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RBI Maintains Repo Rate, US Yield Curve Inverted, Airport Privatisation et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Dec 5, 2018 1:32 PM 3 min read
Editorial

Good evening readers,

 

Did you know that a company incorporated in India needs to first IPO on an Indian stock exchange before it can consider a foreign listing, say on NYSE or LSE?

 

Likewise a foreign incorporated company has to first list itself on its home exchange before being allowed to trade on BSE.

 

Is that a global phenomenon? Not really. Spotify, a Swedish company, listed on NYSE. Alibaba, a Chinese internet giant, listed again on NYSE. 

 

In fact, from 2013 to 2018, 91 Chinese companies raised US$44bn through IPOs on NYSE and NASDAQ.

 

This freedom to "directly" list on a foreign exchange means increased access to sophisticated foreign capital. Higher access translates into higher opportunity. To invest for some, to exit for others.

 

If SEBI has its way, India may soon join this club, on the way hopefully snagging a major and much-awaited win for our late stage start-ups. Fingers crossed. 

 

Moving on to today’s Top 6 Business Stories through our End of Day Wrap Up:

 

RBI maintains repo rate unchanged at 6.5%, maintains 'calibrated tightening' stance.

 

The What: In its fifth bi-monthly monetary policy meet of FY2018-19, the RBI for the second time in a row maintained the repo rate unchanged at 6.5%. The reverse repo rate also stands unchanged at 6.25%.

 

The Big Picture: The decision of the MPC is consistent with its stance of calibrated tightening of monetary policy with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band +/-2%. A below estimate GDP of 7.1% for Q2 must have surely played a role.

 

SEBI Panel discusses direct listing options for Indian companies on foreign bourses.

 
Up Close: This would allow locally incorporated companies to list overseas without first needing to list in India.  

 

What Does This Mean: Currently only "profitable" companies can be listed in India, a condition which many late-stage startups cannot fulfill. This move would potentially enable businesses to access a broader, more diversified and sophisticated foreign investor base. 

 

What else: 8 separate regulations would need to be amended to enable SEBI's direct foreign listing push.

 

Filing income tax returns may get simplified with pre-filled forms.

 

The What: The form will have details such as income, income sources, and personal details pre-filled by the I-T department. CBDT is also working towards ensuring the returns are processed within a week.

 

Also, this: CBDT to also provide e-PAN card in four hours.

 

Airport privatisation rules to be simplified.

What You Need to Know: Proposed changes include:

 

  • Bidders with no prior experience in airport operations to be allowed
  • Airports will be bid out for a period of 50 years
  • Liberal land policy to allow bidders to exploit entire land bank for commercial use

 

Zoom Out: The airports chosen for operation, management and development through a PPP model are those in Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati.

 

The yield on the five-year Treasury dropped below the two-year and three-year Treasury yield, DJIA plunges by 800 points.

Up Close: For the first time since 2007, the yield curve inverted when the yield on the five-year Treasury dropped below the two-year and three-year Treasury yield.

The What: Yield curve is a graphical representation of bond yields of varying maturity dates. Typically, longer the maturity, higher the yield. A flattening/inverting yield curve is often perceived to be indicative of an upcoming recession, with investors increasingly being hesistant to lend in the short term.

 

New York votes for minimum pay formula to protect ride hailing drivers; Uber and Lyft expected to be hit.
 

The What: Under the new policy, the minimum take-home wage for ride hailing drivers has been set at $17.22 per hour. The move, which will go into effect in 30 days, is expected to raise the average driver's pay by $9,600 per year.

 

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