IMF’s Gita Gopinath: Tariffs and emerging market weakness weighing global growth

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

Listen to the Article (6 Minutes)

The International Monetary Fund (IMF) chief economist Gita Gopinath said that the ongoing trade war between the United States and China remains the number one issue for policy makers but at the same time it’s not all bad news for the global economy. CNBC’s Steve Liesman spoke to Gita Gopinath at the Jakcson Hole Symposium and asked if she is seeing recessionary signals.

“Trade is indeed showing a lot of weakness. We are seeing a lot of weakness in industrial production and manufacturing, but on the other hand services is still holding up though not as brightly as it was at the start of this year. Therefore, it’s a mixed bag of signal,” said Gopinath.

“On the one hand you are seeing huge demand for safe assets which is what you typically see before a recession, equity markets are volatile but they are still high. So it’s mixed around the world and consumer confidence, services sectors are still doing fairly well especially in some parts of the world like the US,” she added.

Talking about the US trade policy, Gopinath said: “It’s not just the tariffs that are in place but there is tremendous uncertainty about where this policy is headed and will there be closure anytime soon and that’s weighing business confidence and we are seeing it on investment.

“However, an important part of this is also what’s coming from emerging markets; we have seen pretty strong weakness in emerging markets and it’s Brazil, Mexico, Argentina, Turkey and that’s weighing on growth and that’s coming also from idiosyncratic factors in their own countries,” she added.

On the weakness in global economy, she said: “There is more to be done on the fiscal front. I think it would be a good idea for governments to plan for a possibility that they will need to use their fiscal tools more aggressively than it has been used right now especially countries that have fiscal space, but the number one issue is with respect to trade and trade policy and that has to be addressed.”

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, lenders want tycoon Gautam Thapar removed as chairman of CG Power

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

Listen to the Article (6 Minutes)

Investors and lenders of power equipment maker CG Power & Industrial Solutions Ltd want tycoon Gautam Thapar to be removed as chairman of the company after an investigation unearthed a multi-crore financial scam in the firm, sources privy to the development said.

The company had in a regulatory filing on August 20 stated that an investigation instituted by its board had found major governance and financial lapses including some assets being provided as collateral and the money from the loans siphoned off by “identified company personnel, both current and past, including certain non-executive directors.” Also, some liabilities and advances to related and unrelated parties had been understated.

While the board had on May 10 sent CEO and Managing Director K N Neelkant on leave pending an investigation into some “suspect, unauthorised and undisclosed” transaction, Thapar has continued as the company Chairman.

The sources said some investors, at whose behest the probe was launched, now want Thapar and Neelkant to be removed from their posts to enable a thorough cleanup of the company affairs.

An email sent to Thapar seeking his comments on the scam and move by investors remained unanswered.

While the regulatory filing had not named anyone involved in the scam, the sources said the investigation had found strong links to the present management.

Though the company with 8,000-plus employees and manufacturing units at 21 locations worldwide has an excellent track record and a strong order book, the alleged irregularities had led to it becoming over-leveraged, investors and lenders felt.

The sources also said the company board is authorised to remove the chairman and ones this happens in coming weeks, one of the independent directors may be named as non-executive chairman.

Thapar has only 8,574 shares out of 62.6 crore shares of the company. This shareholding does not provide him with a board position, they said, adding Thapar would, however, continue on the board as only shareholders have the right to remove a director.

Though a founder promoter of CG Power, he lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money.

In the regulatory filing, CG Power had stated that the transactions appear to be undertaken in a “seemingly fraudulent manner” and that it would investigate them further.

It had stated that the company’s current and past employees, including unnamed non-executive directors and certain Key Managerial Personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.

The funds so raised were routed out of the company. This, the company said, had been going on for two years now.

Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively as on April 1, 2017, the filing had said.

According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.

These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.

The company now plans to conduct a detailed forensic investigation to establish wrongdoing.

Yes Bank Ltd owns 12.79 per cent of CG Power after it had in May invoked shares pledged by Thapar’s Avantha Holdings Ltd. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.

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

Nomura upgrades India after govt’s measures; suggests this portfolio

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

Listen to the Article (6 Minutes)

Soon after reducing Nifty’s March 2020 target to 11,880 from 12,900, global brokerage Nomura upgraded India to ‘overweight’ after finance minister Nirmala Sitharaman announced a slew of measures to stimulate growth in a weakening economy.

The government announced the rollback of the controversial tax surcharge on the Foreign Portfolio Investment (FPIs) and domestic investors announced in the union budget in July and a Rs 70,000 crore immediate recapitalisation to PSU Banks

Further, the government has also withdrawn angel tax provisions for startups. All pending goods and services tax (GST) refunds until now to be paid in 30 days and future GST refunds to be paid in 60 days. Corporate social responsibility (CSR) violations will be treated as a civil offence from a criminal offence, she added.

ALSO READ: These are the first reactions of brokerages to FM Nirmala Sitharaman’s measures to revive economy

According to Nomura, the upgrade on India is amid positive local developments amid rising global uncertainty. Indian market with less than average leverage to global growth could do relatively better, Nomura explained.

It also added that the reform measures and sectoral incentives could provide a much-needed booster shot. Nomura, now, expects a recovery in the second half of 2019 and a growth of 6.6 percent in H1, from its earlier estimate of 5.8 percent.

Recently, in its June quarter earnings review report, the brokerage cut its Nifty target for March 2020 to 11,880 from 12,900 on lower earnings estimate post disappointing results season and acceleration in earnings cut. The brokerage said that it continues to have a stock specific for the India markets.

“Our key overweight sectors remain corporate banks, insurance, infrastructure, and healthcare, while we are underweight on NBFC, auto, consumer and IT Services. We replace SBI Life with ICICI Prudential Life in the model portfolio,” the brokerage said in the report.

Among stocks, top picks for Nomura are ICICI Bank, ICICI Prudential, L&T, SBI, and CONCOR.

Nomura’s model India portfolio includes the following stocks:

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

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

Top stock recommendations by Sudarshan Sukhani, Mitessh Thakkar, Prakash Gaba for Monday

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

Listen to the Article (6 Minutes)

Indian shares are set for a strong start on Monday after finance minister Nirmala Sitharaman announced a series of measures to revive the economy and encourage investment, including withdrawal of foreign portfolio investor (FPI) tax surcharge and capital infusion in PSU banks. However, a broader selloff in global markets likely to cap gains.

Among stocks, Sudarshan Sukhani was positive on HDFC, TCS, and InterGlobe Aviation, and negative on Tata Motors. Mitessh Thakkar is bullish on M&M, Castrol India, Reliance Industries, and bearish on Kotak Mahindra Bank. Prakash Gaba has a ‘buy’ call on Bata India, Bharat Electronics and MindTree.

Here are the top buy-sell calls by market experts for Monday:

Sudarshan Sukhani – s2analytics.com

– Buy HDFC with a stop loss of Rs 2,000, target at Rs 2,060

– Sell Tata Motors with a stop loss of Rs 110, target at Rs 102

– Buy Interglobe Aviation with a stop loss of Rs 1,600, target at Rs 1,700

– Buy Tata Consultancy Services with a stop loss of Rs 2,225, target at Rs 2,300

Mitessh Thakkar – mitesshthakkar.com

– Buy Castrol India with a stop loss of Rs 116.5, target at Rs 125

– Buy Mahindra & Mahindra with a stop loss of Rs 528, target at Rs 546

– Buy Reliance Industries with a stop loss of Rs 1,262, target at Rs 1,300

– Sell Kotak Mahindra Bank with a stop loss of Rs 1,511, target at Rs 1,450

Prakash Gaba – prakashgaba.com

– Buy MindTree with a stop loss of Rs 695, target at Rs 730

– Buy Bata India with a stop loss of Rs 1,460, target at Rs 1,510

– Buy Bharat Electronics with a stop loss of Rs 97, target at Rs 108

Also, track all live market action on CNBC-TV18 Market Blog

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

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

CLSA: Capital infusion in PSUs a plus but push on rate cut a risk

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

Listen to the Article (6 Minutes)

Finance minister Nirmala Sitharaman on Friday announced key reforms for foreign portfolio investors (FPIs), public sector banks and the auto sector among others. An upfront recap of PSU banks within budgeted levels, refinancing lines to housing financiers, and support for a credit guarantee for non-banking financial companies (NBFCs) are three of the key positives from the announcements, CLSA said in a research report.

The report said: “Capital infusion of Rs 700 billion in PSU banks is to be upfront rather than late in the year. This would mostly be via recap bonds, so it would be cash and fiscal-neutral.”

“For HFCs [housing finance companies], the National Housing Bank will provide an additional refinancing line of Rs 200 billion over and above recent refinancing of Rs 100 billion. This would provide additional liquidity to HFCs at a cost of 8-9 percent,” the report added.

Further, the brokerage noted that the NBFCs will be permitted to use Aadhaar-based KYC to speed up the process, which it contends, should reduce costs and improve efficiency for NBFCs and HFCs.

“PSU banks will work closely with NBFCs on a co-origination model to ensure that NBFCs’ reach and banks’ funding can be leveraged. This should be positive for credit to SMEs [small and medium-sized enterprises] and commercial vehicles/auto loans,” the report added.

Meanwhile, the potential negative factor that the brokerage is largely concerned about is the repo rate. “So far, RBI [the Reserve Bank of India] has lowered the repo rate by 100 basis points but banks have cut term deposit and lending rates 20-25 bps. We expect transmission to continue, supported by easier liquidity,” said CLSA.

It added: “While the government has not directly asked banks for a commitment to cut rates, moral persuasion can be a risk to margins. We need to see how banks manage this in a margin-neutral way.”

“A 5 bps lower margin can drag FY20 sector earnings down 4 percent.”

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