Month: August 2015

Smartphone slowdown hits where it hurts: Jobs

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

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As consumers in the West and China buy fewer smartphones, the slowdown is showing up in falling profits for handset makers, as well as sweeping job cuts across the once red-hot sector.

Over the past two months, a dozen manufacturers and component suppliers, including Blackberry, HTC, Lenovo, Microsoft, Qualcomm and most recently Panasonic, have announced layoffs.

The reduction in headcount ranges from 1,300 staff at Panasonic, which is scaling back its mobile phone battery business, to 7,800 at Microsoft amid a restructuring its smartphone business. Blackberry did not disclose the size of its layoffs.

And experts say that the pain is not over for the big smartphone and phone-component makers, as all search for the next big area of growth.

Read More: Smartphone market is slowing massively…blame China

“The smartphone landscape has led to breaking points,” said Neil Shah, research director at Counterpoint Research. “There are two kinds of layoffs happening – one in the hardware space with traditional vendors such as Lenovo, Motorola – the other is the component space – with the likes of Qualcomm,” he said.

As smartphone markets in North America, Europe and China approach saturation, a perfect storm is brewing, Shah explained. It’s a combination of slowing demand, intensifying competition driven by the influx of low-cost Chinese manufacturers, and a buildup in inventory.

Many smartphone makers, after tasting success in a particular market, ramped up production only to be left with excess supply, he said.

“Motorola, for example, was doing really well in Latin America. But as low-cost players such as Huawei came into the market, it’s been affecting their performance, so now they are sitting on inventory,” Shah said.

With such factors at play, global smartphone shipment growth is expected to slow to 10.4 percent on-year in 2015, down from 27.5 percent in the previous year, according to IDC, a market research firm. In China, the world’s biggest market, shipments are forecast to grow just 1.2 percent on-year in 2015, down from 19.7 percent in 2014.

Challenging times ahead

Nor is the business landscape going to get easier for smartphone manufacturers or their component suppliers going forward, say analysts.

“The days of easy growth, especially as many rode the China growth wave, are over. This is not to say that growth has stalled in the industry, but just that there are too many contenders for the same piece of pie,” said IDC senior market analyst Kiranjeet Kaur.

Read More: Why BlackBerry could ditch its own OS for Android

“Also, now a large number of vendors are running on very thin margins, while the pricing pressure continues to increase and volume growth is not exponential anymore. I don’t expect the situation to ease out anytime soon,” she added.

Mark Einstein, Industry Principal at Frost and Sullivan agrees the operating environment will remain challenging, adding there could be more layoffs ahead.

“We’ve seen a lot of companies really fall from grace in the smartphone industry,” he said. “The next big one to watch is Sony – what it’ll do with its handset business. It’s still up in the air,” he said.

While the smartphone market isn’t “over”, many of these companies will need to find their growth elsewhere, said Einstein.

“The next big phase of growth, as far as we know, is going to be in wearables and the internet of things,” he said. “But as manufactures shift their business models, it’s going to be tough for a while.”

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

Shanghai Composite widens losses to 3% as US futures tank

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

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Mainland equities lost 3 percent on Monday while Dow futures tanked 200 points on reports that Beijing may finally halt its controversial market intervention.

A report by The Financial Times over the weekend said that Beijing will abandon large-scale share purchases, sparking concerns over more declines for A-shares. Beijing may now switch its focus from intervention to stopping those it believes are “destabilizing the market,” the FT report said. Suspected state firm buying has propped up A-shares in recent sessions, resulting in two straight days of 5 percent rallies in Shanghai.

Fresh commentary from Federal Reserve officials also weighed on sentiment in Asia. Fed Vice Chairman Stanley Fischer told CNBC at the Jackson Hole symposium over the weekend that it was too early to tell whether the case for a September interest rate hike is compelling, creating further uncertainty over when the U.S. central bank will finally tighten monetary policy.

Wall Street indices saw a mixed close last week, with the S&P 500 and the Nasdaq eking out slim gains but the Dow Jones Industrial Average closing down 12 points. The S&P 500 also entered a Death Cross—often seen to indicate an impending bear market—with the 50-day moving average falling below the declining 200-day moving average for the first time since August 2011.

Shanghai down 3 percent

China’s benchmark Shanghai Composite snapped a two-day winning streak while Hong Kong shares slipped 0.5 percent. Attention was on Beijing’s official August purchasing manager’s index (PMI) that follows large state-owned firms, due on Tuesday. A Reuters poll expects manufacturing activity likely hit a three-year low at 49.7, which may exacerbate market losses. The private Caixin/Markit August PMI, which tracks smaller companies, is also on tap Tuesday.

A-shares of Bank of China, China Construction Bank and Bank of Communications lost 3 percent each after warning of rising bad loans on last week.

In remarks published on Saturday, Premier Li Keqiang defended his government’s handling of the recent financial volatility and added that China would “enact more targeted and responsive macro-regulation to offset downward economic pressure, [and] more robust reform and innovation efforts to energize the market.”

For example, China’s parliament passed a plan over the weekend to cap outstanding local government debt at USD 2.5 trillion this year in an effort to stem escalating borrowing. Local governments racked up around USD 2.9 trillion in debt as of end-June, according to official estimates. Reforms like these will help restore investor confidence in the economy and markets, said analysts at ING in a morning note.

Nikkei 1 percent lower

Japan’s benchmark index fell below the 19,000 level in early trade, retreating from Friday’s one-week closing high.

A stronger yen hurt exporter shares across the board, with Japan Display and Komatsu 4 and 2 percent lower, respectively.

Investors also digested weak July industrial production figures. Released before the Tokyo market open, the report showed a monthly fall of 0.6 percent, missing Reuters expectations for a 0.1 percent rise and coming in well below June’s revised 1.1 percent gain.

ASX down 1 percent

Australia’s benchmark S&P ASX 200 moved off its eight-day closing peak, dragged down by steep losses among financials.

Australia New Zealand Banking, Commonwealth Bank of Australia, Westpac and National Australia Bank all tumbled more than 1 percent each, while AMP lost 2 percent.

The Reserve Bank of Australia (RBA) holds a policy review on Tuesday, but the majority of analysts don’t expect any chance to the current 2 percent interest rate. But second-quarter gross domestic product released on Wednesday is likely to sway market sentiment. Spread-betting firm IG is anticipating a 2.2 percent annual gain, little changed from the previous quarter’s 2.3 percent rise.

“The main uncertainty is whether the recent market turbulence and currency devaluation has influenced the RBA. Continued devaluation of the yuan could lead to much lower global inflation than currently forecast, and any mention of this in the statement would be significant,” commented Angus Nicholson, IG’s market analyst.

Kospi 0.4 percent lower

South Korean stocks snapped a four-day winning streak and moved off a nine-day closing high hit last week. Disappointing economic data exacerbated the mood, with July industrial output declining 0.5 percent on month.

Blue-chip stocks like Samsung Electronics and Shinhan Financial sold off by more than 1 percent each.

Today’s calendar

Indian gross domestic product for April-June is expected around 8pm SIN/HK; median estimates are for a 7.4 percent rise in annual growth, a tad below the 7.5 percent rise seen in January-March, according to Reuters.

Malaysian markets are closed on Monday but the ringgit may draw attention on Tuesday following an unprecedented show of public discontent against the government. Thousands of protesters marched in several major cities over the weekend calling for Prime Minister Najib Razak’s resignation amid reports he received nearly USD 700 million from debt-ridden state fund 1Malaysia Development Berhad. Najib has rejected the report, saying the money was a donation from a backer.

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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

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

Modi accepts defeat on contentious land decree

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

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Indian Prime Minister Narendra Modi will let an executive order making it easier for businesses to buy land lapse on Monday after failing to win support from opposition parties in a major blow to his economic reform agenda.

Modi said on Sunday the government was ready to amend the proposed law and criticised the spreading of false rumors that made farmers afraid of the changes.

“I have always said that, in the dispute related to the land acquisition law, the government is open minded,” Modi said in his monthly radio address. “I am willing to accept any suggestion for the benefit of farmers.”

Modi swept to power last year on expectations he would accelerate an economic transformation that began in the 1990s but is struggling to build support for reforms in parliament, where his party is in the minority in the upper house.

Read More: Don’t raise rates in turmoil: India’s central bank Gov. Rajan

Leaders of Modi’s party said they had not given up on making it easier to acquire land needed to kick-start hundreds of billions of dollars in stalled projects. However, after failing to win support in parliament, they may ask states to pass their own laws.

Modi has had to issue temporary executive orders in the past seven months that allow the government to forcibly purchase farmland for industrial development. He has failed to secure the votes in parliament needed to make the changes permanent.

Land reform is critical for Modi’s drive to build new roads, homes and factories and, if stalled, would blight his vision of 100 new ‘smart’ cities across India linked by industrial corridors and high-speed rail routes criss-crossing the country.

Conflict between farmers and companies trying to secure land for industrial projects has hampered India’s plans to expand its network of highways, build mines and other infrastructure, holding up about $300 billion of investment.

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

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

China is growing at ‘reasonable’ pace despite pressures: Li

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

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China’s economy is growing at a “reasonable” pace and, despite growing pressure, the government can handle well the risks the country faces, Chinese Premier Li Keqiang said.

The premier, in remarks published late Saturday after a special cabinet meeting, said China is continuing to steadily manage its economy.

Li said international market instability “has increased the uncertainties around the global economic recovery, and the impact on China’s financial market and imports and exports has also deepened, with the economy facing new pressure.”

Read More: Markets are a mess, but don’t blame China: Pro

He defended China’s efforts to steer through a volatile period since mid-June, when China’s stock market plunged. On Friday, Shanghai’s benchmark index was nearly 38 percent below where it was on June 12.

The premier reiterated earlier remarks that there’s no basis for continued depreciation of the yuan following its devaluation on Aug. 11. The yuan “will stay basically stable as a reasonable and balanced level,” he said.

Li said recent cuts in the reserve requirement ratio (RRR), interest rates, taxes and fees and measures aimed at stabilizing the market were already paying off.

Analysts say that further measures are necessary to support the economy and calm markets.

China’s economy, which in the past produced double-digit growth, is slowing.

The government reported that annual growth in the second quarter was 7 percent, a figure that some economists doubt.

Li said China would “enact more targeted and responsive macro-regulation to offset downward economic pressure, more robust reform and innovation efforts to energize the market, and more effective delivery to secure the positive momentum for growth”.

Read More: China defends devaluation, sees ‘limited’ impact

He said China needed to encourage new forms of investment and financing by local governments and businesses, such as local debt swaps and corporate bonds.

He reiterated the role of an open, transparent capital market but said risk management needs to be improved to prevent regional or systemic risks.

“China has great potential for further development and is well capable of effectively managing risks and keeping them under control,” Li 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

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

Malaysians stage mass protest for PM’s resignation

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

Listen to the Article (6 Minutes)

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

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

Market volatility becoming new norm: Jean-Claude Trichet

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

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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

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

Protesters ask Fed to delay rate hike at Jackson Hole

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

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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

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

Investors take a second look at EM as China fears cool

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

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Emerging markets (EM) have faced the brunt of this summer’s selloff, topped by volatile swings in Chinese stocks this week, meaning for many investors the region as a whole is more or less off limits.

But a growing number are now arguing that the supposed weakness — largely fueled by fears of slower Chinese growth — is overblown and recent market declines are more of a buying opportunity than a reason to sell.

Read More: Global equity funds witness biggest-ever exodus

Asset allocators have largely looked to the euro zone, Japan and the U.S. for returns this year, as loose monetary policy has helped boost sentiment. Goldman Sachs this week maintained their overweight view on developed markets versus emerging economies in equities.

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

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