Nightmare for investors
Also in today’s edition: China has caught the chill; Russian rock, Indian cut; I-bankers go corporate; Rivals' cooperative
Good morning! Imagine going on a vacation to get away from household chores such as doing the dishes only to spend hours wiping away food gunk. It is a reality now. Airbnb hosts are saving up on cleaning fees to fight inflation. Travellers are now shunning Airbnbs for a hotel stay, reports the Wall Street Journal. Can't blame them.
🎧 Germany’s famous Oktoberfest is back after two-year hiatus. The Sarus crane is displaying new behavioural patterns due to climate change. The Signal Daily is available on Spotify, Apple Podcasts, Amazon Music, and Google Podcasts, or wherever you listen to your podcasts.
The Market Signal*
Stocks: The Federal Reserve's upcoming meeting on Wednesday could drive markets this week. The Bank of England will move on interest rates this week. Yoga guru Ramdev's Patanjali is looking to list four more companies on the bourses in the next five years.
Early Asia: The SGX Nifty opened +0.19% higher than its previous close in early morning trade. The Hang Seng Index (-0.68%) and Nikkei 225 (-1.11%) played spoilsport.
Chinese mobile phone makers may flee India after a government crackdown, Chinese state media reported quoting an unnamed India-based executive. The report cited Oppo’s new $20 million plant in Egypt as the precursor to an exodus to likely destinations such as Indonesia, Bangladesh, and Nigeria.
Made in India: Smartphone shipments from India have jumped 16% this fiscal year and Oppo contributed a fourth of that. Indian investigating agencies are, however, probing alleged tax evasion by Oppo, Vivo and Xiaomi.
Meanwhile in China: Companies are sharply cutting costs. Chipmakers have stopped hiring and thousands of startups in the sector have shut shop. If the electronics industry is hit, it will impact local companies’ (think Oppo,Vivo, Xiaomi) foreign units which source components from the mainland factories.
Tailpiece: The economic situation is so bad that KFC now sells chicken feet, necks and other less sought-after chicken parts.
Quiet Shines The Russian Diamond
The lull that gripped the diamond industry after the West sanctioned Russian miner Alrosa has lifted and the precious stones are now flowing freely.
Context: Alrosa’s numbers are unavailable after January 2022 but trade intelligence provider Volza reports that Russia sent 87,120 rough-diamond shipments out of India’s total 4,10,642 consignments as of early September. Most of those likely came through the UAE and Belgium, an analysis of data from the Gem and Jewellery Export Promotion Council (GJEPC) shows.
Route map: Rough diamonds are two-thirds of India’s gems and jewellery (G&J) imports. In FY20, those came from Switzerland (33%), the UAE (27%) and Belgium (20%). In FY22, nearly half came from the UAE. Switzerland was out of the picture. The shipping route likely shifted even more after an India-UAE trade deal. G&J exports to Switzerland, however, shot up by 138% in April-August 2022 compared April-August 2021.
A Vicious Circle Is Forming
As one of the most rocky financial quarters draws to a close, inflation continues to maul major economies, forcing shifts that could change the way the world functions.
Fiery prices: In Argentina, prices are rising at a rate of 100%, forcing its central bank to raise interest rates to 75%. The British pound fell to a 37-year low. Home prices in Istanbul are up 200% as Turkish inflation soars to 80%.
Fitch Ratings expects India to grow slower than expected in FY 2023. The US economy will also likely slow down as the Fed continues its war on prices. The impact was felt in global stocks, debt and commodity markets as panicked investors triggered sell-offs.
Underpinning the inflation spiral is, of course, Russia’s war in Ukraine which has changed the dynamics of global energy supply. Investors who were withdrawing from fossil fuels may return to backing polluting energy sources such as coal. Governments are making moves that will see the world falling back a step or two in climate change mitigation and moving a step ahead in automation to save labour costs. Germany is taking over three Russian oil refineries. Taking advantage of a loophole in green energy laws, Europe is burning more wood pellets. Labour-short Japan is relying more on robots. So is China. That trend could spread as companies elsewhere will also lap up low-cost automation as an insurance against disruptions such as pandemic shutdowns.
M&A Experts Plump For Corporate Cushion
The deal makers of Dalal Street are jumping ship to India Inc.
What: The Economic Times reports quoting headhunter Native that ~150 mid to senior level investment bankers moved jobs. More than half of them joined either large companies or startups. Many have joined the mergers and acquisitions divisions of companies such as Reliance Group and Piramal Enterprises.
Why: The trend is unsurprising considering that economic conditions and business environment in the past 4-5 years have led to consolidation in almost all industry segments. Large conglomerates such as the Tata, Adani and Reliance groups have set a scorching pace of acquisitions as they race to consolidate in sectors ranging from FMCG to cement. Naturally, it makes business sense to hire specialists rather than rely entirely on investment bankers. M&A deals in April-June this year topped $82 billion in India. That was 10% of the global tally.
Cooperation Is The Middle Name
India took over the presidency of the Shanghai Cooperation Organisation (SCO) even as Prime Minister Modi called for connectivity and free transit rights through member-states.
Talking rivals: The SCO summit in Samarkand was closely watched the world over as it was a meeting of several countries that harbour intense rivalries. Two member states, Kyrgyzstan and Tajikistan were slugging it out while the meeting was on. Russia is already waging a war in Ukraine. India and China barely ended their border skirmish on the eve of the conference.
Potential: India has already said its agenda includes building supply chain resilience and climate change mitigation. With the region’s reserves of fossil fuels and natural resources, Russian, India and China’s tech and manufacturing capabilities, workforce, land area, and maturing markets, better cooperation between SCO member-states could even change the global order.
PS: Chinese President Xi Jinping stayed away from a mask-free gala dinner.
Going offline: Ola Electric is opening its own offline retail stores or “experience centers” across the country. The move comes amid sagging sales of its S1 Pro scooter.
censor moderate: A US federal appeals court upheld the validity of the Texas “free speech” law that limits the ability of social media platforms over 50 million to moderate content that failed user guidelines.
Coming soon: The Reserve Bank of India will bring its new card tokenisation norms into effect from October 1.
Dark messages: The CFO of a listed automobile company, JBM Group, was duped of ₹1 crore via fake WhatsApp messages. The sender appeared to mimic its vice-chairman while demanding money from the CFO.
No dice: Gifs aren't cool anymore. Not us, but Giphy says so. The comments came in light of its filings with the UK's competition watchdog, that's looking to block the Facebook takeover attempt. In its official filing, Giphy noticed a decline in young users, further adding the target audience remains "boomers" and that it's "out of fashion", with receipts et al. We are sus.
The walls have ears: And so, the Chinese are *really* looking for a place to vent. Users are flocking to Mastodon, a decentralised Twitter, after the state clamped down rules on social media, including one to displace user locations. Its registered over 50,000 Chinese users this year.
New venture: WhatsApp is making movies now. It will premiere an original 12-minute short film about an NBA player Giannis Antetokounmpo called Naija Odyssey on Amazon Prime Video and YouTube. Who would have thunk it?
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