Investment bankers pay heavy price for China’s broking pie

Overseas banks keen for a piece of China’s red-hot brokerage sector will have to swallow some rich prices to buy into domestic securities firms, which are in no hurry to make deals as they focus on their own share listings. But for investment banks such as Citigroup and JPMorgan, a strategic partnership with a local securities house is a must in the long run, if they want to cash in on China’s rapidly growing stock markets, whose capitalisation has reached nearly 20 trillion yuan ($2.65 trillion), exceeding Hong Kong.

Besides Citi and JPMorgan, banks including HSBC and Credit Suisse are shopping for Chinese partners. Even Morgan Stanley, which launched China’s first such investment banking joint venture in 1995, is eyeing its second deal, banking sources said. “You cannot ignore China if you want to explore new profit streams in emerging markets,” said Philip Leung, a Shanghai-based partner for Ernst & Young.

Mainland China is on track to overtake Hong Kong, as Asia’s biggest centre for initial public offerings this year. Analysts have said, they expected fund-raising by Chinese firms via domestic IPOs to hit 400 billion yuan this year, up from 165 billion yuan in 2006 as Beijing encourages more Hong Kong-listed firms to sell shares at home. Most overseas banks will miss out on the current IPO boom — except for Goldman Sachs, UBS and Morgan Stanley, which established partnerships in China when the industry was still mired in a severe downturn.

Read more in The Economic Times

India 4th largest market for Oracle in APAC

India is the fourth largest market for Oracle in the APAC (excluding Japan) region, according to its third-quarter results for the region, while China is the first followed by South Korea and Australia.

Oracle equates the market size in tandem with the nation's economy. So while Oracle has been in China for just about 17 years and in India for 19 years, China has been growing at approximately 9% per year. However, within two years, India has jumped to fourth position from fifth, while 5-6 years back it was in the 10th position.

Though the company denied giving any exact numbers, it registered 89% growth from its new license revenues in Asia Pacific & Japan whereas the database and middleware new license revenues went up 26% in Q3FY07.

In the past few years, Oracle has made 30 acquisitions in view with its focus on vertical markets. "Acquisitions in APAC region in the financial services, retail, telecom and utilities is not off-limits for Oracle," said Brian Mitchell, senior vice president, Asia Pacific while announcing Oracle’s third quarter results for APAC (Q3FY07).

On the Indian operations side, the company has 19,000 employees, a majority of which are in its development centre. This quarter also saw Oracle completing its first phase of expansion into 17 cities of India, which brought the total number to 23. Apart from the focus on education, healthcare, construction and real estate verticals the company increased its focus on small and medium enterprises (SME).

With 4,500 customers already in the SME segment, it increased its momentum by launching Oracle Accelerate Programme. To tap into the growing SME segment Oracle recently rolled out its CRM (customer relationship management) on-demand platform. According to Krishan Dhawan, managing director, Oracle India, though the software-as-a-services concept is yet to catch up with the Indian organisation CRM is one application that is easy to deploy and manage.

While speaking on its Q3FY07 performance Dhawan pointed out that the company has continued its momentum in acquiring customers and entered some new industry areas including cement, paints, construction, real estate, retail, education and healthcare. Some of the wins of the company are-- Godfrey Philips, LG Electronics, Gujarat Electricity Board, ICICI Prudential life Insurance Company, Shree Cement, and Tube Investments of India among the others.

Apart from this, Oracle is also planning to tap into the growing utilities segment and the media sector. "The Indian media sector has not been technology intensive and hence is a virgin territory for Oracle. Similarly with the SPL acquisition we are now in a better position to offer solution to the utilities segment," remarked Dhawan. Other than Malyalam Manorama and Amar Bazaar Patrika Oracle recently had a win in the media segment with Amar Ujala Publications.

With the Indian retail segment hotting up, Dhawan felt that the coming years will see an increase uptake of IT in this segment. Oracle plans to focus on the retail segment through its recently acquired company Retek. It has already set up a centre of excellence (COE) at Bangalore. The centre with 300 people will help retailers who want to increase their profitability through IT deployment.

China hikes rates to slow inflation, investment

China raised interest rates for the third time in 11 months to curb inflation and asset bubbles in the world's fastest-growing economy, according to a report on the website of Bloomberg.

The one-year benchmark lending rate will be raised to 6.39% from 6.12%, starting tomorrow, the Beijing-based People's Bank of China said today on its website. The one-year deposit rate will be increased to 2.79% from 2.52%. A central bank spokesman confirmed the increases, the report added.

Central bank Governor Zhou Xiaochuan is concerned that cash from a record trade surplus is stoking excess investment, raising the risk of accelerating inflation and boom-and-bust cycles in asset prices. Premier Wen Jiabao said yesterday the nation's economic expansion is unstable and environmentally unsustainable, the report said.