>China BULL

Other than cash, gold, and a few select natural resource stocks, the only other investments I'd make in these wild and crazy times are in Chinese companies, buying them hand over fist for the long haul.

Yes, that's right. Even bearing in mind the recent milk/melamine scandal, which is outrageous.

You see, China is about the only economy on the planet with both short- and long-term growth potential. Just take a look at the latest economic stats ...

China's August retail sales exploded 23.2% higher to their fastest growth rate in nine years.


Jewelry sales soared a whopping 44.3%, making China the world's second-largest consumer of gold jewelry. Even more impressive when you consider that only one out of every ten Chinese consumers can currently afford gold.

The booming retail sales growth is not confined to just the major east coast cities like Shanghai, either. That 23.2% figure is for ALL of China, proving that the expansion is now blanketing even the rural areas.

Think August might be just a freak month? Well consider the eight month, year-to-date retail sales growth of 21.9% — up from 16.8% for all of 2007. That's almost one-third higher!

No wonder Gome Electrical Appliances Holdings Ltd., China's No. 2 electronics retailer, reported that first-half profits almost tripled.

Have any doubt about domestic consumption supporting China's economy? Well these stats prove otherwise, that domestic demand is soaring.

It would not be good if all that spending occurred by going into debt. But that's not the case in China. Indeed ...

Disposable income in China is soaring.

Urban income jumped 14.4% for the first six months of this year. And even after accounting for inflation, the real net gains in urban incomes gained a huge 6.3%.

But it's not just the urban areas of China that are doing well.

Rural incomes are also soaring — exploding 19.8% higher in the first six months of 2008, from a year earlier. Net of inflation, rural incomes are up 10.3%!

Compare these figures to U.S. net income — adjusted for inflation it's MINUS .9%.

China's seasonally-adjusted Purchasing Managers' Index, jumped to 51.2 in September.

The index — which tracks changes in output, new orders, employment, inventories, and prices — is showing explosive manufacturing growth and indicates China's economy is weathering the global slowdown.

The output side of the index rose to 54.6 in September from 48.7 percent in August, while the index of new orders climbed to 51.3 from 46.

And in case you think China's exports are slowing, the index of export orders increased as well, to 48.8 from 48.4. Total overseas sales of Chinese goods are up 22.4% for the first eight months of the year.

Capital investment also continues to surge in China.

Fixed-asset investment growth rose a whopping 29.2% in July, while urban fixed-asset investment for the first half of the year increased 27%.

Property investment jumped 31%. Investment in farming, fishing and forestry sectors exploded higher by 61.9%. Total fixed asset investment in central provinces surged an amazing 35.3%!

I could keep going, but I think you get the picture. China's economy, despite what the naysayers are telling you, continues to crank ahead, firing away on eight cylinders.

So while the rest of the world is in the midst of a severe credit contraction, China's first-half GDP gained 10.1%, including outstanding rural growth of as much as 13% across six central provinces!

What about China's banks? Are they facing severe losses from what I call the "first world credit crisis?"

Hardly! At most, China's banks have about 3.7% of their total net worth invested outside of China. So even if all of that went up in smoke, it would hardly make a dent in China's banking capital.

Indeed, and ironically ...

Two more things to be on the lookout for with China ...

First, China will continue to buy up oil and lend underlying support to the oil market for years to come. It's the chief reason oil prices have remained above the $90 level, and China will be the chief reason we will eventually see $200-a-barrel oil.

Second, I have strong reason to believe that Beijing is soon going to substantially increase its gold reserves, which at 600 metric tons, are among the lowest in the world as a percent of the country's foreign exchange reserves.

Why? Beijing now has almost $2 TRILLION in reserves in its piggy bank. I have no doubt that central bankers at the People's Bank of China have held high level discussions with Treasury Secretary Henry Paulson.

And Chinese central bankers are prepared to buy oodles of the U.S. Treasury securities that Paulson is going to have to auction off to raise funds for the $700 billion plus U.S. bank bailout.

Put simply, China is going to use a large portion of its $2 trillion in reserves to help bail out the U.S.

>ICICI CLARIFICATION

Dear Customer,

We are aware that you are being misled by numerous malicious and baseless rumors. Many of these are via SMSes. Many of our customers have written in to us expressing solidarity and confidence in our relationship, and have mentioned they have dismissed these rumors, for which we are grateful. Still we know that these rumors may cause you distress and doubts. You are our valued customer and we would not like you to have any of these feelings. So we have now chosen to write to you directly to allay your concerns if any.

You would have seen the categorical endorsement of the soundness of Indian banking as well as ICICI Bank's sound financial health from the RBI and the Finance Minister. You would have also read about the unequivocal certificate of confidence reposed on us by S&P an independent rating agency of repute. We have categorically and in a transparent manner disclosed that

* We have ZERO exposure, directly or indirectly, to US sub-prime
*
We have 150% more capital than what Banks are required to have, and we are one of the highest capitalized banks in the country
* We have a AAA rating
* We have sound liquidity to meet your needs whenever you need and in what ever amounts you may need

Your bank has grown and achieved its status of pre-eminence due to the patronage and trust you have reposed thus far in us. We have made many an Indian smile with a house, car and every banking need dreamed of by Indians. I am sure nothing factually or otherwise has changed in our relationship that we should let baseless rumors cast doubts in your mind. We once again want to reaffirm to you that the bank you have built and assisted to grow to pre-eminence will be with you day and night. We take pride in serving you and being the bank of your first choice.

We desire and request the continuance of your unwavering trust and relationship. We promise to you that not only your deposits but all your interests are safe and secure with us. In case you need to reach us, kindly write to us at customer.care@icicibank.com.

Sincerely

V. Vaidyanathan
Executive Director
ICICI Bank Ltd

source:- ICICI customer care

>India readies big bailout measures

NEW DELHI: With liquidity becoming the immediate priority of the government, it is looking at a slew of measures to make more funds available to t
he credit market and there are strong indications that banks may be nudged to lend to companies with a good credit rating.

Official sources told TOI that a further cut in the cash reserve ratio (CRR), a reduction in interest rates and a 'ban' on reverse repo are some of the options being looked at to augment liquidity, while a ban on short selling is also being considered as a way of curbing the markets' bearish sentiments.

A proposal to dilute mark-to-market norms for banks is also being considered. Such a step, which has already been taken in the US, essentially allows banks to pretend that their assets have the same value at which they were bought rather than the current market value. Thus, they are able to avoid providing for any losses that would accrue if they valued them at current levels.

In addition to these measures, banks might be informally told that they should lend to companies with AAA ratings. This, because it would serve little purpose to restore liquidity to banks if they continued to remain wary of lending.

In the aftermath of the global financial meltdown, banks and financial institutions have turned ultra-conservative in lending. "What purpose would it serve if the banks remain tight-fisted," said a bank functionary monitoring the tight credit situation.

The cut in CRR would effectively mean that banks need to maintain a smaller proportion of their reserves with the RBI, thus releasing more funds to lend. Similarly, the central bank foregoing the option of reverse repo would mean that it would not soak up money from the banks, thereby leaving them more funds to loan.

While the two measures are aimed at boosting liquidity, the proposal to cut interest rates is aimed at making credit available to companies at reasonable rates. As inflation rose, the RBI had successively hiked interest rates and though price rise remains an important concern for a government faced with looming elections, the government now strongly favours restoring liquidity.

Some companies have been apprehensive about CRR cuts easing the liquidity situation but inadequate to fund expansion plans. They argued that this would curb the momentum of growth.

While liquidity remains the prime concern, the government clearly feels the need to address market volatility as well. Hence the idea of banning short selling. Short selling means an investors sells of shares he does not possess. It has already been banned in the US, Italy and China in an attempt to check market downslide.

Experts are divided on whether it is an effective measure. Those against it point out that the month-long ban in the US, which has just ended, failed to achieve anything. In fact, they argue, the stocks protected by the ban only become more volatile and some of their prices dropped more sharply than others.

>Will the G-7 Save the World?

Here is what the G-7 will try to do this weekend:

* Take decisive action and use all available tools to prevent "important" institutions from failing.

* Take steps to unfreeze credit and money markets and ensure that banks and other institutions have broad access to liquidity and funding.

* Ensure that banks and other major financial intermediaries can raise enough capital from public and private sources to re-establish confidence and kick start lending to individuals and businesses.

* Ensure that each country's deposit insurance programs are strong and consistent to assure depositors their money is safe.

* Take action to restart the secondary markets for mortgages and other securitized assets.

If they can do the above things, the crisis should start to end. How quickly it will end and what will be the lingering effects are any one's guess.

Regards
Rish