WASHINGTON, Aug 23 — Federal Reserve Chair Jerome Powell stressed today that the central bank will act to ensure the US economic expansion continues, even in the face of “significant risks” posed by slowing global growth. But as Beijing…
MUMBAI: When Prime Minister Narendra Modi was re-elected in May with a sweeping majority, Indian stock markets jumped to all-time highs as investors anticipated big bang pro-business reforms to revive a flagging economy.
But sentiment is souring in the country’s boardrooms after a much-anticipated budget in July failed to provide any stimulus, and instead hiked taxes on the ultra-rich and on foreign portfolio investors.
Several businessmen say Modi’s government needs to take swift action on the economy, but instead it seems preoccupied with the situation in Kashmir, which is under a lockdown after authorities curtailed the autonomy of the restive region.
“The speed of decision-making is very good for example in Kashmir, but the speed of decision-making on business matters is not good,” said Adi Godrej, chairman of the Godrej Group, which sells everything from electronics to chemicals.
“India Inc is worried that the slowdown may deepen further. We need action,” Godrej said in an interview, citing tax breaks for the auto sector and big companies among his top wishes ahead of his taking any major decisions to weather the slowdown.
India’s GDP growth in January-March slid to a near five-year low of 5.8%, and most analysts expect data due later this month to show that growth in April-June faltered even further.
Domestic passenger vehicle sales, a key economic indicator, plunged an annual 31% in July – the steepest recorded pace of decline in nearly two decades.
Godrej’s fears were echoed in interviews with over a dozen businessmen, fund managers, foreign investors and executives with multinationals, revealing widespread unhappiness among the very business elite that cheered Modi to power.
Modi’s office did not respond to requests for comment.
Companies have already started to cut their workforces. The autos sector alone has laid off about 350,000 workers since April and even companies like cookie maker Parle – which sells biscuits for as little as 5 rupees, or 7 cents, a pack – have warned they may have to lay off up to 10,000 workers, due to weakening demand.
The broad Nifty index has shed more than 10 percent since hitting a high in June, in part pressured by the trade war between the United States and China. Foreign portfolio investors yanked $1.8 billion out of Indian equities in July alone.
Investors say they want clarity from Modi on what his government plans to do about the economy, and the beleaguered lending sector. Banks are grappling with almost $150 billion in bad loans and a massive shadow lending industry has been stung by a liquidity crunch after the collapse of major player Infrastructure Leasing & Financial Services (IL&FS).
Foreign portfolio investors seeking a tax cut and automakers demanding easier access to finance for dealers and buyers have flocked to New Delhi to lobby Finance Minister Nirmala Sitharaman.
Similarly, bankers have urged the government to announce a stimulus package that drives investment and new lending.
The Finance Ministry did not respond to questions about any planned measures. Officials in New Delhi, speaking on condition of anonymity, told Reuters the government is unlikely to provide a stimulus or tax breaks because this could compromise India’s fiscal deficit target of 3.3% for fiscal 2019-20.
Krishnamurthy Subramanian, India’s chief economic adviser, said on Thursday that using public money to help the private sector was a “moral hazard.”
Some banking and finance executives who met Sitharaman recently have criticised her, saying her attitude during meetings was not constructive.
“There is no discussion. It is mostly: ‘Thank you we’ll look into it’,” said one investor of a meeting with her.
The Finance Ministry did not respond to requests for comment about the meetings.
The Reserve Bank of India has been slashing interest rates, including an unconventional 35 basis point cut this month, but the stressed banking sector has yet to fully pass on the benefits of lower rates.
Modi’s supporters point to his successes though, including a unified goods and services tax in 2017 that they say is poised to bring more of the informal economy into the tax net, and contend businesses should be patient.
“The economy has slowed down liked the rest of the world, but I remain optimistic about the future,” said Sunil Alagh, the head of marketing firm SKA Advisors, and a Modi supporter. “Modi will take corrective action.”
Many businessmen also say the government is going overboard in a drive against tax evasion, corruption and money laundering.
Indian coffee baron V.G. Siddhartha apparently killed himself last month, and purportedly left behind a letter blaming tax authorities for “harassment.”
Naresh Goyal, the founder of bankrupt carrier Jet Airways , and his wife were stopped from flying out of India in May, while former finance minister P. Chidambaram was arrested on Wednesday after police officers scaled the wall of his New Delhi home in an operation shown on national television.
State-run bankers have privately said they are too afraid to take haircuts on soured loans or lend to troubled companies for fear of later being accused of wrongdoing.
Modi has said he is merely ensuring white collar criminals are not let off the hook.
In his Independence Day address on Aug. 15 though, Modi did try to assuage corporate India’s fears, saying “We should stop viewing our wealth creators with suspicion: they deserve greater respect.”
Still, with no specifics on how the government plans to address the jitters, many businessmen remain disillusioned.
“Five years ago it was a new beginning. It was like when you fall in love,” said a Mumbai-based manufacturer, asking to remain anonymous for fear of retribution. “Now the dream is punctured.” – Reuters
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HONG KONG/NEW YORK: China’s biggest e-commerce company Alibaba Group Holding Ltd has delayed its up to US$15 billion (RM62.6 billion) listing in Hong Kong amid growing political unrest in the Asian financial hub, two people with knowledge of the matter told Reuters.
Alibaba’s Hong Kong-listing plans are being closely watched by the financial community for indications on the business environment in the Chinese-controlled territory and provides a window into Beijing’s reading of the situation.
While no new timetable has been formally set, Alibaba could launch the Hong Kong deal as early as in October, seeking to raise US$10-US$15 billion, when political tensions ease and market conditions become favourable again, said one of the people.
The decision to postpone the deal, initially set for late August, was taken at a board meeting before Alibaba’s latest earnings release last week, the second person said.
The delay is due to the lack of financial and political stability in Hong Kong amid more than 11 weeks of pro-democracy demonstrations which have become increasingly violent and plunged the city into turmoil, the people added.
Tear gas has been used frequently by police while more than 700 people have been arrested, followed by an unprecedented airport shutdown last week. Hong Kong’s stock market fell to seven-month lows last week.
“It would be very unwise to launch the deal now or anytime soon,” the first person said. “It would certainly annoy Beijing by offering Hong Kong such a big gift given what’s going on in the city,” the source added.
Both people declined to be identified as they were not authorised to speak to media.
Alibaba declined to comment on its Hong Kong deal plans.
The deal, potentially the world’s biggest equity deal of the year and the largest follow-on share sale in seven years, would give Alibaba a war chest to keep investing in technology.
The company, however, views it as a way to “diversify its access to capital markets”, but not as core to its business, said the second source. Alibaba “does not see the postponement as a blow”, the person added.
Meanwhile, a listing by Alibaba is a big deal for the Hong Kong stock exchange, which is lagging behind its New York rivals in the annual battle to be the leading global listings venue.
Just last month, Anheuser-Busch InBev cancelled a planned up to US$9.8 billion Hong Kong IPO of its Asia Pacific unit.
The city loosened its rules last year specifically to lure overseas-listed Chinese tech giants to list closer to home. Alibaba would be the first to test the new system.
Asked last week whether Hong Kong’s turmoil would affect Alibaba’s listing, Hong Kong stock exchange CEO Charles Li avoided directly acknowledging the company’s application, which is still technically confidential.
But Li added: “I am confident that companies like that ultimately will find a home here, because this is home and I think they will come. I don’t know when though.”
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HONG KONG/NEW YORK: China’s biggest e-commerce company Alibaba Group Holding Ltd has delayed its up to $15 billion listing in Hong Kong amid growing political unrest in the Asian financial hub, two people with knowledge of the matter told Reuters.
Alibaba held a board meeting before its latest quarterly earnings release last week, during which the board decided to postpone the Hong Kong listing which was set to take place in late August, one of the people said.
The decision was made on the lack of financial and political stability in Hong Kong amid more than 11 weeks of pro-democracy demonstrations which have become increasingly violent and plunged the city into turmoil, the people added.
Tear gas has been used frequently by police while more than 700 people have been arrested, followed by an unprecedented airport shutdown last week. Hong Kong’s stock market also fell to seven-month lows last week.
While no new timetable has been formally set, Alibaba could launch the Hong Kong deal as early as in October, seeking to raise $10-$15 billion, when political tensions ease and market conditions become favourable again, said the other source.
“It would be very unwise to launch the deal now or anytime soon. It would certainly annoy Beijing by offering Hong Kong such a big gift given what’s going on in the city,” said the source.
Alibaba declined to comment on the deal.
Both sources declined to be identified as they were not authorised to speak to media. – Reuters
BUENOS AIRES: Argentina’s new finance minister made stabilizing the country’s battered currency his top priority Tuesday, while still pledging to meet commitments made to the International Monetary Fund, which is sending a team to Buenos Aires.
Hernan Lacunza, a former central bank governor, said “guaranteeing the exchange rate is a first-order objective.”
The Buenos Aires stock market shed 10.45 percent by the close following Lacunza’s comments.
The peso — which lost 20 percent of its value last week as markets reacted to a crushing primary election defeat for business-friendly President Mauricio Macri — showed no signs of a bounce.
The currency rebounded from early losses to close 1.26 percent higher at 57.39 to the dollar.
Lacunza’s arrival would ease short-term tensions, but “Argentina’s situation is still delicate and the stock market is not going to recover at the same rate as the exchange rate,” Economist Matias Rajnerman of Ecolatina told AFP.
Lacunza assumed his new role Tuesday as replacement for Nicolas Dujovne, who resigned after Macri’s unexpectedly heavy defeat in nationwide primary elections seen as a bellwether for October’s presidential election.
“We will guarantee compliance with the fiscal targets,” he told a news conference after being sworn in by Macri.
“Allowing more volatility would only add uncertainty and inflationary pressure,” said Lacunza, the economy minister of Buenos Aires province before Macri summoned him to take over from Dujovne.
An IMF spokesman said Tuesday the Washington-based lender would shortly send a mission to Buenos Aires.
“We are closely following recent developments in Argentina and are in ongoing dialogue with the authorities as they work on their policy plans to address the difficult situation that the country is facing,” IMF spokesman Gerry Rice said in a statement.
Lacunza has ‘tough job’
Lacunza “has the tough job of trying to come up with more measures like those announced last week, while trying to calm investors and secure IMF help,” analysts Eurasia said in a note.
Macri reacted by announcing salary hikes, tax cuts and an increase in pension allocations, in a bid to win back voters.
But ratings agencies downgraded Argentina’s debt on Friday, as investors fled the country and the outlook deteriorated.
Populist Peronist candidate Alberto Fernandez, now the clear favorite to unseat Macri, has questioned the reform program backed by a $56 billion IMF rescue package.
He said the country is “virtually” in default and should renegotiate the IMF loan.
The country is currently in a recession and posted 22 percent inflation for the first half of the year — one of the highest rates in the world.
However, the IMF had praised the Macri administration’s performance, and said the belt-tightening reforms were starting to yield results that would spur economic growth.
The fund has released just over $44 billion so far as part of the three-year loan program, but many economists have said the amount is not enough to stem the tide of Argentina’s economic woes.
Dujovne, minister since January 2017 and closely associated with the IMF deal, was seen as responsible for the economic adjustment that led to the election collapse.
Also Tuesday, Central Bank chairman Guido Sandleris warned that the recent exchange rate shock was having “a negative impact on prices.” But he said the bank would continue to act to halt the currency’s slide.
“Inflation will rise unfortunately in September and October,” Sandleris told reporters.
In a message to reassure savers amid echoes of Argentina’s 2001 crisis and the accompanying “bank freeze,” he insisted the banks “have enough liquidity to deliver their deposits to those who require it.”
Argentina defaulted on its debt in 2001 during the worst economic crisis in its history, and it took years before it could restore its credibility in world financial markets. – AFP
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