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Trump Effect triggered Indian and Chinese stock exchanges to decouple

The correlation between the CSI 300 and the Nifty 50 indexes survived Xi Jinping’s ascent to power in 2012 and Narendra Modi’s election in 2014. Donald Trump, however, has succeeded in driving through a wedge.

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US President Donald Trump, Wikimedia

Singapore, 1st May 2017: US president Donald Trump has managed to do what Chinese President and Indian Prime minister could not do upon being elected to their respective offices.

The correlation between the CSI 300 and the Nifty 50 indexes survived Xi Jinping’s ascent to power in 2012 and Narendra Modi’s election in 2014. Donald Trump, however, has succeeded in driving a wedge. The link between equity prices of the world’s two most populous economies is now the weakest since at least the 2008 financial crisis. Trump’s effect has severed the relations between Indian and Chinese stock exchanges.

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In some ways, the decoupling predates the US presidential election. Markets that ebb and flow in tandem 30 to 40% of the time had developed minds of their own by the time Britain voted to leave the European Union last summer.
However, correlations are supposed to be mean-reverting. The continued divergence of China and India this year, with the Nifty’s 21% jump in dollar terms overshadowing a 5% gain in the CSI 300, shows that Trump’s policies may be prolonging the separation.

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It isn’t that investors have become relatively more bullish on Indian earnings compared with those in China. On a price-earnings basis, the Nifty has on average enjoyed a 40% premium over the CSI 300 since early 2012. The gap, which widened to almost 100% when Modi’s election as Indian prime minister started to look like a cinch, is currently 29%.

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Even so, every gain in the Indian benchmark is making investors sceptical. A friendless rally, as Gadfly has argued, is good for the market because it’s keeping investors focused on how, for example, Trump’s proposed clampdown on H-1B work visas would hurt India’s software exports. But companies like Tata Consultancy Services Ltd and Infosys Ltd are anyway stoking the embers of a dying industry. What’s not getting enough attention is the impact of the other Trump proposal – “tax reforms”.

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Now, a 15% US corporate tax rate is probably a chimaera, but if the ultimate political compromise in Washington is for a meaningful reduction in what companies pay, the lift to their profitability is bound to make them search for growth markets.

As New Delhi’s own tax reforms pave the way for a common domestic market of 1.25 billion people, some of those US investments could head to India.

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While India has a massive jobs deficit, the almost 6% gain in the rupee this year suggests that becoming the next factory to the world with the help of a cheap currency is not on Modi’s wish list. That’s one more reason why a recoupling of the Chinese and Indian markets is unlikely to happen soon.

– prepared by Nikita Tayal of NewsGram, Twitter: @NikitaTayal6 

Next Story

U.S. President Donald Trump to Prohibit Abortion Referrals by Family Planning Clinics

The administration plan also would prohibit federally funded family planning clinics from being housed in the same location as abortion providers.

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Donald Trump
President Donald Trump speaks at the Susan B. Anthony List 11th Annual Campaign for Life Gala at the National Building Museum, May 22, 2018, in Washington. VOA

The Trump administration said Friday that it would bar taxpayer-funded family planning clinics from referring women for abortions, a move certain to be challenged in court by abortion rights supporters.

The final rule released Friday by the Health and Human Services Department pleased religious conservatives, a key building block of President Donald Trump’s political base.

The administration plan also would prohibit federally funded family planning clinics from being housed in the same location as abortion providers.

Planned Parenthood has said the administration appears to be targeting them, and calls the policy a “gag rule.”

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Abortion is a legal medical procedure, but federal laws prohibit the use of taxpayer funds to pay for abortions except in cases of rape, incest, or to save the life of the woman. Pixabay

The regulation was published Friday on an HHS website . It’s not official until it appears in the Federal Register and the department said there could be “minor editorial changes.” A department official confirmed it was the final version.

Known as Title X, the family-planning program serves about 4 million women annually through independent clinics, many operated by Planned Parenthood affiliates, which serve about 1.6 million women. The grant program costs taxpayers about $260 million annually.

Abortion is a legal medical procedure, but federal laws prohibit the use of taxpayer funds to pay for abortions except in cases of rape, incest, or to save the life of the woman.

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The final rule released Friday by the Health and Human Services Department pleased religious conservatives, a key building block of President Donald Trump’s political base.Pixabay

Abortion opponents praised the administration’s move.

“We are celebrating the newly finalized Title X rules that will redirect some taxpayer resources away from abortion vendors,” Kristan Hawkins, president of Students for Life of America, said in a statement. Although federal family planning funds by law cannot be used to pay for abortions, religious conservatives have long argued that the program indirectly subsidizes Planned Parenthood.

Also Read: E-Commerce Policy: Centre To Regulate Cross-Border Flow Of Data

A group representing family planning clinics decried the administration’s decision.

“This rule intentionally strikes at the heart of the patient-provider relationship, inserting political ideology into a family planning visit, which will frustrate and ultimately discourage patients from seeking the health care they need,” Clare Coleman, head of the National Family Planning & Reproductive Health Association, said in a statement. (VOA)