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Review: Fed cuts bond buying, still wary about labor mkts


The Federal Reserve on Wednesday pressed ahead with its plan to wind down its bond-buying stimulus and upgraded its assessment of the US economy, while reaffirming it is in no rush to raise interest rates.

KEY POINTS:

* The central bank cut its monthly asset purchases to $25 billion from $35 billion, leaving it on course to shutter the program this fall.

* The Fed reiterated that it would likely keep rates near zero for a “considerable time” after its bond buying ends and restated that an “accommodative” policy was needed.

* The Fed has kept overnight rates near zero since December 2008 and has more than quadrupled its balance sheet to $4.4 trillion through a series of bond purchase programs.

* It cited improving labor market conditions and declining unemployment and acknowledged rising inflation.

* Although Fed Chair Janet Yellen believes the nation’s 6.1 percent unemployment rate overstates the health of the jobs market, she warned earlier this month that a rate hike could come “sooner and be more rapid than currently envisioned” if labor markets continue to improve more quickly than anticipated.

Google under European regulatory spotlight


googleGoogle Inc faces a variety of challenges from European Commission regulators, in contrast to its experience in the United States where the Internet search company has largely mitigated regulatory threats. The following are some of the regulatory issues that Google is contending with in Europe:

*Android – EC regulators have stepped up inquiries into Google’s policies regarding its Android mobile operating system, which is used in 80 percent of the world’s mobile phones. Regulators appear to be focused on whether Google’s mobile policies impede rivals.

*Search – An EC investigation that began in 2010 seeks to address complaints that Google manipulated its search results to rank its own services higher than competitors. A proposed settlement, under which Google has agreed to display rivals’ links more prominently, among other things, is contested by critics who say it lets Google off too easily.

*Right to be Forgotten – Google has scrambled to process tens of thousands of requests by individuals who want search-result links to unflattering news articles removed, following a ruling by Europe’s top court in May. Regulators criticized Google for restricting its implementation of the ruling to European sites rather than to the broader Google.com website.

*User data – Italy’s data protection regulator gave Google 18 months to change the way it treats and stores user data, a response to Google’s controversial move to combine data collected on individual users of its various online services and to consolidate its 60 privacy policies.

*Taxes – Britain, France and Germany have called for stricter rules to stop companies such as Google, Apple and Amazon aggressively avoiding taxes in austerity-bitten Europe. Google has said it complies with the tax rules of all the countries in which it operates.

FM to meet PSU bankers to discuss financial inclusion plan


Finance Minister Arun Jaitley will hold a meeting with chief executives of public sector banks and financial institutions on July 31 to discuss the government’s financial inclusion plan, among other things.

The plan — Sampoorna Vittiya Samaveshan Mission — will be launched on August 15, as announced by the FM in the Union Budget, and will look to open bank accounts in uncovered households, as also provide the unbanked population with other services such as insurance.

Under the mission, the government will look to open not just 15 crore new bank accounts but will also issue debit cards powered by RuPay, India’s indigenous payments system developed on lines of MasterCard and Visa. Among the other things on the cards will be an accidental insurance cover of Rs 1 lakh and an overdraft facility of Rs 5,000 crore for account holders who agree to undergo a financial literacy course.

As per Census 2011, 58 percent of the country’s population does not have access to financial services. CNBC-TV18 also learns that the government will look to link the creation of new bank accounts to Aadhaar, which has covered about about 70 crore of the country’s 120 crore population, in order to avoid duplication of accounts in a single household.

EU and U.S. announce new sanctions on Russia over Ukraine


The European Union and the United States on Tuesday announced further sanctions against Russia, targeting its energy, banking and defense sectors in the strongest international action yet over Moscow’s support for rebels in eastern Ukraine.

The measures mark the start of a new phase in the biggest confrontation between Moscow and the West since the Cold War, which worsened dramatically after the downing of Malaysian flight MH17 over rebel-held territory on July 17 by what Western countries say was a Russian-supplied missile.

“If Russia continues on this current path, the costs on Russia will continue to grow,” President Barack Obama said in Washington.

“Russia’s actions in Ukraine and the sanctions that we’ve already imposed have made a weak Russian economy even weaker,” he said.

In Brussels, diplomats said ambassadors from the 28-member European bloc agreed to restrictions on trade of equipment for the oil and defense sectors, and “dual use” technology with both defense and civilian purposes. Russia’s state run banks would be barred from raising funds in European capital markets. The measures would be reviewed in three months.

German Chancellor Angela Merkel, who had been reluctant to step up sanctions before the crash because of her country’s trade links with Russia, said the latest EU measures were “unavoidable”.

Previously Europe had imposed sanctions only on individuals and organizations accused of direct involvement in threatening Ukraine, and had shied away from wider “sectoral sanctions” designed to damage its biggest energy supplier.

The new measures were coordinated with Washington in the hope that Russian President Vladimir Putin will back down from a months-long campaign to seize territory and disrupt Ukraine, whose pro-Moscow leader was toppled in February.

 

 

Flipkart raises USD 1bn funding; drops plans to go public


India’s largest e-Commerce firm Flipkart today said it has raised USD 1 billion (over Rs 6,000 crore) in fresh funding from a group of investors, the largest so far in the fiercely competitive online shopping segment in the country. The company did not disclose its new holding pattern.

The sources said, however, that with this round of fund raising, Flipkart is valued at about USD 7 billion (around Rs 42,000 crore). Co-led by existing investors Tiger Global Management and Naspers, Singapore’s sovereign wealth fund, GIC, Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management and Sofina also participated in this latest financing round.

The Bangalore-based firm will utilise funds on expanding its online and mobile services, focusing on areas like R&D, enhancing customer experience and sellerbase. Flush with cash, Flipkart is also scouting for acquisitions, which can help it expand into newer technologies like wearables and robotics, a move that it believes will impact mobile commerce in the days to come. “The funds will be used to make long-term strategic investments in India, especially in mobile technology,” Flipkart co-founder and CEO Sachin Bansal told reporters here.

The focus at Flipkart is to continue to make shopping online simpler and more accessible through the use of technology, he added. “This funding will enable us to step up our investments for innovations in products and technologies, setting us up to become the mobile e-commerce company of the future.

This funding will help us further accelerate momentum and build our presence to become a technology powerhouse,” he said. On the company’s IPO plans, Bansal said: “IPO is not in consideration at all, we are not thinking about it. We have not settled on a business model that we can take public.”

ITC Q1 profit rises 15.6%; revenue beats estimates, up 25%


ITC gifCigarette-to-hotel-to-FMCG major ITC reported a 15.6 percent year-on-year growth in net profit at Rs 2,186.4 crore in first quarter (April-June), which was lower than street expectations but aided by strong revenue growth in cigarette, agri and paper businesses. Net sales grew 24.9 percent, stronger-than-expected, to Rs 9,164.4 crore in the quarter ended June 2014 compared to Rs 7,339 crore in corresponding quarter of last fiscal.

Revenue from its cigarette business (under FMCG category), which contributes more than 45 percent to total revenue of the company, reported a 18.8 percent growth at Rs 4,201 crore. FMCG others (which included packaged foods, apparel, stationery products, personal care products and agarbattis) grew by 10.9 percent year-on-year at Rs 1,934.61 crore in the quarter gone by.

Agri business revenue during the quarter (which covers commodities such as soya, spices, coffee and leaf tobacco) reported a massive 50.6 percent growth at Rs 3,296.1 crore and revenue from paperboards, paper and packaging business grew by 11.7 percent at Rs 1,288 crore compared to the year-ago period.

However, only hotels business posted a marginal decline in revenue at Rs 248.7 crore during the quarter compared to Rs 249.9 crore in corresponding quarter of last fiscal. Operating profit (EBITDA) of the company increased by 17.5 percent, in-line, on yearly basis to Rs 3,194 crore but margin dropped 230 basis points (more than expected) to 34.8 percent in first quarter of current financial year 2014-15 impacted by higher expenses and tax cost. Analysts had estimated operating profit at Rs 3,221 crore and margin at 38 percent for the quarter.

Textile policy to create 35 mn more jobs, $300 bn exports


An expert panel constituted by the government Monday submitted the draft of the new National Textiles Policy, which aims to achieve USD 300 billion exports by 2024-25, and creation of additional 35 million jobs by attracting investments.

The blueprint termed as the draft ‘Vision, Strategy and Action Plan’ to revitalize the textiles and apparel industry envisages an additional investment of USD 120 billion. It was presented to Textiles Minister Santosh Gangwar by Chairman of the Expert Committee Ajay Shankar. “The Expert Committee identified basic concerns in textiles sector and identified the national priorities in the form of a Vision & Strategy and the Action Plan for attaining the targets set out in the Vision for exports, investment and employment by the year 2024-25,” an official release said.

“The Vision projects Indian textile and apparel exports to grow from USD 39 billion at present to USD 300 billion by the year 2024-25. This translates into additional investment required of the order of USD 120 billion and in the process around 35 million additional job creation is expected to take place,” it added.

The key objectives of the new National Textiles Policy include developing a vision statement of the textile sector for the next decade to treble market share from the current 4 percent in the next decade.

Keeping in view the various changes in the textile industry on the domestic and international fronts and the need for a road map for the textile & apparel industry, Ministry of Textiles had initiated the process of reviewing the National Textile Policy, 2000. Accordingly, an Expert Committee was constituted including leading industrialists from the textile sector to make fresh recommendations.

The draft Vision, Strategy & Action Plan for Indian Textiles & Apparels (2024) will be put up on the website of Textiles Ministry for inviting online comments/suggestions.

Gaza fighting abates as diplomatic tension flares


Israel eased its assaults in the Gaza Strip and Palestinian rocket fire from the enclave declined sharply on Monday, the military said, with both the United States and United Nations calling for a durable ceasefire.

As international pressure mounted to end a 21-day conflict in which more than 1,000 people have been killed, an Israeli military official said the army would only fire in response to attacks, adding that this would be for an “unlimited” period. However, Israeli troops continued to hunt and destroy cross-border militant tunnels inside Gaza, and it was not clear if Hamas Islamists who control the small enclave were ready to agree to a prolonged pause. Hamas said on Sunday it wanted a 24-hour truce to mark the Muslim holiday of Eid al-Fitr, which started on Monday.

In the hours after its announcement, Gaza gradually fell quiet. Just one rocket was fired out of the battered coastal territory at the Israeli city of Ashkelon in the first nine hours of Monday, the military said. Gaza residents reported brief bursts of tank shelling and no casualties. “This ceasefire or abatement is dynamic on the ground. If we need to, we will respond,” Israel’s chief military spokesman, Brigadier General Motti Almoz, told local media.

US President Barack Obama on Sunday urged Prime Minister Benjamin Netanyahu to hold fire unconditionally, while the UN Security Council agreed a statement that called on both sides to implement a humanitarian truce that stretched beyond Eid.

Netanyahu’s security cabinet met into the early hours of Monday to debate ceasefire proposals and also a possible escalation of the Gaza offensive, which Israel says was needed to halt Hamas rocket fire and destroy its tunnel network. Israeli air, sea and ground attacks have killed some 1,031 Palestinians, mainly civilians and including many children, Gaza officials say. Israel says 43 of its soldiers have died, along with three civilians killed by rocket and mortar fire from Gaza.

Australia approves Adani’s $15.5bn Carmichael coal project


The Australian government on Monday approved Gujarat-based Adani Mining Pty Ltd’s USD 15.5 billion Carmichael coal and rail project in Queensland, subject to strict conditions to protect groundwater.

The Carmichael mine, which could become Australia’s largest coal mine producing 60 million tonne a year, has sparked protests from green groups and marine tour operators concerned about export of the coal from a port near the Great Barrier Reef. “The strict conditions will ensure the protection of the environment as a paramount concern,” Australia’s environment minister, Greg Hunt, said in a statement. The coal from the Carmichael mine will be transported via a 400-km railway line to Abbot Port, where the company owns a shipping terminal, and from there it will be exported to India. Adani says the coal will help meet the country’s rising power demands.

Adani acquired the port, which is near the Great Barrier Reef, in 2011 and will have to expand it in order to ship the coal. Post Q2FY14 results, the Adani management had indicated that in light of subdued imported coal prices, its Australian capex plans are currently on hold and no material capex is expected at least in FY14. It said the coal production may commence in FY18-19.

JLR announces price cut for 3 models sold in China


TATAMOTORS was the biggest loser on Friday on account of Jaguar Land Rover (JLR) taking price cut for three of its top end variants: the Range Rover, Range Rover Sport and the F-Type sold in the Chinese market.

JLR announced a 5-10 percent voluntary price cut across the board in response to a probe made by the Chinese decision making body National Development and Reform Commission (NDRC). NDRC had initiated some investigations into corporate price rigging, as well as monopoly practices on claims that some of the foreign car makers like JLR were overcharging Chinese customers.

Analysts say price cuts are a concern given the importance of profitability in China for JLR’s overall margins. However, there has been no confirmation from the JLR management. China remains a very important geography for the company. More than 25 percent of JLR’s volumes and 40 percent of its revenues come from the Chinese market. Moreover, the models in which the price cuts were taken contribute about 35 percent of the revenues.

Citi believes this creates an overhang in the short-term for the stock. There is uncertainty until the intent behind the ruling is complete understood. However, there is limited financial impact, given China’s structure expect an impact of 5 percent on FY14, JLR profits and the estimated impact of 100 million pounds post tax on 15,000 units of JLR, so it’s a limited financial impact according to them.

Macquarie maintains outperform. They have a 12-month target price of Rs 540. The 5 percent decline seen in the stock price on Friday is a good buying opportunity for Tata Motors. The total impact on JLR’s EBITDA is 1 percent and this was long coming because the average selling price in China is double that of how much JLR sells in the other market. Therefore, it was about time that they reduced prices. Edelweiss says that the worst-case scenario indicates a 4 percent impact on EBITDA and a 6 percent impact on the profitability. They have lowered their FY16 consolidated earnings per share (EPS) but they have maintained a buy with a target price of Rs 517.

 

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