy out the redeemablepast year as demand revived from traditional NTPCs cumulative preference shares held by Henkelexport destinations -- the United States and The Coal Ministry today took a decision to AG in the latter. Henkel India owes around RsEurope, which had fallen sharply after the deallocate 14 coal blocks and 1 lignite block 454 crore to its lenders. The acquisition willfinancial crisis. Indian exporters have also awarded to public sector companies like NTPC elevate Jyothy to amongst the top five fastseen high growth in new markets, especially in and DVC, besides 3 private firms, over their moving consumer goods (FMCG) players inLatin America. failure to develop the same for captive use. To India.RBI ups rates homes, cars to turn costly weed out non-serious players, the government South Africa: Investor confidence inches upGovernor of the Reserve Bank of India Duvvuri had last year issued notices to the firms and The Maxim-ETM Investor Confidence IndexSubbarao surprised investors with a higher- sought their responses as to why coal blocks rose in the first quarter to 107.3 from athan-expected interest rate increase that will allocated to them should not be withdrawn, as moderately upwardly revised 105.7 (105.4) inmake homes, cars and building of factories they had failed to develop them within the the fourth quarter of 2010. According tomore expensive. After criticism that India was allotted timeframe. economist from ETM, George Glynos, thebehind the curve in tackling inflation, Food inflation at 8.53 per cent year-on-year on index level indicates neither particularlyGovernor Subbarao raised the reverse repo, April 23 bullish nor particularly bearish investorthe rate at which RBI lends to banks, by 50 Food price index rose 8.53 per cent and the fuel sentiment. Late 2010 and early 2011 sawbasis points to 7.25%, double of what price index climbed 13.53 per cent in the year to many large funds increase offshore asseteconomists forecast. A new emergency April 23.In the previous week, annual food and allocation, and this would likely havefunding option for banks, Marginal Standing fuel inflation stood at 8.76 per cent and 13.53 dampened local equity sentiment.Facility, is introduced at 8.25%. per cent, respectively. The wholesale price index- Russia: $5.5Bln in Gas Taxes EnvisionedAdani arm buys Australian port for Rs 9,000 based inflation, the most widely watched gauge The Finance Ministry is looking to collectcrore of prices in India, rose 8.98 per cent in March additional billions of dollars by raising taxesThe Adani group’s Mundra Port and Special from a year earlier, higher than Februarys 8.31 on the natural gas industry, Finance MinisterEconomic Zone (MPSEZ) announced the per cent rise. Alexei Kudrin said on 6th May.acquisition of Abbot Point Port in Australia for
  9. 9. The pros spect of a hig gher tax burd den came as a Gazprom-led d In Foc cus  internatio onal consortium completed lay m ying the Nord Stream pipeline. . Osama-Bin O n-LadenThe pipe sections on th bottom of the Baltic Sea will be finally he y Osama bin Mohammed bin Awad bin Laden (March 10, 1957 – Ma 2, n h ay ogether this comwelded to ming summer. 2011) was the founder o al-Qaeda, the organization responsible for the of e rUnderlyin Inflation in Brazils Thrivin Economy Sca ng B ng aring Investors s Septembe 11 attacks o the United S er on States and num merous other mass- mYet again, it is inflation that is scaring in t nvestors away f from Brazil, one e casualty a attacks against civilian and military targets. H was a member of He orld’s biggest ecof the wo conomies which saw 7.5% grow in 2010. Its h wth s the wealth Saudi bin Lad family. hy dencurrency, however, has risen 40% against the US dol llar in just two o On May 2 2011, bin Lad 2, den was shot a and killed insid a secured private deyears alon with 6.4% inf ng flation. The currency is currently sitting close e residentia compound in Abbottabad, P al n Pakistan, by U.S. Navy SEALs in ato a three e-year high, with Goldman Sach claiming tha it is arguably h hs at y covert op peration orches strated and aut thorized by U.S President Ba S. arackthe world most overv d’s valued currency This is worr y. rying for those e Obama. A Al-Qaeda confirm med the death o bin Laden on militants web of n bsitesexporting out of Brazil as buyers (payin in dollars) ar scared off by g a ng re y on May 6, 2011. ,higher pri ices. This is just one man, but can we kill idea or ideology……… tIndonesia Economic Growth Slows, G a’s G Giving Central Bank Room to oHold Rate esIndonesia economic growth slowed last quarter a government a’s g as tspending eased, boostin scope to ex ng xtend a pause in interest-rate e Is s war aga ainst Terr rorism ov ver?increases after inflation cooled. Gross domestic pro n s oduct rose 6.5percent in the three mo n onths through M March from a y year earlier, the eCentral B Bureau of Statis stics said. “The data increases the risk that e tthey may delay more tightening, especially give e en the recent tmoderatio in inflation and as an app on preciating rupia is having an ah nanti-inflat tionary effect.BSP: Econ nomy can absor interest rate hikes rbThe Bangko Sentral ng Pilipinas said on 6th May that the two interest P n trate incre eases so far this year were not expected to cause a drag on t nthe econo omy, and added that growth targets remained attainable. The d emove of t the BSP to raise interest rates by 25 basis p e s, points in March hand by an nother 25 basis points was me s eant to only sip phon off excess sliquidity i the economy to avoid an acc in celeration of pric increases. ce