Yuan inches lower, set for losing week on anxiety over virus impact on economy
China's yuan eased against the dollar on Friday as it staggered towards a feeble end to a week that saw no end in sight to the country's coronavirus epidemic even as Beijing stepped up containment efforts and support measures for the economy.
While investors have been comforted by China's moves to restore calm to battered markets, confidence remains fragile as the death toll from the outbreak continued to climb sharply to over 600, leaving policymakers fretting over the potential drag on global growth.
The People's Bank of China (PBOC) Vice Governor Pan Gongsheng said earlier in the day that China's economy could be disrupted in the first quarter due to epidemic, but it is expected to recover once the virus is brought under control.
Prior to market opening on Friday, the PBOC lifted the midpoint rate higher for the first time in seven trading days to 6.9768 per dollar, 217 pips or 0.3% firmer than the previous fix of 6.9985. That didn't stop the onshore yuan from retreating, having gained to a two-week high the previous day on Beijing's announcement that it would lower tariffs on some U.S. goods. It opened at 6.9750 per dollar and was changing hands at 6.9800 at midday, 80 pips weaker than the previous late session close.
If the yuan finishes its late night session at the midday level, it would have weakened about 0.6% to the dollar for the week. The volume in the onshore market shrunk further to $4.13 billion by midday from a normal half-day turnover of about $15 billion.
Traders said the extended Lunar New Year break and the virus outbreak have delayed the resumption of businesses across the country, disrupting broad sectors of the economy, and kept many corporate clients away from the market this week. Many traders expect the yuan to be under pressure over the short run, at least until the virus is brought under control.
“As the economic indicators are released, market focus will be shifted back to economic fundamentals,” said a trader at a Chinese bank, expecting the yuan swing in a wider range of 6.93 to 7.03 per dollar in the near term. Reuters
SBI cuts MCLR by 5 bps across tenors
The country’s largest lender State Bank of India (SBI) on Friday announced a 5 basis points reduction in its MCLR across tenors, effective February 10.
This is the ninth consecutive cut in MCLR by the bank in the current fiscal.
With this reduction, the one-year marginal cost of fund-based rate (MCLR) has come down to 7.85 per cent per annum from 7.90 per cent, a bank statement said.
The reduction in MCLR by the bank comes a day after the Reserve Bank of India (RBI) left the repo rates unchanged at 5.15 per cent but announced long-term repo operation for up to Rs 1 lakh crore, making cost of funds cheaper for banks.
SBI further said in view of surplus liquidity in the system, it has realigned its interest rate on retail term deposits (less than Rs 2 crore) and bulk term deposits (Rs 2 crore and above), effective February 10.
It slashed term deposits rates by 10-50 bps in the retail segment and 25-50 bps in the bulk segment.
“The impact of recent RBI policy measures and reduction in deposit rates will be reflected in the next review of MCLR,” the bank said. PTI
Also read: Rates to fall despite RBI’s status quo
Fed includes 'heightened stress' in leveraged loans in 2020 bank stress tests
Large banks with significant trading operations will have their finances tested in 2020 against a scenario that includes “heightened stress” in leveraged loans, the Federal Reserve announced on Thursday.
The Fed also plans to test banks with substantial trading or processing operations against a hypothetical counterparty default as part of its 2020 round of stress tests.
The Fed's focus on leveraged lending in the upcoming round of stress tests comes after regulators and some in the industry have aired concern for years over the rapid growth in the corporate debt market, particularly in loans to already heavily-indebted firms.
This years stress test will help us evaluate how large banks perform during a severe recession, and give us increased information on how leveraged loans and collateralized loan obligations may respond to a recession,” said Fed Vice Chairman Randal Quarles in a statement.
The annual health check of big bank finances will continue to include a hypothetical severe economic downturn, where the unemployment rate nearly triples to 10% and economies worldwide contract significantly.
Eleven of the largest U.S. banks, including Goldman Sachs and JPMorgan Chase, will have to face the leveraged lending component, and those firms will also face the specific test on counterparty default alongside custody banks Bank of New York Mellon and State Street Corporation.
All told, 34 banks with more than $100 billion in assets will face this year's stress test. The Fed approved capital plans for all tested banks after the 2019 cycle. Reuters
Rupee slips 9 paise to 71.27 against US dollar in early trade
The rupee opened on a weak note and declined by 9 paise to 71.27 against the US dollar in opening trade on Friday, tracking weak opening in domestic equities and foreign fund outflows.
Forex traders said weak opening in domestic equities, rising crude oil prices and foreign fund outflows dragged the local unit, but weakening of the American currency in the overseas market supported the rupee.
The rupee opened weak at 71.26 at the interbank forex market and then fell further to 71.27, down 9 paise over its last close.
The rupee had settled at 71.18 against the US dollar on Thursday.
Brent crude futures, the global oil benchmark, rose 0.31 per cent to USD 55.10 per barrel.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, as they sold shares worth Rs 560.36 crore on Thursday, as per provisional data.
Domestic bourses opened on a negative note on Friday with benchmark indices Sensex trading 27.18 points down at 41,278.85 and Nifty down 24.65 points at 12,113.30.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell by 0.05 per cent to 98.44.
The 10-year government bond yield was at 6.42 per cent in morning trade. PTI
IMF: Gulf's financial wealth could be over in 15 years
The International Monetary Fund (IMF) said on Thursday Gulf Arab states -- some of the world's richest countries -- could see their financial wealth depleted in the next 15 years amid lower hydrocarbon revenues if they don't step up fiscal reforms.
The six-nation Gulf Cooperation Council (GCC) - whose net financial wealth the IMF estimates at $2 trillion - accounts for over one fifth of global oil supply, but economies in the region have been hit hard by a drop in oil prices in 2014 and 2015.
While lower crude prices have put pressure on governments to generate non-oil revenues and fix their finances, “the effect of lower hydrocarbon revenue is yet to be fully offset,” the IMF said in a report.
“At the current fiscal stance, the regions existing financial wealth could be depleted in the next 15 years,” it said.
The Washington-based international crisis lender said global oil demand could peak by around 2040 or much sooner in case of a stronger regulatory push for environmental protection and energy efficiency.
“All GCC countries have recognized the lasting nature of their challenge ... However, the expected speed and size of these consolidations in most countries may not be sufficient to stabilize their wealth.”
Gulf states have for decades used their energy wealth to provide millions of citizens with government jobs, part of a social contract by rulers that rewards political acquiescence and educational attainment with employment for life.
But high-paying public sector jobs that demand little of workers have translated into low productivity and an entitlement culture, as well as rising costs as populations grow.
Budgets are stretched further by hefty state spending on subsidies, social services and generous state pensions.
GCC governments have only gradually introduced austerity measures to avoid social discontent, such as the introduction of a value added tax (VAT) in some GCC countries. But most continue to struggle to balance fiscal consolidation and growth. Reuters
Sensex, Nifty drop in early deals in line with Asian market
Indian equity benchmarks Sensex and Nifty edged lower in opening deals on Friday, tracking subdued Asian market.
The 30-share BSE Sensex was trading lower by 56.87 points or 0.14 per cent at 41,249.16, while the broader NSE Nifty fell 13.60 points or 0.11 per cent to 12,124.35 in early morning trade.
On Thursday, the Sensex had settled 163.37 points, or 0.40 per cent, higher at 41,306.03 and the Nifty had closed up 48.80 points, or 0.40 per cent, at 12,137.95 after the RBI left the policy rates unchanged but maintained its accommodative stance to boost growth.
Both equity benchmarks Sensex and Nifty had logged their fourth straight gains on Thursday.
Global crude benchmark Brent advanced 0.33 per cent to USD 55.30 per barrel.
On the currency front, the Indian rupee dropped 9 paise to 71.27 per US dollar in morning deals.
Exchange data showed foreign investors pulled out Rs 560.36 crore on a net basis from the Indian equity market on Thursday.
On the global financial market front, Asia was trading lower, while US stocks consolidated gains for a fourth consecutive day to climb new record highs, as sentiment kept improving on China’s pledge of tariff cuts on American goods.
In the sixth bi-monthly monetary policy review of 2019-20, the kept the repo rate unchanged at 5.15 per cent while retaining its accommodative stance.
The central bank also kept the GDP growth estimate unchanged for the current fiscal at 5 per cent but projected a pick up to 6 per cent in the next financial year. PTI
Kerala’s GDP recorded higher growth rate at 7.5% in 2018-19
Economic Survey for 2018-2019 tabled by the Kerala government in the Assembly on Thursday showed a higher growth rate with the state’s Gross Domestic Product at 7.5 per cent during the period as against 7.3 per cent in 2017-18.
According to the survey, though the growth rate was on a higher side, agriculture and allied sector growth declined.
“The agriculture and allied sector growth declined to (-)0.5 per cent during 2018-19 from a growth rate of 1.7 per cent in 2017-18,” it said.
The survey also said contribution of secondary and tertiary sectors improved from 2017-18.
“In 2017-18, the contribution from secondary sector was 27.7 per cent at constant prices and 25 per cent at current prices.
Among the sectors, the highest growth was in the secondary sector with 8.8 per cent growth at constant (2011-12) prices followed by tertiary sector (8.4 per cent),” the survey said.
It also said the growth in secondary sector was mainly due to a spurt in the manufacturing sector.
The survey said the total turnover of State Public Sector Undertakings under Industries Department in 2018-19 was Rs 3,442.74 crore, an increase of 17.9 per cent from 2017-18.
It said the state has an internet penetration rate of 54 per cent and it was the second highest in the country.
The survey, citing the National Sample Survey Office, said women in Kerala were far ahead in terms of computer literacy and basic internet knowledge.
“In rural areas, 35.1 per cent of women in Kerala have basic internet knowledge. The all India level is 8.5 per cent.
In case of urban areas, 41.7 per cent women in Kerala have basic internet knowledge (30.1 per cent at national level). Kerala is the first State to make internet access a basic right,” a release issued by the finance department said.
According to quick estimates for 2018-19, Kerala’s per capita income is Rs 1.48 lakh as against the national average of Rs 93,655.
“In other words, average income per person in Kerala was approximately 1.6 times the Indian average in 2018-19,” it said.
Finance minister Thomas Isaac will present the state budget on Friday. PTI
Uber loses $1.1 billion investing in food delivery, driverless cars
Uber continued to lose money as it builds up its food delivery business and develops technology for driverless cars, but revenue for its rides business nearly tripled as the company picked up more passengers around the world.
The ride-hailing giant lost $1.1 billion in the fourth quarter of 2019, about 24% more than the same time last year. The loss amounted to 64 cents per share, which was slightly better than what analysts were expecting. Analysts polled by FactSet predicted Uber would lose $1.18 billion, or 67 cents per share, during the quarter.
Uber brought in $4.1 billion in revenue, up 37% from a year ago. Its revenue grew around the world, although the biggest gain was in the U.S. and Canada, where Uber pulled in 41% more than last year.
But its Eats business lost $461 million in the quarter before accounting for interest, taxes, depreciation and amortization, down 66% from the same time last year as Uber put money into growing the business in a highly competitive food delivery market.
“2019 was a transformational year for Uber and I’m gratified by our progress, steadily delivering against the commitments we’ve made to our shareholders on our path to profitability, said Dara Khosrowshahi, CEO, in a statement. We recognize that the era of growth at all costs is over. In a world where investors increasingly demand not just growth, but profitable growth, we are well-positioned to win through continuous innovation, excellent execution, and the unrivaled scale of our global platform.
In Uber’s last earnings call, Khosrowshahi said the company’s goal was to turn a full-year profit in 2021.
The fourth quarter was marked by painful disclosures at Uber.
In December, the company released a long-awaited report, in which its riders reported more than 3,000 sexual assaults during 2018.
The same month, Uber agreed to pay $4.4 million to end a federal sexual harassment probe about its internal corporate culture. But those announcements did not take a toll on the stock, which has been inching up over the past two months.
Uber’s stock cratered after its IPO, falling 42% to a low of $25.99 in November. But it recovered some ground over the last month, reaching $37 on Thursday, about 18% below its IPO price.
Its losses in the fourth quarter included $243 million in stock-based compensation. PTI
India needs to double credit growth to 15% to achieve $5 trillion economy target by FY25: Bankers
The country needs to double credit growth to 15 per cent to become a USD 5 trillion economy by 2024-25, say bankers.
The country has recorded high double-digit credit growth in the past and is capable of achieving similar growth now as well, they added.
“If you want to reach a USD 5 trillion economy, the outstanding credit, which is around Rs 95-98 trillion, it will have to be doubled, which means we need to grow (credit) at around 15 per cent,” State Bank of India’s Chairman Rajnish Kumar said at an IBA event.
Echoing his views, Union Bank of India’s Managing Director and CEO Rajkiran Rai G said for a USD 5 trillion economy, credit growth has to be more than 15 per cent per annum.
“To sustain that kind of credit growth, we need to build a robust risk management system so that we don’t repeat the mistakes of past. The sourcing, process, monitoring have to be evolved and technology will play a major role in it,” Rai said.
Banks’ credit growth has been hovering at around 7 per cent, currently.
Prime Minister Narendra Modi on Thursday underlined the need for working together to make India a USD 5 trillion economy, while stressing that the government has been able to maintain macroeconomic stability amid tough global environment.
“Let’s move ahead with the resolve to make India a USD 5 trillion economy,” he said while replying to a debate on Motion of Thanks to President for his address to Parliament.
Kumar said one important sector where India needs huge amount of investments is infrastructure.
He said globally the norms around capital are getting tighter.
“There is demand for providing more for the risk, which restricts capital for growth,” he said.
Kumar said the country needs huge capabilities in project financing.
To enhance its project financing capabilities, SBI has done a lot of policy modification. He said the Indian Banks’ Association (IBA) is also working on resolving issues surrounding consortium lending. PTI