5 Minutes Read

Is this Asia’s new manufacturing hub?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

The GMS comprises Vietnam, Myanmar, Cambodia, Laos and Thailand as well two regions in China: the Yunnan province and the Guangxi Zhuang Autonomous Region. Rajiv Biswas of IHS Global Insight estimates the region’s combined gross domestic product (GDP) at $1.1 trillion this year, larger than in Indonesia, Southeast Asia’s most populous country.

The greater Mekong subregion (GMS) could become Asia’s new low-cost production hub as the region becomes more integrated, experts say.

The GMS comprises Vietnam, Myanmar, Cambodia, Laos and Thailand as well two regions in China: the Yunnan province and the Guangxi Zhuang Autonomous Region.

“With China’s industrial heartland in the coastal regions of the Pearl River Delta and Yangtze River Delta facing increasing pressures on competitiveness due to rising labor costs, the GMS offers considerable potential as an alternative location for the establishment of low cost manufacturing,” Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight, said in a note last week.

Biswas estimates the region’s combined gross domestic product (GDP) at $1.1 trillion this year, larger than in Indonesia, Southeast Asia’s most populous country. By 2015, the region is forecast to grow 6.2 percent and hit a combined GDP of $3 trillion by 2024. The area currently accounts for less than 5 percent of global manufacturing in value-added terms, but IHS notes that infrastructure is key to realizing the region`s potential.

“If infrastructure connectivity is strengthened in Southeast Asia to allow high-speed rail networks and modern roads to link provinces such as Yunnan in southern China to the Indian Ocean via Thailand and Myanmar, this could significantly improve freight logistics…and create significant opportunities for the development of major ports and free trade zones in Thailand and Myanmar, boosting their economic development as entrepots.”

While China still enjoys retains its reputation as the world`s leading production center, its slowing economy and double-digit wage increases are causing foreign firms to look to Asia`s frontier economies.

Minimum wages increased by 13 percent in 20 out of 32 Chinese cities this year, according to data from non-governmental organization China Labor Bulletin. Average factory labor costs are roughly $7 a day in Vietnam, versus $28 in China, official data shows.

“While China has many advantages, including a much better developed supply base, advanced infrastructure, robust manufacturing and engineering capacity, and a huge domestic market, this [wage increase] could still create an opening for Southeast Asian economies to become the next factories to the world,” global consulting firm McKinsey said in an October report.

Aside from infrastructure, the firm identifies three developments could stimulate growth in the region`s manufacturing sector: the implementation of the Asean Economic Community (AEC) integration plan, attracting production from multinationals, and the application of big data and disruptive technologies.

Beijing doesn’t appear concerned about potential competition for manufacturing.

Instead, it recently pledged $11.5 billion in financial assistance, including $1 billion in infrastructure aid, during the 5th GMS Leaders Summit earlier this month. The money comes on top of Beijing`s commitment of $40 billion for financing projects aimed at improving infrastructure across key GMS economies, such as Laos, Myanmar and Vietnam in its establishment of a Silk Road Fund in November.

So, why exactly is China so interested in the GMS?

“Improved connectivity in the Southeast Asian economies of the GMS will also assist the economic development of the inland Chinese provinces in southwest China such as Yunnan province, which is already growing more rapidly than the Chinese national average,” Biswas said.

“The economic development of the GMS will therefore help to realize a key strategic priority of the Chinese government, for reducing the economic development gap between inland Chinese provinces and the more advanced Chinese coastal provinces,” he added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Asia mixed after China PMI data; AirAsia shares down

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

China’s Shanghai Composite index fluctuated between gains and losses after the release of key manufacturing data.

On the last trading day of 2014, Asian shares turned mixed early Wednesday as a set of key Chinese manufacturing data curbed risk sentiment. Low volume is expected in Asia today, with Japan, South Korea, Indonesia and Thailand shuttered for the holiday season.

US stocks fell in low volume trade on Tuesday, on the back of a sharp decline in the utilities sector which led the S&P 500 down 0.5 percent. The blue-chip Dow had its biggest drop in two weeks, settling 0.3 percent lower, while the Nasdaq Composite lost 0.6 percent.

Crude oil prices will likely remain in focus, after weighing on Asian markets in the last session. US oil futures ended 51 cents higher at USD 54.12 per barrel on Tuesday, rebounding from a five-and-a-half year low, but volatile trading persisted as worries over a global supply glut offset concerns about output disruptions in Libya. Benchmark Brent crude closed up 12 cents at USD 58 per barrel, but was on track for its second weakest month since the global financial crisis of 2008.

ASX flat

Australian equities pared gains early Wednesday as rallying commodity stocks pulled back, but the benchmark S&P ASX 200 index stayed on course for an increase of nearly 1.4 percent year to date.

Miners take heart from a rebound in iron ore prices overnight, with Atlas Iron and BC Iron jumping 10 percent and 8 percent each while Fortescue Metal added 1.5 percent.

Gold shares also edged up, recovering from Tuesday’s selloff, as spot gold settled above USD 1,200 an ounce. Evolution Mining lost early gains to trade flat and Kingsgate notched up 1.5 percent.

Early Wednesday, the Australian dollar moved away from Tuesday’s four-and-a-half-year low, gaining 0.4 percent to fetch USD 0.8212 against the greenback at 1000 SIN/HK.

Mainland indices down

China’s Shanghai Composite index fluctuated between gains and losses after the release of key manufacturing data. At 1000 SIN/HK, the benchmark index traded 0.1 percent lower while in Hong Kong, the Hang Seng index traded flat.

The HSBC/Markit China manufacturing purchasing managers’ index (PMI) for the month of December came in at 49.6, up slightly from the reading of 49.5 in the preliminary reading, but still lower than November’s 50.0.

The preliminary reading from HSBC/Markit indicated a contraction in activity in December for the first time in seven months. A reading above 50 indicates growth, while a reading below signals a contraction.

Chinese train makers CSR and China CNR are in focus after confirmed a merger to boost global competition and win more overseas construction contacts. Shares of both firms rocketed more than 30 percent in Hong Kong on their first day of trade, since being suspended on October 27.

Tracking AirAsia QZ8501

Meanwhile, Indonesian officials have confirmed that debris found off the coast of the island of Borneo is from the missing AirAsia flight QZ8501. The jet had been carrying 162 people – including 155 passengers, 2 pilots, 4 cabin crew and one engineer – to Singapore from Surabaya, Indonesia on Sunday.

Shares of the Malaysian budget carrier headed lower early Wednesday, losing 0.4 percent to touch 2.730 ringgit. The benchmark FTSE Bursa Malaysia KLCI index, where AirAsia is listed, was flat.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Why Greece is not the risk it once was

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

A new drama is unfolding between Greece and its lenders. The country’s parliament, for a third time, failed to elect a new president, a ceremonial position. But that election represented a vote of confidence, or in this case, lack of it, in the government of Prime Minister Antonis Samaras.

Greece may be one of the first trouble spots for markets in 2015, but it’s not likely to be what really rocks them.

A new drama is unfolding between Greece and its lenders. The country’s parliament, for a third time, failed to elect a new president, a ceremonial position. But that election represented a vote of confidence, or in this case, lack of it, in the government of Prime Minister Antonis Samaras.

“While Greece was the tip of some systemic pressures in 2010, and 2011 in particular, I think Greece has become a local issue,” Amherst Pierpont Securities global strategist Robert Sinche said. “I don’t think it’s going to be anywhere near as broad-based an issue as it was a couple of years ago.”

Samaras who had opposed an election, set a date of Jan. 25, three days after the European Central Bank meets. That sets the stage for a potential win by the Syriza party, which opposed the country’s bailout and the austerity measures imposed on it.

“I think the working assumption for the last month is that Syriza would win and I think the polls are tightening up a little now, so it’s not as clear. … There was this perception that if the government falls, Syriza wins. Some people extrapolated they would pull out of the euro which they would never do. The euro zone is different than it was in 2011,” said Sinche. “Yields are much lower. You have the potential for the ECB to do sovereign purchases.”

Read More: Perfect storm could send euro even lower

Meanwhile, the ECB is expected to discuss quantitative easing at that Jan. 22 meeting, and the Greek vote has ramped up expectations that it could take action even more.

Sameer Samana, senior international strategist at Wells Fargo Advisors, said while Greece is somewhat of an issue for markets, it is not the biggest risk by far. The impact of falling oil prices, Russian aggression against Ukraine and China’s economy are all potentially bigger.

“Whether it’s Greece or Russia … if all of these things push the ECB to do more faster, that could be the silver lining in all of this. That could be the short-term turbulence that allows the central bank to step up in a bigger way. That could be more meaningful,” he said.

Sinche said he expects the Syriza party could threaten a “Gr-exit” from the euro zone, but it would never seriously consider it. However, the troika of lenders may in fact bend to some of its wishes. The troika consists of the ECB, the European Commission and the IMF, which said Monday that Greece faces no imminent funding issues.

“Discussions with the Greek authorities on the completion of the sixth review of the program that is being supported by an Extended Arrangement will resume once a new government is in place, in consultation with the European Commission and the European Central Bank. Greece faces no immediate financing needs,” said an IMF spokesperson.

Read More: Santa stealing some of next year’s cheer

Samana notes that opposition leader Alexis Tsipras has softened his tone, and no longer calls for an exit from the euro zone. While his party could gain the most votes in a general election, it looks like it may have to form a coalition to rule.

Greek stocks fell 3.9 percent Monday, and the yield on its 10-year bond rose to 9.638 percent. Yields on Spanish and Italian debt also rose. While Europe’s markets were broadly affected by Greece on Monday, the major markets of Germany and France closed higher.

Barclays strategists expect Greece to inject Europe’s peripheral markets with volatility while its election and dealings with the troika shake out. The strategists said if a coalition government is required, it will need more time to form and that will bring a higher level of volatility.

Read More: Athens angst hits southern European stock markets

The strategists, in a note, point to a more moderate tone from Tsipras, who they say has called for a write-down of about a third of Greece’s debt but prefers not to use default as a tool.

Sinche also expects Syriza to be more moderate than initially expected.

“I think they would realize the economy would collapse, and it would doom them politically for a long time. I think what they want to do is go to the brink again and negotiate better terms,” said Sinche.

“When the troika was playing hard ball, they were playing hardball with Greece, with Spain and Italy and everyone else lined up behind them. This is not being brought on by economic conditions. This is being brought on by political issues in Greece. Europe is not very strong but it’s out of recession. Most countries look like they’re growing.”

The question now is whether Greece would qualify for support in an ECB quantitative easing program.

Barclays strategists expect the ECB to announce a QE programme on January 22. “It is likely that a troika program would be a necessary condition for the ECB to include GGBs into the QE program,” they wrote.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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Oil Fluctuates as Traders Assess China’s Vow, Unrest in Libya

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Oil hits fresh five-year low, looks past Libya

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

The Libyan crisis escalated as the conflict among militias roiled the OPEC-member nation. The strife could create a turning point in the monthslong rout of the oil market that has seen prices plunge as much as 50 percent, said Francisco Blanch, head of commodities at Bank of America

Oil prices got a temporary boost Monday from fresh concerns over Libya’s ability to bring oil to market, but prices reversed and US crude futures hit a new five-year low.

The Libyan crisis escalated as the conflict among militias roiled the OPEC-member nation. The strife could create a turning point in the monthslong rout of the oil market that has seen prices plunge as much as 50 percent, Francisco Blanch, head of commodities at Bank of America, told CNBC’s “Squawk on the Street” on Monday.

“I do think Libya is a very important supplier. The return of Libya is what started the rout downwards in the first place, so I think if we do see Libya offline for the majority of 2015, it could provide a lot of support to prices here,” he said.

Also Read: Gold holds below $1,200 as dollar hits new highs

But the glut of oil in world markets has been weighing on markets, and OPEC has vowed not to cut production as prices fall. “The market continues to react to the oversupply in crude oil and the reiteration by the Saudis that they’re not cutting production,” said Andrew Lipow, president of Lipow Oil Associates.

West Texas Intermediate futures for February fell to $53.12 per barrel, breaking through an earlier 2014 low and its lowest price since May 2009.

“We’re going to see $50 in the next couple of weeks for WTI,” Lipow said. “This could be the first December since 2005 that crude inventories will have risen, when we normally expect a drawdown as oil companies meet their LIFO targets.”

Read More: Bottom on oil’s plunge unknown: Expert

Fighting has shut down Libya’s largest ports at Es Sider and Ras Lanuf. A fire caused by a rocket attack last week destroyed 800,000 barrels of crude — more than two days’ of the country’s production — Libyan officials said on Sunday.

Libya is now producing just 128,000 barrels of oil per day, Reuters reported. Lipow said about 500,000 barrels of Libya crude have come off the market recently.

BofA estimates the world market is oversupplied by about 1 million to 1.2 million barrels of oil per day, Blanch said. The big supply surplus will come in the second quarter of the year, when demand comes down seasonally, he added.

Blanch projects that Brent crude will rebound after that to $80 per barrel by the end of 2015. The price of benchmark Brent crude futures fell to $57.46, the lowest since May 26, 2009,when it touched $55.91.

Brent futures had been trading above $60 a barrel earlier Monday on the Libyan news.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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Oil Fluctuates as Traders Assess China’s Vow, Unrest in Libya

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Asian markets key focus this week to be Dec China PMI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

The slowdown in the mainland’s manufacturing sector indicates that the world’s second-largest economy is still seeing signs of fatigue

Asia`s economic data calendar is thin for the last week of 2014 and market attention will likely fall on a private survey of the mainland`s manufacturing activity.

Due at 0945 SIN/HK on Wednesday, the HSBC/Markit China manufacturing purchasing managers` index (PMI) for the month of December is expected to remain stable at 49.5, according to economists polled by Reuters. This is compared with a reading of 49.5 in December`s flash PMI, which contracted for the first time in seven months. The 50-point level separates growth from contraction.

In November, the official reading for Chinese factory output eased to an eight-month low of 50.3, according to the National Bureau of Statistics, while HSBC`s final reading edged down to a six-month low of 50.

The slowdown in the mainland’s manufacturing sector indicates that the world’s second-largest economy is still seeing signs of fatigue and some analysts believe it will need more stimulus measures to avoid a sharper slowdown.

Read More China`s trade growth seen falling short of target in 2014

Rest of Asia

In other parts of the region, a slew of monthly indicators are due from Thailand and South Korea.

The latter will hand in industrial production and retail sales for November on Tuesday, along with inflation and trade figures later in the week.

Moody`s Analytics estimates South Korea`s factory output fell 2.1 percent on-year in November, a wider drop from a 1.6 percent contraction in the previous month.

Meanwhile, the monthly trade surplus of Asia`s fourth-largest economy likely narrowed to $4.7 billion in December, from November`s $5.6 billion, according to Moody`s. Exports and imports are expected to remain weak, adding to doubts over the pace of South Korea`s recovery.

“The export engine faces considerable challenges from weaker Chinese and European demand and the falling yen, which is cutting Korea`s competitiveness. The slowdown in trade and factory output as well as falling global oil prices is lowering Korea`s import bill,” analysts wrote in a note last week.

Read More Thailand`s economic growth view goes under the knife

A mixed report card is expected out of Thailand this week, suggesting the Southeast Asian nation`s economy is still struggling to regain momentum after a coup ended months of political unrest five months ago.

Thailand`s factory output for November is seen declining for the 20th consecutive month, though the estimated 1.4 percent fall would mark a slower pace of decline from the 2.9 percent drop in the preceding month. Private consumption for the same month – which accounts for half of the Thai economy – could slip a seasonally-adjusted 0.6 percent, double of the 0.3 percent fall in October, compared with September`s 1.1 percent increase.

“Consumer confidence remains relatively low [and that] stems from uncertainty around when the ruling junta will deliver additional fiscal stimulus. Monetary easing has been futile in getting Thai consumers to open their wallets. We are unlikely to see an uptick in consumption until further easing is enacted,” Moody`s Analytics said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Previous Article

Oil Fluctuates as Traders Assess China’s Vow, Unrest in Libya

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
Quiz
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 5 Minutes Read

Asian shares mixed after fall in oil prices

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

In its final trading day of the year, Japan’s Nikkei 225 extended Monday’s losses as the yen continued to trade rangebound above the 120 handle against the greenback.

Asian indices kicked off Tuesday on the back foot, following unclear cues from Wall Street overnight as oil prices fell.

Crude oil prices tumbled on Monday, with Brent and US crude hitting their lowest levels since May 2009, as investors feared that supply disruptions in Libya would not offset a global supply glut.

As these negative market factors weighed, the Dow Jones Industrial Average closed down nearly 0.1 percent, ending an 8-day win streak. The S&P 500 reversed opening losses to close up 0.1 percent, while the Nasdaq Composite ended little changed.

Nikkei loses 0.8 percent

In its final trading day of the year, Japan’s Nikkei 225 extended Monday’s losses as the yen continued to trade rangebound above the 120 handle against the greenback. But, the benchmark remains on track for an increase of nearly 9 percent for the year.

Losses in index heavyweights dragged the bourse lower; Fast Retailing, mobile carrier Softbank and robot maker Fanuc made losses between 0.7 to 0.3 percent.

Fujifilm Holdings receded nearly 2 percent early Tuesday. The firm, which said in November that it expected its Ebola-related drug to be approved as soon as the end of 2014, had rallied 0.4 percent in the previous session following news that a man in Tokyo is being tested for possible Ebola infection.

ASX drops 0.7 percent

Australia’s benchmark S&P ASX 200 index widened losses early Tuesday as declines in commodity-related stocks took a toll on the resource-heavy bourse.

Energy producers came under pressure amid fresh lows in oil prices. Santos and Liquefied Natural Gas slumped nearly 3 percent each while Oil Search tanked 1.1 percent.

Gold miners were also lower as spot gold gave up gains overnight. Alacer Gold lost 3.6 percent and Evolution Mining threw away 1.9 percent.

Financials erased early gains, with Macquarie Group and Westpac losing 0.6 and 0.3 percent, respectively.

Kospi falls 0.5 percent

South Korean equities touched a three-week low early in the morning session while the junior Kosdaq index elevated 0.3 percent.

Mixed trading in the top 3 stocks with the heaviest weighting held back the key Kospi index. Samsung Electronics was little moved, but steelmaker Posco and Hyundai Motor shed 0.5 and 2.6 percent each.

Succumbing to the fall in oil prices, energy plays S-Oil and SK Innovation reversed opening gains to notch down 0.2 and 1.9 percent each.

Mainland indices mixed

China’s Shanghai Composite index opened up 0.6 percent while Hong Kong ‘s Hang Seng index inched down 0.1 percent, still within reach of Monday’s closing high.

Missing AirAsia jet, Greece

Meanwhile, the search continues for AirAsia flight QZ8501, with the US now joining in the multinational search effort. The jet, which vanished from air traffic radar early Sunday, carried 162 people — including 155 passengers, two pilots, one engineer and four cabin crew — to Singapore from Surabaya, Indonesia.

Shares of the Malaysian budget carrier tumbled over 7 percent to a four-week low of 2.690 ringgit on Monday.

In Europe news, Greek politicians failed to elect a president in a key vote, paving the way for a snap election on January 25, 2015. While the result did not come as a surprise for many analysts, the news sent European stocks lower, with Greek stocks falling as much as 11 percent.

“An election puts all sorts of doubt on the future of the bailout agreement given anti-austerity party Syriza is currently leading the polls. While (European) markets had already priced this in, I would still remain cautious around Greece,” wrote IG market strategist Stan Shamu in a note.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Fed and ECB: kudos and problems ahead

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

To understand the complexity of the Fed’s task in overcoming the Great Recession and its aftermath, one should also note that the US financial system returned to pre-crisis conditions only in the second half of last year.

The accelerating US economy is on course to generate this year a trade deficit of USD 700 billion – about 4 percent of its gross domestic product (GDP) – which can be considered as America’s net contribution to the growth of the world economy in 2014.

That remarkable achievement must be credited to the Federal Reserve’s effective crisis management. Working against the headwinds of a sharply tightening fiscal policy, and the lingering problems in the financial system, the Fed has made it possible for the economy to bounce back from the widespread ravages of one of its worst financial crises on record.

The unusually long and fragile convalescence of the US economy, and the huge losses of output and employment, reflect the severity of the crisis. And to understand the complexity of the Fed’s task in overcoming the Great Recession and its aftermath, one should also note that the US financial system returned to pre-crisis conditions only in the second half of last year. It took that long to get the banks’ borrowing at the Fed (a distress signal for institutions that can’t raise funds in private markets) down to levels seen in the months preceding the onset of the financial crisis in the second half of 2008.

This flashback is useful to remind ourselves of where we are coming from, while the markets and financial analysts exult at signs of a long-awaited cyclical upswing. They don’t seem to think that the present euphoria may lead the Fed to take away the proverbial punch bowl sooner than generally thought. After all, the growth rate of 2.5 percent in the first three quarters of this year strongly suggests that the US economy may have already hit the limits of readily available capital and labor resources.

Difficult steps ahead

Clearly, the Fed is facing a tough task of crafting an effective policy response. That is particularly difficult at a time, as is the case now, when the economy begins to accelerate. Under those circumstances, it takes an unusual ability – and a huge amount of luck – to correctly read the business cycle dynamics in order to administer an adequate amount of properly paced credit restraint to keep output and employment on a sustainable noninflationary path.

These difficulties are more easily understood by remembering the Fed critics’ usual refrains. When they say “the Fed did too little too late,” they accuse the Fed of letting the economy slip into recession. And when they say “the Fed panicked by doing too much too soon,” they refer to Fed’s premature rate hikes aborting the recovery.

Assuming that they are acting in good faith, the Fed’s critics forget that they are demanding the impossible: An institution run by human beings endowed with perfect foresight.

Read More: Keep an eye on the Fed’s accelerating asset sales

Here is what that perfect foresight means. Instead of making a guess, the Fed would have to know exactly where the economy is at the time it designs and implements a policy change. And then, it would have to know exactly where the economy will be at the time when the policy change – acting through an ex-ante unknowable lag – will hit the real economy.

Remembering these fundamental concepts in the theory of monetary policy makes me reluctant to criticize the Fed – the only major exception being the Fed’s calamitous and unforgivable errors leading up to the financial crisis.

I will, therefore, pass one more time on Fed’s criticism, but I will venture a hunch: It seems to me that the Fed should speed up the removal of a mind-boggling inflationary potential presented by its bloated balance sheet.

The latest numbers show that during the two weeks between November 26 and December 10, the Fed shrank its balance sheet by USD 56.3 billion. That brought the monetary base down to USD 3.7 trillion, a USD 315.1 billion decline from its peak of last August.

These liquidity withdrawals had no negative impact on US money and capital markets: The federal funds rate remained well below its 0.25 percent target, and the yield on the Treasury’s benchmark ten-year bond closed at 2.25 percent last Friday.

I expect to see the Fed accelerating asset reductions in the weeks and months ahead.

The ECB’s broken transmission

The European Central Bank (ECB) is in a completely different situation as a result of the weak cyclical position of the euro area economy.

With the monetary union’s growth rate of 0.9 percent in the first nine month of this year, and the bank loans to the private sector falling at an average annual rate of 1.3 percent in the three months to October, the ECB has to maintain its exceptionally loose monetary policy in the months ahead.

But the ECB needs no additional liquidity creation. The euro area markets are already swimming in liquidity. The problem is in an inadequate bank lending to businesses and households. Banks are gun-shy because of bad credit risks in a stagnant economy. Their balance sheets are also closely (maybe too closely) monitored by the regulatory authorities.

That means that the ECB’s most urgent and important task is to fix its dysfunctional transmission mechanism between monetary policy and real economy.

The ECB’s other problem is an apparent expectation of some euro area governments that the central bank will do the heavy lifting for them. True to form, Germans are issuing stern warnings to countries (France and Italy) accused of dragging their feet on structural reforms while pushing for even looser monetary policies. German taskmasters may have a point here because it does seem that advocates of greater liquidity are the ones seeking to avoid the political fallout from unpopular reforms.

Markets, however, should be under no illusion about the ECB’s determination to support the euro area economy and the viability of the common currency as the pillar of Europe’s economic integration. That is its mandate, and its pledge to do “whatever it takes” is no empty bravado.

Investment thoughts

US equity markets are still one of the best bets around. Buying the market is over, but great values are available in an accelerating economy.

The euro area will continue to benefit from its expanding American export markets. That will help it to overcome some of the growing damage from (a) trade frictions with Russia and (b) an apparently increasingly difficult business environment in China thatthe Germans keep complaining about.

Michael Ivanovitch is president of MSI Global, a New York-based economic research company. He also served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York and taught economics at Columbia.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Putin orders vodka price cap amid economic crisis

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

Putin told a meeting with government officials and regional governors that expensive vodka prices encourage the production of bootleg spirits, which carry greater risks to people’s health than legally produced alcohol.

Russian President Vladimir Putin ordered his government on Wednesday to rein in rising vodka prices, as he battles to preserve his popularity amid an aggravating economic crisis.

Putin told a meeting with government officials and regional governors that expensive vodka prices encourage the production of bootleg spirits, which carry greater risks to people’s health than legally produced alcohol.

Russia is facing its worst economic crisis since 1998, when the country devalued the ruble and defaulted on its debt. Putin’s popularity is partly based on his reputation for providing prosperity and stability.

Read More: Ruble stabilizes but experts expecting more pain

“The overshoot of vodka prices leads only to increasing consumption of bootleg (spirits),” said Putin, who is known for promoting a healthy lifestyle. “I think the relevant structures (government bodies) should think of that,” he added.

According to a study by leading international universities last year, a quarter of all Russian men die before they reach their mid-fifties, and their love of alcohol—particularly vodka—is partly to blame.

The government-regulated minimum retail price of half a liter of vodka has been increased by around 30 percent since last year to 220 rubles (USD 4).

Read More: Russia not the tip of contagion crisis: Expert

Russia has been tightening regulations for producers of vodka and beer, such as Russia’s Synergy, Poland’s CEDC and Danish brewer Carlsberg.

Russia’s economy is expected to slide into recession in 2015 due to falling oil prices and Western sanction over the Ukraine crisis. Annual inflation, meanwhile, is expected to exceed 10 percent this year.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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Oil Fluctuates as Traders Assess China’s Vow, Unrest in Libya

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Saudis hit ‘panic button’ at $40 oil: Energy CEO

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

With the Saudis’ deficit for 2015 projected to reach USD 50 billion—the official figure is USD 39 billion—the country’s leaders will face challenges in maintaining its subsidies, he said. Young people will not stand for planned wage cuts, either, he added.

Saudi Arabia has insisted that OPEC will keep oil production at 30 million barrels per day no matter the cost of crude, but even the world’s biggest oil exporter has a limit, the CEO of Breitling Energy told CNBC on Friday.

“I think the panic button is at USD 40,” Chris Faulkner said in a “Squawk Box” interview. “They can say whatever they want, but at the end of the day, they can’t just bleed out money forever.”

With the Saudis’ deficit for 2015 projected to reach USD 50 billion—the official figure is USD 39 billion—the country’s leaders will face challenges in maintaining its subsidies, he said. Young people will not stand for planned wage cuts, either, he added.

Read More: Gartman: Get ready for oil bankruptcies

That said, Faulkner expects oil prices to rebound to the low USD 70s by the end of 2015, after initially sliding further into the low USD 50s and possibly recovering in the second quarter.

With oil prices at current levels, Venezuela will likely default on its debt payments due in March and October, Faulkner said.

Brent crude for February delivery traded below USD 61 in morning trade on Friday.
Faulkner sees natural gas remaining below USD 5 until 2020, as the supply and demand fundamentals are unlikely to change significantly.

Read More: Just beginning of nat gas decline, could hit USD 2.50: Pro

Natural gas dipped below USD 3 on Friday for the first time since Sept. 24, 2012.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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Oil Fluctuates as Traders Assess China’s Vow, Unrest in Libya

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today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
Quiz
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2015: India needs to watch out for these external shocks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

South Asian security risks include another Mumbai-style terror attack in India, a military coup in Pakistan, the resurrection of the Taliban in Afghanistan, as well as the resumption of anti-India terrorist groups in Bangladesh

A disorderly slowdown in China and regional geopolitical tensions could derail optimism surrounding India`s outlook next year, according to a new report.

Asia`s third-largest economy is closing out the year with a bang as cheap oil boosts its fiscal position and investors cheer Prime Minister Modi`s pro-business reforms, making Indian markets one of the world`s best performing hedge fund strategies this year , according to Hedge Fund Research (HFR). The renewed confidence is crucial to India maintaining its status as the current favorite among emerging markets.

“From the Indian perspective, how China manages the readjustment of its economy and how secure South Asia remains will be two major determinants that will influence world affairs in 2015,” warned Mumbai-based think tank Gateway House this week.

South Asian security risks include another Mumbai-style terror attack in India, a military coup in Pakistan, the resurrection of the Taliban in Afghanistan, as well as the resumption of anti-India terrorist groups in Bangladesh.

Meanwhile, stalled economic activity in Beijing poses considerable risks for the entire world since Beijing is the largest trading partner for several nations, including India. Trade between the two economies totaled $65.5 billion last year and $66.5 billion in 2012.

Read More: Why China won`t be Asia`s dominant power

The group outlined the two worst-case scenarios for India depending on these two factors.

An unstable South Asia that overlaps with an orderly Chinese economic slowdown could strengthen China`s authority in new institutions, setting it on course for parity with the United States, sidelining India from the global stage, Gateway House said.

This could see New Delhi lose its reputation as a global swing state, with the U.S. and China making all the global decisions, the group said. India may also be excluded from new global trade agreements like the Trans Pacific Partnership (TTP) and the Free Trade Area of the Asia Pacific (FTAAP).

In this case, the group advises New Delhi to strengthen relations with other powers like the European Union, Japan, and actively excluded powers such as Russia.

Read More:  Why India and Russia remain BFFs

If both South Asia and China are unstable – South Asia because of security and China because of the economy – then the U.S. will consolidate its power and retain its unipolar dominance, overshadowing India`s political might, the report stated.

“Co-operation with Pakistan for a tidy drawdown of troops from Afghanistan is on the cards, as is surrender by India on trade and climate change negotiations. The dollar strengthens with the U.S. exercising exorbitant privilege. BRICS (Brazil Russia India China and South Africa) and G-20 recede in importance, and the World Bank and IMF (International Monetary Fund) call the shots again.”

“It will be back to the 1970s, when India depended on the U.S. for capital, technology and innovation,” the report added.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

 Daily Newsletter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Previous Article

Oil Fluctuates as Traders Assess China’s Vow, Unrest in Libya

Next Article

Shanghai residents turn to NFTs to record COVID lockdown, combat censorship

LIVE TV

today's market

index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
Quiz
Powered by
Are you a Crypto Head? It’s time to prove it!
10 Questions · 5 Minutes
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Question 1 of 5

What coins do you think will be valuable over next 3 years?

Answer Anonymously

Should Elon Musk be able to buy Twitter?