Month: November 2013

Words of wisdom? How to decode company jargon

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors eagerly anticipate earnings announcements each quarter to gain a crucial insight into how well a company is performing – but a global equity fund chief says it pays to be wary of the words that a business uses – not just its figures.

“It does tell you that there’s something going wrong, I think, when people start reaching for the gobbledygook phrasebook,” Terry Smith, CEO of Fundsmith with four decades’ experience in finance, told CNBC Tuesday.

PepsiCo uses jargon when it came to job titles, according to Smith. He said the soft drinks maker – which holds third place in the US sales rankings behind Coke and Diet Coke – had employed a “global beverage foresight director”, a “head of hydration” and even a “head of enjoyment.”

Also read: PepsiCo reports higher profit despite economic pressures

“Have they got a hindsight director? Someone who tells them what went wrong in the past,” Smith said. “These are ridiculous titles. Why haven’t they just got a head of sales who’s charged with selling more Pepsi?”

PepsiCo declined to comment when contacted by CNBC.

Meanwhile, Wal-Mart, which posted disappointing quarterly sales in August and gave a cautious outlook, is also guilty of befuddling analysts, investors and onlookers, Smith said.

Smith – who admitted to not following the stock closely – explained that in a recent results presentation, Wal-mart’s management team said “leverage” no less than 80 times. Leverage has a legitimate meaning, but Smith said this usage was a worrying sign that a company could be trying to hide something.

Also read: Wal-Mart sees ‘tough’ economy, speeds small-store strategy

Charles Holley, executive vice president and chief financial officer for Wal-mart, said in the earnings presentation: “The productivity loop is top of mind across the organization, and we remain focused on delivering leverage for the company by year-end. Long-term strategic investments by our leverage services area pressured operating expense leverage during the past quarter, but we believe the benefits of these investments to our customers and shareholders outweigh the near-term impact on expenses.”

“What’s a productivity loop?” Smith asked. “Any idea what that means?”

In response Wal-Mart say that the terms “productivity loop” and “leverage” are not new and have been discussed extensively by the company as part of its financial priorities of growth, leverage and returns.

“The productivity loop allows us to manage our expenses so that we can invest in price and drive customers to our stores. It’s a business model that has been successful for us,” a spokesperson told CNBC.

“It starts with leverage. If we can leverage our expenses, it frees up cash for us to invest in price because we know that’s a traffic driver in our business. As we’re effectively able to lower prices, we drive traffic into our stores and that volume allows us to leverage our expenses.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Japan success shows Apple badly needs China Mobile

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As Apple’s revenue growth in the Americas and Europe flatlined during the July-September quarter, Japan proved to be a bright spot for the consumer electronics giant.

Japan was the company`s fastest-growing region in terms of revenue with 41 percent on-year growth last quarter, significantly higher than revenue growth of 6 percent in Greater China.

Sales growth in Japan was driven by Apple’s tie-up with NTT DoCoMo – the country`s largest carrier – which highlights the consumer electronics giant`s dire need for a deal with China Mobile, analysts said.

Read more: Apple earnings, revenue beat Wall St. estimates

“Japan has been a strong market for Apple for some time on both iPhone and iPad. This quarter was particularly strong as Apple added NTT Docomo as a carrier,” said Carolina Milanesi research vice president, Consumer Technologies and Markets, at Gartner.

NTT Docomo began selling iPhones to its 60 million customers in September. The company provided heavy subsidies for the device, forcing rivals KDDI and SoftBank to boost their incentives for iPhone buyers, all to the benefit of Apple.

Apple accounted for 34 percent of the country`s 2.8 million mobile phone sales in September, up from 14 percent in both July and August, according to Counterpoint Research.

Read more: Live blog:Apple`s earnings call

Tom Kang, managing director, Mobile Devices at Counterpoint Technology Market expects solid revenue growth in Japan to continue for the next two quarters.

“There are two factors – the pull factor is that the minimalist design of the iPhone really resonates with Japanese consumer tastes,” said Kang. “And the push factor is Docomo made a big deal with Apple where they are trying to sell as many iPhones as they can, and KDDI and SoftBank are making sure their users don`t turnover to Docomo.”

“Strong revenue growth is going to continue until everyone who wanted an iPhone gets an iPhone and that`s probably going to be next March,” he said, noting that January to March is traditionally the gift giving season in Japan.

In order for Apple to increase its addressable market in China, it needs to lower the price of its devices and add China Mobile as a carrier of its products, said analysts.

Read more: Apple, China Mobile deal may be coming soon

Apple was expected to announce a partnership with China Mobile, the world`s largest mobile carrier with 750 million subscribers, during a launch event in Beijing in September. However, no deal has been confirmed.

“China Mobile is a way to open up a whole new market. Partners are critical to driving sales volume. All handset makers operate that way,” said Alberto Moel, senior research analyst at Sanford C Bernstein.

Melissa Chau, senior Research Manager at IDC Asia Pacific agrees that a deal with China Mobile is critical to Apple`s success in the mainland, but points out that the company is running out of partners to tie up globally that will drive huge jumps in revenue.  

“Apple`s biggest growth comes with tying up with new partners, and as long as they can do so, they are on a good growth path,” said Chau.

“(However) they have covered most partners. China Mobile would be a feather in their cap, but what then?,” she said.

-By CNBC`s Ansuya Harjani; Follow her on Twitter@Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gold-loving India turns to another metal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Gold demand typically peaks around now as Indian consumers load up on gold ahead of Diwali.

In response, gold shares on average have gained 2 percent one week ahead of the holiday. But we aren’t seeing that big move in gold this year. Shares of the metal are down 1.4 percent this week, ahead of Diwali, which is being celebrated November 3.

Analysts and gold gurus are predicting that demand in India will be weaker this year as consumers battle a slowing economy, rising inflation and a depreciating rupee.

“You can bet that with the current state of the economy, Indians will be buying less gold and looking for alternative gifting options this Diwali season,” says Arvind Panagariya, professor of economics at Columbia University and India observer.

Read more: Soaring India stocks have strategists on edge

So if Indians aren’t buying gold, what are they buying?

According to the local merchants in New Delhi and Mumbai—silver. It might not carry the same prestige and status, but it is cheaper and thus a good alternative. Silver shares trade at USD 22 an ounce, while gold shares are trading north of USD 1,300.

Merchants are seeing strong demand this season for silver coins, up about 10 percent to 15 percent year-over-year, according to BNP Paribas Securities in India.

BNP in India Executive Director Neil Nathwani said that with the economic slowdown, sales of dried fruits have surged.

“Some retailers of such products have seen sales grow by over 45 percent this year.”

 But silver and dried fruits won’t be able to replace gold’s important role in weddings, religious events and festivals.

Read more: India’s gold fever cools this Diwali

That’s why some experts say that regardless of economic conditions, India will always have a strong affinity for the yellow metal.

Somasundaram PR, managing director, India, for the World Gold Council, said that people there buy gold as a long-term investment to protect their wealth and that gold has social and emotional significance.

 “Demand for gold, whether in the form of jewelry or investment [bars and coins], is predominantly retail—driven by millions of individuals across rural and urban India investing as part of their household savings … not discretionary spending for consumption,” PR said.

Demand just might not be as strong this holiday season.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This industry has an entry level salary of $335,000

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Hedge fund professionals have seen higher compensation for the third consecutive year, with the average salary for an entry-level analyst at a mid-performing hedge fund totaling USD 335,000 in 2013, an industry report has found.

Portfolio managers at large hedge funds should also be grinning right now, given that average salaries have reached USD 2.2 million, the 2014 Glocap Hedge Fund Compensation report, released Thursday found.

The hike in compensation levels was largely the result of an increase in bonuses rather than base salary rates, the report found.

Read More: Hedge funds hope for more mortgage juice

Energy hedge funds crushed despite ‘screaming’ market

Asian hedge funds shine in stellar month for industry

“Hedge funds’ bonus pools were fueled in 2013 by the combination of increased performance fees and additional management fees generated on an increase in investor capital allocations,” said Anthony Keizner, head of Glocap’s hedge fund practice.

“These larger bonus pools will be passed through this year as higher compensation for key staff,” he added.

Entry-level analysts at large firms saw a rise in bonuses between 0 to 10 percent in 2013, while portfolio managers and other senior professionals at large firms saw bonuses ranging from a decrease of 5 percent to an increase of 20 percent.

The burgeoning pay packets are testament to the thriving global hedge fund industry which the report said had reached record levels of investor capital in 2013, with USD 2.51 trillion as of the end of the third quarter.

Average compensation across the industry rose between 5 and 10 percent in 2013, the report said, with portfolio managers, senior analysts and risk managers at top performing funds seeing the highest relative increases.

Meanwhile the Hedge Fund Research Weighted Composite Index – an index designed to represent the whole hedge fund industry – rose 5.5 percent year to date, while the percentage of hedge funds which reached their high watermarks – a set performance level a manager must reach before receiving a bonus – rose to 62 percent year-to-date through to September, compared with 48.4 percent last year.

Hiring was also increasing, the report found, and as a result qualified candidates more frequently received multiple offers and the duration of job searches (from posting to filling the role) had become shorter.

There was a trend among large hedge funds of hiring managers who had experience managing portfolios during the crisis periods of 2008 and 2011, to show they can weather market downturns. In addition, hiring managers were also more likely to require candidates to show an ability to generate performance without overexposure to risk, as risk limits continue to tighten, the report said.

Factors which impinged on further pay increases in the hedge fund industry were a decline in compensation levels in the banking industry and a flat compensation environment in private equity.

The report was compiled by executive search firm Glocap and data provider Hedge Fund Research.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asia tablet makers take a bite out of Apple

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Since Steve Jobs stepped out onto the stage to launch the world’s first iPad in the second quarter of 2010, Apple’s offering has been the device to beat in the tablet space.

Apple has sold over 170 million tablets since the iPad’s debut and if analyst expectations are to be believed, that number will balloon in the current quarter thanks to the release of the iPad Air and iPad Mini with Retina.

But while many analysts are bullish on Apple’s latest offerings, the cold hard facts reveal the iPad king is losing market share in the tablet space.

Read more: Apple’s tablet competitors

Is Samsung losing its earnings momentum?

Don’t want an iPad? Here are some tablet alternatives

Nokia enters the great tablet race

And the verdict on the iPad Air is…

New data compiled by research firm IHS show Apple’s market share slipped to 29.7 percent in the third quarter from 33.5 percent in the previous quarter.

Meanwhile, aggressive pricing strategies are seeing companies such as Samsung, Lenovo and Taiwan’s Asus gain ground in the tablet space.

As demand for smartphones tapers off, Samsung has begun to focus on the tablet market. The South Korean tech giant is now one place behind Apple with 22.2 percent of the market.

Addressing analysts on its third quarter earnings call, Samsung said it plans to increase tablet shipments by 20 percent in the fourth quarter to take advantage of demand over the all-important Christmas period.

Rhonda Alexander, director of tablet research at IHS, says Samsung is employing a similar strategy to the one it used to beat Apple in smartphone shipments – offering users a range of options at a variety of price points.

“The erosion in Apple’s unit shipment market share was inevitable… Cheaper almost always wins the volume race, and the competitors were quick to adjust pricing when it became clear that it was impossible to achieve anything close to Apple’s unit growth at the same price level,” she said.

This has seen a surge in the number of tablets selling for less than USD 250 dollars – helping lift Android to the number one operating system by tablet shipments in the quarter.

But the race to the bottom on prices is putting serious pressure on product quality.

The IHS survey remarks on the rise of so called ‘white box’ vendors – little-known regional tablet makers in China that form a large portion of the ‘others category’ – which accounts for 34.2 percent of the market. They sell 7-inch android-based devices for $100 or less.

“The cheaper tablets tend to have much higher return and failure rates. This results in much shorter overall product lifetimes in the Android market than in the iOS space, and contributes to iOS still leading the tablet market in installed base, despite Android’s lead in unit shipments over the past year.”

 At Apple’s fourth-quarter results, it claimed to hold an 81 percent share of tablets currently in use. This is a key metric used by content and app developers for deciding which operating systems to align with. Many developers have voiced their frustration with the Android operating system due to the lack of uniformity across devices.

For these reasons, Alexander says the tablet market remains bifurcated, noting “Apple is yet to experience any serious competition for the premier customer” and should therefore be “on track to lead the tablet market on revenue for years to come.”

Other analysts expect strong demand for Apple’s new products.

“We expect extremely robust demand for Apple’s new product portfolio and expect upside to be contingent on Apple’s ability to continue ramping supply of the new iPhone and iPad products. Beyond the December [quarter], we expect solid momentum behind [Apple] to continue into 2014 as the iPhone and iPad hit larger geographic rollouts,” Deutsche Bank analyst Chris Whitmore said in a note. He expects Apple to sell 24.5 million iPads in the December quarter.

Rob Cihra of Evercore predicts Apple will sell 25 million units in the period.

“We think the new iPad Air revamp in particular ignites a bigger refresh cycle than widely expected, even while Retina looks supply constrained into the March quarter,” he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is China causing a global wine shortage?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Coupled with a drop in global production to its lowest level in 40 years, China’s growing thirst for wine is contributing to the risk of a global shortage, a report from Morgan Stanley has found.

According to the report, increasing consumption levels in both China and the US combined with declines in European production in 2012 following poor harvests in France, Italy and Spain, has raised the risk of a global shortage, which could lead to higher prices and increased demand for exports.

“Data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released,” the report said.

Read more: ‘Red obsession’: How China is transforming the bordeaux market

Move over Bordeaux:French premium winemakers eye China vintage

Aglass of Meow-lot? Japan launches wine for cats

Morgan Stanley noted that in 2012 there were only 1 million excess cases, a sharp fall from 600 million in 2004 when wine production peaked. Furthermore, the report found that after adjusting to allow for non-wine uses (such as making vermouth), demand for wine actually exceeded supply by 300 million cases in 2012, the deepest shortfall in over 40 years.

This shortage is expected to be exacerbated as demand from the US, the world’s second largest consumer of wine after France, and China, the fifth largest importer, grows.

China’s appetite for wine is set to boom over the next couple of years as households become wealthier. Wine consumption in China has doubled twice over the past five years and is expected to double again by 2016 to 400 million cases, matching US consumption levels.

Meanwhile, global production levels haven’t kept pace, and have been on a downward trend since the early 2000s. Europe, which makes 60 percent of the world’s wine, has seen the steepest decline of 24 percent since 2004.

However, according to Michael Daymond-King, fine wine consultant at global wine merchant the Bordeaux Index, the report overplays concerns about a global shortage in the wine market.

“The [Morgan Stanley] report focuses more on the cheaper end of the wine market, priced under USD 20 per bottle. There are certainly less of these cheaper wines being produced in Europe, but I doubt whether it will impact prices, because there is still enough volumes coming from Australia, Chile, Argentina and New Zealand,” he said.

In terms of rising demand from China, Daymond-King agreed that appetite is booming, but said in his view strong production levels within the country will compensate for much of the increased demand. Meanwhile, growing consumption levels of wine in the US would be easily met by supplies from Australia, he added.

“People forget that China is a big consumer of wine but also a big maker of wine,” he said.

But the Morgan Stanley report said that although China produces 180 million cases annually, it won’t be able to produce enough wine to meet domestic demand and will therefore have to import the difference.

China currently imports 20 percent of its total consumption, mainly from France.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Global consumer confidence up, except in Asia

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The latest survey of consumer confidence around the world revealed that while confidence was returning to developed markets such as the US and Europe, confidence had been shaken in emerging market economies in the Asia-Pacific region.

The quarterly survey, carried out by global information company Nielsen, measured local job prospects, personal finances and immediate spending intentions and showed that consumer confidence was improving in developed markets. It was “holding steady” in most emerging markets.

The global consumer confidence index reached 94 in the third quarter, a two-point increase from the same quarter last year but unchanged from the previous quarter. In Europe, the index increased three points to 74, the biggest quarter-on-quarter increase since the first quarter of 2010. In the US, meanwhile, consumer confidence hit its highest level since the third quarter of 2007.

The survey was conducted online among more than 30,000 respondents in 60 countries. It found that, globally, plans to buy new clothes, spend on vacations, out-of-home entertainment and home improvements increased 5 percentage points each in the third quarter.

Nielsen conceded that the results only provided a perspective on the habits of existing internet users, not total populations, and that internet penetration rates differ by country which could affect the results.

The jump in confidence was greatest in Portugal, although confidence remains low compared to other European nations. The fall in confidence was the most pronounced in Ukraine.

Read more: UK economy: High confidence but decade-low living standards

In the UK , the number of consumers believing that the country is out of recession was at its highest point in five and a half years.

The only main concern for UK consumers that had increased on the previous quarter was rising utility bills, the survey showed. That comes as six of the country`s largest energy providers hike their bills by an average of 9.1 percent ahead of the onset of winter.

Read more: UK energy companies under pressure to explain price hikes

As developed markets showed a return to consumer confidence after six years of economic crisis, however, only marginal consumer confidence increases were reported in Latin America and Middle East and Africa.

Furthermore, in previous emerging economic powerhouses such as India and Brazil, consumer confidence was waning and recessionary sentiment was increasing. That reflected fears over the slowdown in economic growth that has beset both countries.

In terms of regional consumer confidence, however, everywhere except Asia-Pacific had experienced an increase, perhaps reflecting tensions in the region`s emerging markets during August and September, the period in which the survey was conducted.

At this time, Asia-Pacific economies were reeling from intense capital outflows on widespread expectations that the U.S. Federal Reserve could taper its bond-buying program, a policy which has supported investment in the region as investors searched for higher yields.

Read more: Global sell-off worsens on flight from emerging markets

Indeed, in addition the Nielsen survey revealed a marked increase in recessionary sentiment from respondents in Indonesia, Thailand and India where the summer sell-off was most pronounced.

Despite the slight decline in confidence, however, the intention to spend was most evident in Asia-Pacific and North America, showing that the momentum of consumption has not slowed down – particularly in China.

Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen, said that it was important to keep the declines in perspective.

“At the same time, we have to keep modest developing market declines in perspective. While India is significantly off peak optimism of 131 measured three years ago in 2010, it is still one of the largest and most confident countries in the world, and that has an impact on the entire region.”

Conversely, he added that while it was positive to see an improvement in confidence in developed markets, it was going to be “a slow climb for economic conditions in the global economy to recover, and there is no sign of rapid expansion around the corner.”

– By CNBC`s Holly Ellyatt, follow her on Twitter @HollyEllyatt

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Are markets at risk of 1999-style Fed bubble?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the continued rise in US stocks to record highs has led to some speculation about the formation of a market bubble, analysts told CNBC that investors are not appreciating the full risk of another 1999-style bubble.

This week the SandP 500 and the Dow Jones Industrial Average  both surged to record highs of 1,775.22 and 15,721 respectively. The two global benchmarks closed slightly lower on Wednesday, however, following slightly less dovish than expected comments from the Federal Reserve.

According to Michael Gayed, chief investment strategist at investment advisers Pension Partners, the healthy performance seen this year has been purely driven by the Fed`s expansive quantitative easing (QE) program, rather than valuations, a sure sign of the potential for a correction.

“You are seeing fairly sizable inflows into equities – the most since 2000, yet inflation expectations are still not trending up… [It] now appears to be the start of a potential bubble given how far US equities have diverged from the underlying economy, inflation expectations and the overall reality of where we are in the economic cycle,” he said.

“This is really a big, big problem that is being under-appreciated,” he added.

Gayed drew parallels with the market environment seen in the late 1990s, when huge appetite for internet-based stocks led to massive gains for US indices and their eventual crash in 2000, broadly known as the dot.com bubble.

A similar trend is emerging in US stock markets today, he said, due to the Fed`s huge monetary stimulus program, which has pumped $2.8 trillion into the US economy since late 2008. But rather than stimulate the economy, the flow of easy money has instead stimulated the stock market.

“[As a result] they are risking the embarrassment of another 1999 Fed induced/liquidity induced bubble,” he added.

The Pension Partners` chief investment strategist highlighted a number of warning signs that a bubble could be forming in the US stock market, including the recent poor performance of US small caps, strong appetite for defensive sectors and the fact that bond yields were not rising in a way “that suggests the stock market is right about the future.”

“Big [corrections] in stock market… are preceded by complacency, the illusion of stability, leverage and a sense of entitlement,” he added.

However, Gayed also told CNBC that the Fed`s “power of words” which has been demonstrated by the huge impact its use of the word `taper` has had on markets could give the central bank the ability to prevent a severe correction.

“Just by introducing the word `taper` yields spike. Maybe they can use a few words here and there to just calm the stock market down,” he said.

Gayed`s concerns echo a number of industry commentators who have recently started to warn of a bubble forming in US stocks.

Larry Fink, CEO of Blackrock, the world`s largest money manager, warned this week that the Fed`s quantitative easing policy was leading to the formation of market bubbles and advised the central bank to start tapering immediately.

Meanwhile Robert Heller, former Governor at the Fed from 1986 to 1989, told CNBC on Thursday that markets were “perilously close” to the formation of a bubble.

The SandP 500 and the Dow Jones have risen 24.5 percent and nearly 20 percent, respectively, year to date.

-By CNBC`s Katie Holliday; Follow her on twitter @hollidaykatie

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Four major emerging nations face crucial elections

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With India, Indonesia, Brazil and South Africa scheduled to hold presidential or general elections within the next 12 months, politics are set to be a key driving force in emerging markets.

The elections will be scattered throughout 2014, with South Africa’s general election to be held between April-July, India’s general election to be held by May, Indonesia’s presidential election due in July and Brazil’s presidential election set for October.

“These countries will see a change of administration at a time when all their economies are coming off the boil, which really ramps up the risks surrounding the elections,” said Stephen Wilford, director, Asia Pacific, Global Risk Analysis at Control Risks.

Read more: Emerging markets to shake up Fortune 500 list

“The new leaders will have to try and execute structural reforms in an environment of slow growth, which makes the task all the more difficult,” he added.

 According to Alastair Newton, senior political analyst at Nomura, India’s general election is the most important of the bunch.

Read now: Soaring India stocks have strategists on edge

“India looks to me to be a different story – that’s where markets should be concentrating their attention in the emerging market elections next year,” Newton told CNBC Asia’s “Squawk Box” this week.

“If [Narendra] Modi does storm home with a solid plurality, we could see reforms which are going to lift India’s growth not back to double-digits, but maybe back to 7-8 percent,” he added.

Narendra Modi is the prime ministerial candidate for the main opposition Bharatiya Janata Party, which is seen as more market friendly and amenable to structural reforms than the ruling Congress party.

 Indonesia, meanwhile, will get a new leader as the incumbent president Susilo Bambang Yudhoyono (SBY) is constitutionally barred from seeking a third term.

The prospect of reformist Jakarta Governor Joko Widodo being elected as president has gotten investors excited. Widodo, who has quickly risen to the top of opinion polls, is seen as a clean politician who has not used his governorship for personal enrichment.

Read more: In Indonesia, a Governor at Home on the Streets

Analysts, however, don’t believe his election would be a game changer for the economy.

“In Indonesia, there’s a real buzz and hope that the Jakarta governor can make a big difference. But he doesn’t strike us as someone who is in favor of market friendly reforms. For example, he has agreed to a big increase in Jakarta’s minimum wages, and he’s also opposed the increase in subsidized fuel prices,” said Robert Prior-Wandesforde, director of Asia economics at Credit Suisse.

Newton of Nomura says while the country’s stock market will rally if Widodo becomes president, it will be a “false dawn.” “I don’t think Widodo will be any more successful with structural reforms than SBY has been,” he said.

As for Brazil, recent opinion polls have confirmed current President Dilma Rousseff as the clear front runner, according to Reuters.

Similarly, in South Africa, the ruling African National Congress party is expected to win the elections next year.

—By CNBC’s Ansuya Harjani; Follow her on Twitter:

    @Ansuya_H

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow