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Thu, 22nd June 2017

Anirudh Sethi Report

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Latest Posts

IEA says global crude oil demand will grow by 1.5m bpd in 2018 vs 1.3m bpd in 2017

Oil demand should outpace supply in the second half of this year but excess inventories will persist well into 2018, dealing a blow to global crude producers enacting output cuts to bring down stubbornly high stockpiles.

The forecast from the International Energy Agency comes as higher than expected demand growth next year is met by even stronger output from the US and other producers outside of the Opec cartel.

In its monthly oil market report, which include forecasts for next year, the Paris-based energy agency said: “[The] outlook for 2018 makes sobering reading for those producers looking to restrain supply.”

The IEA expects global demand growth will increase by 1.4m b/d next year- from 1.3m b/d in 2017 – as China and India take total consumption to a record 99.3m b/d.

IMF raises GDP growth forecast for China to 6.7% vs 6.6% prev

IMF forecasts for China now published 14 June

  • GDP ave rate 2018-20 6.4%
  • China should accelerate reform, address risk of sharp economic adjustment
  • should resume progress towards flexible exchange rate
  • capital flow measures should be transparent and consistent

Meanwhile USDJPY 110.06 going nowhere in a hurry. EURUSD 11218 and underpinned still.

GBPUSD retreat holding at 1.2780 and now looking to test 1.2800 again but sellers still lurking.

China data today – recap … consumers, factories hold up as global outlook brightens

Bloomberg’s take on the data from China today

China’s retail sales and industrial output remained resilient in May, while signs emerged that measures to cool the property market are having some effect.
The article also includes assessments from some China econommists, I especially noted this it:
“with growth edging down, the People’s Bank of China is likely done with tightening for the time being.”

 

RBI picks dozen for remedial steps

The RBI has trained its guns on a dozen bank accounts that are awash with bad loans for action under insolvency rules that could lead to the liquidation of the companies.

An internal committee of the Reserve Bank of India (RBI) has identified the 12 accounts that would be considered for resolution under Insolvency and Bankruptcy Code (IBC).

These accounts account for around 25 per cent of the gross non-performing assets (NPAs) of the banking system. Bad loans in the banking system are estimated at over Rs 8 lakh crore, meaning the NPAs in the 12 accounts are at over Rs 2 lakh crore.

The RBI had constituted an Internal Advisory Committee (IAC) comprising independent members of its board to advise it on cases that may come under the insolvency code.

This was part of an action plan of the central bank against bad loans under Banking Regulation (Amendment) Ordinance, 2017.

According to the ordinance, the RBI can issue directions to banks to initiate insolvency proceedings against defaulters.

Goldman Sachs: 60% chance MSCI includes China’s A shares in emerging market index

MSCI will make an announcement on June 20 on whether China is included in the EM index

GS say there is a 60% probability of inclusion. The firm cite as a “key argument” supporting inclusion:
  • China has the 2nd largest equity market in the world
  • Its representation in global benchmarks is low relative to its economic influence
GS says inclusion would likely see funds inflow of around $210 billion into Chinese stocks over the next five years
Chinese press is bullish for inclusion. The China Securities Journal citing regulatory changes, improved connections between HK and China markets as reasons in favour.
Reuters also have a piece up, with more detail and background, and it also addresses the thorny issue of stock that have been suspended from trade, with this gem:
  • Embarrassed Chinese regulators are also moving to discourage whimsical suspensions
Whimsical suspensions … yeah that’s what you want to read (not) when investing in China

Private oil inventory data shows a surprise build in crude stocks

This is from the private survey of inventories (available to subscribers to their service)

  • The official data from the US Energy Information Administration is due Wednesday morning, US time.
  • Reuters polling showed US crude inventories were forecast to have fallen 2.7 million barrels last week … but the result from the private survey is a build in inventory
The oil price has dipped upon the release of this data .

 

Overnight : S&P and Dow has record closes. Nasdaq still working on reversing declines.

S&P ends up 0.45%. Nasdaq up 0.73%.

The S&P index and Dow are both closing at record highs.  The Nasdaq still has some ways to go but it too had a solid gain.
Specifically,
  • The S&P is closing up 10.96 points to 2440.35 (0.45% gain). The high reached 2441.49. The low traded down to 2431.28. The close took out the prior high close at 2439.07.
  • The Dow is closing at 21328.47, up 92.80 points (up 0.44%) . That is a record close for that index.
  • The Nasdaq was up 0.73% or 44.90 points to 6220.371.  The close is still below the record level of 6321.76 (so it remains 101 points away).   The index is also still below the 50% of the move down from the June 9th high (at 6226.18) AND the 100 hour MA at 6231.  A move above those technical levels is still needed to push the price higher.

Riyadh Doubles Price of Cigarettes to Recoup Lost Oil Cash

Saudi Arabia has introduced a new tax on cigarettes and energy drinks that has led to a 100-percent price hike, as the kingdom continues to struggle with sunken oil prices.

The newly introduced tax has cranked up prices on cigarettes and energy drinks across Saudi Arabia, according to various media reports. Prices for carbonated drinks have been increased by 50 percent as well.

The introduction of what has been dubbed a “sin tax” is officially meant to discourage consumption of harmful products that are likely to cause health problems, and will eventually increase medical expenses that are paid in part by the government, according to the official website of the country’s General Authority of Zakat and Tax (GAZT).

“We’ve communicated with the business sector and have set up many workshops to introduce the selective tax both at the GAZT and the Chamber of Commerce,” GAZT spokesperson told Arab News.

Under the new regulations, a pack of cigarettes costs between $4 and $6. Days before the introduction of the tax, smokers tried to buy up as many packs as they could, while shops did all they could to hide the merchandise from customers until after the new regulations came into effect.

As for energy drinks, they are now being sold with a warning, written both in Arabic and English, that reads, “This product does not have any health benefits. Consuming more than two cans a day may negatively affect your health.”