Tuesday, March 31, 2015
Japan remains cautious about signing up to the China-led Asian Infrastructure Investment Bank, indicating that Tokyo will miss the March 31 deadline for application, but both Taiwan and Norway said they would seek to join the institution. Despite warnings from Washington, over 40 nations have joined or said they intend to become members of the AIIB, adding clout to an institution seen as enhancing Beijing's regional and global influence.
A slump in euro-area consumer prices eased in March, offering respite to the ECB after it pledged to buy €1.1T of assets through September 2016 to fend off deflation. According to flash estimates released by Eurostat this morning, the annual rate of inflation climbed to -0.1% from -0.3% in February. Other data also showed the region's unemployment rate falling to 11.3% last month, down slightly from 11.4% in January.
Meanwhile, the euro fell for a second day, heading toward a fourth straight quarter of declines, amid concerns Greece will fail to reach an agreement with its European partners to unlock a fresh lifeline of €7.2B. The currency is now down 0.9% at $1.0737 after sliding 0.5% on Monday - weakening 11% this year against the dollar. Greece's creditors said yesterday that the reform plan the country submitted over the weekend fell short of the needed requirements
Russia, Australia, Denmark and the Netherlands have now become the latest countries to join the China-led Asian Infrastructure Investment Bank despite misgivings in Washington. China has set a March 31 deadline to become a founding member of the bank, which is seen as a significant setback to U.S. efforts to extend its influence in the region and balance China's growing financial clout and assertiveness. At least 35 countries will join the AIIB by the deadline, the bank's interim chief, Jin Liqun, said last Sunday.
Indian banks are yet to cut base rates in response to the central bank's 50 bps cut during 2015.
Credit growth might lag rate cuts by 6 to 9 months.
Base rate cuts will put pressure on banks' net interest margins, but could be offset by gains in bond portfolio.
Bank earnings might remain under pressure during 1H15.
Expect the central bank to further cut policy rates by 25 to 50 bps during 2015.
The Reserve Bank of India has cut policy rates twice in 2015 in out-of-scheduled policy meetings - bringing rates to 7.5% from 8%. This was mainly due to lower consumer-level inflation, which is currently running at around 5%. The Indian banking sector has been experiencing slowdown in credit growth, especially for the past 12 months. While part of the credit demand has moved to the commercial paper (CP) market due to quick transmission of policy rate cuts, we see that the CP market is just 4% of the banking sector, and hence will not be able to divert credit demand from the banking system.
Monday, March 30, 2015
South Korea hopes its infrastructure companies will benefit from the country joining the China-backed Asian Infrastructure Investment Bank, its finance ministry said on Friday. The countries share close trading ties: China is South Korea's biggest trading partner and the two nations are set to sign a free trade agreement in the first half of this year. Seoul announced yesterday it would join the AIIB as a founding member, the latest U.S. ally to do so despite Washington's warnings.
Lower oil prices and subdued consumer demand have again pushed Japan to the brink of deflation, underscoring the difficulties faced by policy makers to revive the world’s third-largest economy through its ¥80T a year stimulus program. Japanese core consumer price inflation, which includes energy prices but excludes food, fell to zero Y/Y in February, far below the 2% target the central bank had aimed to achieve by this spring. The Nikkei closed down 1% on the news, falling to 19,286.
Thursday, March 26, 2015
Ford has invested $1B in a new plant in western India that will help it triple its exports from the country. Ford (NYSE:F) is planning to make India an export hub for compact cars such as the EcoSport, and the newly launched compact sedan, Ford Figo Aspire, the first car to be produced at the new facility. The plant will also nearly double the company's installed production capacity in the country to 610K engines and 440K vehicles a year.
Wednesday, March 25, 2015
S. 143(1A): As the object of s. 143 (1A) is to prevent tax evasion, it can apply only to tax evaders and not to honest assessees. The burden of proving that the assessee stated a lesser amount in the return in an attempt to evade tax is on the revenue
CIT vs. Sati Oil Udyog Ltd (Supreme Court)
The object of Section 143 (1A) is the prevention of tax evasion. Read literally, both honest asessees and tax evaders are caught within its net. We feel that since the provision has the deterrent effect of preventing tax evasion, it should be made to apply only to tax evaders. Section 143 (1A) can only be invoked where it is found on facts that the lesser amount stated in the return filed by the assessee is a result of an attempt to evade tax lawfully payable by the assessee. The burden of proving that the assessee has so attempted to evade tax is on the revenue
Tuesday, March 24, 2015
Activity in China's factory sector slipped to an 11-month low in March as new orders crumbled, a private survey showed. HSBC's flash China manufacturing index dipped to 49.2, from 50.7 in February, while the new orders sub-index fell for the second straight month to 49.3. The poor readings will likely fuel calls for more stimulus measures as persistent weakness plagues the world's second-largest economy despite two recent rate cuts and other easing.
Sunday, March 22, 2015
The Obama administration is expected to issue long-awaited regulations setting new standards for hydraulic fracturing in the oil and natural gas industries. The final rules reflect years of work by regulators seeking to balance environmental interests and economic imperatives, but may well fail to appease environmentalists who have argued for strong protections or oil industry leaders who insist well-tailored state rules are better than one-size-fits-all federal mandates.
Thursday, March 19, 2015
Global shares edged up today after the Fed dropped its "patient" philosophy toward raising rates, but downgraded its views on the economy, inflation and lowered its interest rate trajectory. The statement would put a June increase on the table, but the dovish tone suggested the first hike wouldn't come until at least September or October. In the wake of the Fed's cautious words, the dollar clawed back much of the ground it lost on Wednesday, after posting its biggest daily fall in 18 months. U.S. Dollar Index +1.8% to 99.08.
Wednesday, March 18, 2015
Oil extended losses to a seventh day, with crude futures down 2.2% at $44.20, ahead of stockpiles data and the Federal Reserve's monetary policy decision. U.S. crude stocks are forecast to have surged for the tenth straight week to a new record high, fueling new supply concerns of a global oil glut. The Fed is also likely to cut the word "patient" from its policy statement, leaving the door wide open for a rate hike in June.
Tuesday, March 17, 2015
The Bank of Japan maintained its massive ¥80T stimulus program today despite a tumbling inflation rate, indicating that a steady economic recovery will help it achieve its price target without immediate, additional monetary easing. Heading south, the RBA released minutes to its March 3 meeting when it kept its benchmark interest rate on hold after lowering it in February, saying some time was needed for "the economy to adjust to the earlier change" - but left the door wide open for another cut. The FOMC also begins its two-day meeting on interest rate policy this morning, with nearly all believing that the Fed will delete the word "patient" from its statement.
Monday, March 16, 2015
India’s BoP for Oct-Dec 2014 pegged at USD 13 billion surplus, helped by lower current account deficit and higher capital account surplus.
When compared against nominal GDP, the BoP surplus was at 2.6%, current account deficit was at 1.6% and trade deficit was 7.7% of GDP.
Current account deficit at USD 8 bn; higher than previous quarter due to higher trade deficit.
Jan-Mar 2015 might see current account surplus at 1.1-1.3% of GDP due to lower oil and gold import bill.
Consequent to the BoP surplus and central bank interventions, India's forex reserves continued to build-up, reaching USD 338 bn for the week ended March 6th, 2015
Rupee to remain weak due to USD appreciation and REER over-valuation
With the dollar hitting fresh 12-year highs and growing concerns that the U.S. might run out of oil storage, U.S. crude fell for a fifth day, dropping to its lowest intraday price since March 2009. As the dollar index stayed above the key 100 level, Crude futures lost as much as 2.8% to $43.57 a barrel, closely following the IEA's prediction on Friday that tanks in the U.S. may become full this year as drilling-rig cuts fail to slow production
International Computers Indian Manufacture vs. CIT (Bombay High Court)
A plain reading of section 35D indicates that the Legislature has thought it appropriate to give a special benefit to the assessee in respect of expenditure specified in sub-section (2) incurred before commencement of business or after the commencement of business, in connection with the extension of industrial undertaking or in connection with setting up a new industrial unit. This provision allows amortisation of the specific category of expenditures incurred by the assessee, by way of deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years as provided therein. The legislature, therefore, having specifically provided for amortisation of the preliminary expenditure which includes expenditure incurred for issuance of shares by the assessee in connection with the issue of shares, the said expenditure on issue of shares is not eligible for depreciation.
Tuesday, March 10, 2015
The euro continued its decline on Tuesday, hitting a new 12-year low against the dollar, as Dallas Fed President Richard Fisher reiterated that the U.S. should promptly end its easy monetary policy and press ahead with an interest rate increase. So far this month, the euro has dropped more than 400 pips, or 3.63% against the dollar. The currency also felt pressure from lower euro zone debt yields after the ECB launched a €1T bond buying program yesterday. The euro is -0.9% to 1.0751.
Monday, March 9, 2015
Round one of the Federal Reserve's annual bank stress tests concluded with all 31 banks under scrutiny passing. The tests include how a bank's Tier 1 ratio, a measure of capitalisation, would react under a hypothetical crisis. This year's tests included a more stringent corporate debt default scenario.
During last year's stress tests the average CDS spread among US banks was 73bps. The current average stands at 66bps; an indication that the US banking system is healthier this time around.
Round two results, which are due to come out next Wednesday, will delve deeper into how banks will allocate future profits, in a much more comprehensive capital analysis. All eyes will be on the big banks JP Morgan (NYSE:JPM), Bank of America (NYSE:BAC) and Citigroup.
Looking to stimulate the eurozone economy and avert the threat of deflation, the ECB began its €60B per month QE program today by buying German government bonds, Bloomberg reports quoting two traders in government debt. While European equities slipped, eurozone yields held steady, and the euro added 0.6% to $1.0903 to regain some ground after its slide to an 11-year low last week.
Global equity markets started the week on the back foot after Friday's strong U.S. jobs data stoked concerns that the Fed could raise interest rates as soon as June. In Asia, Japan GDP revisions also hurt sentiment, following a new report that estimated the economy grew an annualized 1.5% in the October-December period, down from an initial reading of 2.2% in February. German export figures similarly kept markets subdued, after January's seasonally-adjusted exports posted their biggest drop in five months.
Sunday, March 8, 2015
Global trade in liquefied natural gas (LNG) will exceed $120B in 2015, surpassing iron ore as the most valuable commodity after oil, Goldman analysts say. Competition among producers will increase as buyers shift away from long-term contracts. U.S. supplies coming online and other factors will lead to declines in LNG prices "until they can challenge thermal coal in the fuel mix of the power sector,"
Tuesday, March 3, 2015
The government welcomed a surprise interest rate cut on Wednesday as good news for the economy that would not pose any inflationary risks.
Both the rate cut and last weekend's annual budget were "consistent with non-inflationary growth",
The Reserve Bank of India (RBI) lowered its policy repo rate by 25 basis points to 7.5 percent on Wednesday, its second inter-meeting cut this year on the back of easing inflation and what it said was the "weak state" of parts of the economy.
The cut comes days after the government and the Reserve Bank of India agreed to formally adopt inflation targeting, although the central bank had been effectively using targets since early 2014.
Analysts said the RBI's rate cut appeared to give backing to the government's fiscal plans and its pledge to exercise responsibility despite a delay in meeting a fiscal deficit target of 3 percent of gross domestic product by a year to 2017/18.
Indian bonds and rupee rose sharply after the cut. The benchmark 10-year bond yield dropped to as much as 7.61 percent, its lowest level since July 15, 2013. The partially convertible rupee gained to as much as 61.65 to the dollar, its strongest level since Feb. 4.
Japan emerges from recession with 2.2% annualized growth in the last quarter of 2014.
Inflation stabilizes at 2.4% and is likely to be met with Bank of Japan inaction.
Strong industrial production resulted in equity rally, but further caution warranted
In an early encouraging sign, Japan's industrial production in January 2015 surged to 4.0% over market expectations of 2.9% and December 2014 growth of just 0.8%.
This expansion is expected to carry on to February and March 2015 which is mainly attributed to foreign demand instead of domestic demand for Japan at this stage.
The Japanese equity market took this positively together with the fact that Japan is officially out of recession
German retail sales and record index advances in the U.S. fueled European stocks earlier in the session, pushing the DAX up a staggering 16.4% YTD. Retail sales rose by 2.9% M/M and 5.3% Y/Y in January, heavily beating economists' forecast for a 0.3% M/M decline. U.S. stocks also began the new month with a bang, as the Nasdaq closed above the 5,000 level for the first time since March 2000, yesterday, and the Dow and S&P 500 set new records
Monday, March 2, 2015
China cut interest rates by a quarter percentage point over the weekend, while a survey showed HSBC's PMI climbing from 49.7 to 50.7 in February, the strongest level since July. "Deflationary risk and the property market slowdown are two main reasons for the rate cut this time," said a central bank official. In the last few months, China has been showing further signs of flagging economic growth, with GDP dipping to 7.3% in Q4 - its slowest rate in over two decades, and CPI sliding to 0.8% in January - its weakest showing since late 2009.
Sunday, March 1, 2015
India’s Finance Ministry has projected the country's economic growth to accelerate to a four-year high of between 8.1%-8.5% in the fiscal year starting April, making the South Asian nation one of the fastest-growing economies. The latest projection is much higher than the 7.4% growth the ministry forecast for this fiscal year, as falling oil prices and the government’s commitment to implementing economic reforms have improved the country's outlook.