Niveshak July 2010 Issue

Saturday, July 24, 2010 , Posted by Bhav at Saturday, July 24, 2010

Dear Niveshaks

The other day I was wondering about what could have brought China an indomitable competitive advantage which has not only helped it in achieving a phenomenal GDP growth rate but also in making it resilient of the recession which gulped most of the parts of the world 2 years back. A prolonged discussion with one of my colleagues brought forth various points like labour cost, manufacturing competence etc. One thing where our discussion ultimately boiled down to was China’s pegged currency. But recently we saw China making an announcement that it will make Yuan’s exchange rate more flexible thereby breaking the currency’s 23-month-old dollar peg. This move was welcomed by most of the stock indices of the world with Sensex advancing by 1.7% and MSCI Emerging Markets Index by 2.4%. The S&P 500 was 1.2% higher, so were European stocks.

The dollar peg had come under intense fire from critics as China’s export juggernaut roared back to life, while much of the rest of the global economy remained sluggish in the wake of the financial crisis. But China has ruled out any chance of a major appreciation or one-off revaluation. So the question arises whether this unpegging of currency will dampen this form of China’s competitive advantage in due course of time or it is just an intended move to placate critics of China’s currency regime. Our cover story for this month answers this question by stating the possible implications, or I should rather say repercussions, on China and rest of the world.

The May issue carried an article on the much hyped SEBI-IRDA tussle that had surfaced because of the insurance product ULIP. Well… the insurance industry regulator IRDA has emerged victorious in the regulatory turf-war, with the government ruling that it and not the market watchdog SEBI would oversee the product. But what seem important for us are the steps taken by IRDA to ensure that ULIPs sold by agents are based on the financial profile of the individual being approached and not on the fees. This, if implemented on a larger scale, will definitely serve the purpose in the best interest of the investors. In the current edition, we present to you a very interesting article on BP and the oil spill from one of its rigs in the Gulf of Mexico. This focuses specifically on the financial aspects and impacts of the oil spill, which contaminated a vast area of United States marine environment and continues to have a serious impact on the ecosystem, on BP and the whole Oil industry of the world.

Time indeed moves so fast. It gives me immense pleasure to inform you that we, Niveshak, are at the doorstep of our 3rd year of existence and will celebrate its second anniversary in the next issue. With this new beginning, let us revisit the world of finance with all its failures and their learning from the last century. Yes this is the theme for the next issue. We invite you to write articles on “Milestones that shaped the world of Finance” for the Anniversary edition. However, you can also send articles on any topic of your choice. For more information, please see the declaration page of this issue. We look forward to your support and wishes to continue this growth story at an exponential pace.

What a journey it has been.

Bhavit Sharma

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