Latest News Today: DHFL Share Price Rises on News of Resolution Plan, US-China Trade War Escalates

DHFL share price rises upon news of resolution plan. Tencent in talks to acquire 10% stake in Universal Music Group. Why did Jeff Bezos sell 1.5 million Amazon shares and raise $2.8bn last week? How big is the business empire of the world’s wealthiest man? US-China trade war escalates after Trump administration takes historic decision to brand China a currency manipulator.

 

Moving on to the top Business news of the day.

 

 
 DHFL 

DHFL finalises resolution plan, lenders to face no haircuts. 

 
The What: The Board of Dewan Housing Finance Corporation Ltd (DHFL) has finalised a resolution plan. 

 
The Plan of Action: As part of the resolution plan, DHFL will put a moratorium of repayments and will also seek funding from banks and the National Housing Board for re-starting retail lending.

 
The plan will also take steps to address the asset-liability mismatch.

 
Zooming Out: Banks have an exposure of INR40,600cr to DHFL as on March 31, 2019 while the housing financier has an obligation of INR45,380cr towards those holding its bonds and debentures. DHFL’s loans assets totalled to INR98,000cr. 

 
Meanwhile, bondholders of DHFL have been given a three-week deadline to come on board to the inter-creditor agreement (ICA).
 
 
DHFL share price rose c. 31% to INR55.05 on back of the news.
 
 

 INTEREST RATES 

 
Ahead of RBI’s policy meet on Wednesday, fourth consecutive rate cut expected. But by how much?
 
 
To Cut or Not to Cut?: When the Monetary Policy Committee meets tomorrow, most observers expect a rate cut to be delivered, the fourth consecutive one this year.
 
 
The RBI has already changed its stance from neutral to accommodative: the last 25bp cut sent the repo rate to below 6% for the first time in almost a decade (chart). Now, with domestic slowdown, benign inflation and similar easing by other Central Banks (the US Fed recently announced its first cut in a decade), many expect not only another cut but a steep one – by 35 or even 50 basis points.
 
 
But Hold On: An escalating trade war between the US and China, a weakening Rupee and a free-floating Yuan could prove to be spoilers. While they might not temper the RBI’s commitment to cut rates altogether, they could dissuade it from delivering a cut above 25bp.
 
 
 CHINESE YUAN 
 
US-China trade war escalates after Trump administration takes historic decision to brand China a currency manipulator.
 

Endless Escalation: Since the last 24 hours or so, the US-China trade war has escalated to an unprecedented level. Yesterday, China allowed the Yuan to slide to its lowest level in more than a decade, passing the psychologically significant 7-to-a-Dollar threshold. Then Beijing announced its companies would stop purchasing US agricultural products.

 
And Now, This: Washington escalated tensions further a few hours ago 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.  

 
In response, China allowed its currency to fall further today (before it stabilised as the day progressed). Meanwhile, the US Fed could resort to more easing to prop up growth as bilateral ties sour and the trade war rages on and on with no end in sight.
 
 
 UNIVERSAL MUSIC 

Tencent in talks to acquire 10% stake in Universal Music Group.

 
Tencent Goes Gaga: Chinese digital giant Tencent is reportedly in talks with French media conglomerate Vivendi to buy a 10% stake in Universal Music Group (UMG) at a valuation of $33.6 bn. UMG is the world's biggest music company whose acts include Madonna, Lady Gaga, U2, Katy Perry and the Rolling Stones.
 

The deal, if it goes through, would give Tencent a one-year option to purchase another 10% stake under the same price and terms.

 
Across the Universe: The two companies are also exploring other areas of “strategic commercial cooperation” that would help UMG grow through new digital initiatives and territories.

 
“This is an exciting development for both Vivendi and UMG and affirms once again just how much our strategy and hard work are succeeding,” remarked Sir Lucian Grainge, CEO and Chairman of Universal Music Group.
 
 
  
 BEZOS 

Why did Jeff Bezos sell 1.5 million Amazon shares and raise $2.8bn last week? How big is the business empire of the world’s wealthiest man?
 
 
Confessions of a Sellaholic: Over the last week, Jeff Bezos has been on a selling spree. In total, he sold about 1.5 million shares of his Amazon stock, or 2.5% of his total shares, garnering c. $2.8bn in the process.
 
 
The raison d'être behind Bezos’s actions are unknown: Amazon’s spokesperson declined to comment on it. Market speculation is rife: the US government’s (and the EU’s) antitrust investigations, increasing backlash against big tech from politicians and the public, disappointing Q2 profits, grim Q3 forecasts, diverting funds to Blue Origin (his private space exploration company) or to Bezos Day One Fund (his charity) are some probable explanations.

 
Planet Bezos: The Amazonian business empire of the world’s wealthiest individual is not limited to the ecommerce behemoth he founded. It also includes a long list of acquisitions and investments in Whole Foods, IMDB, Airbnb, Twitter and The Washington Post, to name a few. Here’s a giant chart of the Jeff Bezos empire.
 
 
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