Financial entities should know the ‘character’ of their client

All you wanted to know about PNs

A search for PN on http://www.abbreviations.com/ yields 37 results, beginning with ‘pain’ (physiology). The rest include part number, Pitcairn Island, planetary nebulae, pseudo noise, peripheral neuropathy, practical nurse, proton neutron, portable network, primitive notion, and project nothing.

“Participatory note or PN was a fairly unknown term to most people, including those who invested in the stock market,” observes Mr Sunil Rongala , a PhD in economics, in a discussion with Business Line on the currently hot topic.

It has been about a week since the market regulator SEBI (Securities and Exchange Board of India) decided to crack down on PNs. And suddenly we realised the power that PNs have over the Indian stock market. “They (the holders of PNs) decided to go in for a mass sell-off after SEBI decided to impose sanctions on them,” recounts Mr Rongala.

Excerpts from an e-mail interview, in which he dwells upon what it is about PNs that has inspired so much fear and loathing.

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The two causes of market crisis

Market crises have a life of their own, separate from value

“While it is not strictly true that I caused the two great financial crises of the late twentieth century — the 1987 stock market crash and the Long-Term Capital Management (LTCM) hedge fund debacle 11 years later — let’s just say I was in the vicinity.”
With these solemn lines begins A Demon of Our Own Design – Markets, Hedge Funds and the Perils of Financial Innovation (Wiley, 2007), by Mr Richard Bookstaber.
“If Wall Street is the economy’s powerhouse, I was definitely one of the guys fiddling with the controls. My actions seemed insignificant at the time, and certainly the consequences were unintended…”
Arguing that market crises — like what the US has seen with the subprime mess — are an inevitable result of the market’s penchant for leverage and its abuse of derivatives and other innovative securities, the Demon created a stir on Wall Street

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Important ways to invest in Brazil

On how to set up business in Brazil

With qualified professional advice, a well-prepared market plann and a good tax strategy, investments in Brazil can be rewarding, say Mr Gilberto Ayres Moreira and Mr Fabio Appendino , Partner and Associate attorney-at-law, respectively, in Gaia, Silva, Rolim & Associados ( http://www.gaiasilvarolim.com.br/), a law firm based in Brazil.

The firm is active in several areas of corporate legal services, “such as environmental protection, restraint of trade, mining, shipping, aviation, oil and gas, finance, insurance, communications and telecommunications regulations.” Apart from a team of more than one hundred professionals, in key Brazilian cities like São Paulo, Rio de Janeiro, Belo Horizonte, Curitiba and Brasília, the firm also draws on the support of correspondents in many foreign countries.

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Most of our real estate companies are still closely held or family run

Real estate developers looking at newer financing options

Big residential townships, SEZs (special economic zones) and mega retail malls are prominent among the recent trends in the real estate landscape. To cope with these mega developments, the developers are looking at various options of financing, says Mr R. Venkatesh, Regional Director, Transaction Advisory Services, Ernst & Young, Chennai.

"While debt funding, private equity (PE), IPO (initial public offer) route shall continue to happen, though at realistic and reasonable valuations, new avenues such as listing of REITs (real estate investment trusts) at overseas exchanges are expected to attract developers' attention to plan their fund raising exercise," he adds, during an email interaction with Business Line.

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