India On Your Radar?

India is only getting minimal coverage in the mainstream media, but it needs to be something everyone is keeping their eye on. No signs yet that is going to spread beyond, but don't think for one minute that if this situation in India gets out of control it won't affect the rest of the world... because it will. Let's follow this story and see if it begins to move from the back pages to the front pages of your local paper...

A Warning as Markets Cool in Asia

By VIKAS BAJAJ, New York Times 1/12/2001

MUMBAI, India — Stock markets in India and a handful of other, smaller Asian countries, which surged last year as foreign investors bet on their fast growth, are starting to remind investors of the risks involved.

The Indian stock market has fallen more than 7 percent from a record high set in November, as investors have grown increasingly concerned about inflation and corruption scandals that have paralyzed the country’s Parliament. The Nifty 50 stock index did close up 1.9 percent on Wednesday, but that came after a six-day losing streak.

Meanwhile, the stock market in Bangladesh, which jumped 96 percent last year, has tumbled 27 percent in recent weeks after regulators tightened rules to limit speculation. That market, which went into a free fall on Monday, setting off riots, recovered some of those losses in the last two days after the government eased regulations to make it easier for investors to borrow money. Stock markets in Thailand, Indonesia and the Philippines have also fallen in recent days, though not as sharply.

The stumble has not extended to more established exchanges in Asian emerging markets. The Hang Seng index in Hong Kong is up more than 4 percent in the last month and more than 8 percent over the last 52 weeks.

And the MSCI Asia APEX 50 Index, a broad measure of Asian stocks excluding Japan, is up 5 percent over the last month and nearly 14 percent over the last 52 weeks.

But the recent pullback in less established and more volatile Asian stock markets serves as a warning to foreign investors who poured billions of dollars into emerging markets last year: in spite of their long-term potential, these fast-growing countries still face numerous challenges.

Many countries are battling high and still-rising inflation, especially in food and energy, and their policy makers are worried about bubbles forming in their financial systems, said Russell Napier, a strategist at the investment firm CLSA in London.

“Inflation will be an endemic problem in the emerging markets,” Mr. Napier said. “We are not going to solve this inflation in a quarter or two quarters.”

In India, prices remain stubbornly high even as the country’s central bank, the Reserve Bank of India, has raised key interest rates by up to 2 percentage points. A recent surge in vegetable prices has put staples like onions beyond the reach of many consumers. Food prices jumped 18 percent at the wholesale level at the end of December, compared with the same period a year ago.

Contunie reading......