高盛高华-GS INDIA LIMITATIONS ON ODIS

October 17, 2007           10页
Asia Pacific: Portfolio Strategy
India: Limitations on ODIs
Incremental negative; maintain positive stance

 

SEBI proposes limiting P-notes
The Securities and Exchange Board of India is proposing to limit or curtail
offshore derivative instruments, which include participatory notes that are
an important mode of foreign investor access to local equities.
Worst case foreign selling: about US$47bn
We estimate the worst case net foreign selling at US$47bn or about 4% of
market cap. However, we think actual net selling may be much less than
this and will likely transpire over an extended period.
Incremental negative; retain positive strategic stance
This announcement is an incrementally negative liquidity event, because it
limits new inflows from foreign investors without FII status and may
encourage foreign selling. However, we maintain our positive strategic
stance based on strong macro and corporate earnings growth and ample
domestic liquidity. Valuations are high, but are likely to remain so given
growth prospects.
Implementation ideas
We highlight our analysts’ Buy-rated stocks and a zero-cost upside option
strategy.