HDFC Down 7% - No Surprise

HDFC Bank (HDB) was down 7% Thursday on earnings (slash) oil stocks are down (slash) every emerging market stock trades together with oil. Earnings up, bad debt up - no surprises. Chart has taken a turn for the worse, but essentially this is a dry bulk shipper in drag as is every emerging market stock. They all trade in "one big horde".

Maybe after all is said and done HDFC Bank can start opening banks in the U.S. - we're going to need a few. (ICICI bank (IBN) already has opened branches in the U.S.)

• MUMBAI, Jan 14 (Reuters) - HDFC Bank, India's second-largest private sector lender, beat forecasts with a 45 percent jump in quarterly profit on Wednesday, but its shares fell as much as 2.4 percent on rising bad debts. Banks in India are grappling with rising defaults by customers, caused by high borrowing costs and a slowing economy that has hit some jobs.
• New York-listed HDFC Bank (nyse: HDB - news - people ) said its gross non-performing loans [NPL] rose to 19.11 billion rupees ($392 million) in the December quarter, up 14 percent from July-September. 'In the kind of environment we are going through, NPL are expected to go up,' Paresh Sukthankar, executive director said on television news channel CNBC-TV18. 'With adequate provisioning we are not too concerned by the slight rise.'
• HDFC Bank, which has posted a 30 percent or more growth in net profit for 27 consecutive quarters, said net profit in its fiscal third quarter ended Dec. 31 rose to 6.22 billion rupees from 4.29 billion rupees a year earlier. That beat analyst expectations for a net profit of 5.9 billion rupees in a Reuters poll.
• Net interest income, the difference between interest earned and interest paid, climbed 37.8 percent to 19.8 billion rupees.
• 'It was a clockwork kind of results,' said Angel Broking banking analyst Vaibhav Agarwal. 'Everything was in-line or above except NPL deterioration which is something one needs to monitor despite the trying environment.'
• Its capital adequacy ratio rose to 13.7 percent from 11.4 percent at end-September, after the bank raised 17.3 billion rupees in bonds in the December quarter.

In a relative world, these are quite good results but I cut back a bit as the stock broke support (but it's still a >1% stake). I'll look to add if it continues down ($50-$55 looks appealing for a second stake). But as I said above - overlap all these foreign emerging market names with a typical oil stock (or commodity) and the correlation is almost 1:1. Quite sad. We'll just call it HDFC Oil or HDFC Dry Bulk Shipping or HDFC Iron. All the same to HAL9000 - if oil is up, that means global growth is back - if its not all emerging markets are dying... 1st grade logic.

p.s. speaking of dry bulk shippers, DryShips (DRYS) and TBS International (TBSI) are right back at key support - ready to RUN the second this market rebounds. Gooooo Global Growth.

Disclosure: Long HDFC Bank in fund; no personal position

Comments

[keithpiccir...:]

So you got stopped out, or took the hit and would add more?
Does the losers average losers premise apply here? All of the sector has been getting whacked and is a follower, not a leader off poor earnings and debt levels.
I'm sad but not mad.
This morning is looking up pretty big, C has broken 2 of its eggs and will try to reorganize to make an edible omelet.
Watch for the profit taking again on what should be another volatile day.
It's going to take a while longer for this global growth story, the dbi is turning up ever so slowly, but I am reading 6 months for both China and us to get going with infrastructure.

Jan 16 08:11 AM

[TraderMark:]

Still in Keith, I cut back some when it fell through support but I want to hold this longer term. I was hoping to see $50-$55 yesterday but did not. Basically this trades with all other emerging stocks. One big group!

Jan 16 08:19 AM

[keithpiccir...:]

Just sold half my position at the opening for $65.70 on the C / BAC bounce.
Thanks for the lead.
Now I have to "shore up" on that EXM position...

Jan 16 09:54 AM

[ViewFar:]

One of the comments I've heard is that if oil is up, demand is up therefore global growth is occurring. It is pretty clear that there has been demand destruction due to the recession in the US, and emerging markets are feeling the pain as well. But to set up the next big rally, we needed oil to get back to the 40s, so that emerging markets can start building up again... so oil being down is a good thing for emerging markets as are a floor on foreclosures in the US because that will help the Housing ATM to tick again...The correlation between foreign emerging companies and oil will cease hopefully soon.

Jan 16 12:56 PM

[TraderMark:]

ViewFar,

Gosh I hope so - this is the most annoying connection of all time. That said, emerging markets will be weaker than the consensus believes in my opinion. China might be 0-2%ish growth by end of 2009. Keeping in mind 5% for them is -5% for us.

Jan 16 01:26 PM