Indian and global market news and impact analysis India 1) Indias current account deficit — the excess of spending overseas than earnings — almost doubled in the September quarter on high gold imports, but the situation is not alarming as it was in early 2013 since the outlook for commodity prices, especially crude oil, is soft. The current account deficit (CAD) increased to $10.1 billion or 2.1% of the gross domestic product in the fiscal second quarter, up from $ 5.2 billion, or 1.2% of the GDP a year earlier. Significantly, the value of gold imports during the quarter doubled to $7.6 billion from $3.8 billion in the same period a year ago. The doubling of CAD is not worrying economists this time since sliding crude oil prices could more than offset the adverse effects of higher gold imports. Even the gold imports may not steadily climb since inflation is likely to fall. Madan Sabnavis, chief economist, Care Ratings said, Exports would be under pressure and while imports will benefit from low crude prices, gold imports would counter this benefit to an extent. Much of the rise in current account deficit has been on account of a sharp rise in gold imports. 2) The finance ministry has asked state-run banks to monitor top-level management changes at companies for warning signs about financial performance as part of efforts to monitor loans and take appropriate action before they turn into non-performing assets (NPAs), which swelled in September. A senior executive at a public sector bank confirmed the development and said the ministry would soon send round formal instructions. There have been preliminary discussions. We have been told by the ministry to keep a close watch on such accounts, said the executive. A ministry official said the issue will also be raised by its nominees on bank boards. Its a part of the early warning system to rein in bad loans. If banks feel a change in management can impact the firms business they should be asking the right questions. The central bank and the government have been looking to crack down on rising bad debt in order to ensure the financial health of state-owned banks. Bad loans at such lenders increased to 5.32% of advances at the end of September, compared with 4.82% at the end of the same month last year. Frequent changes at the top could suggest possible trouble at a company. Global 1) Chinas imports shrank unexpectedly in November while export growth slowed; fueling concerns the worlds second-largest economy could be facing a sharper slowdown and adding pressure on policymakers to ramp up stimulus measures. Exports rose 4.7 percent from a year earlier, while imports dropped 6.7 percent, the biggest drop since March, data released by the General Administration of Customs showed on Monday. That left the country with a record trade surplus of $54.5 billion, which analysts say could increase upward pressure on the Yuan even as exporters are struggling. Exports have been the lone bright spot for Chinas economy in the last few months, perhaps helping to offset soft domestic demand, but there have been doubts about the accuracy of the official numbers amid signs of a resurgence of speculative currency flows through inflated trade receipts. 2) The Federal Reserves vow to keep interest rates near zero for a considerable time is likely to remain in place for now, with the U.S. central bank set to take a slow and steady approach to its first rate rise in a decade. The pledge will be up for debate again when policymakers meet next week, with a strong jobs report bolstering the case of officials who want to remove it. But others feel it still has some shelf life, and even when officials drop it, they will almost certainly insert a placeholder to assure financial markets any rate hike is still a ways off. In October, the Fed restated the pledge, but also added in its post-meeting statement that a rate hike would come sooner if the economic data was strong, and later if it wasnt. JPMorgan economist Michael Feroli said in a research note last month that it made sense for the Fed to keep the phrase now that it has been neutered by the addition of the sentence that indicates faster progress would bring earlier rate hikes, and slower progress would bring later rate hikes.
Posted on: Tue, 09 Dec 2014 05:59:14 +0000
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