Sun, 28th May 2017

Anirudh Sethi Report


Archives of “business” Tag

China greasing economy with $55bn in tax breaks

China’s State Council on Wednesday approved 380 billion yuan ($55.1 billion) in tax relief that will mainly favor farmers and small businesses in a move that is seen as both economic and political.

The second large-scale tax cut to follow last year’s comes as China’s economy is forecast to slow down in the latter half of 2017, during which the Communist Party will convene its 19th National Congress and reshuffle top leadership.

China will modify its value-added tax this July by removing the 13% bracket while retaining the 6%, 11% and 17% tiers. The 13% rate currently applies to farm products and natural gas, but they will move to the 11% category. Farmers as well as households that purchase rice and vegetables will likely benefit from this change.

For smaller companies, those that pay 300,000 yuan or less in annual taxable revenue qualify for preferential tax treatment. The ceiling will be lifted to 500,000 yuan. Furthermore, small businesses and startups will be allowed to deduct 75% of research and development costs, up from 50%. These tax breaks will remain in effect until the end of 2019.

The Chinese government enacted about 500 billion yuan worth of corporate tax cuts in 2016. Helped also by a surge in infrastructure spending, the real economy grew 6.9% during the January-March period this year, marking the second quarter of economic acceleration. However, the People’s Bank of China, the country’s central bank, has been gradually raising market interest rates in order to rein in the real estate bubble.

India : Note ban to hit business growth

The government’s decision to demonetise higher denomination currency notes would put downward pressure on India’s growth in the short term that could further delay the recovery in investment cycle.

Given the downside risk to growth and lower inflation, domestic brokerage firm Kotak Securities said the brokerage expects the Reserve Bank of India to cut interest rate by 75-100 basis points.

Flagging off concerns regarding risk to domestic growth, analysts at Kotak Institutional Equities said the very near term disruption due to the cash crunch in retail trade and related activities would be a drag on the GDP growth.

“This will accentuate with likely slowdown in segments such as consumer durables and real estate activities. We note that real estate, retail trade, hotels and restaurants constitute 30 per cent of GDP,” it said.

According to Kotak, the GDP calculations incorporate private companies, which contribute 35 per cent of the overall sales.

In a predominantly cash economy this can lead to a significant slowdown in the SME segment, which will have a bearing on economic growth and investments.

There could also be a potential loss of pricing power in the discretionary products segment, which will be disinflationary.

The brokerage added that the surge in deposits and the consequent increase in the liquidity are expected to significantly boost the statutory liquidity ratio (SLR) demand for bonds.

India manufacturing activity hits 13-month high

India’s manufacturers made solid gains in August as business activity ramped up to a level unseen for more than a year.

The Nikkei-Markit manufacturing purchasing managers’ index for India came in at 52.6 in August, up from 51.8 in July and marking an eighth straight month above the 50-point line separating growth from contraction.

The 13-month high for the headline figure came courtesy the strongest growth in new business since December 2014, led by the consumer goods segment and supported by capital and intermediate goods.

Businesses surveyed said new business was both external and domestic, as export orders and output grew at the quickest clip in a year, with consumer goods again taking the lead. That spurred only marginal growth in new hires, however, as most of the firms surveyed kept staff numbers unchanged.

Markit economist Pollyanna De Lima said the firm was now forecasting real GDP growth of 7.5 per cent for the 2016/17 fiscal year, adding:

On the price front, survey data highlighted softer increases in input costs and output charges and, in both cases, inflation rates were below their respective trends. In light of these numbers, the RBI has scope to loosen monetary policy in the upcoming meeting to further support economic growth in India.

Q2 2016 UK GDP revision 0.6% vs 0.6% exp q/q

Q2 2016 UK GDP revision data report 0.6% prior q/q

  • Prelim 0.6%. Q1 0.4%
  • 2.2% vs 2.2% exp y/y. Prelim 2.2%. Prior 2.0%
  • Exports 0.1% vs 0.7% exp q/q. Prior -0.4%
  • Imports 1.0% vs 0.8% exp q/q. Prior 0.1%
  • Private consumption 0.9% vs 0.8% exp q/q. Prior 0.7%
  • Government spending -0.2% vs 0.3% exp q/q. Prior 0.5%
  • Business investment 0.5% vs -0.8% exp q/q. Prior -0.6%
  • -0.8% vs -1.4% exp y/y. Prior -0.8%
  • Gross fixed capital formation 1.4% vs 0.4% exp q/q. Prior -0.1%
  • June index of services 0.2% vs 0.1% exp m/m. Prior -0.1%. Revised to 0.0%
  • 0.5% vs 0.4% exp 3m/3m. Prior 0.3%

ArcelorMittal to sell stake in China’s Hunan Valin Steel

Hunan Valin Steel announced on Wednesday that European steelmaker ArcelorMittal will sell its 10% stake in the midsize Chinese steelmaker to a government-affiliated investment fund in Hunan Province for around 1.1 billion yuan ($165 million).

Hunan Valin is a listed company operating under the wing of state-owned steelmaker Hunan Valin Iron & Steel Group. ArcelorMittal will divest its entire stake as Hunan Valin Steel changes its main business from steel to “finance and energy-conservation-related businesses,” according to Hunan Valin Steel’s announcement. It was unclear whether the parent company would continue in the steel business.

 As China’s economic growth has slowed, its steel industry has been saddled with severe excess production capacity. To reduce capacity, the government is stressing corporate culling and restructuring.

6 Trading Behaviours For Traders

1) Fresh Ideas – I’ve yet to see a very successful trader utilize the common chart patterns and indicator functions on software (oscillators, trendline tools, etc.) as primary sources for trade ideas. Rather, they look at markets in fresh ways, interpreting shifts in supply and demand from the order book or from transacted volume; finding unique relationships among sectors and markets; uncovering historical trading patterns; etc. Looking at markets in creative ways helps provide them with a competitive edge.

2) Solid Execution – If they’re buying, they’re generally waiting for a pullback and taking advantage of weakness; if they’re selling, they patiently wait for a bounce to get a good price. On average, they don’t chase markets up or down, and they pick their price levels for entries and exits. They won’t lift a market offer if they feel there’s a reasonable opportunity to get filled on a bid.

3) Thoughtful Position Sizing – The successful traders aren’t trying to hit home runs, and they don’t double up after a losing period to try to make their money back. They trade smaller when they’re not seeing things well, and they become more aggressive when they see odds in their favor. They take reasonable levels of risk in each position to guard against scenarios in which one large loss can wipe out days worth of profits.

4) Maximizing Profits – The good traders don’t just come up with promising trade ideas; they have the conviction and fortitude to stick with those ideas. Many times, it’s leaving good trades early–not accumulating bad trades–that leads to mediocre trading results. Because successful traders understand their market edge and have demonstrated it through real trading, they have the confidence to let trades ride to their objectives.

Bayer confirms $62bn takeover offer for Monsanto

Bayer, the German chemicals and pharma group, confirmed its offer to acquire Monsanto, with a $122 per share all-cash offer which values the US agribusiness at $62bn.

The offer represents a 37 per cent premium to Monsanto’s undisturbed share price of $89.03 on May 9

The German group said buying Monsanto would be a “compelling opportunity to create a global agricultural leader”. Bayer said it expected annual synergies of about $1.5bn after the third year, plus additional benefits in future years.

“We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders,” said Werner Baumann, Bayer’s chief executive in a statement.

Deutsche Bank’s net income fell 58 % in Q1

DeutcheDeutsche Bank’s net income fell 58 per cent in the first quarter its investment bank was hit by turbulent markets at the start of the year.

In the three months to March, Deutsche posted a net profit of €236m, down from €559m in the same period a year earlier,  Analysts had expected a loss of €249m, according to a Reuters poll.

John Cryan, the bank’s new chief executive, said that the results were the result of “challenging” market conditions “largely reflecting concerns about the outlook for the global economy”.

He said:

“This uncertainty led to a decline in client activity in the capital markets, and our revenues fell from the prior year, most notably in our trading and corporate finance businesses. Our results reflect these challenging conditions as well as the impact of our strategic decisions to exit or reduce significantly selected businesses.”

Only 7% of India’s B-school graduates employable

Barring a handful of top business schools like the IIMs, most B-schools in the country are producing sub-par graduates who are largely un-employable and therefore earning less than Rs 10,000 a month, if at all they find a job, a report has pointed out.

The report blames the lack of quality control and infrastructure, low-paying jobs through campus placement and poor faculty as the major reasons behind India’s unfolding B-school disaster.

India has at least 5,500 B-schools operational at present, but including unapproved institutes could take that number much higher, the report by Assocham said, expressing concern over the decay in the standards of these B-schools.

“Only 7 per cent of MBA graduates from Indian business schools, excluding those from the top 20 schools, get a job straight after completing their course,” it found.

The report says that only 7 per cent of the MBA graduates are actually employable.

If Draghi’s Latest Doesn’t Scare You? You Just Aren’t Paying Attention

To say central banks have intervened far too long within the financial markets would be an understatement. However, what can not be overstated is just how far down the “rabbit hole” of lunacy they are continuing to push all measures of fundamental business understandings such as, competitive advantage, governance, price discovery, viability, and a whole lot more. Not withstanding, the devastating effect these disruptions are placing upon the population’s at large that rely on these very businesses for both their own general welfare (as in employment) but also, the taxes they pay that go into general funds of all sorts whether it be local, state, federal et al.

Today, everything (and I do mean everything!) one thought they understood about free market capitalism has been thrown into the wastebasket of history and replaced with edicts and dictates set forth by an un-elected gaggle of economic theorists who’ve decided the world of business is theirs to control. How do they control it? Hint: The courage to print!

Whether you’re a solo-practitioner or CEO of a global concern one thing should be making you very, very, very (did I say very?) concerned: The recent proclamations, as well as, delivery from the ECB’s Mario Draghi.

Mario Draghi not only openly stated, but did so in a manner which many put into the “defiantly so” camp, that he has the right, the means, and wherewithal to purchase corporate debt as he see’s fit. If that doesn’t shake you down to your business core – you just aren’t paying attention.