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Opinion & Analysis

Japan’s Manufacturing Output In March at Its Lowest Since 2016

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The manufacturing activity in Japan fell to its sharpest and lowest growth since 2016 as demand for the products fell both abroad and locally. As per the Purchasing Managers’ Index, PMI it was a little better than February but was still below the 50 point level which distinguishes from expansion and contraction.

What is PMI?

The Purchasing Managers Index is got from surveys conducted on private companies and is an indicator of the economy which is derived based on the data. A survey is conducted on up to 400 purchase managers from different domains of the manufacturing sector based on factors like new orders from clients, inventories, backlogs of orders, production, employment, and supplier delivery speed.

As per the March data, the new orders from customers both overseas and local fell and was the worst performance since 2016. The survey also indicated that companies had stopped hiring and resulted in the lowest job creation since November 2016. Additionally, the new orders and sales from its Chinese and Taiwan clients also fell.

Reasons for slow growth:

The PMI index for March was at 47 which is slightly above the minimum 46.9 and below the February data of 47.4. As per leading economist at IHS Markit Joe Hayes Japanese companies are in a tough situation due to global as well as local factors. PM Shinzo Abe due to the weak economic outlook and uncertainty has put off the hike of national sales tax to 10% from the existing 8% and also had to push the fiscal reforms on the back burner.

There is less demand locally and globally while the economic situation is not conducive either.

The US-China trade war is not just impacting China but also on Japan as most of the Chinese manufacturers obtained parts and other equipment from Japan. That has had a major impact on the demand from China. Other than China, Europe is the other leading overseas customer which is also in a downturn.

Economist Joe Hayes said ‘The likelihood of the negative trend in output being stymied anytime soon appears slim, with demand for goods from both domestic and international sources waning further. Asian goods producers face headwinds from slowing growth in Europe and China, while global trade risks are yet to be mitigated by a breakthrough in US-Sino relations’. He further added that the manufacturing companies due to this economic situation are ‘fiercely challenging’ due to slow growth.

Chainalysis Gives Clarification about Allegations Made by Coinbase
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Chainalysis Gives Clarification about Allegations Made by Coinbase

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In the industry of blockchain intelligence, Chainalysis is one among many high-profile companies and a well-known blockchain analytics firm that is situated in New-York. To allow law enforcement agencies, companies and governments to supervise transactions done by blockchain and keep track of any suspected illegal activities, it offers technology tools like proprietary Know Your Transaction. Illegal activities such as offering finance to terrorist and money laundering are tracked by this tool.

There were claims made that this type of firms that offer such tools might be circulating their user’s details. This allegation came to light in February last week when the controversy about acquisition made by Coinbase about Neutrino which is another blockchain analytics firm backlashed. In an interview, the senior executive of Coinbase gave the justification about the acquisition by claiming that their Coinbase’s previous intelligence tool suppliers had intentionally sold their users’ database to the third parties.

This allegation made by Coinbase about Chainalysis was clarified when Chainalysis issued an official statement which stated that their tool neither collects nor sells user’s personal information while it is providing services to digital currency exchanges.

To give the details about the service operations to the exchanges that are their clients there is a phrase known as Know-Your-Transaction (KYT) in Chainalysis. The clients are supposed to submit their transaction details by entering into this programme so that they can plug-in to the Chainalysis’s dataset.

Quite unambiguously Chainalysis had written on the topic of personal information of customers’ users that any connection from the transaction that happens among the person or the people who are involved in that transaction should be done externally and not on Chainalysis since the personally recognizable information from the client exchanges is not collected by them.

The executive of Coinbase did not express exactly which of the past intelligence companies had sold the data, but Chainalysis made it very clear that their firm does not need to store any information to carry out transaction analyses. Hence, there is no chance of them circulating any sort of personal information.

The statement made by Chainalysis continued further to say that they are focusing on targeting transactions depending on “indicators of risky behavior.” This type of destination addresses is known as ‘illicit entities’ such as terrorist funding organization or darknet market. Therefore, the main motive of the company’s blockchain analytics tools is to monitor transaction database of service-level and not to label each wallet of every user.

Ping An Bank The Best Performer This Year
Trading News

Ping An Bank: The Best Performer This Year

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Ping An Bank Co., a Chinese bank is performing at its best at the moment after its dismal performance last year. This has given hope to the investors that the strength of the lender in retail banking will help shoulder the country’s economic slowdown. Ping An Bank shares went up by 39 percent this year. This is the largest gain seen on the CSI 300 Banks Index. According to the analysts in the industry, the bull run will probably continue. The rise of share prices has stoked demand for its $3.9 billion convertible bond sale, which offers nearly 1,400 times the amount.

With Chinese banks benefiting from the pledge made by policymakers for regulatory and capital support, China Merchants Bank Co. and Ping An Bank are reaping the rewards for their concentrated focus on retail banking.  The sector is dominated by the Shenzhen based lenders where competition is slightly less fierce and offers higher returns than in the corporate lending sector.

According to Liao Chenkai, an analyst at Capital Securities Ltd, investors are open to paying a premium to retail banking even during the economic slowdown as it is less recurrent than wholesale banking. He also mentioned that although China Merchants Bank and Ping An have a lot in common, the former bank trades at a higher premium which will probably cause Ping An bank shares to rise further.

China Merchant Bank shares were traded at almost 1.6 times its forecast price while Ping An shares were traded at almost the same forecast price.  The transition of Ping An Bank from corporate to consumer backing began in the year 2016, several years behind the China Merchants Bank. At the tie, retail contributed only forty-one percent of its profit. When the share prices rose to 68 percent in 2018, the bad-loan ratio of Ping An Bank stood at around 1.05% which was lower than the corporate lending bad-loan ratio at 2.49 percent. However, Ping An Bank’s return on equity remains at eleven percent which is lower than the sector’s average, as the bank continues its transition.

The fourth quarter net income of Ping An Bank beat market expectations and triggered a rally among the mid-sized banks in the country. China International Capital Corp. has forecasted about 17.6 percent gain compared to the average 9.4% for China listed banks. According to analysts, retail banking is bright at the moment due to its ability to being less capital consuming and able to provide earnings stability.

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Oil Price Fall As U.S. Inventory Goes Up

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Oil prices dropped on Wednesday as a result of the bullish output forecasts by two of the biggest U.S. producers. The OPEC led production cuts that led to a buildup of weekly U.S. crude oil stockpiles also had a role in the oil prices falling on Wednesday.

International Brent crude futures dropped 39 cents to $65.47 per barrel from their last settlement. Brent fell to its lowest point at $65.22 on Wednesday earlier in the session.  

The U.S. West Texas Intermediate crude oil futures also went down by 0.7 percent to $56.15 per barrel.

According to Benjamin Lu, an analyst at Philip Futures, a Singapore based brokerage firm, crude oil futures will continue to have trouble as markets try to balance between rising U.S. production levels and OPEC led cuts. He also said that the rise in event-driven trading was also responsible for increasing market volatility.

Exxon Mobil Corp and Chevron Corp released Permian Basin projections on Tuesday, which pointed to increased shale oil production.

This will result in cementing the two companies as dominant players in New Mexico and West Texas field, with at least one-third of the Permian production coming under their control in the next five years.  American Petroleum Institute released data that showed a larger than expected gain in U.S. crude stockpiles.

U.S. crude inventories went up by 7.3 million barrels in the last week. This showed an increase of 1.2 million barrels compared to analysts’ expectations. According to Kim Kwang-Rae, an analyst at Samsung Futures, Seoul, saw a rise in U.S. crude inventories weighs heavily on oil prices. Rising concerns about the increasing oil production in the Permian region is also another reason for dropping oil prices.

U.S. Department of Energy’s Information Administration will be releasing official data later on Wednesday.

The rise in oil production in North America undermines the efforts led by OPEC (Organization of Petroleum Exporting Countries). U.S. crude oil inventories have gone up by 7.3 million bpd last week alone.  OPES and its allies had pledged to reduce its output to 1.2 million bpd (barrels per day).

With the ongoing U.S- China trade talks, the market is on the lookout for further signs for resolving the conflict between the world’s two largest economies. According to Mike Pompeo, U.S. Secretary, the U.S. President Donald Trump is not willing to accept any deal that is not perfect. However, Trump is open to work until an agreement is reached with Beijing.

Jeff Bezos Bill Gates and Warren Buffet
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Jeff Bezos, Bill Gates and Warren Buffet Top Richest Person of World, Mark Zuckerberg Down by 3 Positions – Forbes List

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The founder of Amazon Inc., Jeff Bezos holds the top position as the world’s wealthiest person; he is ahead of Bill Gates and Warren Buffet in the Forbes List, data according to recent Forbes list of the extremely wealthiest person. Meanwhile, the Facebook co-founder has slipped by 3 positions, and former New York Mayor Michael Bloomberg has climbed by two positions, the US President Donald Trump has jumped to 51st position in the Forbes ultra-ranking list.

Things seem to be significantly good at the top in the ranking. As per the Forbes list, that was published on Tuesday by Forbes mentions that Jeff Bezos who is 55 has remained at the top position and has increased his wealth by $19 million in a year, and as of now his wealth is around 131 billion dollars.

Jeff Bezos holds 16 percent of stake in Amazon. The left wing of the US Democratic Party is targeting him because of his wealth that has increased the money gap between Bezos and Gates.

Bill Gates is the founder of Microsoft and a philanthropist. He is 63 and has observed his wealth increasing to $96.5 billion which has climbed up from 90 billion in the previous year, Forbes stated.

Interestingly, the Forbes ultra-rich list has been dominated by Americans. Out of the top 20 billionaires, 14 billionaires are Americans and are from the US.

According to magazine prediction, Warren Buffet’s holding has decreased by 1.5 billion, and now the worth is 82.5 billion dollars. He is at third place in the Forbes list; 88 years old Buffest is believed to be an investment guru. He was shocked in February to see a huge downfall in the shares of Kraft Heinz, which is a US processed food producer, the firm in which he had invested and held money.

French Luxury good company LVMH CEO, Bernard Arnault has been at 4th position, however, Facebook founder Mark Zuckerberg has nearly lost 9 billion dollars of his net worth and has moved down to 8th position. Earlier, he was at 5th position in the Forbes list.

Mexican tycoon Carlos Slim has overtaken Mark Zuckerberg, Zara and Inditex founder Amancio Ortega of Spain and Larry Ellison-the co-founder of Oracle. With that, Bloomberg moved to 9th position from 11th position as his company worth rose to 55.5 billion dollars, Forbes stated.

Other billionaires who are included in the top 20 billionaires list are non-Americans namely, Mukesh Ambani who is the Chairman of Reliance Industries. He is ranked at 13th place and the Head of Chinese internet company Tencent, Ma Huateng has made his presence in the top 20 Forbes list.

While, the US President Donald Trump has been ranked at 715th position and according to the Forbes estimation, Trump’s wealth is at 3.1 billion dollars which has been the same from the previous year. Trump has been ranked at 715 in Forbes list, last year he was ranked at 766th position.

Donald Trump is not the richest person of US who has been elected to the highest post; rather the credit goes to a Democrat, J.B. Pritzker who took over the post of governor of Illinois in January. J. B. Pritzker who is the owner of the Hyatt hotel has valued his worth to be around 3.2 billion dollars.

Government of India and World Bank Sign 250 Million Dollar Deal
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Government of India and World Bank Sign 250 Million Dollar Deal; will Help Women by Boosting Rural Income Within 13 States of India

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On Tuesday, the World Bank and the Indian government sealed a deal of worth 250 million dollars for the National Rural Economic Transformation Project (NRETP). The deal will eventually assist women in rural households to build strong organizations related to farm and non-farm products. This will help women in rural households to switch to a new era of economic initiatives.

The main objective of the project will be to encourage and support the women-owned and women-led farm and non-farm organizations within value chains. The project will also assist women to develop a business which will help them to access finance, networks and markets while further creating jobs, as World Bank addressed in a statement.

An agreement was signed on Monday between the World Bank and the Government of India. The NRETP is further financing to 500 million dollar National Rural Livelihoods Project (NRPL) which has been accepted by the World Bank in July 2011. As of now, the NRLP has been executed across 13 states of India, 162 districts and around 575 blocks. The project has recruited more than 8.8 million women from poor rural section households into self-help groups (SHGs) of 750,000. The SHGs is associated with the Village Organizations of 48,700 and Gram Panchayat level Federations of 2900. The 13 states will receive the support under the new project which has been signed on Tuesday and later 125 districts will be included from across these states.

The 250 million dollar loan has a time limit of 5 years and the ultimate maturity of 20 years. The National Rural Livelihoods Mission (NRLM) was launched in 2011, and ever since the project has mobilized rural women into self-help groups.

The World Bank further mentioned that the NERTP could assist enterprise development programmes for rural poor women and also youth by developing a platform so as to access finance as well as start-up financing options so that they can develop their enterprises or collaboratively own enterprises and even control them.

Other important elements of the project consist of creating financial products by using digital financial services so as to support the small manufacturer collectively to scale up their business and to engage with the market.

The project will further strive to offer skills, technical assistance and investment support to enhance the women-owned and women-led manufacturer collectively to change farm and non-farm enterprises into premium quality like livestock products, fisheries and commercial crops.

As per the data, these groups have borrowed almost 30 billion dollars from commercial banks. The new project will also help youth skills development which has associated with Deen Dayal Upadhaya Grameen Kaushalya Yojana. Point to point learning within states and communities was a good strategy within NRLP and this will also be implemented in this project.

The objective of National Rural Livelihood Mission (NRLM) is to eradicate rural poverty and generate opportunities for livable livelihood across rural societies by supporting sustainable community based organizations which will in-turn promote economic and financial services for the poor of rural society, Sameer Kumar Khare-the additional secretary for Department of Economic Affairs and Ministry of Finance mentioned. Further adding to this he said, the additional funding will support us to offer motivation to the poverty alleviation measures and to secure fair and comprehensive growth in India.

The new loan agreement was signed by Sameer Kumar Khare being a representative of Indian Government, and Acting Country Director of World Bank of India, Hisham Abdo as a representative of World Bank.

GDP Slowdown Could Instigate Rate Cuts in Australia
Opinion & Analysis

GDP Slowdown Could Instigate Rate Cuts in Australia

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The Australian economy has been in doldrums over the past few months as growth came to a virtual standstill and the Gross Domestic Product (GDP) left a lot to be desired. In such a situation, an interest rate cut from the central bank is one of the most effective ways to cheapen credit and stimulate economic activity. According to reports, the Central Bank of Australia could actually go for rate cuts even though a senior member of the bank stated that it is unlikely. The numbers paint a sorry picture for the Australian economy, which is worth $1.3 trillion and it is believed that rate cuts could be in the offing soon.

The actual figures illustrate the dismal state of the Australian economy over the past year. While the estimated GDP growth for 2018 was 2.5%, it grew at only 2.3%, and it is interesting to note that domestic economic activity nosedived during the latter half of the year. GDP rose by only 0.2% in the fourth quarter and by 0.3% in the quarter before that. The poor show also sent the Australian dollar into a meltdown. Many investors believe that the rate cuts are coming and that could also be a reason behind the fall in the Australian dollar.

Andrew Ticehurst, who is an economist at Nomura has prepared a report in which he has stated that rate cuts are likely. He stated, “We think rate cuts this year, while not guaranteed, are now more likely than not. We expect another round of material growth forecast reductions from the RBA [Reserve Bank of Australia] and see an increasing risk that inflation continues to fall short of the target band for an extended period.” In addition to that, JP Morgan and Australia’s own investment banking giant Macquarie have also stated that a rate cut is likely. However, the most telling indication that a rate cut is likely can be gleaned by having a look at the interest rate futures. According to reports, the probability of a rate is now 100%. On Tuesday, that probability stood at 86%.

The fall in the GDP in the third and fourth quarters in 2018 is an alarming development. The last time that the GDP fell in two back to back quarters was in 2006. Philip Lowe, Governor of the RBA, is, however, optimistic about the future of the Australian economy and did not sound as gloomy as one would expect. Prior to the publication of the GDP data, Lowe had said, “The adjustment in our housing market is manageable for the overall economy. It is unlikely to derail our economic expansion.” 

Bernard Arnault the Owner of LVMH Defeats Warren Buffet as the Third Wealthiest Person of the World
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Bernard Arnault the Owner of LVMH Defeats Warren Buffet as the Third Wealthiest Person of the World

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Luxury goods investor Bernard Arnault has overtaken the Chairman of Berkshire Hathaway Inc. Warren Buffest to gain the title of third wealthiest person of the world in the Bloomberg Billionaires Index list.

Bernard Arnault is a Frenchman, who has added 14.5 billion dollars to his company so far during this year. And, now the worth of his fortune is 83.1 billion dollars, on Tuesday, he surpassed Warren Buffet by 100 million dollar so as to join the top richest list of the world and currently the third richest person ever since the launch of Bloomberg’s wealth ranking in 2012. He is the Chairman of Louis Vuitton Parent (LVMH) which is the only European company other than Amancio Ortega owned by Zara of Spain to be at the third position on the richest list.

Most of Arnault’s wealth is related to his fortune LVMH and Christian Dior. The shares of both the fortunes were increased by 20 percent during the current year and noticed record break sales amidst challenging slowdown in China.

Bernard Arnault’s 2018 profit matches to his opponent Jeff Bezos, the founder of Amazon who is the World’s wealthiest person. He has managed to add 15.2 billion dollars to his holding, and now the worth of the company is at 140.1 billion dollars on the index of Bloomberg. Mark Zuckerberg, the co-founder of Facebook Inc. had a good start in 2019; the company shares were jumping by 15.3 billion dollars.

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Popularity of Face Mask makes Koreans Billionaire

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With Korean face masks becoming increasingly popular, they have the ability to do wonders to your skin besides building fortunes like in Kim Jung-Woong’s case.

The growing importance given to skincare and beauty has helped a few Koreans amass plenty of wealth as customers look for the ever elusive dewy look. Large cosmetic manufacturers and banks have started noticing the impact of Korean beauty products.

In October 2018, the Goldman Sachs Group Inc acquired five percent of Kim’s GP Club Co. Ltd., a company that manufactures lipsticks, creams, and other beauty products and is valued at $1.3 billion. Kim Jun-Woong and his family own the remaining 95 percent of the company.

According to Son Moon-ho, Chief Operating Officer at GP Club, the investment bank had been following the company. The Goldman Sachs spokesman declined to comment about the deal.

Unilever spent around 2.27 billion euros in 2017 to acquire a majority of Carver Korea Co., a skincare product manufacturer. It bought out stakes held by Bain Capital, Goldman and the company’s founder, Le Sang-rok.

The Credit Suisse Group AG bought a three percent stake for about 40 billion won in L&P Cosmetic Co., the Mediheal mask sheet manufacturer.

South Korea is only a quarter of the size of Japan, and yet is the sixth largest exporter of cosmetics in the world in 2017, as per data provided by the Korea Trade-Investment Promotion Agency. In 2018, the company logged almost $4.6 billion of exports in the first 9 months. The demand from China has helped drive up the figure by almost 31 percent compared to last year.

Kim initially started off his career by selling cosmetics to Chinese wholesalers and establishing JM Solution, his own brand in 2016. It took off right from the beginning and gained popularity on Taobao, Alibaba’s e-commerce platform.

In 2017, geopolitical tensions struck the Korean beauty market after South Korea gave permission to the U.S. military in order to install the Terminal High Altitude Area Defense system to counter nuclear threats from North Korea. Beijing considered this move as a security threat and urged a boycott of Korean products.  Gp Club took advantage of these tensions to pull ahead of the competition.

The company also introduced new products like the Honey Luminous Royal Propolis Mask and lowered prices so that customers in mainland China were able to afford it compared to the foreign goods which were priced higher.

Total Monetary Penalty of 11 Crore Rupees Imposed on Four Banks by RBI
Bankruptcy

Total Monetary Penalty of 11 Crore Rupees Imposed on Four Banks by RBI For Delay In Executing Swift Software Directions

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The Reserve Bank of India (RBI) has imposed a total monetary fine of worth 11 crore rupees on 4 banks namely, United Bank of India, Karur Vysya Bank, IOB and Karnataka Bank for not implementing the directions on messaging software, Swift. RBI has already levied four crore rupees on Karnataka Bank, and now another fine of Rs 3 crore has been imposed by RBI on Indian Overseas Bank and United Bank. Apart from this, the regulators have fined Rs 1 crore on Karur Vysya Bank.

Karnataka Bank in a regulatory filing has mentioned that the Reserve Bank of India has imposed a total monetary fine of 4 crore rupees on the banks for not implementing four operational control related to the Swift messaging software.

Meanwhile, United Bank in an independent regulatory filing said that the alternative exchanges are hereby made known that the Reserve Bank of India has levied an aggregate fine of Rs 30 million on these banks. And they should deposit it within 14 days, citing the reason as non-compliance and violating the directions that were furnished in the RBI circular which informed the banks for time-bound implementation and for the enhancement of Swift messaging software and its four operational controls.

Over the delay in executing the directions that were circulated by RBI on February 20, 2018, RBI has imposed a fine of 3 million rupees on Overseas Bank, which is a state-owned bank. Further, the IOB also mentioned that the IOB Bank has taken the essential steps to strengthen the internal controls and to prevent from such setbacks.

The Karur Vysya Bank mentioned that the Central Bank (RBI) has levied a monetary fine of 1 crore rupees on the bank for failing to implement the RBI directions that were issued on Swift messaging software.

Moreover, the RBI circular states that to enhance the operational controls related to the Swift messaging software, it is very much essential that the banks must not delay in the implementation of directions, a Timely bound implementation is a necessity.

Meanwhile on Saturday, the four banks namely, Union Bank of India, SBI, IDBI and Dena Bank has informed exchanges about the monetary fine that has been imposed on them by the regulators for not implementing the directions related to Swift software.

RBI has imposed a penalty of Rs 3 crore on Union Bank, two crore rupees on Dena Bank and one crore rupees on both IDBI and SBI each.

Swift is the universal message software that is mostly used by financial bodies. Due to misuse of this messaging software, there was a fraud of Rs 14000 crore registered at the PNB bank. After the PNB fraud that was brought to light in February 2018, the RBI has been very strict on all banks so as to secure all the transactions related to the bank.