Sebi announces guidelines for shelf disclosure documents The shelf disclosure documents would have a validity of 180 days, according to Sebi notification on October 12. New Delhi, Oct 15: Market regulator Securities and Exchange Board of India (Sebi) has introduced guidelines which allow companies to file a document for listing of debt securities issued through private placement. The shelf disclosure documents would have a validity of 180 days, according to Sebi notification on October 12. In its board meeting in August, the Sebi had said that a clause for a shelf placement document with a validity of 180 days would be provided for frequent issues through private placement. As per the norms, "an issuer making a private placement of debt securities and seeking listing thereof on a recognised stock exchange may file a Shelf Disclosure Document containing disclosures..." the Sebi said. Further, the regulator said that an issuer filing a shelf disclosure document would not be "required to file disclosure document, while making subsequent private placement of debt securities for a period of 180 days from the date of filing of the shelf disclosure document". The regulations state that the companies while making private placement under shelf disclosure document would have to disclose documents such as the memorandum and articles of association for the allotment of the debt securities and copy of last three years audited annual reports. Besides, an issuer needs to file a copy of the Board authorising the borrowing and list of authorised signatories. The issuer has to submit disclosures to the Debenture Trustee in electronic form at the time of allotment of the debt securities. The Sebi said the company seeking to list debt securities via private placement needs to file with the concerned stock exchange "updated disclosure document with respect to each tranche, containing details of the private placement and material changes, if any, in the information provided in Shelf Disclosure Document." Rs 71 lakh too small for a central minister, says Beni; defends Khurshid Union Steel Minister, Beni Prasad Verma New Delhi, Oct 15: Seeking to defend his colleague, the Union Steel Minister, Beni Prasad Verma today put his foot in his mouth saying a man like Salman Khurshid will not do any wrong for Rs 71 lakh, which is a "very small amount" for a central minister. "Salman Khursid is a responsible person. He is a central minister. He was a central minister earlier as well. When he is saying there is no scam, he should be believed...I don't think a person like Khurshid will do anything for an amount like Rs 71 lakh. It is a very small amount for a central minister," he said here. Verma was commenting on the alleged misappropriation of funds by a trust run by Khurshid and his wife. In a press conference yesterday, Khurshid had rejected the allegation and had offered himself to any probe. "If it would have been Rs 71 crore, even I would have been serious," Verma said adding Khurshid should not resign from his current position. Verma trained his guns on the activist-turned-politician Arvind Kejriwal who has been demanding the resignation of Khurshid on the issue. "Kejriwal is going to launch a party. I have all the best wishes for him. India has a multi-party system and one more will come. It's good. But, I have a piece of advice for him: Don't bark day in day out, try sometimes to roar like a tiger. Those who always bark are of no value," Verma said. Can Kejriwal deliver the goods? Kejriwal & Co are benefiting from the groundswell of public anger against corrupt politicians. — V. Sudershan Even if India Against Corruption makes some electoral gains on the anti-corruption plank, what is the guarantee that Kejriwal and his men will not be sucked into the system? October 15, 2012: Even with Anna Hazare nowhere in the picture, Arvind Kejriwal of India Against Corruption is going great guns. First, he attacked the Congress chief Sonia Gandhi's son-in-law Robert Vadra over an issue that had been doing the rounds in Delhi's grapevine for two years and written about a year ago. Now he is training his guns on Law Minister Salman Khurshid, who, incidentally, has been the most vociferous in defending l'affaire DLF-Vadra, over the alleged misappropriation of funds in the Dr Zakir Hussain Memorial Turst. The Trust gives out appliances to the physically challenged and Kejriwal picked up the story broadcast by a TV channel. The allegations are grave indeed, even though the amount involved, about Rs 71.5 lakh, is rather small. Of course, not for Mango people like you and me, but in comparison to the hundreds of crores our politicians and their relatives, are notorious for siphoning off. Khurshid and Louise, his wife, who is the project director of the Trust, have put forth a spirited rebuttal and heated words are being exchanged by both sides. Khurshid says he doesn't respond to allegations from "people on the streets" and Kejriwal says if the Prime Minister and the Congress Party don't ensure Khurshid's resignation, they will get a fitting reply in the 2014 elections when Khurshid will have to contest the election against a physically challenged person. Jury out on Kejriwal Forget the Khurshid saga, the jury is still out on Kejriwal himself. The cheering he is getting at the moment is because the mango people of India are fed up of the shenanigans and mega corruption of our politicians. By the way, I am beginning to like these words, because mango is not only an exotic but also my favourite fruit, and I'd rather be called a 'mango person' than the rather depressing 'aam aadmi', which doesn't do justice to my gender. While his sharp attacks on the people in power make much easier the job of 24x7 channels thirsty for news, he doesn't inspire spontaneous trust that a comparatively simple-minded Anna Hazare did. And then acting as jury and judge before a trial can be launched is not only a dangerous, but also an unfair thing to do. For example, on Monday, he dismissed the inquiry ordered by the Akhilesh Yadav-led government into the allegation against the Trust run by the Khurshids. "There is enough evidence, but who will conduct an investigation. Akhilesh Yadav? A case of disproportionate assets is pending against his father Mulayam Singh in Supreme Court. The Law Minister will appoint a government lawyer against Mulayam. Khurshid will save Mulayam Singh and Mulayam's son will save Khurshid." Acid test Rubbishing the system, however inadequate or warped, might be okay for a rebel, an activist, a rabble-rouser or cynical journalists. But not for somebody who aspires to come to power to remedy the system by contesting elections. Even if his party makes some electoral gains in the next election on the extremely potent anti-corruption plank, what is the guarantee that Kejriwal and his men will not be sucked into the system? From all available accounts, the pot of gold at the other end of political power is indeed a mammoth one. Even if you give the extremely righteous-sounding Kejriwal the benefit of doubt, can he offer an assurance that even in the event of an honest man heading the government, as in the present scenario, whatever power he manages to get will be dispensed by a team that is entirely made up of honest people? I will wait before I hail Kejriwal a hero; I don't like his swagger, arrogance and contempt for another point of view. Malala's courage So, I'd rather write about the extraordinary courage of the feisty Pakistani girl Malala who dared to defy the Taliban and had them launching such a dastardly attack on her. Malala, who had been defying the Taliban and championing the girl child's right to education, was shot in the head by the Taliban for promoting 'western values'. Her best friend Shazia Razman, who was in the same bus, and was also shot in the shoulder and hand in the same gruesome attack, has also vowed to defy the Taliban and return to school with her friend Malala. With the entire civil society in Pakistan, its Government and other outraged sections such as the clergy condemning the Taliban for their shameful brutality, Malala has now been flown to a British hospital for specialised care for her still critical and fragile condition. According to initial reports, she is going to need prolonged neurological rehabilitation care. Malala, who belongs to the infamous Swat Valley of Pakistan where girls' schools were destroyed by the Taliban some years ago, has been defying the Taliban and attending secret classes from 2009. She has also been writing an anonymous blog for the BBC championing girl's education. The kind of courage this teenager, the daughter of a schoolteacher, has displayed is mind-boggling and goes beyond the realm of the courage and focus required for political activism. Very few adult women have dared to defy the Taliban in either Afghanistan or Pakistan. With the Taliban swearing to attack her again, it is doubtful she'll be able to return to Pakistan. While girls in India do not have to put their lives on the line for the right to attend school, on the issue of women's rights and violence against women, we have little to cheer about. Fast on the heels of the series of rapes in Haryana came the shocking news of the Haryana Panchayat khaps' bizarre recommendation that the age of marriage of girls should be reduced to save them from rape. And on Monday, India woke up to the shocking news of the gang-rape of a 21-year-old student of the National Law School in Bangalore, in the adjacent Bangalore University campus. While the Vadras, Khurshids and Kejriwals slug it out under the glare of continuing media coverage, is the media, or activists, doing enough to highlight and combat such depravity and degradation in our society, is the moot question. 'We are in for another deflation shock … So actually it's time to own cash' | ||
Russell Napier is among the world's foremost financial minds and author of the bestselling Anatomy of the Bear - Lessons from Wall Street's Four Great Bottoms. The consultant for CLSA Asia- Pacific Markets sees another deflationary shock coming globally, the markets plunging – the S&P 500 to 400 points. "In March 2009, it got to 666 points. It got somewhere there but it did not get to 400. So I am happy to stick with the number 400 and tell everybody who reads this interview to work out what that means for the rest of the world," he told Vivek Kaul in an exhaustive, freewheeling interview. Excerpts: | ||
Vivek Kaul | ||
How do you see things in Europe right now? The way I try to look at these economies is really to look at the financial conditions, the banking systems, credit availability etc. Those numbers are about bad for Europe. If you look at bank lending, it is contracting to the private sector. The money they are lending is going to the governments. The key issue really is lack of credit to the private sector. There is more and more evidence that it is actually due to lack of demand, and that just makes it just a more difficult problem to solve. Why is that? When your banking system is incapable of providing credit there are lots of things you can do to help it. But when people fundamentally don't want to borrow and corporates don't want to borrow then it's a different situation. What would normally happen is quantitative easing and trying to keep money growing at a time when bank credit is contracting. But for political reasons that is difficult in Europe. So Europe is facing a very difficult and nasty economic downturn, and things are going to get significantly worse. There is a chance that somebody is going to have to leave the euro as early as next year. All seventeen members have to ratify the fiscal compact which is a major constitutional change. Still quite a few of them haven't ratified it and as early as the first quarter next year some country may be unable to ratify. At that stage we would have a crisis because the country that fails to ratify wouldn't be able to stay in the euro. So we are all rolling into a European crisis next year. So what can keep the euro going? If they become a Federal States of Europe. Can they? No, that's highly unlikely. All seventeen members have to make the same constitutional changes and the same surrenders of sovereignty. And this is not an economic call. This is a political and social call. It is highly unlikely they will end up surrendering their sovereignty to a Federal government of Europe. How do you see the things in the United States? There is a much more mixed picture coming out of the United States of America. Bank credit is expanding and private sector is borrowing. What is interesting is that small and medium enterprises have been borrowing and we have been seeing a growth there for over a year now. That is normally a very good sign of things because those are normally the people who create jobs. What about other borrowing? Banks balance sheets have premium components to them in terms of credit. And one is credit to small and medium enterprises. The other is mortgage credit. There is no sign of growth of mortgage credit. The other is consumer credit. There is no sign of growth in consumer credit either. At this stage one can be more optimistic about the US simply because small and medium enterprises are borrowing. What about the long-term view? I have a longer term problem with the US which isn't going to show up quarter to quarter in the growth numbers but it is structurally the most important thing that is going on there. The rate at which foreign central bankers, particularly the Chinese, are accumulating treasuries has dropped very dramatically. The Chinese are not buying and actually seem to be selling treasuries. Along with the Federal Reserve, they are the biggest owners of treasuries. They are neck and neck. When the biggest owner of treasuries is effectively a forced seller, it has to make you cautious on America despite the shorter term positive data coming out. What will be the impact of this? If the Chinese are not going to be funding the American government, it's more of an onus on the American savers to fund the American government. With savings being a reasonably finite number there is less to lend to the private sector. I see us already in a larger picture trend of America where the savings of America will be increasingly be funding the American government and not the private sector. At the minute that is not having any negative impact or particularly negative impact on private sector credit availability. But ultimately it will. That being the case, are Americans saving enough to bankroll the American treasury? No. They are not saving enough to bankroll the American treasury and the private sector. You have to put them together. But if it comes to a push on whether the government is funded or the private sector is — even in America, which is ideologically more to the right, more free market than elsewhere — you will find savings are forced towards the government and away from the private sector. So how do you expect the US to finance its unfunded liabilities such as social security and medicare over the years? One estimate even puts the unfunded liabilities at $222 trillion. In the short term, as long as they can keep borrowing at this level, they will probably keep borrowing at this level. There is a basic rule. A government that can borrow at 2% will borrow at 2%. That's an entirely and completely unsustainable path for the American government. But it is just so easy to borrow at 2% that they will continue to do that. So that reality for America will not dawn for unfunded liabilities until it has to borrow at a more realistic interest rate, which is inevitable. The numbers you point out are absolutely huge but it's becoming incredibly difficult to say when that will happen, when they will have to live with proper real interest rates. It could be several years. It could be several days. But eventually, of course, they will have to do that. And there is a whole host of solutions for the US government. Like what? There is a thing called financial repression which is effectively forcing people to lend money to the US government or forcing financial institutions to lend money to the US government. That is the path to travel for all the developed world countries. But there will have to be a renegotiation of benefits to the baby boomer generation. Every society has to choose where the burden has to fall. Does it fall on taxpayers? Does it fall on savers? Or does it fall on people who are recipients of this dole of money from the government. It will be a mix of all of these. So at some stage we will have to see a major renegotiation of the obligations that were signed for the baby boom generation in the 1960s. But it could be many years away. I have to stress that this will be political dynamite. No society wants to withdraw benefits from its retired or elderly population. But the entire western world faces the reality that is exactly what it will have to do. Do you see what they call the American Dream changing? It has massively changed over the last two decades already. American people sustained by going from one person working to two persons working and then adding significant leverage to it. So the dream has been extended through those two mechanisms and clearly it is not going to go much further from here. It's a much harder slog from here given excessive levels of debt on the starting position. It's not only an American phenomenon but it's a developed world phenomenon. It's easy to be negative but the only possible positive way out of this is some technological innovation which gives us some very high levels of no inflationary growth and very high levels of productivity. Could you elaborate on that? If you read financial history sometimes these things just come along. They surprise everybody. One thing that is that could do it is cheap energy. Shale oil and shale gas are the main places we would be looking at for cheap energy. But it is worth stressing that we are going to need a very high level of real economic growth. So in America it will have to be in excess of 4% or maybe as high a 4.5%. That's the sort of real economic growth that would help countries grow their way out of the debt problem and meet most of the potential liabilities going forward. One shouldn't rule out that we have that wonderful outcome but it still does seem like very unlikely. Talking about technological innovation, can you give me some examples from the past? Yeah, absolutely. They have really been energy-related. In the United Kingdom, the canals were such a revolution that the transportation cost collapsed. The price of coal in some major cities came down by 60-70% due to the introduction of canals. Obviously, when energy prices fall by that much you get a productivity revolution. The railways had several impacts. Electricity, which we didn't really get going into the industrial process until the start of the last century, had a major impact. The automobile had a major impact. These are the types of major technological innovations which can change the world. When you can give the world cheap energy then that's when you can begin to talk about much higher levels of growth. It is almost impossible to tell where these things come from but one that is sort on the horizon is shale oil and shale gas and potentially what that can do. But I want to stress it is going to have to produce levels of real economic activity in America, which haven't been seen for a very, very long period of time, perhaps ever. Do you see the American government defaulting on all the debt it has accumulated? They will not default in the technical term of the word, which means refusing to pay back in dollars the debt in principle. But we are already in a situation where the Federal Reserve has intervened in the treasury market to hold the treasury yield below inflation. Now that is not a default. But if you own treasuries and the yield is below the rate of inflation then the real value of your investment is declining in dollar terms. In terms of you and I investing in that treasury market it means that we are losing capital and therefore I would call this a democratic default. The second democratic default which I will come to America and the whole developed world will eventually be restrictions of free movement of capital. We are heading towards a world of controls and capital restrictions, which was a norm from 1945 to 1980-81. Do you see them printing money to repay all the accumulated debt? The answer is that partially they are already doing it. Quantitative easing is a form of printing money. Therefore you can say that is a process that is underway. So I have no doubts whatsoever that the Americans will be printing money to satisfy their foreign creditors. Does that mean a hyperinflation kind of scenario? No. It is always assumed that if there is a dramatic sale of the treasuries by the Chinese, the Federal Reserve will simply buy all those treasuries and simply create lots of money in the process. If that mechanism happened you would end up with hyperinflation. But it's worth remembering that there is a technical definition of hyperinflation and that is a rate of inflation of 50% per month or more. So it's a very high number. Sometimes people think that 20% per annum is hyperinflation but its 50% per month technically. The Federal Reserve is not stupid enough to do that. It would not simply print all the money it could to do to repay its creditors. So what will happen? What will happen is that there will be some money printing and, as I stressed, inflation will be higher than the yield on treasuries. But Plan B is financial repression which is to effectively force the financial institutions and the people of America to buy the treasuries. Now this does not involve printing of money. I am sure that if the Federal Reserve sees inflation climbing to anywhere near 10%, it would go to the government and say that we can't continue to print money to buy these treasuries and we need to force financial institutions and people to buy these treasuries. In India, banks have to compulsorily buy government debt. We can force banks and government companies to have a minimum amount of their assets in government debt. The road to hyperinflation is well known to central bankers. It has never ended well even though it can wipe out your debt very, very rapidly indeed. Nevertheless, the political and social implications of that are truly dire. It tends to throw up despots and destroy democracies. Financial repression, if you are a saver, is terrible, but is much less painful than hyperinflation. But what about the Western world practising austerity to repay its debt? True austerity is when you simply closed down on government spending and accepted the economic consequences of that and still kept taking in tax revenues. But that's a politically painful way of doing it. True austerity is highly unlikely. What Europe has is nothing like sufficient austerity to take them to a situation where they can repay government debt. So the only way out is repression, which is simply funding the government by forcing the people and financial institutions to buy government securities. That's a very painful thing if you are a saver, but so much better than austerity, default and hyperinflation. It is ultimately the most acceptable form of getting out of this problem. Even with repression we are talking about a couple of decades before we could gain levels of gearing in the developed world drawn towards normal levels. Do you see the paper money system surviving? Yes I do see the paper money system surviving. To say that it doesn't survive means we replace it with something that is based or anchored on metal. But the history of the paper currency system or the fiat currency system is really the history of democracy. Within the metal currency there was very limited ability for the elected governments to manipulate that currency. And I know this is why people with savings and people with money like the gold standard. They like it because it reduces the ability of politicians to play around with the quantity of money. But we have to remember that most people don't have savings. They don't have capital. And that's why we got the paper currency in the first place. It was to allow the democracies. Democracy will always turn towards paper currency and unless you see the destruction of democracy in the developed world and I do not see that we will stay with paper currencies and not return to metallic currencies or metallic based currencies. What about gold? Gold is never easy to predict and it is particularly difficult at the moment. In the long-run view, which I have just stated — that repression is ultimately the best choice for democracies — gold is the best asset class. It is the standout asset class. In a world of negative real interest rates, prolonged for some decades, gold does really well. And in a world where tax rates are going up, where the government needs to get more private wealth under its own control, gold, being small, portable and hideable, becomes an asset of choice. So my long-term prognosis for gold remains very good. In the short run, I am concerned that if we get another economic setback from here and we see growth coming down from here, the price of gold may come down. But I would say any decline in the price of gold is a wonderful opportunity to buy some more and for the long term holder gold remains essential. What are the other asset classes you would be bullish on? I tend to believe that we are in for another deflation shock. The Asian crisis of 1998 was a deflation shock and we had one in 2002 when the American economy slowed and Ben Bernanke had to make his helicopter speech. We had another one post Lehman Brothers. So what you would want to look at is what asset classes did well during those periods? And really very little does well when we have deflation shocks. Whether deflation turns up or not, the shock is very bad for pro-growth assets. So actually it's time to own cash. Cash has historically been a good preserver of health during periods of deflation. It is worth buying debt of some of the governments that don't have very much debt. There are some countries out there with small amount of government debts and they are small such as Singapore and Norway. So I would recommend cash and very small holding in government debt in markets where the governments don't have very much debt. Also when markets have come down a bit we are looking to buy equities and we are looking to buy gold. By when do you see this deflationary shock coming? Well its coming. It is very rare for these things to erupt in the morning. Lehman Brothers was the exception -- a bank with $600 billion of liabilities going bust suddenly threatens the stability of the entire financial system. Sometimes it happens like that but rarely. It happened like that in the 1930s with the bankruptcy of Creditanstalt (an Austrian bank that went belly-up in 1931 and started a chain of bankruptcies). Occasionally, it can be a major event. But it can be just like it was in 2003 — just slower and slower growth. The one red flag which could suddenly jump and signal deflation is if someone leaves the euro because clearly if it's a major currency leaving the euro, they will be re-denominating their debts in their domestic currency which is tantamount to a large default on the global banking system. That is a small chance of that early next year. What if the country is Greece? Frankly Greece defaulting on its debts isn't going to make much difference to a banking system but makes a big difference to the IMF and the government. But more likely it's just going to be slower and slower growth coming forward, particularly in China. The world has bet a lot on Chinese growth. The more the growth slows in China and capital flows out of China, the more the world begins to realise that it's China which has been the source of global growth and global inflation, and if that's not there we are more likely to get deflation. So that's the more likely scenario rather than a Lehman Brothers-style event. So, you are basically saying that the high Chinese growth rates will now be a thing of the past? Yes, unless they do some major reforms. And in my opinion that they need to do is reforms which will encourage private Chinese capital to remain in China and invest in China. There is very limited reason for Chinese private capital to remain in China now, because the returns are so poor. So anything they could do to open up the financial system for private sector investment and competition would be good. And more importantly, allow the private sector to take over some state-owned enterprises and restructure them. If they are prepared to make that giant leap in terms of reforms. then there is every prospect that keep they will keep capital in China. The good thing is we are getting a new administration. The bad thing is it is very difficult to predict what a new Chinese administration stands for. But soon enough we will know and if they come up with some policies like this, then there are many reasons to be more optimistic about the outlook for global growth. By what levels do you see the stock markets falling in the coming deflationary shock? I will just go back to my book Anatomy of the Bear, which was published in 2005 and in the book I forecasted that the equity market, the S&P 500 (an American stock market index constructed from the stock prices of the top 500 publicly traded companies) will fall to 400 points (On Friday the S&P 500 closed at 1,428.5 points). As you know, in March 2009 it got to 666 points. It got somewhere there but it did not get to 400. So I am happy to stick with the number of 400 and then just tell everybody else who sort of reads this interview to work out what that means for the rest of the world. Interviewer Kaul is a writer. Email: vivek.kaul@gmail.com |
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