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This Week in Business News: RBI Rate Cut, FPI Talks, Yuan Troubles, Huawei's Android, H1B Visas

Professor of Financial Economics and Part-time Value Investor, Transfin.
Aug 11, 2019 3:30 AM 5 min read
Editorial

RBI cuts repo rate by 35 bps from 5.75% to 5.40%, maintains accommodative stance. RBI’s consumer confidence survey paints a grim picture. Finance Minister “receptive” to industry’s ideas and complaints, promises reviews and reforms. Govt could take decision to tweak FPI surcharge. China’s Yuan falls to lowest point in 11 years. US-China trade war escalates after Trump administration takes historic decision to brand China a currency manipulator. Paytm’s PayPay reaches 10 million customers in Japan. Facebook in talks with publications to open a "News" tab on its platform. Huawei unveils its own Android. Saudi oil giant Aramco could be listed in early 2020. Trump administration considering executive order to enable monitoring of social media giants to check politically biased curation. H1B visa denials skyrocket to all-time high.

 

Moving on to the top Business news stories of the week:

 

 RBI 

RBI cuts repo rate by 35 bps from 5.75% to 5.40%, maintains accommodative stance. RBI’s consumer confidence survey paints a grim picture.

 

It’s A Cut!: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) in a unanimous vote cut the repo rate by 35 basis points (bps) from 5.75% to 5.40%, maintaining an accommodative stance.

 

Bleak House: As per RBI’s consumer confidence survey that collected responses on households’ perceptions about and expectations from the general state of the economy (including parameters like the general jobs scenario, the overall price situation and consumers' own income/spending), consumer confidence is rapidly deteriorating on the back of worries over jobs and other aspects of the economy.

 

A Grim Future: The survey also sought response from 1,231 companies. The business sentiment indices show that while Indian manufacturing companies are satisfied with the current environment, they are cautious of the times to come.

 

Many were pessimistic about the availability of funding, especially with the ongoing liquidity crisis in the NBFC sector. Moreover, companies are worried that they won’t be able to sell their wares like they used to and therefore inventories would pile up leading to cuts in production - something that's already visible in the auto industry.

 

 FM FPI MEET 

Finance Minister “receptive” to industry’s ideas and complaints, promises reviews and reforms. Govt could take decision to tweak FPI surcharge.

 

About Friday’s Meeting: FPIs, representatives of NBFCs and mutual funds, and other key financial sector participants met Finance Minister Nirmala Sitharaman on Friday to urge a slew of reforms to ease tax burden and boost the slowing economy.

 

Sitharaman was reportedly receptive to their ideas and, at a separate event, promised to review CSR rules and consider a uniform 25% tax rate for all companies once the government was assured that tax revenues were on a high-growth trajectory. More here.

 

About FPIs: Regarding the decision on FPI surcharge, the government will reportedly take a decision to tweak that decision soon. “A few measures will be announced soon, now that the finance minister has met FPIs and market participants,” a government official told Business Standard.

 

 YUAN 

China’s Yuan falls to lowest point in 11 years. US-China trade war escalates after Trump administration takes historic decision to brand China a currency manipulator.

 

Tell Me What You Yuan, What You Really, Really Yuan: Lowest value in over a decade, weakest offshore valuation since it began, and biggest one-day drop in four years. Those were the phrases used to talk about the Yuan this week. The Chinese currency was weakened to below 7 Yuan per Dollar, “a psychologically important level”, as Beijing dealt with the ramifications of America’s new tariffs. It fluctuated about that level since then whilst sending the global currency market (including the Indian rupee) into dire straits. China’s intention behind letting its currency slide is to make its exports more competitive.

 

And Then, This: Washington escalated tensions further by taking the historic decision to label China a currency manipulator. The last time a US President took this step was in 1994 when Bill Clinton did so (against China even then). This risks a currency confrontation and additional penalties for China on top of the tariffs flying around.

 

 TECH  

Paytm’s PayPay reaches 10 million customers in Japan. Facebook in talks with publications to open a "News" tab on its platform. Huawei unveils its own Android.

 

A Big Hit: Paytm’s joint venture in Japan with SoftBank and Yahoo Japan called PayPay now has over 10 million users. Additionally, it is supported by one million merchant partners and local stores. Paytm entered Japan last October following the formation of the joint venture.

 

Zuckerberg News Network: Facebook is planning to launch a “News” tab on its service and is reportedly willing to pay news publishers as much as $3mn a year to license their content on its site. The social media giant is reportedly in talks to license headlines and article previews of news outlets like ABC News, The Wall Street Journal, The Washington Post and Bloomberg.

 

Facebook has long been criticised by the news industry for its dominance in digital advertising. Along with Google, it commands 60% of all digital advertising revenue, slurping in ad dollars while using news outlets’ content for free.

 

Harmony, by Huawei: The world’s second largest smartphone maker just launched its challenge to Android (and Windows). Its new smartphone OS is named Harmony OS and is based on the same functionality as the Android Open Source Project. This OS will be available on Huawei’s smartphones and while it is rumoured to also be a substitute for Microsoft Windows, the OS will not yet be available for laptops and PCs due to “consideration of partnerships and the ecosystem”.

 

 WORLD  

Saudi oil giant Aramco could be listed in early 2020. Trump administration considering executive order to enable monitoring of social media giants to check politically biased curation. H1B visa denials skyrocket to all-time high.

 

Saudi on a Stock Board: Following its first international bond sale in April, Saudi Arabia is reportedly working to having Aramco listed on a stock market in early 2020. The oil giant’s listing plans were previously put on hold as it focused on acquiring a 70% stake in chemicals company Sabic, a deal that was signed in March this year for $69.1bn.

 

Tackling Big Tech: According to reports, the White House is pondering over an executive order that would empower the Federal Communications Commission to monitor how tech giants like Facebook, Google, Instagram, Snapchat, Twitter and Pinterest manage their social networks.

 

The order – not yet released and which could be amended – enables the FCC to determine how social media companies filter posts, videos or articles on their platforms as a means to tackle online censorship.  Also in consideration are public complaint dockets and inter-departmental oversight to check whether curation on these platforms is politically neutral.

 

Who That Be? Not H1B: India’s largest IT services exporters are seeing their US work visa applications rejected at rates higher than ever before. Employees at TCS, Infosys, HCL and Wipro saw half their visa applications rejected in the past year as the US government pushed for more indigenous employment.

 

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