Midnight News Update –Sep 21st2017
In what was the first explicitadmission by the government about an economic slowdown, the FM promised a slew of measures to revive the flagging Indian economy. It may be recollected that GDP growth for the first quarter ended June had touched a low of 5.7% raising fears that the Indian economy may seriously underperform China. Economists are already expecting a combination of fiscal and monetary expansion which may include more public spending as well as a quicker cut in interest rates in line with the sharp cut in the rate of inflation. How inflation is managed remains to be seen.
Oil prices may be headed for the strongest third quarter since 2004 as Iraq has hinted that the OPEC may pursue more production cuts to reduce the supply of oil in the market. While the US Shale has intervened to prop up supply it will not be sufficient if the OPEC resorts to more aggressive supply cuts. Brent crude has moved from the sub-$50 levels to a level of $55/bbl and the price rise is purely on the back of expectations that supply from OPEC will be cut further. To add to the story, two of the major oil markets viz. Europe and Japan are seeing a sharp revival in macroeconomic growth.
Prudential of UK and ICICI Bank are looking to sell a further 6% stake in ICICI Prudential Life, which will enable the promoters to bring down their stake further to adhere to the 25% public shareholding norm. Currently, the two promoters are jointly holding 81% stake in the insurance JV and this sale is targeting at bringing their stake down to 75%. It is exactly 1 year since ICICI Prudential Life came out with a public issue and got its shares listed on the bourses. The stock has appreciated nearly 26% over the last one year and was one of the first listings in the insurance space.
After steel, the government has tightened the screws on the imports of radial tyres from China. The government announced anti-dumping duties on select radial tyre imports from as these tyres had already taken a 25% market share from local manufacturers due to lower priced dumping. China has been dumping these radial tyres into India at a level below the nominal cost. India has imposed similar duties on other products like steel, fabrics and chemicals from different countries including China. This will be a big boost as truck and bus radial tyres account for nearly 55% of the total tyre market.
Tata Steel Europe and Thyssen Krupp of Germany have decided to merger their operations to create the second largest steel entity in Europe. This merger will also address the issue of overcapacity in the industry. As per the MOU the JV will be called Thyssen Krupp Tata Steel and will be equally owned by both the parties. They see annual synergies of up to Euro 600 million on an annual basis as a result of this merger. It will also lead to a rationalization of administrative and other costs as well as a reduction in workforce to the tune of 400 workers. The two entities have been in talks for a JV but had been held up due to the BSPS. With Tata Steel moving out of the BSPS, the doors were open for a coming together with Thyssen Krupp. The JV will have annual revenues of Euros 15 billion and will be a non-cash deal.
Japanese trade showed a sharp rise for the month of August with a sharp recovery in imports and exports. While imports were up by 15.1%, the exports for the month were up by 18.2%, much better than the consensus estimates. The trade surplus for the month came in at $1.02 billion and that is one of the main reasons why forex traders have been looking at the Yen as a safe haven currency. Shipments of autos to the US were up by 28.3% during the month of August. Even the shipments of electronic goods to Asia were up by 21.6% indicating a distinct pick-up in global trade.
