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Turkey Raises Interest Rate to 24%, Rupee Takes a Breath of Relief for Now et al

Professor of Financial Economics and Part-time Value Investor, Transfin.
Sep 14, 2018 12:44 PM 2 min read
Editorial

Good evening readers,

 

Ten years ago on September 15th 2008, Lehman Brothers filed for Chapter 11 bankruptcy - optically kicking-off the global financial crisis. An year later multiple European countries were unable to repay or refinance their debt or bail-out troubled banks. Low interest rates and austerity became the heart beat of much of the rich world. A prolonged recovery ran in parallel to a rise in populism, right-wing nationalism, anti-immigrant waves, Brexit, and accession of Donald Trump as US President.

 

'When a bubble can occur' continues to elude us. 'Hindsight' helps figure things that precede. 'Historical precedent' helps with things that follow.

 

Something similar happened in 1930s. Hmm...never mind. Here's to more bubbles! As and when they come.

 

And today's End Of Day Wrap Up :)

 

INDIA

 

October 1 set as date for implementing TDS and TCS provisions under GST. 

Companies are required to deduct 1% Tax Deducted at Source (TDS) on payments to goods or services suppliers in excess of INR2.5L. States will in addition levy 1% TDS under State laws. 1% Tax Collected at Source (TCS) to be levied on e-commerce companies, with State governments in addition allowed to collect 1% TCS under State laws.

 

Rupee and Government Bonds recover with slowing inflation and expectation around support measures.

Consumer prices grow below 4%, easing pressure on RBI to aggressively increase interest rates. Aside from a rate hike, support measures may include currency stabilization by the Central Bank, incentives for non-residents to send foreign currency home, higher tariffs on gold, swap windows for oil marketing companies etc.

 

Government approval not required for fixing remuneration of top corporate executives.

Exemption applies for remuneration of over 11% of net profit of the firm. Special resolution from shareholders should suffice. Amendment to be implemented with retrospective effect.

 

WPI growth slows to 4-month low of 4.53% in August due to easing of food prices.

Price reduction of food items offset 17.73% inflation in 'fuel and power' category.

 

US/INTERNATIONAL

 

Turkey's central bank raises interest rate to a higher-than-expected 24%. 

Under massive investor pressure and in a bid to control inflation and preserve the tanking Lira, Turkey surprised global markets with a significantly higher-than-expected main short-term interest rate hike from 17.5% to 24%. This should at least partly improve investor confidence in Turkey and other emerging markets and somewhat ease fears of contagion risk within the larger emerging market landscape. 

 

Data on investment in factories, railways and other projects in China demonstrate slowest growth in 25 years.

Fixed-asset investment outside rural households rise by 5.3% in January-August period yoy, lowest figure since 1992. Government statistics bureau say investment growth should stabilize in coming months courtesy government's plans to kick-start large projects. Trade war to continue as an overhang. 

 

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