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    RBI Board Meeting, Yuan Under Pressure, Oil Prices Rise et al.

    Professor of Financial Economics and Part-time Value Investor, Transfin.
    Nov 19, 2018 2:02 PM 3 min read

    Good evening reader,

     

    Less than four weeks ago we wrote of the geopolitical sandstorm which hit Saudi Arabia.

     

    After numerous narrative changes, some believable, others almost comically ill-prepared, we now know what was always suspected.

     

    A CIA assessment confirmed this weekend that it was indeed Mohammed Bin Salman (MbS), Crown Prince of Saudi Arabia, who ordered the brutal killing of Jamal Khashoggi.

     

    Reaction?

     

    Sadly, we seem to be living in the age of ignorance, euphemised as Realpolitik. At least that’s evident from the below snippet of reportage published in Friday’s New York Times:

     

    “Neither administration officials nor intelligence officers believe the controversy over Mr. Khashoggi will drive Prince Mohammed from power, which is one reason White House officials believe cutting ties with the prince would not be in the interest of the United States.”

     

    President Trump, before being briefed by the CIA said:

     

    "[Saudi Arabia] have been a truly spectacular ally in terms of jobs and economic development…I have to take a lot of things into consideration."

     

    Out of sight. Out of mind. Already.

     

    However, here are Today’s Top 6 Business Stories through our End Of Day Wrap Up:

     

    RBI Board is meeting today to discuss key issues of contention with the government.

     

    The Central Bank is expected to deliberate on:

     

    • Relaxation of the Prompt Corrective Action (PCA) framework wherein ailing banks face restrictions on distributing dividends, remitting profits, lending etc.
    • Easing of lending norms to Micro, Small and Medium Enterprises (MSME) sector
    • Special liquidity window for Non-Banking Financial Companies (NBFCs)
    • RBI's current economic capital framework to determine if the level of reserves it holds is excessive or not.

     

    RIL considers expanding its oil-refinery at Jamnagar by more than half.

     

    The What: Reliance Industries Limited (RIL) has begun discussions with licensors and equipment vendors to expand the refining complex at Jamnagar. The upgrade may cost $10bn. RIL is expected to make a final decision to be able to start work by 2020.

     

    What you need to know: Jamnagar is already the 'world’s biggest oil-refinery'. The upgraded plant will be able to process as much as 30mn tons of crude oil in a year.

     

    Government requests more data from Facebook, 68% higher than a year ago.

     

    As per a Facebook Transparency report, the Indian government made 16,580 data requests in the first six months of 2018.

     

    The government had previously made

     

    • 22,024 data requests in all of 2017
    • 13,613 data requests in 2016

     

    The report, however, did not reveal the kind of information sought but said that the company provided data to the government in 53% of cases.

     

    US/INTERNATIONAL

     

    Oil prices rise 1% amid expectations of OPEC-Russia supply cut.

     

    Price of Crude Oil surged 1% on back of a possible reduction in output by producer nations.

     

    Zoom Out: Organization of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia is advocating a 1-1.4mn barrels/day cut in supply of crude oil by year-end.

     

    The anticipated supply cut is expected to administer a slowdown in demand growth.

     

    Nissan Chairman arrested for violation of Japan’s financial trading law.

     

    Chairman Carlos Ghosn and Director Greg Kelly of Nissan Motor have been involved in financial misconduct, as per an internal investigation by the company.

     

    The Why: It is reported that Ghosn was allegedly using company assets for personal use and understating his income on financial statements to reduce the disclosed amount. He has agreed to voluntarily speak to Tokyo prosecutors. 

     

    Yuan under pressure as US Treasury Yields soar high.

     

    The What: China’s short-term government debt now yields less than its US equivalent.

     

    What you need to know: Market interest rates and bond prices move in the opposite direction. Higher the interest rate, lower the bond price, higher the yield. Investors flock to higher-yielding bonds which subsequently increase the value of their underlying currency. In this case, investors are preferring USD to Yuan and hence the pressure on the latter.

     

    The Big Picture: The Federal Reserve announced three rate hikes this year, with the People’s Bank of China keeping its benchmark rate rather steady.

     

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