STAN.L - Standard Chartered PLC

LSE - LSE Delayed Price. Currency in GBp
654.80
-0.60 (-0.09%)
At close: 4:35PM BST
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Previous Close655.40
Open648.00
Bid654.60 x 0
Ask654.80 x 0
Day's Range645.80 - 655.60
52 Week Range514.20 - 742.60
Volume4,352,483
Avg. Volume8,083,495
Market Cap20.929B
Beta (3Y Monthly)0.94
PE Ratio (TTM)41.18
EPS (TTM)15.90
Earnings DateJul 29, 2019 - Aug 2, 2019
Forward Dividend & Yield0.17 (2.69%)
Ex-Dividend Date2019-03-07
1y Target Est8.78
  • Singapore Central Bank Signals More Easing as Growth Risks Mount
    Bloomberg

    Singapore Central Bank Signals More Easing as Growth Risks Mount

    (Bloomberg) -- Singapore’s central bank signaled it’s ready to adjust monetary policy further after easing Monday for the first time since 2016 as risks to the economic growth outlook persist.The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, reduced “slightly the rate of appreciation” of the currency band and said it’s prepared to “recalibrate monetary policy” if prospects for inflation and growth weaken significantly.Data Monday showed the economy narrowly missed falling into recession in the third quarter, but the MAS was downbeat about growth prospects and sees inflation remaining benign. The U.S.-China trade war has weighed heavily on the export-reliant city state, with manufacturing taking the brunt of the pain.“We thought the final sentence in the statement -- that MAS ‘is prepared to recalibrate monetary policy should prospects for inflation and growth weaken significantly’ -- is telling of its intentions,” said Terence Wu, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “For now, we do not rule out a further reduction of slope to zero appreciation in the next meeting.”The Singapore dollar gained as much as 0.4% to S$1.3679 against the U.S. dollar Monday. The Straits Times Index climbed 0.5% as of 10:15 a.m. in Singapore.​The monetary policy decision was predicted by 14 of the 22 economists surveyed by Bloomberg, with the remainder projecting a more aggressive move to a zero-appreciation posture for the currency band. The MAS held policy in April after tightening twice last year.What Bloomberg’s Economists Say“If the U.S. and China can avoid a further escalation in tariffs, we expect the MAS to leave policy on hold at its next regularly-scheduled meeting in April. Further escalation, though, might prompt an inter-meeting easing. Recent signs of a truce in the U.S.-China trade war may have persuaded the central bank to retain a bit of policy ammunition, rather than going “all-in” with a reduction of its currency band to zero.”Click here to read the full reportTamara Mast Henderson, Asean economist​Central bankers globally are taking a more dovish stance as trade tensions weigh on growth and as manufacturing weakness threatens to spill over into services sectors. In Singapore, authorities have taken a gradual approach as they monitor risks and keep a close watch on labor-market indicators that so far have stayed resilient.An early reading of gross domestic product data Monday showed the economy grew an annualized 0.6% in the third quarter from the previous three months, rebounding from a contraction of 2.7%. The median estimate in a Bloomberg survey of economists was for growth of 1.2%. Compared with a year ago, GDP rose 0.1%, unchanged from the second quarter.“GDP numbers, despite skirting a technical recession, do not make for an upbeat read,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The manufacturing recession continues. The outlook is at best hazy, if not gloomy.”Singapore’s growth is expected to pick up modestly next year, “although this projection is subject to considerable uncertainty in the external environment,” the MAS said. These are its latest projections for inflation and growth:GDP growth will likely be around the midpoint of the 0-1% forecast range in 2019. The output gap has turned “slightly negative” and is expected to persist into 2020Core inflation is expected to come in at the lower end of the 1-2% range in 2019 and average 0.5%-1.5% in 2020All-items CPI is projected to be around 0.5% this year and average 0.5-1.5% in 2020“We think the MAS’ core inflation forecast for 2020 suggests the door for further easing is open, if needed,” said Divya Devesh, head of Southeast and South Asia currency research at Standard Chartered Plc in Singapore.The MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of a currency band. It doesn’t disclose details of the basket, or the band or the pace of appreciation or depreciation.\--With assistance from Tomoko Sato, Chua Baizhen, Niluksi Koswanage, Stephanie Phang, Melissa Cheok, Joyce Koh and Chester Yung.To contact the reporters on this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net;Ruth Carson in Singapore at rliew6@bloomberg.netTo contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael S. ArnoldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Some of 2019’s Wackiest Investment Predictions Are Coming True
    Bloomberg

    Some of 2019’s Wackiest Investment Predictions Are Coming True

    (Bloomberg) -- When December arrives and trading is quiet, market strategists come up with their wildest predictions for the year ahead. Disclaimer: they don’t actually expect all of them to be right.But 2019 is proving to be bizarre for traders and some of those calls are actually coming true. Of the eight “financial-market surprises” published by Standard Chartered Plc, two have effectively materialized, while three more still remain possible.Coming True:The Federal Reserve cutting interest rates (Done so twice, with another one priced in)The European Central Bank restarting quantitative easing (By 20 billion euros per month from November)Still in Play:The U.S. and China reach an agreement to weaken the dollar (Officials looking at rolling out currency pact)The U.S. Treasury tries to sell 50-year bonds (May do so next year if there is appetite)The U.K. faces a hard Brexit and the pound falls to parity with the dollar (Talks still currently taking place, though optimism is sparse)Looking Unlikely:Hong Kong abandons its dollar currency peg (Traders including Hayman Capital Management’s Kyle Bass are betting unrest will spur capital flight, but it hasn’t happened)OPEC breaks up and Brent crude falls to $25 a barrel (Supply deficit is at its widest level in years)Japan monetizes the national debt, the yen climbs to 80 per dollar (JPMorgan sees the yen as the “only cheap recessionary hedge” remaining)Standard Chartered aren’t the only ones who had a punt. Saxo Bank A/S published their “10 Outrageous Predictions” for 2019 in December, including one that called a German recession. By most accounts, Europe’s largest economy may be in one already. There is no sign of some of the others -- including a solar flare creating chaos and a global transportation tax.Neither bank predicted a $17 trillion pile of negative-yielding debt -- bonds guaranteed to lose investors’ money if held to maturity -- a meltdown in the U.S. repo market, or a drone attack on a Saudi oil facility. But hey, you can’t get everything right.(Updates with latest on each of Standard Chartered’s scenarios.)To contact the reporter on this story: John Ainger in London at jainger@bloomberg.netTo contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Neil Chatterjee, Michael HunterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Fund Manager Shuns Rupee Bonds From Indian Companies
    Bloomberg

    Fund Manager Shuns Rupee Bonds From Indian Companies

    (Bloomberg) -- A fund manager who spent most of about two decades in the banking sector with Standard Chartered Plc is shunning rupee bonds from Indian companies due to the risk of the local currency weakening, and favors their dollar debt instead for the high yields.“We don’t want to take exposures to rupee debt as the risk-off modes can make returns unpredictable,” said Hemant Mishr, founder of SCUBE Fixed Income Fund, a $100 million India-focused bond fund. The fund will focus on investing in high-quality dollar bonds mostly from Indian issuers, he said.The rupee’s three-month historical volatility at 7.6% is the highest among major Asian currencies, adding to fears of a quick reversal in flows if the currency slumps further after weakening 2.6% in the last quarter. Offshore notes of Indian companies have returned 11.9% so far in 2019, ICE bond index data show.Mishr expects more Indian companies to sell dollar bonds, as a debilitating funding crunch in the aftermath of shadow lender IL&FS Group’s collapse last year worsens strains in the domestic credit market.(Updates with chart on rupee volatility)\--With assistance from Kartik Goyal.To contact the reporter on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.netTo contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum, Anto AntonyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Oilprice.com

    The New Sweet Spot In The Permian Boom

    New Mexico is about to surpass West Texas as the epicenter of the Permian oil boom, with most drillers looking for new sweet spots

  • Reuters

    StanChart CEO confident China-U.S. trade dispute can be settled

    Standard Chartered chief executive said on Tuesday that the trade dispute between the United States and China could be settled and that it was in nobody's interest for the deadlock to continue for a long time. Bill Winters said there were concerns about the unreliability of supply chains as a result of the conflict between the two countries. "There are winners and losers from that – Chinese companies themselves are relocating parts of their supply chains from China to other parts of Asia – Taiwan has been a beneficiary, Vietnam has been a beneficiary," he said at a Bloomberg conference in London.

  • Should Standard Chartered PLC (LON:STAN) Be Part Of Your Income Portfolio?
    Simply Wall St.

    Should Standard Chartered PLC (LON:STAN) Be Part Of Your Income Portfolio?

    Is Standard Chartered PLC (LON:STAN) a good dividend stock? How can we tell? Dividend paying companies with growing...

  • Oilprice.com

    Oil Slumps Again… Will OPEC Act?

    The geopolitical risk premium in oil has seemingly evaporated, and as oil prices continue to inch lower, OPEC might have to do more to calm the markets

  • Reuters

    Nigerian lenders asked central bank to review $1.3 bln levy -banking source

    Nigerian lenders have asked the central bank to review a $1.3 billion charge levied on 12 lenders because the regulator did not stick with the cut off date it published when the policy was announced, one banking source told Reuters. Bank chiefs met with central bank officials in Abuja on Thursday to discuss the charge, arguing the regulator had set Sept. 30 as the deadline for imposing the levy but used Sept. 26, the source with knowledge of the meeting said.

  • Moody's

    Standard Chartered Bank (Thai) Public Co Ltd -- Moody's announces completion of a periodic review of ratings of Standard Chartered Bank (Thai) Public Co Ltd

    Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Standard Chartered Bank (Thai) Public Co Ltd and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.

  • Reuters

    UPDATE 1-Mainland banks, pro-Beijing businesses caught in Hong Kong protest cross-hairs

    Hong Kong anti-government protesters are increasingly focusing their anger on mainland Chinese businesses and those with pro-Beijing links, daubing graffiti on store fronts and vandalising outlets in the heart of the financial centre. Protesters took aim at some of China's largest banks at the weekend, spray-painting anti-China slogans on shuttered branches and trashing ATM machines of outlets such as Bank of China's Hong unit, while nearby international counterparts such as Standard Chartered escaped untouched.

  • Moody's

    Standard Chartered Bank Malaysia Berhad -- Moody's announces completion of a periodic review of ratings of Standard Chartered Bank Malaysia Berhad

    Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Standard Chartered Bank Malaysia Berhad and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.

  • Reuters

    UPDATE 2-Weak U.S., euro zone data push European shares lower

    European shares ended a three-day winning streak on Tuesday as investors were gripped by growth worries after poor U.S. manufacturing data fanned fears of slowing growth in the world's largest economy. The pan-European STOXX 600 index touched session lows, and closed down 1.3% after data showed U.S. manufacturing contracted for the second month in September, knocking U.S. stocks. This followed on from euro zone data that showed manufacturing activity contracting at its steepest rate in almost seven years.

  • BlackRock Poised to Add India Bonds as Selloff Boosts Appeal
    Bloomberg

    BlackRock Poised to Add India Bonds as Selloff Boosts Appeal

    (Bloomberg) -- BlackRock Inc., the world’s largest money manager, plans to add to its holdings of Indian bonds, lured by one of the highest yields among emerging Asian nations and the promise of more monetary easing.“We are looking at some stabilization and would potentially look for adding exposure” after the risks from the likely increase in federal borrowings settle, Neeraj Seth, head of Asian credit at the firm, said in a phone interview.Rupee debt sold off in the past two months, the longest run of losses in a year, after the government’s surprise $20 billion tax cut sparked fears of missing deficit targets. At the same time, with the 10-year yield at 6.70%, India offers plenty of premium to developed markets.“The current 10-year yield level has started to look attractive,” Seth said, adding the fund likes the five-year and 10-year bonds.The yield on bonds maturing in June 2033 declined three basis points to 6.99%, while that on 10-year note was little changed after falling three basis points earlier. Yields have surged more than 30 basis points in the past two months, driven up recently by fears that the unexpected tax cut will boost an already bloated bond supply. Even an expected interest-rate cut by the central bank on Friday -- the fifth for the year -- has done little to aid sentiment.Standard Chartered Plc estimates the government will need to borrow as much as 800 billion rupees more, and Fitch Ratings flagged the likelihood of a wider fiscal deficit. The government’s borrowing plan remains unchanged for the rest of the fiscal year, Economic Affairs Secretary Atanu Chakraborty told reporters Monday.“The market is concerned about higher supply brought by the corporate tax reforms, which requires higher level of borrowings,” Seth said. “The market has been readjusting for that.”(Updates with Tuesday’s trading in fifth paragraph)To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.netTo contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Ravil Shirodkar, Anto AntonyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Egypt Cuts Interest Rates Again as Stocks Rebound After Protests
    Bloomberg

    Egypt Cuts Interest Rates Again as Stocks Rebound After Protests

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Egypt cut interest rates for the third time this year, seizing on slower inflation, a stable currency and stocks rebounding after a rare bout of anti-government protests last week that rattled investors.The Monetary Policy Committee lowered the deposit rate 100 basis points to 13.25%, in line with the median estimate from a Bloomberg survey of economists. It also brought the lending rate down to 14.25%, according to a statement on Thursday. While all 15 analysts in the survey predicted a cut, they were split about how much easing the central bank could afford.After a pivot to monetary easing in August thanks to a steep slowdown in inflation, the MPC is looking past last weekend’s unrest and fear of more to come. Monetary stimulus couldn’t be more timely as business activity has contracted in all but two of the past 12 months, according to the Markit Egypt Purchasing Managers’ Index.Reiterating its message from last month, the central bank said the decision was “consistent” with achieving an inflation target of 9%, plus or minus 3 percentage points, by the end of 2020. It also repeated that future decisions remain “a function of inflation expectations, rather than prevailing inflation rates.”The Arab world’s most populous nation has been on a mission to bring inflation under control after it devalued the currency by half in 2016 and slashed subsidies on items like fuel to curb the budget deficit and seal a $12 billion International Monetary Fund loan. Inflation rocketed to over 30% before a steep slowdown.With annual urban inflation easing to 7.5% in August, its lowest level since 2013, Egypt offers fixed-income investors one of the most profitable carry trades in emerging markets. Egypt’s pound is the world’s second-best performer against the dollar this year, gaining almost 10%. In August, policy makers delivered a cut of 150 basis points, the first in six months and their biggest since 2017.“It’s positive that the central bank maintains the monetary-easing momentum,” said Mohamed Abu Basha, head of macroeconomic analysis at Cairo-based investment bank EFG-Hermes. “Despite the second rate cut in the last two months, Egypt’s carry trade remains attractive given still high real yields.”Egyptian stocks tanked between Sunday and Tuesday as foreign investors pulled money out the country following the protests. Though they’re still the world’s second-worst performers this week, down 6%, they recovered in the last two days.\--With assistance from Harumi Ichikura.To contact the reporter on this story: Paul Abelsky in Dubai at pabelsky@bloomberg.netTo contact the editors responsible for this story: Paul Abelsky at pabelsky@bloomberg.net, Paul WallaceFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • This Fintech Safari Could Be a Wild Ride
    Bloomberg

    This Fintech Safari Could Be a Wild Ride

    (Bloomberg Opinion) -- From ATMs to credit cards and PayPal, the West’s dominance of innovation in consumer finance appears to have exhausted itself.  At the top of the emergent new order is the fintech duo from China — Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Next in line are Alphabet Inc. and Walmart Inc., whose highly localized smartphone payment rivalry is playing out between Google Pay and PhonePe in India. In Southeast Asia, two homegrown ride-hailing giants are aspiring to dominate commerce.But the ultimate frontier in tech-enabled consumer banking lies far from the Asian theater.Consider this one statistic: In 13 countries, more than 10% of the population uses mobile phones for payments. All of them are in sub-Saharan Africa, where a majority of adults don’t have basic bank accounts. The rise of African mobile money is associated with M-Pesa, Kenya’s digital-wallet revolution. Now traditional lenders like Standard Chartered Plc, with a presence on the continent going back more than a century, are discovering that online banking can help them mobilize low-cost current and savings accounts more profitably than acquiring customers via physical branches. StanChart’s digital push, which began last year in Cote D’Ivoire, has spread to other countries including Uganda, Ghana, Kenya and Tanzania. The next stop will be Nigeria. Among the attractions of going fully online: a 15-minute client signup process that doesn’t require physical validation of people or documents. Can Hong Kong’s eight virtual banks – StanChart will be among them – similarly compress expensive and time-consuming know-your-customer processes? That’s one question analysts will ask when the lenders finally arrive next year, after a delay caused by the ongoing anti-government protests in the city. The answer would partly determine the dent online-only banks will make in the sprawling deposit franchise of HSBC Holdings Plc, Hong Kong’s undisputed banking leader.Large as it is, Africa remains a tiny laboratory for finance. The revenue pool for the continent was $35 billion in 2017, according to McKinsey & Co, which sees it expanding to $53 billion by 2022. By contrast, HSBC's Hong Kong operations alone garnered $18 billion last year.There are other distinctions, too. Hong Kong and Singapore are giving out brand new virtual banking licenses, whereas in Africa, StanChart uses its existing commercial banks to offer its SC Mobile app. Not only will virtual banks in Asia – especially those that don’t have pedigreed lenders backing them – have to win depositors’ trust from scratch, they’ll also have to find borrowers online. Big Data is supposed to make it easier to find creditworthy customers; yet that theory will be put to the test, since digital-only banks won’t have any branch managers intimately familiar with local businesses and their prospects. Africa won’t be without its own peculiar challenges. The verdict will come down when StanChart begins digital-consumer lending operations there, starting with Kenya later this year. This is an area where fintech firms are growing fast, though the basic infrastructure for disciplined lending – consumer-credit registries – are underdeveloped in many parts of the continent. The sudden decision by Tala to shutter its consumer-loan operation in Tanzania has also made the industry jittery. Just last month, the California-based fintech raised new money from the likes of PayPal. Even in Kenya, where small and medium-size enterprises routinely fund themselves with working capital from fintech, onerous debt loads could become a problem.StanChart is right to focus on deposits before it dips its toes into online lending. It’s embarrassing enough that the lender was unable to tell regulators how some of its private-banking clients amassed their wealth, as Bloomberg News reported recently. Promoting an unsustainable credit culture among poorer African customers could be a PR disaster. The rewards of getting it right are high, though. HSBC, StanChart’s traditional rival, has bet big on the Beijing-sponsored Greater Bay Area, an economic powerhouse connecting the manufacturing hubs of southern China — and the gambling centers in Macau — with Hong Kong, and the financial and corporate services the city has to offer. But not only is the mainland caught up in a global trade war, its relationship with Hong Kong is also fraying. And while StanChart has its strong presence in Southeast Asia, especially Singapore, to compensate for any weakness in China and Hong Kong, HSBC is far too reliant on both. Investors took note when Beijing snubbed HSBC by excluding it from the group of banks that help set the loan prime rate, a new policy tool. The Africa push may not have a direct bearing on StanChart’s digital plans in Asia, but it makes sense. Even StanChart’s rivals privately say that the specialist emerging-markets lender, which CEO Bill Winters has been trying to remake with uneven success, has a good story to tell investors. A tale from exotic Africa, no less. And that, too, when HSBC is running thin on happy news.To contact the author of this story: Andy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Bloomberg

    Goldman Is Cutting Its Loan Exposure to SoftBank's Vision Fund

    (Bloomberg) -- Goldman Sachs Group Inc. is seeking to offload a portion of its stake in a $3.1 billion credit line it helped arrange for SoftBank Group Corp.’s Vision Fund, according to people with knowledge of the matter.The New York lender has approached other financial institutions to take on some of its lending commitment to decrease its risk, said one of the people, who asked not to be identified because the talks are private. Goldman has been looking to cut its exposure to the facility for the last few months, one of the people said.The bridge facility, which Goldman and Mizuho International began arranging last year, enables the behemoth investment vehicle to more quickly pounce on transactions. The loan was syndicated to other banks including Standard Chartered Plc, Citigroup Inc., Barclays Plc and Royal Bank of Canada, according to a SoftBank presentation in May.Goldman is offering the debt at prices slightly below par, the people said. While it’s not uncommon for lead banks to syndicate their share of loans, Goldman already reduced its exposure in May by bringing in additional lenders. Now, the firm is looking beyond the existing group, and at least one of the original 10 lenders isn’t interested in boosting its exposure, one of the people said. Goldman is offering to sell the credit line in pieces as small as $50 million, one of the people said.Stalled IPOGoldman indicated to the Vision Fund when it committed to the loan that it would look to reduce its exposure over time, said a person close to the fund.Representatives for Goldman Sachs and SoftBank Vision Fund declined to comment.SoftBank has suffered a string of bad news this week, from the stalled initial public offering of one of the Japanese company’s biggest wagers, WeWork, to fresh doubts over the sale of its debt-laden mobile phone company, Sprint Corp. The cost to protect against nonpayment by SoftBank in the credit-default swaps market jumped Wednesday, according to ICE Data Services.Goldman Sachs has deep ties to SoftBank, working with the company to raise a second Vision Fund and advising founder Masayoshi Son’s businesses on several deals in recent years.SoftBank’s first Vision Fund, which counts Saudi Arabia’s Public Investment Fund as its largest investor, has backed firms including messaging software company Slack Technologies Inc., ride-hailing giant Uber Technologies Inc. and embattled office-sharing startup WeWork. It’s also invested in 10X Genomics Inc., whose shares have jumped since it went public this month, and Guardant Health Inc.Read more: SoftBank backers rethink role in next Vision Fund on WeWork\--With assistance from Sridhar Natarajan.To contact the reporters on this story: Archana Narayanan in Dubai at anarayanan16@bloomberg.net;Gillian Tan in New York at gtan129@bloomberg.netTo contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, ;Alan Goldstein at agoldstein5@bloomberg.net, Steven Crabill, Michael J. MooreFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Bond Traders in India Caught Out by Surprise Fiscal Flip Flop
    Bloomberg

    Bond Traders in India Caught Out by Surprise Fiscal Flip Flop

    (Bloomberg) -- It’s getting hard to keep track of just what one should do with Indian bonds.A rally Friday morning after the central bank signaled more rate cuts turned into the biggest rout in eight months after the government’s unexpected cut in corporate tax raised the specter of missing deficit targets.Losses were pared Monday after Finance Minister Nirmala Sitharaman said the government won’t consider expanding its already record borrowings till much later. Traders though remain cautious, with Standard Chartered Plc forecasting the need for as much as 800 billion rupees ($11.3 billion) of new debt.“Market participants were caught off-guard with the fiscal measures,” said Dhawal Dalal, chief investment officer for fixed income at Mumbai-based Edelweiss Asset Management Ltd. “Recent statements by the RBI and government officials had led to an impression that there was limited fiscal space available for large reforms.”A gauge of volatility for India’s 10-year sovereign bonds rose to an eight-month high. Benchmark yields, which started Friday with a nine-basis points decline, ended the day 15 basis points higher.They fell four basis points on Monday to 6.75%.The unprecedented tax cut, estimated to cost 1.45 trillion rupees in lost revenue, may push up the fiscal deficit to 3.9% of gross domestic product for the year to March, compared with a goal of 3.3%, according to a Bloomberg poll of economists.The government will announce October-March borrowing plans on Tuesday, people with knowledge of the matter said. There are no plans to accelerate sovereign bond offering plan even as authorities refrain from extra borrowing, the people said.A combination of additional debt sale and likely monetary easing will steepen the yield curve, Standard Chartered analysts wrote in a note. While the short end should remain anchored due to surplus liquidity and rate-cut expectations, supply will likely weigh on the long end, they wrote.IDFC Asset Management Co. is overweight on 5-7 years bonds while cutting duration in the 10-14 year segment in its active duration funds, it said in a note.To contact the reporters on this story: Subhadip Sircar in Mumbai at ssircar3@bloomberg.net;Kartik Goyal in Mumbai at kgoyal@bloomberg.netTo contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Ravil ShirodkarFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Reuters

    Huawei CFO's arrest at airport to be focus of Vancouver hearing

    Lawyers for Huawei Chief Financial Officer Meng Wanzhou will be in a Canadian courtroom on Monday to press for details surrounding her arrest at Vancouver's airport nearly 10 months ago. Meng, 47, was detained on Dec. 1 at the request of the United States, where she is charged with bank fraud and accused of misleading HSBC Holdings Plc about Huawei Technologies Co Ltd's business in Iran. Meng, who is expected in court, has said she is innocent and is fighting extradition.

  • India Sends Up the Monetary Helicopters
    Bloomberg

    India Sends Up the Monetary Helicopters

    (Bloomberg Opinion) -- India is making a second big fiscal gamble. The first – a switch from sales to consumption taxes – has failed to achieve revenue targets. The government, which two months ago was trying in desperation to tax everything that moved, has suddenly changed tack and is slashing levies on company profits.Will this revive animal spirits and sputtering GDP growth, and at what cost to stability? That’s what investors want to know. But another crucial question, one whose answer will resonate globally, is whether the tax cut is going to be financed by newly printed currency rather than debt. In other words: Is this helicopter money?Slashing the government’s take from corporate profits to 25.2% from 34.9% has given a boost to stock-market sentiment, while simultaneously seeding fresh doubts about fiscal profligacy in the bond market.Equity investors are basing their judgment on a combination of optics and arithmetic. Thanks to exemptions, most Indian firms can keep their tax rate below 30%. Even so, Friday’s cut will mean a 5%-6% earnings lift for firms in the benchmark Nifty 50 index, according to Kotak Securities Ltd. However, it’s only banks and financial firms that may choose to reap the full earnings harvest. They need higher equity prices to raise more capital, expand their loan books and outgrow their bad-debt problem.Non-financial sectors may respond differently. At 5%, India’s GDP growth is at a six-year low. Manufacturers such as auto and steel companies may opt to cut prices instead of retaining the entire advantage of the lower tax rates.This is where the equity market’s hopes of a demand stimulus collide with the bond market’s misgivings over fiscal slippage. Even if New Delhi has exaggerated the 1.45 trillion rupees ($20.5 billion) estimated cost of its largess, the government might need to cut spending sharply for a second year to retain any claim to fiscal rectitude. Finance Minister Nirmala Sitharaman has said there are no plans for that. Belt-tightening would hurt final demand more than any stimulus from price cuts would help. Spending cuts could destabilize the economy further, especially if state governments also hit the brakes on expenditure. Friday’s tax package also offered a 17% profit tax rate for new manufacturing companies. That compares favorably even with low-tax jurisdictions like Hong Kong and Singapore, and gives Prime Minister Narendra Modi a chance to market India – at shindigs like last weekend’s “Howdy Modi” event in Houston – as an alternative to China for export-oriented investments in textile, electronics and autos, especially electric cars and components.However, for big payoffs, both global demand and the ease of doing business in India must improve. Until then, who will pay for the tax breaks? The printing press.Not only has the Reserve Bank of India bought government bonds worth a record 3.5 trillion rupees in the past 18 months, it has also changed its accounting policy to manufacture a supersize 1.76 trillion rupee dividend for New Delhi. Given how similar that latter amount is to the just-announced tax bonanza, it’s reasonable to ask whether India’s new growth strategy is predicated on tax cuts financed by money creation. As Ananth Narayan, a former Standard Chartered Plc  banker-turned-finance-professor has shown, the government could get an even bigger dividend of 2.5 trillion rupees from the RBI if the rupee were to weaken by 5% against major currencies this fiscal year. India is in the middle of an “uncharted print-and-spend cycle,” Narayan wrote before the tax cut. A money-financed tax cut risks damaging the independence of the central bank by turning it into a junior partner in a fiscal adventure. Helicopter money is a last resort in economies where nominal interest rates have hit rock bottom, and even with quantitative easing the threat of outright deflation lingers. At 5.4%, the policy rate in India is nowhere near the zero lower bound. The problem is a lower-than-targeted inflation of 3.2% because of which real interest rates are too high.By announcing a splashy tax cut even after the central bank governor said fiscal space to spur the economy was “limited,” New Delhi has unilaterally sent up the helicopter. Keeping it afloat will implicitly become the RBI’s job. If the gamble works, the central bank will be left to cope with a spurt in inflation and a weak rupee. If it fails to revive growth, there’s bound to be renewed clamor to level the playing field between corporate profit and personal incomes with a flat tax.   To contact the author of this story: Andy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.