Wednesday, April 23, 2008

Eastern economies decoupling tosh

Satyam profit growth disappoints

All top IT Indian companies failed to meet forecast. These are very big companies with minimum of 50,000 employees and also registered in NYSE and a part of NASDAQ. All the tosh about decoupling of the US economy is a big tosh. Ask one question where does India and China sell to...US. And if US stops buying within few months Indians and Chinese will stop buying from us in Europe. And the circle continues.

Posted by deepak @ 11:03 PM (679 views)
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4 thoughts on “Eastern economies decoupling tosh

  • cannot China lend to its own population or other Asian countries to buy its products instead?

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  • “cannot China lend to its own population or other Asian countries to buy its products instead?”

    whiteknight, in a word: yes. For sure Asia will suffer some initial pain as the US crashes, but eventually they will realise that better markets are closer to home – much closer.

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  • The last decade has seen the entire world boom in unison. Every country bar Germany and Japan has seen dramatic house prices rises. Most world stockmarkets were up strongly, at least until 2007. This means it’s equally possible for the entire world to bust in unison too.

    A synchronised slowdown seems quite likely. China and India will fall too; but they are very different countries. China’s shiny new infrastructure and consequent standard of living increases will not be reversed overnight. On the downside, China’s banks have lent too much money to owners of new factories. As exports dip, those factories will be in trouble and the banks will be saddled with commercial subprime debt.
    India has greater risks: it failed to invest in infrastructure and there are greater issues with poverty, demographics, and overcrowding than in China. It’s telling that the boom sectors in India were IT and call-centres – neither of which requires much in the way of new roads, railways, or ports. Overall, China is in a stronger position than India.

    @whiteknight – “cannot China lend to its own….” – Yes they can, but they won’t be so keen to lend after seeing what happened to their loans in America. Lenders are once bitten twice shy. The world is going through a deleveraging process, i.e. an unwinding of debts. The only buyers left will be the cash-rich middle-eastern countries, they spend their oil money largely on social programmes which keep their people in relative comfort. This means buying lots of basics like clothes and household appliances – the things which China makes in abundance.

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  • waiting for the crash says:

    I have worked with a lot of the Indian IT vendors and 2 things Indian IT companies mention.

    The rising cost of IT skills in India of 15% this year and its very diificult to recruit skilled resources in India. Don’t believe the talk of 1 miilion graduates a year. Most do not have the attributes to work in a western style organisation.

    The rise in the value of the rupee is really causing concerns.

    My view is that China and India can now produce the same goods as the west and exchange rates should reflect this. Falling dollar/pound. Rising Yuan and Rupee. Very soon exchange rate advantage of moving work to India or China. Given this 2/3 years before the work outsourced gets moved elsewhere or back to the UK and US.

    The Phillipines is now seen as the next location for cheap skilled labour.

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