HVK Archives: Under BJP, I see a positive outlook for FDI, FII investments
Under BJP, I see a positive outlook for FDI, FII investments - The observer
Posted By Krishnakant Udavant (kkant@bom2.vsnl.net.in)
April 16, 1998
Title: Under BJP, I see a positive outlook for FDI, FII investments
Author:
Publication: The observer
Date: April 16, 1998
Articulate and forthright in his views, HSBC Capital Markets
chief executive officer Shaun Browne is a relaxed man these days.
Browne, along with his peers in Kotak Mahindra and DSP-Merrill
Lynch, successfully leadmanaged the $350-million Mahanagar
Telephone Nigam Ltd GDR last December, against all odds (just
when the South-east Asian meltdown started to create headlines).
"The Reuters got it wrong when they flashed lop six financial
services companies following the Travelers-Citicorp merger," he
points out. HSBC Group, with a market capitalisation of $90
billion was the largest financial service company in the world
before the Travelers-Citicorp merger. Even after the merger, the
combined market capitalisation of the companies are $136 billion
which shows how big an organisation HSBC is. In an interview with
Rajesh Abraham Browne talks about FII investments in the country
and HSBC's plans for India. Excerpts.
With BJP-led coalition naming to power, how do you think the
stock markets are going to react?
To answer that, it is obvious from the reaction of the stock
market. Last couple of months witnessed a spectacular run by the
stock market, especially after the Government was formed, and a
positive run since the Government passed the vote-of-confidence.
This speaks for itself .
There were reports that the 'Swadeshi Government' may discourage
foreign In vestments In stock markets, as compared to the foreign
direct investments.
No, I don't think the Government has ever said that they would
discourage foreign institutional Investments. We have a large
coalition at the Centre which have some individuals who might
have some apprehensions regarding the FII Investments vis-a-vis
the FDIs. But I have not mm anything official from the Government
saying they wish to discourage FII Investments as against the
FDIs. So I don't see any cause for concern on that front at all.
Taking personally, I have been interacting with corporate and
there seems to be lot of Interest for the multinationals wishing
to expand and develop their activities here. At the moment I see
a positive outlook for both the FDIs and the FII investments.
Any risks on the FII Investments Is concerned, that the market
has now moved up so far in a relatively short period of time,
that it Is not Impossible If there are _me doubts of profit
taking by some of the fund managers who, perhaps, parked money in
India by the tail end of the past year or the middle of the last
year.
After the Asian meltdown, they were not expecting huge out-
performances considering that the Sensex was around 3,500 points
in the middle of last year or even less than that. Now the market
is in the region 4200. This in percentage terms, this is a
substantial jump. This could be used as an opportunity to take
profits, particularly since this was totally unexpected in such a
short-time.
Is this the reason for the FII Investments, which showed a net
outflow during the last three months of 1997, to turn positive
again.
I don't think one should make big song and dance about it (on FII
investments turning positive again). I have always said that how
extra-ordinary that it is net positive inflow of FII Investments
Into India. I could not come up with any other country in the
world that for five years, every single month showed net
Investments by FIIs are positive. It completely surprises me that
It was merely a question of time for FII investments to turn
negative. But I think you have to recognise that this is the
nature of FII investments. If you now look into the future. them
could be an odd few months where FU investments turn negative
again. It could be consecutive months for that matter In the
future where you could am the net FII investments turning
negative. But instead of looking at the FII Investments on a
month to month basis, what one has to look is, the overall trend
in the FII investments. And, I think, the overall trend is FII
investments will continue to be positive in the foreseeable
future.
What Is the perception of foreign Investors on the new
Government, knowing very well about Its wadeshi stand.?
Foreign investors, who invest in countries like India, by
definition, recognise that they would be changes In policies, and
of course, the political parties in power, and therefore changes
In policy.
And one of the biggest concerns about the Bharatiya Janata Party
was that it was an unknown entity. And the party had no track
record of Government at the Centre against which one could judge.
But, they brought out a National Agenda on the second day itself.
In it the Government made all the positive signals including
speeding up the disinvestment process, attracting foreign direct
investments in the infrastructure sector. So the general feeling
was that the ruling Bharatiya Janata Party would be Investor
friendly.
Where do India figure on the FIIs hat, after the South-East Asian
meltdown. Is India clubbed In the South-East Asian bracket as far
as your Investments are concerned?
I don't think there is an easy answer to It. The realty is that
if you look at the FIIs who invest m India, names are quite wen-
known, Capital, GSIC to name just few.
Different FIIs run different funds. While some FIIs run India
specific funds. Under the India specific funds, they cannot
Invest anywhere other than India. That's where they raised the
money, and that matter they have to adhere to the policies and
commitments they made at the time of raising the money. Others
run sub-continent funds and there if they feel India is not good
enough, can shift their investments into other countries like
Pakistan, Bangladesh, Sri Lanka or Nepal. Some others run Asia
specific funds. Here, the FIIs weigh their portfolios in India
along with other countries in the region. And if, one country
fares badly, they pull out the funds from that region and put in
some other country in Asia. Some FIIs run emerging-market funds,
here they don't look India or Asia specifically. They also look
into other emerging markets of Eastern Europe, Latin America as
well and weigh their portfolios before taking an investment. Some
others run global funds. So, you can't generalise and ask what
do FIIs think. The answer would be that different FIIs think
differently, depending on the nature of the funds they run.
While most of the FIIs are downsizing their operations In India,
HSBC is expanding Could you elaborate your plate for India?
Well, HSBC Is a very large organisation. There is a variety of
activities within the HSBC Group. On the commercial banking, you
got Hong Kong and British Bank of East. The other side of the
Group is the investment banking side. Within HSBC investment
banking, we do three business. Here we have HSBC Capital Markets
(the merchant banking business), HSBC Securities (stock broking
operations) and HSBC Private Equity. Now, we are seeing a growth
in the merchant banking side of our business, which is HSBC
Capital Markets.
Yes, we are growing in all our product areas. In advisory
services, equity capital markets debt capital markets and project
finance. We are seeing a lot of activity in each of these areas
On the equity capital market as all are aware, one is not seeing
much of an activity at the moment.
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