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Wed, 22nd February 2017

Anirudh Sethi Report

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Archives of “Government” Tag

Moody’s raises outlook on Russia rating to ‘stable’

Moody’s on Friday became the latest ratings agency to lift its outlook on Russia’s credit rating, upgrading it from ‘negative’ to ‘stable’, citing both a fiscal strategy — that is expected to lower the country’s dependence on energy and replenish its savings — and the gradual economic recovery.

The ratings agency had confirmed Russia’s Ba1 rating, which is one notch below investment grade, in April 2016, but assigned it a negative outlook at the time to reflect an erosion of the government’s fiscal savings amid a downturn in crude prices. But on Friday, it said the recovery in the country’s economy following a nearly two-year long recession, alongside the fiscal consolidation strategy, have eased the risks that it had identified last year.

Russia’s deficit-to-GDP ratio is now forecast to narrow by roughly one percentage point per year between 2017 and 2019 and Moody’s said this new target was “achievable” because the government’s “oil price and revenue assumptions are sufficiently conservative”.

Moody’s now believes that the downside risks identified in April 2016 have diminished to a level consistent with a stable outlook. The stabilization of the rating outlook partly reflects external events, and in particular the increase in oil prices to a level consistent with the government’s budget assumptions. The stable outlook also reflects the plans the government has put in place to consolidate its finances over the medium term, and the slow recovery in the economy following almost two years of recession.

Rival raters S&P and Fitch have also boosted their outlook on the country in recent months, as external risks to the oil-producing nation ease.

The “March” of the Yellen starts today

Yellen starts her two day appearance in front of the government

I’ll keep this one short and sweet. There’s really only going to be one thing the market is going to hang on for when Yellen starts speaking, and that’s whether March is going to feature as a hike possibility.

We’ve almost got a repeat situation to last year where we had a Dec hike accompanied by FOMC members proclaiming multiple hikes throughout the year. We all know what we got then and I suspect we’ll get the same now.

The market is looking at the summer for the next likely hike but it will be on guard to change that if Yellen gives them cause to do so, so any green light for a March hike will see the buck pop higher.

Indian households have record gold hoard of Rs 24,000 tonnes worth $800 bn

Indian households, together the world’s largest hoarders of gold, hold a record 23,000-24,000 tonnes of the prea record 23,000-24,000 tonnes of the precious metal, worth at least $800 billion, despite a sharp fall in international prices from their peaks in 2011, according to a comprehensive study of the Indian market by the London-headquartered World Gold Council (WGC). The value of the holdings is based on (conservative) international prices, which doesn’t factor in a 10% customs duty. The value would be substantially higher in the rupee term.

Coupled with 557.7 tonnes of the central bank’s holdings, gold stocks at most of the known sources in the world’s second-largest consumer would represent around a half of its gross domestic product. This means the gold monetisation scheme can be a success if the government makes it lucrative.
The country’s gold demand has been shaken a tad after demonetisation, as some customers feared a crackdown on gold holding as well, but long-term prospects remain bright with demand expected to average at 850-950 per annum by 2020, the WGC said. The country’s gold demand is expected to have fallen to a seven-year low of 650-750 tonnes in 2016, although a recovery is expected as early as 2017.

Prosecutors seek arrest warrant for Samsung chief Lee Jae-yong

Special prosecutors in Seoul on Monday requested an arrest warrant for the de facto head of Samsung, the country’s largest company, as a corruption scandal that toppled president Park Geun-hye ensnared another powerful South Korean figure.

Lee Jae-yong, vice chairman of Samsung Electronics and heir to the company, is wanted on charges of bribery, according to prosecutors who grilled the country’s top executive during a marathon 22-hour interrogation late last week.

Samsung were unable to comment immediately. However, the development will likely be a stunning blow to the company as its attempts to solidify the succession of Mr Lee as chief and to reform its corporate governance structure.

Italy Urges Europe To Begin Censoring Free Speech On The Internet

First it was the US, then Germany blamed much of what is wrong in society on “fake news”, and not, say, a series of terrible decisions made by politicians. Now it is Italy’s turn to call for an end to “fake news”, which in itself would not be troubling, however, the way Giovanni Pitruzzella, head of the Italian competition body, demands the European Union “cracks down” on what it would dub “fake news” is nothing short of a total crackdown on all free speech, and would give local governments free reign to silence any outlet that did not comply with the establishment propaganda.

In an interview with the FT, Pitruzzella said the regulation of false information on the internet was best done by the state rather than by social media companies such as Facebook, an approach taken previously by Germany, which has demanded that Facebook end “hate speech” and has threatened to find the social network as much as €500K per “fake” post.

Pitruzzella, head of the Italian competition body since 2011, said “EU countries should set up independent bodies — co-ordinated by Brussels and modeled on the system of antitrust agencies — which could quickly label fake news, remove it from circulation and impose fines if necessary.” 

In other words, a series of unelected bureaucrats, unaccountable to anyone, would sit down and between themselves decide what is and what isn’t “fake news”, and then, drumroll, “remove it from circulation.” On the other hand, coming one week after Obama give Europe the green light to engage in any form of censorship and halt of free speech that it desires, when the outgoing US president voted into law the  “Countering Disinformation And Propaganda Act”, it should come as no surprise that a suddenly emboldened Europe is resorting to such chilling measures.

So with Europe on the verge of rolling out unbridled censorship, here is the strawman used to justify it.

Bitcoin Soars To 3 Year Highs As China Turmoils

With Chinese liquidity markets turmoiling, bonds crashing, and gold premiums soaring, it appears growing concerns over capital controls tightening has sent Chinese fleeing into Bitcoin as a way to escape the mainland restrictions. Bitcoin is up over $30 today to its hghest since Dec 2013

We first warned of this ‘outlet’ for Chinese capital in September 2015 when Bitcoin was trading around $200… its just topped $830…

Need change in revenue audit methods to adapt to GST: CAG

Government auditor CAG is readying itself to adapt to the proposed Goods and Services Tax (GST) regime as new audit techniques would be required based on a unified tax system once it comes into force, a top official said today.”We will have to bring technological changes because GST is going to be implemented soon. We will have to change our ways and approach, as our approach of revenue audit was based on state levies and central levies. And we are already preparing ourselves for new techniques,” Deputy Comptroller & Auditor General (CAG) H Pradeep Rao said here.

Rao was speaking at IPAI seminar on ‘Audit-an Effective Instrument of Public Accountability – The Changes Ahead.’

“The state governments are all on board with regard to GST and they will also have to integrate to the network (GSTN). So whether it is use of data analytics or use of technology, we are changing continuously. And we are making best efforts.”

‘Reveal who attended RBI’s Nov 8 meet’ -P Chidambram

Former finance minister P Chidambram on Tuesday demanded the Reserve Bank of India should make public minutes of its November 8 meeting whose outcome empowered government to scrap specified notes of Rs 500 and Rs 1,000 denominations.

On November 8, the Narendra Modi government in a televised address announced it was abolishing the legal tender status of Rs 1,000 and Rs 5,00 currency notes.

These high value notes comprised a huge 86 per cent of total currency in circulation and the decision has led to severe cash crunch in country causing inconvenience to the citizens.

“RBI should publish the minutes of meeting on Nov 8, let country know who were the directors who attended the meeting,” Chidambaram demands.

The government had banned these specified notes through an executive order instead of passing a legislation in parliament as part of its drive to curb black money and prevent recurrence of fake currency incidents.

According to the RBI Act, 1934, the Central Board of the apex bank takes a call on legal tender, its validity or invaldity, in circulation in country and proposes government accordingly.

Syrian Gov’t Forces Fully Control Over 95% of Aleppo’s Territory

Syrian Army servicemen in Aleppo.Over 95 percent of Aleppo’s territory are under Syrian government forces control, the Russian Center for Syrian Reconciliation Reconciliation stated Monday.

“Over the past 24 hours, the Syrian armed forces have liberated three quarters of the eastern part of Aleppo. Thus, over 95 percent of the territory of Aleppo is under government control. The total area of the part of the city’s east where the insurgents remain is no more than 10 square kilometers,” the statement said. Earlier it was reported that more than 13,000 civilians were evacuated of militant-controlled regions of Syria’s Aleppo in 24 hours. “In 24 hours, 13,346 civilians including 5,831 children were evacuated in 24 hours with support of the Russian reconciliation center from regions of Aleppo which remain under militant control,” the center said in a statement. According to the statement, 728 militants have surrendered and left eastern Aleppo. The Russian servicemen have also de-mined 7 hectares (17.3 acres) of the territory of eastern Aleppo, including a mosque, a school, a primary school and roads.

40-year JGB issuance set to hit 3tn yen

Japan’s Finance Ministry is set to boost the issuance of 40-year government bonds to a record 3 trillion yen ($26 billion) in fiscal 2017, betting on strong investor demand.

The issuance of two-year and other short- and medium-term bonds with negative yields will decrease due to low demand.

 The JGB issuance plan for fiscal 2017 will be finalized based on opinions the ministry hears at meetings with brokerages, life insurers and other market players. The meetings are scheduled for Friday and Dec. 19. The plan will be announced along with next year’s budget, which will be endorsed by the Cabinet on Dec. 22.
 It will be the first bond issuance since the Bank of Japan adopted a negative interest rate policy in January. The amount of JGBs issued periodically for institutional investors will decrease for the fourth consecutive year due to a decline in refinancing bonds. While the total issuance will decline, the issuance of superlong-term bonds with positive yields will increase.

The issuance of 40-year bonds will increase for the third straight year, rising nearly fourfold from fiscal 2008, when 40-year bonds made their debut. Investor demand for the 40-year bonds, with their relatively high yields, is expected to be strong. The increase in the issuance of superlong-term bonds might also prevent any uptick in demand for refinancing of short- and medium-term bonds.