No Letup for Indian Real Estate despite Government Boost
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No Letup for Indian Real Estate despite Government Boost

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The Indian real estate market has been a flux over the past year or two due to a variety of reasons, after growing at record rates for much of the previous decade. The slowdown in the Indian economy in addition to the credit crunch instigated by the bad loans in the books of many banks has kept the real estate market down. The Indian government had tried to shore up the industry through a range of boosts, but according to an analysts’ poll run by Reuters, the real estate industry is going to remain cool for the foreseeable future. The Indian government had slashed the sales taxes on residential purchases, but even then analysts do not believe that the industry is going to witness a boost in the short term.

The credit crunch has been the biggest hurdle for real estate companies, which depend on loans to develop projects and in the absence of those loans, the industry has nosedived. It is a far cry from the heady days of the past decade. In addition to that, analysts predict that the prices of houses are going to rise by only 1.3 % in 2019. Back in November 2018, the same real estate market analysts had predicted a growth of 2%.

The fact that India is going to have its election this year has also added to the uncertainty in the real estate market. The head of Anarock Property Consultants, Anuj Puri said, “It is no secret that in the past, funds parked by political parties in real estate were sucked out of the system to finance their campaigns – and the market is currently facing a serious liquidity crunch. The period leading up the upcoming election could prove to be stressful for the overall real estate market.”

These may be the primary reasons behind the slowdown in the once-booming real estate industry in India, but many analysts also believe that the market was fundamentally overvalued and it is only after the onset of the credit crunch that the industry has cooled. The Indian head of consulting at Colliers International said as much, “Most markets in India are overpriced. We Indians love to invest in real estate, and the prices are largely driven by that same sentiment. But if you look at Mumbai and Delhi markets, it completely defies logic.” Mumbai and Delhi are two of the most expensive real estate markets in Asia.

Trading News

Delegators of US and China are Approaching Close to End Trade Deal on All Tariffs on Chinese Goods

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The US and China negotiators are very close to reach out to a deal to end the trade war. The Trumps administrator is thinking of withdrawing almost entire tariff hike on the Chinese products. The US can only remove the tariff hike if and only if China abides by its promise of protecting intellectual property rights and purchasing American goods, sources informed to Wall Street Journals.

There are important issues that still remain to be settled; meanwhile, the deal is still in discussion. US and China have agreed on a deal that needs Beijing to buy larger American agricultural goods, energy goods and seeks to remove some barriers that do not allow American Companies to operate in China. If China accepts the above condition, then the US is ready to remove its tariff hike on Chinese goods of worth 200 billion dollars out of 250 billion dollars of Chinese imports which are currently under the American charges.

One of the most important sticking points is whether the tariffs should be immediately withdrawn by the US or should the US wait for a little more time so that they can keep an eye over China and see whether it is following its promise, the sources mentioned. The US seeks to go ahead with the threats of tariffs hike to pressurize China and to make sure that China does not back out of the deal and withdraw the taxes completely when Beijing has implemented all the promises made in the agreement.

During the ongoing negotiation, the US had urged China not to bring in World Trade organizations cases in response to the US tariffs which needs to be levied so as to execute the deal, a person familiar with the talks informed.

The Summit Dates between the US President Trump and Chinese President Xi still needs to be finalized, delegates from both the side stated. The Wall Street Journal reporters had earlier mentioned the summit date to be on March 27 so as to end the trade war.

Sources say that China has presented that it will reduce the tariffs on Chemical, US farm, auto and other US products. Few sources also say that China may purchase natural gas of worth 18 billion dollars and also promises to speed up the process of withdrawing foreign ownership limitations on ventures namely Auto industries and to decrease the tariffs on imported vehicles by less than 15 percent, Wall Street Journal reports suggest.

Meanwhile, Trump along with his Economic team members have given a positive signal of reaching out a deal and sealing it. Earlier, Trump had extended the plan of increasing the tariff hike on Chinese goods that was supposed to take place on March 1.

On Friday, citing the delay over the tariff hike, US President had mentioned Beijing to remove all tariffs immediately that are levied against the US agriculture products.

The U.S and Chinese delegates are regularly in touch with each other through phone or video conference to strike the details of the deal.

However, the Trump administration is pressurizing China to approve the enforcement mechanism so that if China fails to keep its promise, then the US can immediately impose the tariffs hike on Chinese goods. Trump was accusing China of illegal trade practices for a year now and also delaying the promise of moving the economic power back to the US.

The Chinese delegates have offered to increase the purchases of American goods by around 1.2 trillion dollars for the next 6 years, a person familiar with the negotiation stated. But, it is still not known how Beijing is going to follow it if the tariffs hike will not be lifted along with other trading barriers, the person added further. In 2017, China had purchased around 130 billion dollars of US goods, reports according to the US figure.

Silicon Valley Remains Wary Of Washingtons China Concerns
Opinion & Analysis

Silicon Valley Remains Wary Of Washington’s China Concerns

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An increase in the government’s scrutiny of Chinese investments, especially in Silicon Valley has prevented many deals from taking place. In fact, many deals are not even being considered. After many years of growing ties between Silicon Valley and China, the United States tech capital finds itself caught between the rising tensions between Washington and Beijing. The trade wars between the world’s largest economies will establish who will get to create the next generation of communication technologies.

Michael Wessel who is a commissioner of the U.S.-China Economic and Security Review Commission said that China’s innovative efforts have been deep and broad. He also said that China plans on becoming the next global innovation leader and it is trying to achieve this by taking legal as well as illegal paths.

The charges filed against Huawei, a Chinese telecommunications company by the United States justice department has also caused a point of conflict. Huawei’s Chief Finance Officer faces extradition from Canada to the United States on fraud charges filed by the U.S. government. Last week, in Barcelona at the Mobile World Congress, Huawei and U.S. officials lobbied world leaders about whether the Chinese telecommunications company can be trusted or not.

The U.S. government has concerns about China and how it plans to attain technology dominance as per its Beijing’s Made in China 2025 plan. Other than subsidies for research, development and industry, the U.S. government believes that the plans include massive cyber hacking plans in order to force technology transfers, steal corporates and so on.

The U.S. government is looking at setting up new barriers as it believes that certain technologies like robotics and artificial intelligence are critical to national security.

According to Parag Khanna, the author of “The Future is Asian,” avoiding working with China will reduce the access that the U.S. has to information about what the country is up to. There is also a greater chance that China will find more reliable partners and thereby cut the U.S. out of the entire market.

Tim Draper, a venture capitalist in Silicon Valley, was among the first to invest in Baidu, a Chinese technology firm.  He says that both countries can benefit by having open communication without putting up barriers. Chinese technology firms are trying to build 5G networks across the world which offers Beijing opportunities for upping their game in electronic surveillance. The high stakes have made it impossible to predict how China and the U.S. will come to an understanding. Meanwhile, investors and entrepreneurs in Silicon Valley are reducing their cross border investments at the moment.

Regulators in UK and US Create a Bridge for Derivatives
Trading News

Regulators in UK and US Create a ‘Bridge’ for Derivatives

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The United Kingdom and the United States entered in an agreement on Monday for a long-term pact to ensure that the $2 trillion a day transatlantic derivatives market remains uninterrupted by Brexit. The transactions in London and New York account for 80% of all global off-exchange trade contracts.

Derivatives are extensively utilized by companies to protect themselves against unexpected fluctuations in borrowing costs, currencies or raw material prices. However, at present, derivatives trading in the UK confirms no rules written by the European Union, which is set to exit on March 29. Bank of England Governor, Mark Carney told reporters on Monday that the derivative traders in the market can be confident that the trading between the UK and the US will not be affected even by a no-deal Brexit, and the high standards will continue to prevail.

Christopher Giancarlo, Chairman of the US Commodity Futures Trading Commission (CFTC), stated that the agreement highlights London’s status as a global financial center for a long time to come. Measures announced on Monday by the CFTC, the UK Financial Conduct Authority and the Bank of England were aimed at reassuring markets that derivatives will not be affected even if there is a “hard” Brexit. He also added that the London derivatives market could not be readily replicated anywhere else.

Giancarlo assured that these measures provide a “bridge over Brexit” through a sustainable regulatory framework which the booming transatlantic derivatives market may continue and endure. He said that the steps taken are to ensure continuity, and will be implemented regardless of the form of Brexit, and are taken from a long-term perspective. Time for Brexit is ticking away, with just a month to go, however, uncertainty over an exit with transition agreement continues to threaten with economic disruption.

The transatlantic deal makes room for both, trading and clearing of derivatives, by institutions like the London Stock Exchange’s LCH clearing arm, ICE and CME. Andrew Bailey, Chief Executive Officer of the UK’s Financial Conduct Authority, claimed that the agreement is an indication that they want economic cooperation to continue.

Head of the global derivatives industry body, ISDA, Scott O’Malia opined that the agreement between the US and the UK would ensure safe, efficient and uninterrupted functioning of the market.

The European Union, too, has taken steps to ensure cross-border derivatives clearing are not affected in a “no-deal Brexit” scenario, as London dominates clearing of euro-denominated interest rates swapping. However, it still needs to strike a long-term relationship. Police Chief of City of London financial district, Catherine McGuiness said it is extremely important that the EU regulators immediately address critical issues that might arise after a no-deal Brexit, like the continuity of derivative transactions.

Steps taken by the US are permanent covering derivative transactions, while those taken by the EU are temporary and cover only clearing. Meanwhile, EU regulators are framing stricter requirements for foreign clearing houses that want to cater EU customers by insisting it could tell them what to do in a crisis, a step which both UK and US are opposing. This is being considered as an attempt to coerce some derivative businesses to move in the EU.

Company News

Air France and KLM put an end to the long power struggle, agree to have closer integration

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Air France and KLM have to manage to agree on strengthening ties between the airlines, putting an end to a power struggle that had been bothering the Dutch government, staff, and shareholders.

In the process, Air France has secured a salary agreement with pilots after an elongated protest which saw them college strike last year, which caused €335 million ($380 million) to evaporate from the 2018 profits. The truce between the two airlines was declared on Wednesday morning by company officials.

Specifics of the deals, however, weren’t released, though the group Chief Financial Official Frederic Gaygey stated that the Air France-KLM plans would boost both the companies’ prospects despite high fuel prices and other obstacles ahead. Gaygey also said that the group was “absolutely not” considering a merger between the two airlines completely.

The Franco-Dutch airline group pledged new efficiency games to tackle higher fuel costs this year with a motive to deepen cooperation between two of its main careers, Air France and KLM. While presenting 2018 earnings of the group, Chief Executive Officer Ben Smith assured Better coordinated network and fleets after subsiding KLM resistance against closure integration with Air France in a new deal. Smith said these achievements pave the way for the group’s ambition to regain a leading position in Europe and across the globe.

Rivals like Lufthansa and British Airways continue to maintain a profitability lead on Air France and KLM due to restrictive French union deals, and strikes that took away a substantial chunk of profits last year forcing out the previous CEO. Ben Smith joined the group, hit by internal conflicts in September 2018. Smith, an ex-Air Canada veteran, has successfully resolved labor issues by granting wage hikes in return for increased flexibility, which now give hopes to make better and more profitable use of the group aircraft and networks.

The board of Air France-KLM has also agreed to reappoint Pieter Elbers as KLMs chief executive officer.

Ben Smith met with the Dutch government Ministers of Finance and infrastructure last week to discuss the future of the Air France-KLM alliance. Dutch Prime Minister Mark Rutte, while addressing journalists in a press conference on Friday, said that it was extremely important for the Dutch economy that KLM functions well. However, he refrained from giving out any details from the discussion between his Ministers and Ben Smith. He further added that the esteemed organization was out of danger though not functioning as brilliantly as other airlines.

As per the new deal, Air France pilots will get a 4.3% hike in return for concessions including extended flexibility on leave and sharing routes with KLM. The dominant SNPL pilots union signed the deal after received 85% support in a ballot.

Conflicts between the two flagship airlines began last year as Smith, after his appointment in September, started pushing for a more concerted decision making between the two brands as well as his seat on the KLM board. This development encountered resistance from KLM’s workforce, including CEO Pieter Elbers. Due to this, a possible departure of Elbers started to hover especially after his contract would expire in April. This led to a show of public support by the Dutch career’s employees last week, which triggered talks between Smith and Dutch ministers.

Consumer Price Rates
Opinion & Analysis

Consumer Price Rates in US Constant Throughout January

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Consumer price rates were constant throughout January 2019 as lessened gasoline prices counteracted the effect of rising costs of housing, clothing and medical care.

The labor department said that the Consumer Price Index increased only 1.6 percent which is less than its increments in previous years. Last year, CPI increment was 1.9 percent.

The price hike has been tampered by 10.1 percent jump over the previous 12 months in prices at the gas pump. But the dominant part of the Index, which is housing expenses, have risen 3.2 percent.

When volatile energy and food categories are excluded, core prices get an increment of 0.2 percent for the fifth month in a row. It can be said that for the third consecutive month, core prices were 2.2 percent up as compared to the previous year.

Clothing costs got the largest gain in the previous 11 months. It jumped 1.1 percent every month. Moreover, medical care services increased 0.3 percent which was quite close to housing costs increment every month.

Inflation is still in its average form instead of a tightened labor market. Furthermore, this tightening of the labor market is the result of gradually slowing of economic growth in countries like China and Europe. Ultimately, this moderate form of inflation and slow economic growth of these countries are helping in lowering the oil price rates.

Gasoline prices dropped 5.5 percent in January 2019. Also, Gasoline price rates fell 5.8 percent in December. Moreover, food price rates got a hike of 0.2 percent in January month of this year. Though, food price rates got 0.3 percent increment in December month of last year. Food utilized at home showed a 0.1 percent hike in the last month.

Residential rent, which is the money that a homeowner pay to rent or receives when he rents his home, got a hike of 0.3 percent in the last month. Though, it was 0.2 percent in December month of last year.

The Federal Reserve is looking towards various strategies to increase interest rates. Since inflation is at a lower level, there is less pressure on the Federal Reserve as it is continuously increasing consumer price rates in order to accelerate economic growth.

Trading News

As Hopes on Trade Talks Rise Asian Stocks Reach 4-Month High

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There is great optimism that the US and China will be able to come to a deal and resolve the seven-month trade war between both countries. Due to that sentiment, the stocks in the Asian markets which were fluctuating mostly in the negative side rose to a 4-month high on Wednesday.

At the market:

The Beijing and Washington officials are hopeful that the talks which will begin next week will bring them closer to deal over the trade war and that cheered the markets.

The Shanghai Composite which is China’s benchmark and CSI 300 which is a blue-chip rose to 0.4% and the Hang Seng of the Hong Kong market increased by 0.6%. Asian markets rose on indications from the Wall Stress where Nasdaq and Dow rose by 1.5% over the positive outcome of trade talks between China-US. Wall Street was also optimistic as the possibility of another government shutdown became less due to a tentative deal with the US Congress.

Asia-Pacific broadest index MSCI increased by 0.5% and reached its highest since October 2018. South Korea’s KOSPI rose by 0.5%. Meanwhile, Nikkei climbed by 1.3% to reach a two month high.

In the currency market, the dollar was shedding as investors in the hope of a deal between China and the US moved their money to assets that are riskier. The dollar after reaching a two week high stood at 96.69.

The Euro ended a little higher by gaining 0.5% from yesterday and ended at $1.133 surpassing the 3-month low of $1.1258.

The Reserve Bank of New Zealand confined the cash rate at 1.75% which is a record low and highlighted its neutral stance. The Kiwi dollar increased by 1.4% and reached a one week high of $0.6829.

The dollar was steady at 110.57 yen.

Another major development that happened overnight in Wall Street is that the Cboe Volatility Index dropped to its lowest in more than four months and was at 14.95. The yields of the government bonds rose due to the risks being averted for the time being. The 10-year bonds of the US Treasury increased to a high of 2.694%.  The US crude oil futures also increased by 0.1% and was at $53.64 per barrel after it rallied at 1.3% on Tuesday.

There was an increase in oil prices as the data published by OPEC showed that there was a reduction in oil production in January. Moreover, Saudi Arabia which is a leading member in OPEC said that it would cut its output in March additionally by 500,000 barrels.

Company News

Financial Technology venture fund Augmentum invests 7.5 million pounds in small business lender Iwoca

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Aimed at funding balance sheet expansion and accelerating growth of Iwoca’s product offerings and market share. The SME lender will use its award-winning technology to break the barriers obstructing access to finance for over 20 million European small businesses. While many firms are addressing the SME lending market, very few have a credit-product as advanced as Iwoca. Their industry-leading analytics and financial technology give them a competitive edge others will find hard to replicate.

The investment is preceded by another 7 million pounds invested in three European Financial Technology which are Tide, Previse, and DueDil as well as a 2.5 million in Unmortgage. The fintech venture capital firm Augmentum confirmed that these investments would allow exponential growth in the financial technology market worldwide. Augmentum is a unique fintech-focused venture capital firm in the UK, having launched on the main market of the London Stock Exchange in 2018. It gives various businesses access to patent funding and support, unrestricted by conventional funding timelines. The conglomerate of finance industry professionals specializes in investing in initial stage fast growing financial technology start-ups. They have globally selected a pool of disruptive start-ups that are innovating the banking, insurance, asset management, and wider financial sectors.

Iwoca is dedicated to providing fast, flexible source of business finance for all UK and European continental businesses. Their expertise range from retailers, restaurants, hotels to service providers that use Iwoca’s platform to fund various financial problems such as bridging short term cash flow gaps to investing in stock opportunities. From new start-ups to established businesses, Iwoca helps businesses from all walk of life secure funds and keep their ever going concern running. However, you must have a UK-based business and operate as a sole-trader, partnership or limited company to be eligible for membership. Start-ups on this lending platform have a limit of 10,000 pounds. Iwoca sheds visibility into the firm’s online accounts and bank statements, VAT returns and company accounts. Once approved, loans are transacted quickly without the usual complex paperwork which is synonymous with traditional business loans. The financial technology firm has funded more than 25,000 small and medium enterprises across UK, Germany, and Poland. This investment from Augmentum will give much-needed momentum to Iwoca and other financial technology start-ups that are looking for funding across the European continent.

Chinese Economy Grew
Opinion & Analysis

Chinese Economy Grew the Lowest since 1990

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China has officially declared that its economy has grown at 6.6 percent in 2018. It is the slowest growth of the Chinese economy since 1990.

The experts highly anticipated this official announcement all over the world amidst on-going talks with the United States on trade and tariffs.

Economists also have predicted that the Chinese economic growth would fall to this level from the 2017 level of 6.8 percent.

The fourth quarter has seen the lowest 6.4 percent growth, as expected. The fourth quarter growth in 2017 was 6.5 percent.

As per Chinese official data, there also few spots where the second largest economy has the edge. Industrial output grew 5.7 percent in December from a year earlier as the economists have expected growth of 5.3 percent. And the November’s industrial output was 5.4 percent.

Retail sales data rose 8.2 percent in December on-year, in line with a forecast and rose from November’s 8.1 percent gain.

Helen Zhu, head of China equities at BlackRock said the exporters are now trying to get the goods out of China to the United States before the new tariff regime starts. Though the economy is experiencing a deceleration, the vital hope for China is the exports.

She also told that she had expected support to the economy by increased Chinese Consumption and tax cuts. But, she reaffirmed that the growth for 2019 would be lower than the figures of 2018.

It is curious to know that some people have their reservations regarding accepting the Chinese official records of GDP growth. The veracity of the figures issued by the Chinese agency is yet to be proved.

Julian Evans-Pritchard, senior China economist at Capital Economics, a research house said the official GDP figures from China are so stable that it won’t be a proper picture of Chinese economic preference.

He also added that the service sector had been strengthened in the last quarter.

Chinese statistics bureau chief Ning Jizhesaid that the trade war with the United States has affected the domestic economy, but the impact is manageable. As per one report, the uptrend in the Chinese economy is happening due to the rise in the domestic demand.

Even before the China- U.S trade war, China was trying to manage the slowdown in its economy.

China is now trying to balance a crackdown on high debt levels while also maintaining economic growth. It is also trying to reduce the reliance on the debt would benefit the economy in the long run, it likely means a far slower pace of growth than the country has seen in recent years.

While as per the official data released the Chinese economy fared well for most of the months in 2018, but now the economy appears to be slowing down.

The two largest economies after a series of conflicts between them on trade practices finally agreed to make a deal out of this. China has offered a six-year boost in imports during its ongoing talks with the U.S., as per the sources. China also has promised to buy more goods from the United States which will be working as a boost Trumps’ electoral promises.

WEF Founder
News

‘Inclusive’ Approach Needed for Globalization Says WEF Founder

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This year’s World Economic Forum in Davos starts in a week with the theme being Globalization 4.0: Shaping a new architecture in the age of the fourth industrial revolution. Many top executives and leaders from around the world attend this conference every year, and ahead of this event, the WEF founder has advocated the heads of state to draw an inclusive approach to globalization. This statement may have also been partly because of the ongoing political tensions among the major economic powers of the world. The Global Risks report was released by WEF earlier this week and a warning of an impending slowdown in the economy. The recent times have seen many geopolitical disharmonies which include the trade disagreements, Brexit, a slowdown in the Chinese economy, troubled international relations and much more.

Globalization has been the buzzword for many decades now, and that has helped both the developed countries as well as the developing countries with better economic growth. However, in recent years, globalization has taken a beating with many leaders taking a populist stand against it. That has disrupted migration as locals have started voicing their disapproval over lost jobs due to offshoring and automation as well as the closing of old industries. Keeping in mind these sentiments of the people the executive chairman of WEF Klaus Schwab told reporters that ‘We have to define a new approach to globalization which is inclusive.’ He also added that there is a need for moralization or demoralization of globalization and make it more sustainable and inclusive.

He further added that ‘Globalization has produced many winners and losers and there are many more winners, but now we have to look after the losers.’

Top leaders give Davos a miss:

This conference attracts the top executives from all over the world, this year some 3000 government, business, and other spheres are going to be in attendance. However, what is noteworthy is that some of the heads of states of leading countries like German Chancellor Merkel. Japanese PM Shinzo Abe, US President Trump, Italian PM Giuseppe Conte, French President Emmanuel Macron, Britain PM Theresa May, heads of India and Russia are not attending this event. Despite the absence of these top leaders, there is no loss of status as this is still a great stage for politicians to display their agenda.

There will be many executives like Chinese Vice President Wang Qishan, British Finance Minister Philip Hammond who will be looking to reassure top businesses. There is already growing anxiety over various affairs like tension in international politics, economic slowdown, fall in stock markets, which the leaders will seek to address in this forum and give the investors some confidence.