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Falling yuan, sinking rupee, stalled reforms subdue markets

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Mumbai, Devaluation of the Chinese yuan and the Indian rupee, as also the stalled reforms process, dampened investor sentiments in the equity markets during the weekly trade ended Aug 14.

yuan0 (1)
The barometer 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) fell by 169.08 points or 0.59 percent during the weekly trade, ending at 28,067.31 points from the previous close of 28,236.39 points on Aug 7. The S&P BSE Sensex had marginally gained by 121.83 points during the weekly trade ended Aug 7.
“The devaluation of yuan is a sign that the currency wars have started at a time when the world economy is stalling, commodities prices are falling and the Chinese markets are bleeding,” Anand James, co-head, technical research desk, Geojit BNP Paribas.
“The yuan’s surprise devaluation also stroked fears of competitive devaluation across Asia, especially before the (US) Fed’s monetary policy decision due in September,” he added
The yuan has fallen by 4.6 percent since Tuesday, its biggest devaluation since 1994.
The devaluation, intended to boost exports, has made investment in China cheaper, thereby leading foreign funds away from India.
This also impacted the rupee, which on Thursday fell to its lowest level against the US dollar in 24 months at Rs.65.23.
The logjam in parliament and the yuan’s devaluation led the markets to lose a total of 724 points during the first three trading days of the week.
However, investors were seen hopeful of a rate-cut based on healthy macro-economic data points including Consumer Price Index (CPI), Index of Industrial Production (IIP) and Wholesale Price Index (WPI).
“The recovery was led by the 0.05 percent rise of the yuan (on Friday), after three days of depreciation instigated by the People’s Bank of China, and better than expected macro data,” Rahul Dholam, senior analyst with Angel Broking, cited
The macro-economic data points showed a fall in India’s annual retail inflation rate to 3.78 percent in July, the annual wholesale inflation fell to (-)4.05 percent, however there was a rise in the factory output to 3.8 percent in June.The WPI coupled with consumer price index (CPI) have pointed at a gradual reining in of prices.
The RBI has set a target for CPI inflation at 6 percent by January 2016.
On the bright side of the volatile weekly trade was the possibility that the government might extend the “Monsoon Session” or call for a “Special Session” of parliament to pass the GST bill kept investors optimistic about the future of the key economic legislation.
“The signals that are coming — like an extension of the monsoon session or a proposed special session to get the GST bill passed — are very encouraging,” Devendra Nevgi, chief executive of ZyFin.
“The India growth story is based on the ability of the government to bring in reforms. For the central bank to be able to cut rates and usher in the demand by propping-up the consumer sentiment. The lack of reforms will send a dampening signal to the rest of the world,” Nevgi elaborated.
Lately, investors have been reluctant to chase higher prices given the possibility that the reform process might be stalled due to the government’s inability to conduct business in parliament.

(IANS)

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China Warns Canada Against Severe Consequences If Huawei CFO Isn’t Released

A Huawei spokesman said on Friday that the company had "every confidence that the Canadian and U.S. legal systems will reach the right conclusion."

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Huawei, China
A man lights a cigarette outside a Huawei retail shop in Beijing. VOA

China warned Canada on Saturday that there would be severe consequences if it did not immediately release Huawei Technologies Co. Ltd.’s chief financial officer, calling the case “extremely nasty.”

Meng Wanzhou, Huawei’s global chief financial officer, was arrested in Canada on Dec. 1 and faces extradition to the United States, which alleges that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions. The executive is the daughter of the founder of Huawei.

If extradited to the United States, Meng would face charges of conspiracy to defraud multiple financial institutions, a Canadian court heard on Friday, with a maximum sentence of 30 years for each charge.

Huawei, China
Meng Wanzhou, Huawei Technologies Co. Ltd.’s chief financial officer, is seen in this undated handout photo obtained by Reuters. VOA

No decision was reached at the extradition hearing after nearly six hours of arguments and counterarguments, and the hearing was adjourned until Monday.

In a short statement, China’s Foreign Ministry said that Vice Foreign Minister Le Yucheng had issued the warning to release Meng to Canada’s ambassador in Beijing, summoning him to lodge a “strong protest.”

Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said Saturday that there was “nothing to add beyond what the minister said yesterday.”

Freeland told reporters on Friday that relationship with China was important and valued, and Canada’s ambassador in Beijing has assured the Chinese that consular access will be provided to Meng.

Good relationship

When asked about the possible Chinese backlash after the arrest of Huawei’s CFO, Prime Minister Justin Trudeau told reporters on Friday that Canada had a very good relationship with Beijing.

Huawei, China, Canada
The exterior of the Alouette Correctional Center for Women, where Huawei CFO Meng Wanzhou was being held on an extradition warrant, is seen in Maple Ridge, British Columbia, Canada. VOA

Canada’s arrest of Meng at the request of the United States while she was changing planes in Vancouver was a serious breach of her lawful rights, Le said.

The move “ignored the law, was unreasonable” and was in its very nature “extremely nasty,” he added.

“China strongly urges the Canadian side to immediately release the detained person, and earnestly protect their lawful, legitimate rights, otherwise Canada must accept full responsibility for the serious consequences caused.”

The statement did not elaborate.

“There will probably be a deep freeze with the Chinese in high-level visits and exchanges,” David Mulroney, former Canadian ambassador to China, said on Friday. “The ability to talk about free trade will be put in the icebox for a while. But we’re going to have to live with that. That’s the price of dealing with a country like China.”

Trump-Xi meeting

Meng’s arrest came on the same day that U.S. President Donald Trump met in Argentina with China’s Xi Jinping to look for ways to resolve an escalating trade war between the world’s two largest economies.

Huawei, U.S., China
A woman walks past an advertisement for Huawei at a subway station in Hong Kong. VOA

“We are tracking the developments of this case and refer you to the filings in the Supreme Court of British Columbia,” said a U.S. State Department official, speaking on condition of anonymity.

The news of Meng’s arrest has roiled stock markets and drawn condemnation from Chinese authorities, although Trump and his top economic advisers have played down its importance to trade talks after the two leaders agreed to a truce.

Also Read: U.S. Sues Chinese Tech Executive Over Business Dealings With Iran

A Huawei spokesman said on Friday that the company had “every confidence that the Canadian and U.S. legal systems will reach the right conclusion.” The company has said it complies with all applicable export control and sanctions laws and other regulations. (VOA)