News analysis: 9/12/16

  • Sell off in Asian stocks(Sensex down ~1.5%) and bonds amid concerns of the US increasing its FED funds rate

    Context: Fed reserve bank of Boston President Eric Rosengren spurred bets on an interest rate hike saying that the US economy could overheat should policy makers wait too long to tighten

  • Government shortlists bankers to manage stake sale in SUUTI portfolio companies: The selected firms will be attending, assisting and advising on the SUUTI holdings for a period of three years. The Government plans to divest ~56Kcr of minority stakes held in listed and unlisted companies through the Specified Undertaking of the Unit Trust of India (SUUTI) in 2016-17. Citi, Morgan Stanley and ICICI securities amongst those selected.(HSBC, JM Financial and SBI selected incase any of the first three run into a conflict of interest situation]

    Impact: Sale based on market conditions, giving greater flexibility to maximise revenue. Inflow of funds helping in narrowing fiscal deficit leading to greater macroeconomic stability, or freeing up funds for investing in the government’s flagship projects.

  • Yes Bank’s billion dollar QIP ends in failure Key factors:
    1. Regulation regarding keeping book open for 3 days, book subscribed on first day, but investors then scared away by volatility and price falling below the lower offer(R1350-R1410)
    2. Miscommunication amongst bankers, leading to the same set of hedge funds being contacted by multiple players leading to double counting
    3. Price on offer too optimistic (Stock already soared ~100% over the past year, leading the investors to believe there was no more “juice” left in stock

    Context: Qualified institutional placement: Sale of securities to investors who are legally recognized by securities market regulators to need less protection from issuers than most public investors. QIPs were introduced by the SEBI in 2006 to encourage Indian companies to raise funds domestically instead of tapping overseas markets

    Sources: ET, Bloomberg. I’ll be posting one blog post everyday leading to the placements. Subscribe to get updates.Cheerio.

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