Economy

Slow Economic Growth In Gulf Countries Expected

The International Monetary Fund reduced the global growth outlook for the third time in 6 months to 3.3% due to the slowing world economy. It seems, that even some of the richest countries including the Gulf are not spared. As per results of the economists poll on Gulf countries, the growth outlook for this year is low due to a reduction in oil production, decreased spending and lack of growth in non-oil sectors.

High spending low growth

Saudi Arabia which is the leading oil exporter is expected to grow at 1.8% this year and 2.2% next year which is less than what was predicted for the country last quarter. This despite the Kingdom increasing the spending by 7% in 2019. Despite that, the GDP forecast shows slow growth. Non-oil growth is likely to increase by 3.6% which is thanks to the diversification of business but the revenue is only a small part of the total budget which ranges from 10% to 35%.

UAE as per economists will see a reduction in growth by 0.1% and be at 3% in 2019 and 3.2% in 2020 despite diversifying into a non-oil business. The budget for this year 2019 was the highest in its history with an increase of 17% when compared to last year and there is an additional stimulus package being provided despite which the growth is slow.

The other region which is facing major economic concerns is Dubai where the economy is at its lowest in 9 years with a GDP of 1.9%. There is growing concerns of unemployment as many companies are cutting jobs and adding to this is the prices of real-estate which is the backbone of the country’s economy is reducing by as much as 15% in 2019. The government has introduced many stimuli like the debt relief program and also adopting new employment strategies for creating jobs but the results are not yet been seen.

Oman is another country which has increased its total expenditure budget by 3% but despite that, the growth is expected to slow to 1.5% from 2% in the year 2018. That will dent the GDP by 9% and is attributed to governments lack of initiative to implement new revenue generation methods.

Most of the Gulf countries are spending more and are having deficits every year but not seeing the growth they are expecting. But these are things that should be implemented as they try to move away from oil and invest in non-oil sectors for sustaining in the global economy in the long-term.

Ralph WilliamsSlow Economic Growth In Gulf Countries Expected
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Seven Banks Charged with Monetary Fine for Violating Banking Norms by RBI

On Tuesday, the Reserve Bank of India (RBI) imposed a monetary fine on seven public sector banks for violating various banking rules. The banks on which penalty have been imposed are Bank of Maharashtra, Kotak Mahindra Bank, HDFC Bank, IDBI Bank, Allahabad Bank, Andhra Bank, and Indian Overseas Bank.

The penalty has been imposed mainly for breaching various directions that were issued by the Central Bank (RBI), which included the norms on monitoring of the end-use of funds, reporting of frauds and classification, sharing of information with other banks and reorganizing of accounts. A fine of Rs 1.5 crore has been imposed on banks namely Allahabad Bank, Indian Overseas Banks and Bank of Maharashtra.

Taking into account the failure of the seven banks to hold on to the directions issued by RBI under Banking Regulation Act of 1949 and under the provisions of section 47A (1)(c) along with Section 46(4)(i) the penalties have been imposed due to exercise of power that is vested in RBI.

The RBI further announced that the action is due to lack in regulatory compliance and is not planned to affirm the transaction or agreement that are enrolled into by the banks along with their customers.

HDFC Bank, IDBI Bank, and Kotak Mahindra Bank have also imposed a penalty of Rs 20 lakh each by the central bank, i.e., RBI. The penalty has been imposed due to the violation of various norms of the bank mainly Know Your Customer (KYC) norms and Anti- Money Laundering (AML) standards.

Andhra Bank has been imposed a fine of Rs. 1 crore for violating similar rules of RBI.

In the previous week, the RBI had imposed fine over 11 more banks for non-compliance of various directions.

Paula HearnSeven Banks Charged with Monetary Fine for Violating Banking Norms by RBI
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Hermes Says Sales in China Still Going Strong

The slowdown in China has come as a bitter shock for some of the biggest corporations in the world, and a large percentage of business has recorded poor fourth quarter numbers due to the declining demand for a range of products in the country. However, for French luxury brand Hermes, the situation is different, and the company announced that their sales continued to be strong in the fourth quarter of 2018. This is in sharp contrast to what has been happening with many other luxury brands in China and without a doubt, a testimony to the appeal of its products.

Over the years, it has become abundantly clear that China is a huge factor in the continued growth of some of the biggest luxury products’ companies in the world. Not only are the sales in China a big revenue driver but Chinese tourists are also a big part of the equation, and overall the consumers in Asian country account for around 33% of their total sales.

It is hardly a surprise then that many of the biggest luxury names in the world have had a bit of a struggle after the slowdown in the Chinese economy. For instance, luxury jeweler Tiffany from the United States and Tapestry suffered depressed sales due to the shrinking of demand in China. However, for Hermes, which is famous for manufacturing the iconic Birkin bags, has not suffered at all and continue to report strong sales figures. The Birkin bags, which are usually priced more than $10000, are one of its most popular products and more often than not, customers are put on waiting lists if they want to buy it. In this regard, it is interesting to point out that Hermes’ rival and fellow French luxury brand Louis Vuitton has expressed the same thoughts. The company has stated that despite the slowdown, the sales in China are still on the rise.

Speaking to journalists, the Chief Executive Officer of Hermes, Axel Dumas said, “We are still growing strongly in Asia, we did not see any change in momentum in our stores in China.” On Friday, the group revealed its sales figures in the fourth quarter, and overall, sales went up by a healthy 9.6% in the quarter. In the Asia Pacific region alone, excluding Japan, went up by 13.1%. In the third quarter, the sales in that region had gone up by 11.7%. Last but certainly not the least, Hermes posted revenues of $1.93 billion, which reflected a 10.1% jump.

Paula HearnHermes Says Sales in China Still Going Strong
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Creditors Give up on Anil Ambani Group Following Loss of 12,600 Crore

Money lenders gave up on the shares of Anil Ambani group companies which they owned as collateral soon after their market value dropped by Rs 12,600 crore [app. $1.8 billion] in this month, further summing to the collection of sorrows to the disturbing Indian billionaire.

Creditors sold off 5.5 billion total shares in four companies namely Reliance Infrastructure, Reliance Power, Reliance Capital and Reliance Communications which lead to 3 to percent point decrease in the founder’s stakes in these companies, as per the filings.

The sentiment of the fragile investor for the Anil Ambani group dealt with another shock after its wireless unit, Reliance Communications, reported on last Friday that it is planning to file for bankruptcy. The selloff has extended to another group of firms as a week, further decreasing the value of the shares that were promised as collateral.

IDBI Trusteeship Services which controls Reliance Power shares mentioned that the assets were sold because the borrowers defaulted on the terms.

Reliance communication has observed the decline in the market value by almost more than half during this week; meanwhile, the shares of Reliance Infrastructure and Reliance Power have significantly dropped by 60 percent each. Reliance Capital has dropped by 34 percent.

The issue of the share pledge has plunged other Indian companies too. Media tycoon Subhash Chandra’s of Essel Group agreed upon a contract by signing it with the lenders that secure the group’s borrowing against shares from being totaled up to 30 September, even if their value declines. On January 25, the agreement was followed by a 27 percent drop in the flagship Zee Entertainment Enterprises.

Justin LebronCreditors Give up on Anil Ambani Group Following Loss of 12,600 Crore
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UN Warns of Currency Wars and Show of Protectionism if Trade War Persists

The United Nations warned in a report that the world might encounter currency wars, widespread protectionism, and billion-dollar losses if the trade conflicts between the U.S. and China persists.

The report was published by the UN Conference on Trade and Development (UNCTAD) on Monday. It also said that while some countries would see a surge in exports, negative global effects were likely to dominate.

China and the United States have been engaged in trade conflict since early 2018. In September, the U.S. increased tariff by 10 percent on around $200 billion of Chinese imports, and it planned to increase those rates to 25 percent in January. However, the head of the two Governments agree to adopt a freeze the increment until March 1, and in the meantime, they are supposed to have talks.

The Damage-

As per the UN report, continuing or increasing tariffs between the two superpowers would have an unavoidable impact on the “still fragile” global economy, including disturbances in commodities, financial markets, and currencies.

UNCTAD’s report said, “One major concern is the risk that trade tensions could spiral into currency wars, making dollar-denominated debt more difficult to service, another worry is that more countries may join the fray and that protectionist policies could escalate to a global level.”

Generally, a currency war occurs when nations depreciate the value of their national currency deliberately for stimulating their economies.

The report also noted that protectionist policies usually hurt weaker economies the most, while moves like tit-for-tat of the trade giants will have a domino effect affecting other dependent countries.

The report noted, “Tariff increases penalize not only the assembler of a product but also suppliers along the chain.”

UNCTAD said the Chinese exports affected by the United States’ tariff measures are likely to hit East Asian value chains the most, and it is estimated to be around $160 billion.

Gains-

Out of the total $250 billion worth of exports which is subject to U.S. tariffs, about 82 percent will be covered by other countries. And 12 percent is expected to be retained by the Chinese firms only. And a mere 6 percent would be captured by U.S. firms.

The same way, of the U.S. exports to China which is subject to Chinese tariff, about 85 percent would be covered by other countries, as per the study. U.S. firms, however, will retain less than 10 percent of exports. And the Chinese firms would capture around 5 percent.

The countries which are expected to benefit from the scuffle are those capable of replacing American and Chinese firms. EU exports would be getting $70 billion from U.S. – China trade war. And the major economies like Japan, Mexico, and Canada would each gain around $20 billion.

However, the countries which are going to see the highest change in their export share are Australia, Brazil, and India.

Pamela Coke Hamilton, head of UNCTAD’s international trade division, said at a press conference on Monday, “Because of the size of their economies, the tariffs imposed by the United States and China will inevitably have significant repercussions on international trade.”

“While bilateral tariffs are not very effective in protecting domestic firms, they are valid instruments to limit trade from the targeted country. The effect of U.S. & China tariffs would be mainly distortionary. U.S. & China bilateral trade will decline and be replaced by trade originating in other countries.”

Paula HearnUN Warns of Currency Wars and Show of Protectionism if Trade War Persists
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Pinduoduo e-commerce Chinese rival to raise more than $1 billion

The cost of competing with the Chinese e-commerce enterprises JD.com and Alibaba are enormous. That has been witnessed by the rival Pinduoduo, most widely known as PDD which is going to build over $1billion in fresh capital only within 6 months after going public.

The company declared that it is planning to sell around 37 million of shares to raise more than $1 billion, perhaps going even as high as $1.25 billion only if the guarantor exercise their total share purchase choice. Some present investors might sell their part of stock which will be noticed during the secondary event; the seller mostly includes Lightspeed China, Sequoia and Banyan, as per the filing.

In July, the PDD went public immediately it raised around $1.6 billion via Nasdaq listing.

Former Googler Colin Huang incorporated PDD in September 2015; PDD adds a social twist to the e-commerce by rendering discounts for the buyers who come together with friends or family members to make a bunch of orders. That is mostly encountered with the customers, especially with female ones, the company stated. There are around 385.5 million active shoppers with a yearly GMV of RMB 344.8 billion or around $250.2 billion during Q3 of 2018, the PDD affirms.

This has helped it to deal with the Chinese e-commerce market, which is mostly ruled by Alibaba and Tencent while it has arrived at some price. The PDD is not at a profit and is not going to be for some more time. Although after going public, PDD has incurred a net loss of around RMB 6.49 billion [$981.4 million] during its Q2 and in Q4 it has recorded RMB 1.10 billion [$159.9 million].

Yes, there has been strong growth, the Q4 revenue increased by 697 percent every year to reach RMB 3.37 billion [$491.0 million] while the identical operating loss was increased by 5 times.

The business is a combination of Costco and Disney; Huang explained which indicates a value for money and entertainment both combined. In a note to the shareholders, he stressed about his vision that it needs a decade before starting to reach its capacity.

To take a leap of faith and to believe in such a strange company it’s not easy; the company aims to satisfy both economic and social needs of users and also strives to make a positive impact on the society. The job and aim of our long term vision and the inner value will not be covert, anytime to earn near time profits. Rather we believe in showing you the real colors of our company irrelevant of the numbers and how rough it looks like. We request you to take a ride of the journey along with us for a long term. We are hopeful that the journey will be marvelous, he recorded.

Keith GilbertPinduoduo e-commerce Chinese rival to raise more than $1 billion
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Parks and Network Help Disney Beat Estimates

Walt Disney Company comfortably beat Wall Street estimates of its quarterly earnings, and much of that has to do with its flourishing theme park business and the growth recorded by its ABC network. The growth at ABC is also a part of Disney’s larger thrust towards turning the company into a digital media behemoth at some point in the future. For the quarter that ended in December, Disney recorded earnings per share of $1.84, which is easily higher than analysts’ estimates of $1.55 earnings per share. Following the announcement, shares rallied 1.8%.

One of the most important things that Disney has tried is to get into online streaming to compete with streaming platforms like Netflix. Because it owns Disney Channels, ABC and ESPN, it has not found it tough to launch such services. ESPN+ and Disney+ are the streaming services that the company launched recently. However, operating streaming services will also have short term costs for the company. Christine McCarthy, Disney’s Chief Financial Officer, stated that the establishment of streaming services would result in loss of operating income to the tune of $150 million on year on year basis. This is down to the fact that Disney will surrender licensing income.

At the same time, the ESPN+ streaming service has been able to attract 2 million customers, and that reflects a 100% increase in the number of subscribers in only five months. According to Disney’s Chief Executive Officer Bob Iger, around 60000 of the new subscribers joined ESPN+ just ahead of the first UFC broadcast on the service.

The company has been completely overhauled to make it ready for a future in which Disney is going to be a major player in the streaming industry, and these earnings were the first to reflect the merits of the new push. The operating income from the media networks- $1.5 billion- made up the biggest chunk of Disney’s income. The profits generated by ABC’s broadcasting arm were however absolutely vital as the division generated a 40% rise in profits.

On the other hand, the profits in the theme park and consumer product businesses rose by 10% to $2.2 billion. The excellent numbers were down to higher spending by guests at the theme parks and higher occupancy rates. An analyst at Investing.com said, “Disney’s earnings momentum shows that the company will be entering a highly competitive video-streaming market from a position of strength. If its existing media assets are churning out good cash and it’s able to contain its costs, the video streaming push later this year should make investors excited and help the stock to get out of its current sluggish spell”

Rosaria SmithParks and Network Help Disney Beat Estimates
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