India’s largest-ever IPO went to market this week, a US$2.4 billion float by real estate firm DLF.
The company received bids worth three times the total shares available. Later this month, state bank ICICI plans to raise US$5 billion in offerings in India and the US.
Those of us who follow the stock markets in Shanghai and Hong Kong may not be particularly blown away by a subscription that is three times oversubscribed. It’s par for the course when trading in these parts. But inability to be impressed does not take away from the significance of the achievement.
India is now only the third stock market from a developing country to have topped the US$1 trillion mark. The other two are China, of course, and Russia. That’s three out of four of the BRIC economies.
Together, all three of these markets are smaller than the New York Stock Exchange but the time is coming when the tables will turn.
The Shanghai and Shenzhen stock markets have virtually no influence outside of China but the Mumbai Stock Exchange and the National Stock Exchange (which started when a group of businessmen started offering shares under a banyan tress a century and a half ago) are reasonably modern and well regulated. Their growth may have been slower than China’s to date but it gives the impression of being more solid.
The problems in India are those of poverty. There is a lack of development. The infrastructure is dismal. There is a general lack of things. But, luckily, most of these are problems that can be solved by throwing money at them.
China, on the other hand, has a few of those problems and others that require more fundamental change. There is, for example, no effective way of getting the public involved in the way the country is run. There is no way for the people to express dissatisfaction with their leaders. There is no escape valve for popular unrest.
And that is the Achilles heel of China’s growth. The last 58 years have seen remarkable stability in a country that has not had much of it in its history. Yes, the imperial system held for generations but dynasties changed often and the preferred method of change was revolution.
Throughout the last century, the system and the attitudes of government changed three times. China went from imperial dictatorship, to revolutionary unrest, to communist dictatorship, to socialism with Chinese characteristics. Most of this was through force of will, generally the will of a few individuals.
The current government has transitioned smoothly several times now. There have been several generations of leaders and yet another is in the offing. Life in China is, on average, more comfortable than it was decades ago or even a few years ago.
It is more comfortable than in India, where the people are prone to change governments easily and often. But they have not, since 1947, changed them violently. There have been a few spots of unrest but the country’s post-colonial democratic institutions are strong. Many in India say this is what lends the country a strength China lacks.
And this strength may, in the future, continue to attract investors to its stock markets. And more investors mean more money and more money can help solve the problems that India still has to deal with.