Thursday, January 24, 2019

24 Jan 2019: Some interesting articles I read today

Snowbalisation: The steam has gone out of globalisation: A new pattern of world commerce is becoming clearer—as are its costs (Article Link)
"Globalisation made the world a better place for almost everyone. But too little was done to mitigate its costs. The integrated world's neglected problems have now grown in the eyes of the public to the point where the benefits of the global order are easily forgotten. Yet the solution on offer is not really a fix at all. Slowbalisation will be meaner and less stable than its predecessor. In the end it will only feed the discontent"

Interesting Article on the current situation of Jet Airways (Article Link)
Mounting losses, increased debt has pushed the airline to the brink. In last three quarters Jet airways made losses to the tune of Rs 3,500 Crs. Rising fuel prices coupled with price warfare has bought left Jet Airways tottering. The playbook we are seeing today is similar to the one we saw in case of Kingfisher – Delays in payment of Salaries to staff followed by defaults on payment of Interest to Banks.
Last month Jet defaulted on payment of interest and principal to a consortium of banks. Jet defaulted on payments for December month to banks. Post the default. ICRA has downgraded Jet airways debt to D from C.
Jet Airways has a debt of Rs 8,000 Cr on its book. Currently Jet has a negative net worth of Rs 9,000 Crs. In next three months Jet airways needs to repay 1,700 Cr of debt and for FY20 its roughly RS 2,500 Crs. It has borrowed from a group of 26 banks. Jet has paid 480 Crs as finance cost for the first half of current financial year. For last financial year Jet has paid around 850 Crs as finance cost.

About 40 per cent of the gross credit exposure of Indian banks is in sectors where water risks are significant (BL Article)
Water problems could push the non-performing assets of banks higher as many lenders have loan exposure in sectors where there are risks to water resources, says a report. At a time when the banking sector is grappling with mounting NPAs, the World Wildlife Fund (WWF) report released on Wednesday said water risks could pose further "liquidity constraints" on the strained balance sheets of banks. Launched with the Indian Banks' Association (IBA), the WWF-India report 'Hidden Risks and Untapped Opportunities: Water and the Indian Banking Sector' provides evidence for why water presents a material risk for banks in India, particularly how water risks could lead to stranded assets in the power and agriculture sectors, two sectors that account for the highest gross credit exposure of Indian banks
According to the report, close to 40% of the gross credit exposure of Indian banks is in sectors where water risks are significant. "Reeling under a crisis of non-performing loans with close to 10% of gross-advances of the Indian banks facing a risk of non-payment from debtors, these risks can place further liquidity constraints on the already stressed balance sheets of banks in India," it said. Citing NITI Aayog's observation, it said, the current water crisis in the country is its worst ever. "With water being a shared resource, what the country requires is a comprehensive and sustainable water management plan by various stakeholders," the report said. While banks are exposed to the risks of water as lenders to businesses, it also places them in a unique position to influence businesses to proactively handle various water related risks, including using WWF's Water Risk Filter and enabling flow of capital towards solutions which address such risks, the report added.

Soumya Kanti Ghosh makes a relevant point on the topic of Central Bank communication (Via email)
I have been reading his reports (mostly 2-5 pages long). These reports makes for a good read on topic which is not covered otherwise. Compared to other macro reports, his writing is unbiased (as I see it)

Basics of Technical Analysis

Corporations are fleeing global chaos (Link)
This is not good news for the employment. UK is a far better place than many EU countries
"Companies around the world are changing their tunes and addresses — uprooting supply chains and moving their headquarters to get ahead of unsettled global chaos. More than half of the 48 financial services companies in EY's Brexit tracker said they are considering moving some of their operations and or staff out of the U.K., thanks to Brexit uncertainty. "I doubt these companies will go back," even if tensions ease, Gutierrez said"

The new U.S.-China Cold War (Article Link)
Indians are in a better place than Chinese. However, I have also read that many Indians are being pulled by Canadians to make a Silicon Valley copy called "Maple Valley" 
The new dynamic affects people as well as products. China is asking state firms to avoid travel to the U.S. and its allies. And if you were an American or Canadian tech company executive, would you travel to China right now, given that Canada has detained a leading Huawei executive (and daughter of the company's CEO) for extradition to the U.S.? Meanwhile, many American universities are kicking their local Confucius Institute off campus, most notably the University of Michigan, amid complaints that those institutes are spying on Chinese nationals who attend those schools. Whether or not that is true, this is another sign of the collapse of trust. This is the deeper issue with the U.S.-China relationship: the continuing erosion, in an era of rapid deglobalization, of previous ties built at least partly on a common sense of purpose. Looking back at 2018, it now seems obvious that this was the most important story of the year. It is easy enough to imagine how things might get worse. More and more accounts of Chinese espionage are likely to surface, and the U.S. is hacking Chinese systems, too. As deals are rejected, commercial and political grudges will stick and fester. Hong Kong may fall even further into the Chinese sphere and behind the Great Firewall.

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