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India's First Blockchain Payment, SBI Q2 Slumps, US Companies Feel the Tariff Heat et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Nov 5, 2018 2:05 PM 3 min read
Editorial

Good evening reader,

 

As we kick off a quieter than usual Festive week in India, a time of year when friends and family take precedence over Work, Business, and Politics - the world outside is spinning hard.

 

When we hit the press (loved saying it, what ill placed nostalgia!), the US would have unleashed its 'toughest ever' sanctions against Iran, affecting more than 700 individuals, entities, vessels, and aircraft, including major banks, oil exporters, and shipping companies.

 

Having pushed down the country's oil exports by nearly a million barrels a day, affecting a commodity whose sale comprises half of its government's revenues, the economic impact of these sanctions would be the least of the world's worries.

 

Rather what bothers is the probable shift of regime from someone comparatively moderate (i.e. Hassan Rouhani, who thanks to these sanctions would have 'failed' its people) to an incumbent hardliner who would, ironically, bring the centrifuges back on.

 

When a bully President high on power tries to 'fix' the Middle East, recent history should grant some sober precedents. If only he read.

 

Moving on now to today's Top 6 Business Stories through our End Of Day Wrap Up:

 

INDIA

 

SBI Q2 profit slumps c. 40% YoY to INR945cr in Q2 vs. INR1,582cr last year.

However, the bank reported an improvement in its asset quality with gross non-performing assets (GNPA) decreasing to 9.95% vs. 10.69% last year. Percentage of net NPAs also improved to 4.84% from 5.29% during the same period.

 

SBI stock closed 3.5% higher at 295.30 apiece after the announcement.

 

Reliance receives India’s first payment via blockchain.

In a first, HSBC Holdings has executed a letter of credit payment using blockchain for an export by Reliance Industries to US-based Tricon Energy.

 

Use of blockchain can significantly reduce the time involved in exchange of export documentation from seven-ten days to less than a day, reported the company.

 

Services PMI rose to 52.2 in Oct, sees quickest growth since July.

The rise in PMI was driven by significant increase in new business orders on back of favourable market conditions, greater client bases and fruitful advertising which in turn led to robust workforce expansion.

 

PMI readings above 50-point mark indicate expansion, whereas below 50 imply contraction.

 

Higher than expected customs revenue likely to help rein in fiscal deficit.

Net customs revenue reportedly grew 26% (higher than expected 19%) in the first six months of the current fiscal. This might help rein in the fiscal deficit within the targeted 3.3% of the GDP in FY18.

 

The Finance Minister had earlier this year announced a raise in customs duties on multiple items, followed by further hikes in the July-October period.

 

US/INTERNATIONAL

 

Amazon in advanced talks to set up its second headquarters in northern Virginia’s Crystal City, Dallas and New York City.

As per a WSJ article, Amazon has shortlisted some 20 cities including Denver, Toronto, Atlanta, Nashville, Tenn., and Raleigh, N.C. to build its second headquarters.

 

Amazon had earlier reported that the new site, intended to be a full second headquarters for the e-commerce titan, would bring as many as 50,000 jobs and more than $5bn in investments over nearly two decades.

 

US companies feel the effects of escalating trade tariffs, report increase in price and changes in supply chains.

As per a WSJ article, If tariffs jump to 25% on the $200bn of Chinese imports that currently face a 10% levy, as the Trump administration has threatened, earnings growth for the S&P 500 could be reduced 2 to 3 percentage points.

 

Tariffs have slowed US timber and grain exports, raised the cost of imported clothes hangers and heavy-equipment materials, and compressed profit margins for computer chip and tool makers.

 

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