The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 16 MAR, 2017

NATIONAL

INTERNATIONAL

Cotton trade may soon have uniform unit of measurement

In what is being seen as a major reform for the cotton trade in India, a committee empowered by the Textiles Commissioner of India is learnt to have proposed a uniform unit of weight for the domestic and international cotton trade.

The committee, which comprises of 7-8 representatives from the cotton trade, stakeholders, exporters and Cotton Corporation of India (CAI), has recommended a uniform unit of weight for cotton trading, in kilos or tonnes.

So far, cotton has been traded in different weight units at different parts of the value chain in different growing regions in the country. For example, Gujarat, the largest cotton producer, uses bales (each of 170 kg) for cotton procurement from markets, while kapas (raw, unginned cotton) is weighed in quintals. Ginned cotton is quoted in candies (355.62 kg each).

“A uniform unit of weight is very much required for the cotton trade in India. We have different units at different levels of the value chain. Even in different growing States there are different units for kapas. Somewhere it is quoted in maund, somewhere it is quoted in quintal,” said Arun Brijmohan Sekhsaria, a leading cotton trader, and one of the members on the Committee.

“Nowhere in the world is cotton procurement quoted in bales. It is necessary not in terms of price or volume but important for a uniform quality standard,” he added.

According to Sekhsaria, currently, the discussions on adopting a uniform unit of weight for cotton is at the level of the Textiles Commissioner's Office. “The Textile Commissioner has mandated the Committee to explore this possibility. We are exploring how it can be done. We have already recommended that buying should be in terms of kilos or tonnes only. This will make pricing accurate,” he added.

A decision on the same is likely to be taken at the next board meeting of the Cotton Advisory Board (CAB), constituted by the Government of India to estimate crop, exports and cotton trade in the country.

Traders happy

Trader sources welcomed the move terming it a step towards more uniformity and transparency in the cotton trade. Says cotton exporter and sector expert Jagubhai Shah from Gill & Co: “This move will definitely help the cotton trade to a great extent. It was required as the price quoted in different States is based on different units of weight. It causes ambiguity and confusion for the exporters, who have to plan their purchases accordingly. Export orders have a +/-5 per cent variation in the weight. We aren’t sure exactly how much cotton will be there in a bale — 160 kg or 165 kg.”

Cotton has been quoted in different weights at different parts of the value chain. the At production level, while farmers get the price based on quintal weight, the procurement at the market/mandis is quoted in bales.

While the Government of India has fixed a weight of 170 kg for a bale, many states still have bales with 160-165 kg. Ginned cotton is quoted in candy, while exports take place in terms of tonnes.

However, there are different views coming from some traders, who believe having a uniform unit of weight would prove to be a futile exercise.

“The weight is almost uniform. International prices are quoted in US Cents per pound, while domestic prices are quoted based on bales, which has already been fixed by the Government of India. I think, there is no point in doing this exercise. It is not going to serve any purpose,” said MB Lal, a cotton expert.

SOURCE: The Hindu Business Line

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Remove Market Committee cess on cotton & cotton waste; SIMA to CM

Southern India Mills Association today urged the Tamil Nadu Chief Minister to announce removal of one per cent Agricultural Market Committee Cess on Cotton and Cotton waste in the State budget for the year 2017-18.

In a representation to Chief Minister Edapadi Palaniswami SIMA Chairman M Senthilkumar said that the Committee on GST GST had asked all states to decide at their level the isse of the cess as is likely to come in force from July next.

With all states already announcing sops for the benefit of the textile industry, the industry in Tamil Nadu was in an awkward position as far as competition was concerned, he said.

Compared to other States the cost of production of spinners in Tamil Nadu was Rs 15 higher as they have to transport cotton bales from other states at a rate of Rs six per kg.

Jayalalithaa It may be recalled that the then Chief Minister, late had assured to take steps to abolish the cess, when former SIMA chairman S Dinakaran had met her on December seven in 2012, he said.

In order to create a level playing field, SIMA requested the government to abolish the cess on cotton and cotton waste for the benefit of the spinners, Senthilkumar said.

SOURCE: The Business Standard

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Exports log double-digit growth in February

In what could be seen as a boost to the economy, goods exports in February entered the double digit growth track for the first time in the on-going fiscal year.

Fuelled by a surge in shipments of engineering goods, iron ore, and petro products, exports posted a year-on-year increase of 17.48 per cent, rising to $24.49 billion.

However, a higher, 21.76 per cent rise in imports to $33.38 billion, mostly due to an increase in the value of petroleum imports, widened the trade deficit to $8.89 billion compared with $6.57 billion in February 2016.

The spurt in exports during the month, which was the sixth consecutive month of growth, increased total exports in the April-February 2016-17 period to $245.41 billion, which is 2.52 per cent higher than exports in the same period last year.

Export bodies are positive about the bounce-back but remain cautious about the uncertainty in global markets.

“With overall uncertainty still looming around the globe, the need of the hour is to further diversify the product basket with more focus on high-tech products where India’s share in global trade is very low,” said SC Ralhan, President, FIEO.

Exports in 2016-17 are now set to cross the last fiscal year’s figure of $262 billion. This will end their annual decline since 2014-15.

Exports fell 15.5 per cent in 2015-16 to $262 billion. In 2014-15, they stood at $310.33 billion, 1.23 per cent lower than the $314.40 billion in 2013-14.

In February, growth across 23 out of 30 major product groups has been positive. Total imports in April-February 2016-17, at $340.69 billion, were 3.67 per cent lower than in the comparable period of the previous year. The trade deficit declined to $95.28 billion from $114.31 billion in the year-ago period.

SOURCE: The Hindu Business Line

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GST council to meet today, may clear supplementary legislations

The all powerful GST Council, which decides on tax rates, exempted goods and threshold, is meeting today. The GST Council is likely to endorse supplementary legislations needed for implementation of the goods and service tax (GST) regime. The council has meet from time to time to resolve the issues regarding the implementation of the pan-India tax regime. The Council is headed by Union Finance Minister Arun Jaitley and comprising representatives of all states. The council may also take up capping the cess to be levied on demerit goods like luxury cars and tobacco products for creation of a corpus that will be used for compensating states for any loss of revenue from GST implementation in the first five years.

The panel, which had at its last meeting approved the final draft of central GST (C-GST) and integrated GST (I-GST) laws, will tomorrow take up for approval the state GST and Union Territory GST (UT-GST) laws, official sources said. Once approved, the supporting legislations together with a GST Compensation Law, will go to the Cabinet for a formal nod before they are presented in Parliament in the ongoing Budget session that ends on April 12.

The government is hoping the C-GST, the I-GST, the UT-GST and the GST Compensation laws will be approved in the current session of Parliament and the S-GST by each of the state legislatures soon to help roll out the new indirect tax regime from July 1. The Council may also be given an update on technology preparedness and migration of assesses to the new regime.

Migration of all the 85 lakh central and state taxpayers is planned to be completed by March 31. So far, over 51 lakh have migrated to the new system. Sources said the Council has already finalised a four-tier tax structure of 5, 12, 18 and 28 per cent, but the model GST law has kept the peak rate at 40 per cent (20 per cent to be levied by the Centre and an equal amount by states) to obviate the need for approaching Parliament for any change in rates in future.

On similar lines, the Council is also likely to decide on a cap rate for cess to be levied at the peak rate of tax to create the compensation corpus. Sources said any law approved by Parliament cannot have open-ended tax rates and therefore a cap or peak rate will have to be mentioned.

For the levy of GST, the peak rate has been put at 40 per cent and a similar cap will also have to be approved for the cess. While the C-GST will give powers to the Centre to levy GST on goods and services after Union levies like excise and service tax are subsumed, the I-GST is to be levied on inter-state supplies.

The S-GST, which will allow states to levy the tax after VAT and other state levies are subsumed in the GST, will have to be passed by each state Assembly. The UT-GST will also go to Parliament for approval.

Sources said the model GST Law will have a clause to enable levy of up to 40 per cent tax, but the effective tax rates will be kept at the previously approved levels. This will also help in a scenario where the cess on demerit goods being proposed to compensate states for loss of revenue from GST is to be merged with the tax rate itself.

SOURCE: The Financial Express

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Firms wait for clarity on final GST laws for IT preparedness

Calling it a race to the finish, Archit Gupta, founder and Chief Executive Officer (CEO) of online tax filing portal Cleartax.com, said that clarity on rates under GST would help companies plan better.

“What we are doing at present is working on a dynamic tax rate module. The government has indicated that rates for each commodity under GST would be close to existing rates,” he said.

The Centre plans to roll out GST from July 1 this year. Once the enabling legislation for Centre, State, Integrated and UT GST as well as compensation are approved by the GST Council, a committee of officials will work on the fitment of commodities.

This would be within the four-tier rate structure announced for GST of 5, 12, 18 and 28 per cent. Cleartax.com, which at present is an income tax filing platform, is also building a similar facility for GST filing and compliance.

Speaking to BusinessLine, Gupta also called for more clarity on issues such as the proposed compliance rating, input tax credit mechanism and the proposed anti-profiteering authority.

“Small and medium enterprises are slightly under-prepared for GST, which is a cause of worry,” he said.

Similarly, Bharat Goenka, Managing Director, Tally Solutions, said some provisions of the draft GST Bill could impact the SME sector.

“These relate to ‘input tax credit available to the buyer only if the supplier has paid tax inside a given window’ and the proposed compliance rating for all businesses that will worsen their cash flow problems which are already uneven in nature and drive them to closure,” he said, adding that there is a dire need to delink payment with the availability of input credit.

Under the proposed GST law, input credit against the taxes paid by the purchaser can be availed only when the seller deposits it with the government. In case of non-compliance, the credit would be denied to the purchaser.

According to Marg Compusoft, the software requirement for SMEs and MSMEs under GST is estimated to be worth ₹40,000 crore.

SOURCE: The Hindu Business Line

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Government launches Rs 600 crore scheme for developing export infrastructure 

The government today launched a Rs 600-crore scheme - TIES - for developing export linked infrastructure in states with a view to promoting outbound shipments. 

Launched by Commerce and Industry Minister Nirmala Sitharaman, the Trade Infrastructure for Export Scheme (TIES) seeks to bridge the infrastructure gap and provide forward and backward linkages to units engaged in trade activities.

The scheme, to be implemented from April 1, would have a budgetary allocation of Rs 600 crore for three years with an annual outlay of Rs 200 crore. Five per cent of the grant approved would be used for appraisal, review and monitoring. It will be implemented from 2017-18 till 2019-20. Five per cent of the grant approved would be used for appraisal, review and monitoring. It will be implemented from 2017-18 till 2019-20. 

"It is going to be on participative basis and the focus is not just to create infrastructure and leave it, but make sure that it is professionally run and sustained," Sitharaman told reporters here.

An inter-ministerial empowered committee for sanctioning and monitoring of the project was set up for the scheme. It will be headed by the commerce secretary.

"We are definitely asking for a clear definition and linkage with export industries (for the projects)," she added.

Commerce Secretary Rita Teaotia said some of the biggest cost, the exporters tend to incur is on account of absence of dedicated infrastructure, whether it is testing or handling facilities or cold storages at ports.

The TIES would focus on projects like customs checkpoints, last mile connectivity, border haats and integrated check posts.

"The idea of this scheme is to address those gaps in infrastructure which are not addressed by any other scheme. It will help to ensure smoother movement of export cargo and also ensure quality standards and certification," Teaotia added. 

Unlike Assistance to States for Development of Export Infrastructure and Allied Activities (ASIDE) Scheme, which was funded by the Centre, the cost of projects under TIES would be equally shared between the Centre and the states. 

However, for north-eastern and the Himalayan region states, the Centre may bear 80 per cent of the cost. 

Under the scheme, priority would be given to the projects involving significant contribution by the implementing agency and bank financing for achieving financial closure. 

The other salient features of the scheme includes promotion of leveraging of funds from other sources including bank financing; no recurring costs of the land to be included; and operating & maintenance costs to be met through pay and use charges. 

The central and state agencies, including Export Promotion Councils, Commodities Boards, SEZ authorities and apex trade bodies recognised under the EXIM policy of government; are eligible for financial support under this scheme.

SOURCE: The Economic Times

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TIES funding to be capped at ₹ 20 crore per project

The Centre’s new scheme —Trade Infrastructure for Export Scheme (TIES) — for financing State’s infrastructure projects, will provide grant-in-aid up to half of the equity being put in by implementing agencies with a ceiling of ₹ 20 crore per project, Commerce & Industry Minister Nirmala Sitharaman has said.

The scheme, to be implemented from next month for a three-year period, has been designed to meet the demand of States for infrastructure funding after the Centre stopped funding an earlier scheme called the Assistance to States for creating Infrastructure for Development and growth of Exports (ASIDE).

“The focus is not just to create infrastructure but to make sure it is professionally run and sustained,” Sitharaman said this while addressing a press conference on Wednesday.

The scheme would provide assistance for setting up and upgradation of infrastructure projects with "overwhelming export linkages'' like border haats, land customs stations, quality testing and certification labs, cold chains, trade promotion centres, dry ports, export warehousing and packaging, SEZs and ports/airports cargo terminuses, Commerce Secretary Rita Teaotia said.

“The last and first mile connectivity projects related to export logistics will also be considered,” she said.

Financial support from the Centre will match the equity being put in by the Central or State implementing agency (project proponent) in States. For North East and Himalyan States, up to 80 per cent financial support would be provided.

The grant-in-aid shall be subject to a ceiling of ₹ 20 crore normally for each project, the Minister added.

Central government agencies, State government agencies, Export Promotion Councils, Commodities Boards and apex trade bodies of India shall be eligible for financial support under the scheme will be known as implementing agencies.

The cost of land shall not be included in the project cost for the purpose of calculating the extent of contribution of the implementing agency under the scheme.

Proposals of the implementing agencies for funding will be considered by an empowered committee specially constituted for the scheme. It will be chaired by the Commerce Secretary and have the Director General of Foreign Trade and representatives from Niti Aayaog, the Ministry of Development of North East Regions and the Department of Industrial Policy & Promotion as members.

SOURCE: The Hindu Business Line

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Rupee hits fresh 16-month high, up 13 paise at 65.69

The rupee continued its stellar run against the dollar to finish at a fresh 16-month high of 65.69 today as exporters aggressively offloaded the US currency ahead of the Fed meet outcome.
Massive capital inflows on hopes of more reform measures following BJP's strong showing in the recently held state elections spurred the rupee's biggest rally since early 2015.
The domestic currency has risen 2.23 per cent since the beginning of the year. 

Reacting to market specific developments, the home currency resumed on a strong footing at 65.76 from Tuesday's closing level of 65.82 at the Interbank Foreign Exchange (forex) market.

It gained further to hit a high of 65.41 on heavy dollar unwinding by banks and traders. 

However, traders said the RBI's intervention through state-run banks capped the steep rise. The surging rupee is a headwind for exporters.

Retreating from its intra-day high, the home unit finally settled at 65.69, showing a smart gain of 13 paise, or 0.20 per cent.
The RBI, meanwhile fixed the reference rate for the dollar at 65.5146 and for the euro at 69.6224.
The resurgent rupee had rallied overnight by a hefty 78 paise -- its biggest single day spike in recent past -- to end at 65.82 in the aftermath of the decisive win for the BJP in Uttar Pradesh polls.
The BJP's thumping victory in Uttar Pradesh and substantial gains made in other states will facilitate reforms as the ruling party inches closer to a majority in the Rajya Sabha, Moody's Investors Service said in a statement.
Meanwhile, domestic bourses took a breather after yesterday's surge and ended marginally lower.

Foreign funds net infused a massive Rs 4,087.89 crore in domestic equities yesterday, as per stock exchange data.
On the global front, the greenback traded little changed against major counterparts ahead of interest rate decision from Federal Reserve even as investors' awaited cues on the central bank's future monetary policy.
The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was trading lower at 101.45 .

In cross-currency trade, the rupee fell against the British pound to end at 80.05 from 79.84 and drifted against the Japanese Yen to finish at 57.31 per 100 yens from 57.26 earlier.
It, however, remained firm against the euro to close at 69.76 compared to 69.99 yesterday.

SOURCE: The Economic Times

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Cabinet okays revised pact with Bangladesh to set up border haats

The Union Cabinet today approved revised MoU between India and Bangladesh for establishing border haats.
"The Union Cabinet, chaired by the Prime Minister Narendra Modi, has given its approval to the Revised Memorandum of Understanding (MoU) and Mode of Operation (MoO) between India and Bangladesh for establishing Border Haats on India-Bangladesh border," an official statement said.
According to the statement, border haats aim at promoting the well-being of the people dwelling in remote areas across the borders of two countries by promoting traditional system of marketing the local produce through local markets.
These measures help improve economic well-being of marginalised sections of society, it added.
Currently, four border haats are operational, two each in Meghalaya and Tripura. 
These were established and operationalised under the MoU and Mode of Operation of Border Haats signed between Bangladesh and India on October 23, 2010.

Subsequently, an Addendum to Mode of operation of Border Haats was also signed on May 15, 2012.
The Revised MoU and Mode of Operation will provide a legal framework for establishment and operationalisation of additional border haats, it added.

SOURCE: The Economic Times

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India, Russia to talk FTA, ways to up bilateral trade 


Trade ministers of India and Russia are expected to chalk out a road map for signing of a free trade pact the Eurasian Economic Union and take up issues to boost bilateral trade at a meeting here tomorrow.
The Eurasian Economic Union includes Belarus, Kazakhstan, Russia, Armenia and Kyrgyzstan. 

Commerce and Industry Minister Nirmala Sitharaman and her Russian counterpart Denis Manturov are slated to address the India-Russia Business Forum after inaugurating the International Engineering Sourcing Show (IESS).
The ministers are expected to take stock of the report of the joint study group on the feasibility of a free trade agreement (FTA) between the India and the Eurasian Economic Union (EAEU) and decide on the timeframe for bilateral negotiations and components of the proposed pact.

The two sides may also take up the issue of mutual market access for agricultural and processed food products, including dairy products and bovine meat, to widen the range of products for bilateral trade.
Several measures, including an agreement on a free trade zone between the EAEU and India, is expected to help increase the bilateral trade with Russia to USD 30 billion by 2025, which stood at USD 6.17 billion in 2015-16.

India is slated to showcase its technological and engineering prowess to top international firms at the IESS.
The 3-day event, beginning March 16, is being organised by engineering exporters' body EEPC India and is likely to see participation from 400 top global exhibitors and over 500 foreign delegates.
India's engineering exports are likely to touch USD 62 billion in 2016-17 on the back of revival of demand in the US.
For April-January 2016-17, the engineering exports have touched the USD 50.87 billion mark, exceeding the total shipments of USD 49 billion for the whole of 2015-16.
EEPC India Chairman T S Bhasin said that while the engineering exports have started growing again, the growth has come about on a low base, an offshoot of sluggish performance in the last few years.

Delegates from countries, including the UK, Brazil, the US and the UAE, are taking part in the IESS.

SOURCE: The Economic Times.

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INTERNATIONAL

Vietnam’s Top 10 Textile Manufacturers

Vietnam’s textile and apparel industry is one of the most important contributors to its economy, and its export value is continuously growing: in 2015, textile exports to the US grew by more than 11% to USD 10.9 billion. Vietnam’s textile and apparel industry is competitive and diverse with a growing number of companies and skilled workers. Here’s our list of the top 10 textile companies in the textile industry in Vietnam:

1.Kyungbang Vietnam Co., Ltd: Based in Binh Duong New City, Vietnam, and founded in 2008, the company manufactures and sells cotton yarns, fibres, and threads. It is a major importer of cotton from the US and Australia, and has invested over USD 40 million in investment capital for the improvement and development of its production facilities.
2. PetroVietnam Petrochemical and Textile Fibre Joint Stock Company: Since its inception in 2007, the company has put a heavy focus on polyester fibre, including the construction of polyester fibre plants. The company manufactures and trades polyester fibre, and also offers chemicals and other services. It operates as a subsidiary of PetroVietnam, which is owned by the Vietnamese central government and is responsible for all of Vietnam’s oil and gas resources. 

3. Hoa Tho Textile and Garment JSC: Founded in 1962, Hoa Tho has provided services and produced textiles for brands including Calvin Klein and Perry Ellis Portfolio. The company produces roughly 1,900,000 pieces of clothing and textiles on an annual basis with a force of almost 8,000 employees. Hoa Tho’s primary specialties are work wear and dress pants. 

4. Tan Nam Trung Commercial Manufacturing Service Co., Ltd: Since its establishment in 2009, the company has specialized in producing high-quality yarns for a variety of purposes and end-uses. It primarily serves customers in the Vietnamese and other Asian markets, but does do business with customers in other regions of the world as well. The company also focuses on quality and innovation in the machinery and technologies used to make its products. 

5. Hantex: Hantex specializes in cotton yarns and fibres, and is currently ranked as one of Vietnam’s top three spinning companies. The company sells roughly 20% of its products to the domestic market, and also does extensive business with companies around the globe. Hantex has a production capacity of almost 2,500 tons of product monthly. 

6. TNG Investment and Trading JSC: Established in 1979, TNG is an experienced manufacturer and exporter of textile goods and textile manufacturing materials with a focus on outwear (jackets, nylon raincoats, and coats) as well as casual wear (shorts, t-shirts, and trousers). 

7. DOTIHUTEX Co., Ltd: Established in 1993, the company has become one of the leading textile manufacturers in Vietnam that specializes in spinning and chemical yarns. It has established business domestically, in Western Europe, and in Southeast Asia. 

8. Hue Textile Garment Joint Stock Company: A member of Vietnam National Garment Textile Group, the company specializes in yarn, knitting, textiles, and materials and machinery for textile and garment production. Also known as Huegatex, the company has a significant presence in the domestic and global markets and exports many of its products to the US. 

9. Mirae JSC: The company focuses on the manufacturing and trading of raw textile materials, as well as the manufacturing of bedding, mattresses, and garment machinery. Established in 2001, the company was converted into a joint stock company in mid-2007. 

10. DONG Hung Group: The company focuses on the production, manufacturing, and export of footwear for the domestic and international markets and is one of Vietnam’s leading shoe manufacturers.
SOURCE: The Tuoi Tre News

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Turkish textile companies may set up factories in Serbia

About four Turkish textile companies are in talks with the Serbian government to set up their respective factories in Serbia. The country is planning to promote its model involving the reconstruction of abandoned halls in towns like Lebane, Lazarevac, Kraljevo, Nis and Leskovac, for investors to set up their machinery and start producing goods.

Trade minister of Serbia Rasim Ljajic informed about the country's new model of establishing industrial halls through an official statement.

Ljajic had said earlier that two Turkish textile companies are interested in investing in Serbia owing to the favourable business climate of the country. Potential investors from Turkey have also visited the production facilities in some of the towns of the country.

Serbia exported goods worth $258.4 million to Turkey in 2016 and its imports from Turkey rose by 18.1 per cent, according to the statistical office of Serbia. (KD)

SOURCE: Fibre2Fashion
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Fed rate hike: Hong Kong increases base rate; gold, oil rise; dollar loses

The Hong Kong Monetary Authority on Thursday raised the base rate charged through its overnight discount window by 25 basis points to 1.25 per cent.

The move from Hong Kong's de facto central bank followed the US Federal Reserve's decision to raise interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank's target.

Hong Kong tracks US rate moves as its currency is pegged to the US dollar.

Shares of banking and property companies will be in the spotlight in Hong Kong as the interest rate increase could raise concerns on the health of their balance sheets.

Including reinvested dividends, the broader Hong Kong stock market has outperformed a sub-index of property and finance companies since the last US rate increase in December.

The city's economy has become more dependent on the mainland at a time when Beijing authorities say meeting a target of 6.5 per cent growth this year won't be easy.

More than three fourths of inbound tourists are from the mainland, a big source of revenue for local companies, and more than half of its trade is with China.

The Hong Kong central bank sets its base rate through a formula that is 50 basis points above the prevailing US Fed Funds Target or the average of the five-day moving averages of the overnight and one-month HIBORs (Hong Kong Inter-bank Offered Rate).

DOLLAR

The dollar nursed bitter losses in Asia on Thursday while sovereign bonds savoured their biggest rally in nine months after the Federal Reserve hiked interest rates, as expected, but signalled no pick-up in the pace of tightening.

The euro got an added bonus when early returns showed the anti-EU party of Geert Wilders won fewer seats than expected in Dutch elections, soothing fears that public opinion was swinging inexorably toward a break-up of the union.

The sigh of relief was heard across Asia as investors had feared faster US hikes and more political upheaval in Europe could spook funds out of emerging markets.

"The Fed makes the world safe for risk until June," said CitiFX strategist Steven Englander. "Buy emerging market FX, equities, commodities."

Somebody seemed to be listening as gold, copper and oil all rallied as the dollar dropped. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9 per cent to its highest since mid-2015.

South Korea's market climbed 1.0 per cent but Japan's Nikkei went the other way, easing 0.4 per cent, as a jump in the yen pressured exporters.

The Dow had ended Wednesday with gains of 0.54 per cent, while the S&P 500 added 0.84 per cent and the Nasdaq 0.74 percent.

The Fed lifted its funds rate by 25 basis points to a range of 0.75 per cent to 1.00 per cent, but said further increases would only be "gradual."

Crucially, officials stuck to their outlook for two more hikes this year and three more in 2018, when many had expected an accelerated spate of moves.

Rather, the Fed said its inflation target was "symmetric," indicating that after a decade of below-target inflation it could tolerate a quicker pace of price rises.

That was painful news for bond bears who had built up huge short positions in Treasuries in anticipation of a hawkish Fed.

DOLLAR DOLDRUMS

Yields on two-year notes were down at 1.30 per cent, having fallen 8 basis points overnight in the biggest daily rally since June last year. They had been at their highest since June 2009.

The drop pulled the rug out from the dollar, which sank to a three-week low of 100.510 against a basket of currencies.

The euro was taking in the view at $1.0737, having climbed 1.2 per cent overnight in its steepest rise since June. The dollar suffered similar losses on the yen to huddle at 113.34.

Richard Franulovich, a forex analyst at Westpac, noted history showed a strong positive correlation between the dollar and yields one week after a Fed meeting and the direction and magnitude of the change in the dots from meeting to meeting.

"The absence of any overt hawkish guidance from the Fed and their dots should leave the dollar trading on the back foot over the next month," he said.

The yen and the Swiss franc tended to move the most in the first week, he added, but the impact tended to be longer lasting on the Australian and Canadian dollars.

Indeed, the Aussie currency rose a rousing 2 per cent on Wednesday to stand at $0.7710. A protracted bout of weakness for the US dollar would be seen as positive for commodities priced in the currency. Spot gold was up at $1,221.38 an ounce, after enjoying its biggest daily jump since September.

US crude futures rose 25 cents to $49.11 per barrel, adding to a 2.4 per cent gain on Wednesday. Brent gained 32 cents to $52.13, after rising more than a dollar overnight.

OIL

Crude oil prices rose on Thursday in early Asian trading, extending gains from the previous session after official data showed US stockpiles had eased from record highs.

Prices surged on Wednesday after a slew of market reports and official data offered some hope that a near three-year global glut in oil is coming to an end, albeit more slowly than many anticipated.

US West Texas Intermediate (WTI) crude was up 28 cents, or 0.6 percent, at $49.14 a barrel by 0010 GMT, having surged 2.4 per cent in the previous session to settle at $48.86, its first increase in eight days.

Brent futures climbed 34 cents, or 0.7 percent, to $52.15. They had their first increase in seven days on Wednesday, gaining 1.7 percent.

The benchmarks have bounced off their lowest levels since the Organization of the Petroleum Exporting Countries (OPEC) agreed at the end of last year to cut crude production, with an initial surge evaporating as stockpiles remained high.

 

Data from the US Energy Information Administration (EIA) showed US crude stocks fell last week, the first weekly decline after nine straight increases.

Crude inventories fell 237,000 barrels in the week to March 10. Analysts had forecast an increase of 3.7 million barrels.

The inventories have been closely watched by oil traders to determine whether the OPEC agreement to cut output is reducing the global glut.

Oil bulls were also encouraged after the International Energy Agency said in its monthly oil report that demand should overtake supply in the first half of this year.

SOURCE: The Business Standard

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Five key takeaways from US Federal Reserve's policy meeting

The Federal Reserve Chair Janet Yellen, in a widely expected move, increased the interest rates in US by 25 basis points to a range of 0.75% to 1% on Wednesday, but appeared less hawkish than expected. 

The move to lift the target overnight interest rate was taken on the back of steady economic growth, strong job gains and confidence that inflation is rising to the Fed’s target.

The latest Fed hike marks the first increase in 2017 and third one in the last two years. The central bank lifted rates once in December 2016 and December 2015 each.

The Fed also stuck to its outlook for two additional rate increases this year and three more in 2018, which is in line with its outlook from December.

Below are key takeaways from the Federal Open Market Committee’s statement and the following press conference chaired by Yellen:

On future rate trajectory

The FOMC stated to take a gradual course on future rate hikes depending on the economic outlook as showcased by incoming data. It expects the federal funds rate to remain below levels that are expected to prevail in the longer run.

“For some time the Committee has judged that, if economic conditions evolved as anticipated, gradual increases in the federal funds rate would likely be appropriate to achieve and maintain our objectives,” the FOMC said in a statement.

“Today’s decision is in line with that view and does not represent a reassessment of the economic outlook or of the appropriate course for monetary policy,” it added.

On balance sheet

Fed reiterated its commitment to take a cautious approach at unwinding its huge $4.5 trillion balance-sheet. Yellen said Fed officials had discussed the process of reducing the balance sheet gradually, but had made no decisions and would continue to debate the topic.

“The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalisation of the level of the federal funds rate is well under way,” noted FOMC statement.

Economic projections

The Fed's economic projections showed the economy growing 2.1% in 2017, unchanged from its December forecast. The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3%

Meanwhile, the median projection for the unemployment rate stands at 4.5% in the fourth quarter of this year and remains at that level over the next two years, modestly below the median estimate of its longer-run normal rate, said Yellen.  

Finally, the median inflation projection is 1.9% this year and rises to 2% in 2018 and 2019,” she added. 

On Donald Trump

Yellen told reporters she has had a brief meeting with President Donald Trump and Treasury Secretary Steven Mnuchin, but added Fed officials have not had a detailed discussion yet about the possible impacts of Trump’s economic program.

"We have not discussed in detail potential policy changes that could be put into place and we have not tried to map out what our response would be. We have plenty of time to see what happens," Yellen said in a press conference.

Sole dissenter

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, was the sole dissenter who voted against the FOMC’s decision to hike interest rates.
“Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C Dudley, Vice Chairman; Lael Brainard; Charles L Evans; Stanley Fischer; Patrick Harker; Robert S Kaplan; Jerome H Powell; and Daniel K Tarullo. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate,” said Fed in a statement.

SOURCE: The Business Standard

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Asian currencies cautious ahead of Federal Reserve data

Asian currencies were largely flat on Wednesday as investors nervously awaited an expected US interest rate hike later in the day and hoped for more clues on the pace of future tightening.
Beside the expected announcement of a quarter-point rate rise (1800 GMT), the Federal Reserve will also reveal a fresh "dot plot" that could signal whether most of its policy committee now expect more than three rate increases this year.

The "dot plot" is policymakers' rate projections and provides a view into their interest rate outlook.
Some market watchers wonder whether the new chart may point to the possibility of four rate rises this year, reflecting a brighter economic outlook.
The Indian rupee and the South Korean won rose while most of the other regional currencies were trading flat.

"We expect the fed funds target range to increase by 25 basis points. This should be the start of a more prolonged, yet gradual pace of rate hikes, in contrast to the past two years, when the Fed paused its rate hike cycle." said Maritza Cabezas, senior economist for ABN AMRO, in a research note.

A few analysts said the Asian currencies would see less impact this time, unlike during the "taper tantrum" of 2013, in which some currencies such as Indian rupee and Indonesian rupiah fell sharply.
"Last time it was a pure yield adjustment in spite of an absence of growth or demand in the US This time around, the difference is some of the upward yield movement is coming on the hopes of growth being posted by fiscal stimulus in the US," said Vishnu Varathan, senior economist at Mizhuo. 

"The sell-off in (Asian currencies) will be not be as acute this time." Policy decisions at the Bank of England and the Japanese central bank alongside a Dutch election vote within the next 36 hours also kept the investors cautious on Wednesday. 

Indian rupee 

The Indian rupee was up 0.4 per cent at 65.525 per dollar, the highest since November 2015.The rupee bucked the trend of other regional currencies, as it rose further on the back of strong election results and inflation data.
On Tuesday, the data from the Ministry of Statistics showed the consumer prices rose by an annual 3.65 per cent in February compared with January's 3.17 per cent increase
"Core pressures should begin to build in the months ahead, effectively narrowing the room for the Reserve Bank of India to lower rates further." said DBS in a research  note.

SOURCE: The Economic Times

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China's yuan weakens, awaits Fed rate decision

China's yuan traded in a tight range on Wednesday, weakening slightly against the dollar, ahead of a US Federal Reserve meeting that could provide hints on how much monetary tightening to expect for the remainder of the year. 

The People's Bank of China set the midpoint rate at 6.9115 per dollar prior to the market opening, which was firmer than Tuesday's rate of 6.9118.

Investors awaited the outcome of the Fed's two-day meeting, which ends later on Wednesday. The US central bank is widely expected to hike interest rates by 25 basis points.
With a March rate hike already priced in, Chinese traders said they were focusing more on any signals Fed Chair Janet Yellen provides afterwards on the potential for further tightening later in the year.

In the spot market, the yuan opened at 6.9130 per dollar and settled at 6.9146 at midday, only seven pips weaker than the previous late session close and 0.04 per cent softer than the midpoint.
"The overall market was calm in the morning with slightly stronger dollar demand by companies," said a trader at a foreign bank in Shanghai.

Two traders noted that major state-owned banks sold dollars in the onshore market on Tuesday afternoon after the yuan breached 6.92 per dollar at one point, in an apparent attempt to stop the currency from falling too fast.
The market shrugged off a speech by Chinese Premier Li Keqiang delivered at the end of the National People's Congress on Wednesday. 
Li reiterated that the yuan would remain basically stable, while China's foreign exchange reserves were sufficient for paying imports and foreign debts. 


He also said that Beijing did not want to see a trade war with the United States and urged talks between both sides to achieve common ground.
Chinese authorities want to carefully manage the yuan exchange rate to achieve currency stability against both the basket and the US dollar, Wang Tao, chief China economist at UBS said in a Note.

"While we expect increasing trade frictions between the US and China, we now think it unlikely that the US government will label China a currency manipulator and apply a blanket tariff on Chinese goods this year," said Wang, who expected the yuan to weaken to 7.15 per dollar by the end of this year.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.16, firmer than the previous day's 95.1.

The global dollar index fell to 101.67 from the previous close of 101.7.

The offshore yuan was trading 0.20 per cent firmer than the onshore spot at 6.9005 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.135, 3.13 per cent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.

SOURCE: The Economic Times

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