During a speech to the Economic Club of New York on November 12, US President Donald Trump yet again railed against the US Federal Reserve — the country’s central bank — for having kept the interest rates in the US economy too thus undermining the competitiveness of the US firms. He said his administration had created 7 million jobs — more than three times more than what anyone thought possible before he was elected in November 2016. Trump said that his administration had reduced poverty and launched an economic boom “the likes of which we have never seen before”. But he said he did this “in spite of a near-record number of rate increases and quantitative tightening by the Federal Reserve since he won the election. Eight increases in total which were in my opinion far too fast an increase… because remember we are actively competing with nations that openly cut interest rates so that many are now actually getting paid when they pay off … [Read more...] about Explained: What are negative interest rates and how do they work?
Bank lending rate
Local government spending will play a major role in stabilizing China's economy, depending on the speed of issuing special debt instruments when companies slow investments, according to economists. The 661.3 billion yuan ($94.47 billion) in renminbi-denominated new loans in October, the lowest level in nearly three years, indicated a weaker fund demand especially in non-financial companies, in line with the further dip in production prices, according to data from the central bank and the National Bureau of Statistics. To stabilize growth, provincial-level local governments have proposed new quotas of the special purpose bond, which is a debt instrument especially to raise capital for infrastructure construction. Local governments are waiting for the approval by top-level policymakers, some experts close to the Ministry of Finance told China Daily on Tuesday. Some economists expected that the total quota of additional special bond may exceed 1 trillion yuan and that figure is nearly … [Read more...] about Local govt spending to stabilize growth
Mahesh Nandurkar, India Strategist at CLSA, expects India's growth to more or less bottom out in December quarter, but insisted it will not be V-shaped recovery when things start looking up. Easy liquidity from RBI's soft money policy, bank recapitalisation, government push to banks to banks to increase lending and the drop in real interest rates will all come in to aid the recovery. Plus, the low base too will come into play, he said. Nandurkar said he likes non-lending financial firms such as insurers, large mortgage companies, even though there are valuation concerns in this space following the recent spike in stock prices. He said while recovery in the real estate sector still remains elusive, the good news is unsold inventory levels are falling and homes are becoming more affordable. That makes housing recovery a theme to play. Talking to media on the sidelines of a CLSA event, Nandurkar said the auto slowdown that has become such a major talking point, the fact is India's … [Read more...] about India’s growth should bottom out in Dec quarter, but no V-shaped recovery ahead: Nandurkar, CLSA
India is undergoing a big transformation, which in the interim has impacted business momentum and demand in the economy. Businesses that are being unable to adapt to new changes – GST, higher competition, technology etc., are facing survival threat, while others are facing a cyclical downturn. Investments and exports have been sliding for some time now, but it is the steep consumption slowdown, which has emerged as the new pain area. Amidst this gloom, the silver lining is that many SMEs in the manufacturing sector has received orders from global companies due to shifting of orders out of China. The domestic equity market have begun to stabilise since early October, 2019. Though participation is skewed and limited, the market breadth has been improving, which suggests the worst could be over for the market. Although there is still skepticism about the recovery, given the global and local headwinds, we would like to stick our neck out and say that this may be a good time to … [Read more...] about How to use a sluggish market to build your equity portfolio