MARKET WATCH 18 MARCH, 2020

NATIONAL

INTERNATIONAL

Coronavirus: Textile industry for moratorium on loan repayment

Coimbatore:The Southern India Mills'' Association (SIMA) on Tuesday appealed to Prime Minister Narendra Modi to mandate banks to provide a one-year moratorium for repayment of principal and interest amount to enable the textile and clothing industry tide over the crisis due to coronavirus. The country has never witnessed such a crisis situation before and therefore, the industry required a helping hand from the government through this measure, SIMA chairman Ashwin Chandran said in a representation. If the Centre agrees to this, it would go a long way in helping the industry tide over the crisis and ensure its survival, the SIMA chairman. COVID-19 is affecting every sphere of life, including manufacturing activities, businesses across the globe and India is also not spared from the panic situation, he said. The textile industry predominantly employs migrant workers from different states and also a large population comes for work from far-off places using public transport, he said. Under the current scenario, especially the constant preventive measures being taken and awareness created by the government to fight against the pandemic, majority of the workers were not reporting for work and the migrant workers were also returning to their native places, Ashwin said. This situation is likely to intensify and result in mass stoppage of production in the industry, he said. With the expected steep reduction in demand due to sudden stoppage of exports/imports and also domestic sales due to the closure of malls and retail showrooms, the industry is likely to face unprecedented and severe losses and needs immediate financial relief to mitigate the crisis, he said. Therefore, the textile industry, being labour and capital-intensive, needs immediate help to tide over the worst ever crisis being faced by the industry, Ashwin said. Knitwear exporters from nearby Tirupur had already appealed to the Finance Minister Nirmala Seetharaman seeking financial measures, including moratorium, to help MSMEs to overcome the crisis.

Source: Financial Express

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No adverse impact on Indian economy due to COVID-19, says Mos Finance Anurag Thakur

NEW DELHI: While the world economy has taken some beating after the outbreak of coronavirus or COVID-19, Minister of State for Finance Anurag Singh Thakur on Tuesday pointed out that the latest data "do not suggest any adverse impact on the economy" after the outbreak of COVID-19. "Additionally, a positive impact on India's economy may arise from decline in global oil prices triggered by the outbreak of COVID-19," Thakur said in reply to a query raised by Rajya Sabha member Vaiko. The minister said that the outbreak of coronavirus has emerged as a key risk to human health as well as the global growth outlook through numerous channels like trade, production and supply chain disruptions; decline in demand; lower tourism and business travel; loss of investors' confidence; and productivity losses from the morbidity and mortality of the work force. "The Ministry of Health and Family Welfare has been coordinating the efforts of the Central government in terms of preparedness, control and containment measures and has also been working with state governments in order to mitigate the impact of the virus outbreak in India," he said. The minister said India's near-term macroeconomic outlook is also vulnerable to disruption of trade with China and second-round effects arising from the expected slowdown in global growth. "However, the latest available data on trade and indicators of domestic output do not suggest any adverse impact on the economy," he said. In order to address the possibility of trade-induced adverse impact on the economy, the minister said that the government is constantly engaging with Export Promotion Councils and trade bodies, particularly in the pharmaceutical, electronics and automobile sectors where the supply chains are sourcing imports from China. "These agencies have been put in touch with Indian Missions abroad to secure and transport inventories available with the existing suppliers," the minister said. He stated that Indian Missions abroad have also been asked to explore alternate sources of supply of raw materials in their respective countries for supporting India's domestic production. With regard to domestic availability of fertilizers, the impact of COVID-19 seems to be negligible at this juncture, the minister said. He said that a Group of Ministers is constantly reviewing the current status, and action for prevention and management of COVID-19 and two meetings of the same were held on March 11.

Source: New Indian Express

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Currency traders punch in on time

Most in India’s financial capital are working from home to avoid novel coronavirus (COVID-19), but those in the treasury department, especially the traders, are not so fortunate, even as activities in the department have come down to a trickle.  Equities and bonds can be traded through web-based platforms (NDS-OM Web for bonds), but it is a bit complicated in case of currency trading. In currency, the interbank rates can be availed only through a few platforms, including Murex, Calypso, and Reuters. These are installed in fixed computer terminals at the treasury floor. There are alternative applications that can be installed on mobile phones too, but they may work with a minor lag, which means interbank offers may not get truly captured. That is why it is important that traders must be present in front of the terminals for trading.  “The system slows down if you are not at the terminal. There is hardly any good alternative than coming to office for trading,” said the head of treasury of a foreign bank. However, considering the gravity of the situation, banks and currency brokers are ready to give a leeway to that too. For example, a private sector bank has told half of its treasury staff to work from home from Monday, said the head of treasury of the bank. But the bank has not yet decided how to ensure smooth functioning of the trading floor. “It is not so much a problem in the other functions of the bank, but treasury is a minute by minute game,” said the treasury head. Still, fearing the worse, traders are being given new laptops with the trading platforms installed to trade from home. A few skeletal staff would always be present as part of the business continuity plan. “We are being given laptops, but that is the last option. As far as possible we need to come to the office, and we have been told trades will be bare minimum,” said a currency trader with a bank. Work from home still not an option for currency traders amid coronavirus. In a bank treasury, there are two main activities — the front desk consists mainly of traders, and the backend is where the reconciliation and settlement operations take place. Surprising as it may sound, it is the backend that is more needed to be in office to meet with compliance. It is a process that has to be done at the site, using the bank’s systems. But here, too, banks are asking people not directly involved in settlement to work from home. However, it is a different case with currency consultants and corporate treasury altogether. “Consultants are mostly working from home, and corporate clients are placing their orders with banks over phone or even placing orders in the market through from web-based platforms,” said Ritesh Bhansali, vice-president at Mecklai Financial. “Hedging activities have come to an almost standstill and corporate clients are only placing orders that would ensure just the daily business,” Bhansali said. Given the currency’s volatility, exporters have stopped hedging altogether, but importers are also not willing to hedge when the rupee is at a near record low level. The expectation is that the rupee will strengthen once the COVID-19 scare comes to an end. The daily trading volume in rupee in the onshore spot market is about $30 billion. Currency dealers estimate the volume has crashed to less than a third due to the virus scare. The thin volume is also creating volatility as any lumped up demand for dollars, or relatively low dollar sales by the RBI, is changing the course of the exchange rates. The rupee ended at 74.27 a dollar, almost same as its previous close of 74.25 a dollar. During the day, rupee traded in the range of 73.86 to 74.32 a dollar.

Source: Business Standard

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Moody's lowers India's GDP growth forecast to 5.3% in 2020

Moody's Investors Service on Tuesday lowered India's GDP growth forecast for 2020 calendar year to 5.3 percent, on coronavirus implications on the economy. Moody's had in February projected a 5.4 percent real GDP growth for India in 2020. This too was a downgrade from 6.6 percent earlier forecast. The 5.3 percent real GDP growth forecast for 2020 compares to 5.3 percent growth estimate for 2019 and 7.4 percent achieved in 2018. Stating that there was significant economic fallout from more rapid and wider spread of the coronavirus, the rating agency on Tuesday said dampening of domestic consumption demand in affected countries exacerbates disruptions to supply chains and cross-border trade of goods and services. "The longer the disruptions last, the greater the risk of global recession becomes," it said.

Moody's forecast a 5.8 per cent growth rate for India in 2021.

"A number of governments and central banks have announced countervailing measures, including fiscal stimulus packages, policy rate cuts and regulatory forbearance; however, the effectiveness of policy easing will be blunted by measures to contain the outbreak, and policy space is constrained for some sovereigns," it said. Also, tighter funding conditions and exchange rate depreciation could stress sovereigns with high foreign currency exposure, heavy reliance on external market funding or low foreign currency reserve coverage, it said. Moody's said oil price shock adds to growth and fiscal pressures for exposed sovereigns. "A period of lower oil prices will further weigh on the economic and fiscal fundamentals of oil exporters, while mitigating the trade shock for importers."

Source: Money Control

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Success in energy efficiency, failure on storage and production front

Despite some achievements, India has missed out on most of the goals, for the energy sector, defined under the Three Year Action Agenda (2017-2018 to 2019-2020) charted by the NITI Aayog. The achievements can be seen on the energy efficiency and fuel quality front, but there are failures on the domestic coal and crude oil production front, in setting up of refineries and crude oil storage facilities among others. India’s per capita electricity consumption also lags far behind (still at one-third of the global average) despite the action agenda calling for bridging this gap. This Three-Year Action Agenda recommended policy changes and programmes for action from 2017-2018 to 2019-2020, the last three years of the Fourteenth Finance Commission. According to the NITI Aayog, the document offered ambitious proposals for policy changes within a relatively short period. “It is understood that while some may be fully implemented during the three-year period, implementation of others would continue into the subsequent years,” the agenda document said. According to the agenda document, per capita electricity consumption in India stood at 1,010 kWh (for 2014-2015) against the world average of 3,200 kWh. There is considerable scope for growth in energy consumption in India. There are four major end users of energy: households, businesses, transportation and agriculture. But, by the end of 2018-19, India’s per capital electricity consumption had risen modestly to 1181 Kwh, still at a third of the global average. The document also said that by 2019, India should sustain its export capacity of refined products by setting up new refineries. “The PSUs may start construction work on new refineries of 60 million metric tonnes per annum (mtpa) capacity. Also, the refineries should upgrade their processing capacity to meet petroleum fuel quality standards of BS-VI.” As fiscal 2019-20 comes to a close, the domestic oil refiners are confident of a nationwide roll out of BS-VI grade fuel. But the work on a 60-mtpa refinery project in West Coast is yet to begin. While some contractual agreements have been forged, the project has been bogged down on the land issue. “By 2019-20, we must set up strategic-cum-commercial oil reserves up to 90 days of consumption through public and private investment,” the agenda document proposed.  But this also remains to be achieved with the present 5.33 million tonne of strategic oil reserves being able to meet barely two weeks’ crude oil demand.

Source: The Hindu Business Line

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Weak rupee hits firms with record debt bills

MUMBAI: The Indian rupee has declined about 2.5% against the dollar this month despite rebounding. That broader weakness couldn’t come at a worse time for the nation’s companies facing a record international debt bill. The spread of the coronavirus has caused historic declines in asset prices globally, with investors increasingly bracing for a global recession and a jump in corporate defaults. Indian borrowers had been loading up on foreign currency-denominated debt amid a squeeze in rupee credit markets, and have to repay US$7.5bil of overseas bonds and loans in the April-June period, the most ever in a quarter. The Reserve Bank of India had eased hedging requirements for foreign-currency borrowings by local firms in late 2018, giving India Inc leeway to go on a record offshore debt binge. — Bloomberg

Source: Financial Express

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Global Textile Raw Material Price 18-03-2020

Item

Price

Unit

Fluctuation

Date

PSF

870.47

USD/Ton

0%

3/18/2020

VSF

1362.79

USD/Ton

0%

3/18/2020

ASF

2004.94

USD/Ton

0%

3/18/2020

Polyester    POY

863.34

USD/Ton

-2.42%

3/18/2020

Nylon    FDY

2026.34

USD/Ton

0%

3/18/2020

40D    Spandex

4095.49

USD/Ton

0%

3/18/2020

Nylon    POY

2297.47

USD/Ton

0%

3/18/2020

Acrylic    Top 3D

5351.25

USD/Ton

0%

3/18/2020

Polyester    FDY

1148.74

USD/Ton

-1.23%

3/18/2020

Nylon    DTY

1855.10

USD/Ton

-0.76%

3/18/2020

Viscose    Long Filament

2183.31

USD/Ton

0%

3/18/2020

Polyester    DTY

1027.44

USD/Ton

-1.37%

3/18/2020

30S    Spun Rayon Yarn

1983.53

USD/Ton

-0.36%

3/18/2020

32S    Polyester Yarn

1576.84

USD/Ton

0.45%

3/18/2020

45S    T/C Yarn

2354.55

USD/Ton

-0.30%

3/18/2020

40S    Rayon Yarn

1726.67

USD/Ton

0%

3/18/2020

T/R    Yarn 65/35 32S

2211.85

USD/Ton

0%

3/18/2020

45S    Polyester Yarn

2169.04

USD/Ton

0%

3/18/2020

T/C    Yarn 65/35 32S

1897.91

USD/Ton

0%

3/18/2020

10S    Denim Fabric

1.26

USD/Meter

-0.11%

3/18/2020

32S    Twill Fabric

0.69

USD/Meter

-1.03%

3/18/2020

40S    Combed Poplin

0.97

USD/Meter

-0.44%

3/18/2020

30S    Rayon Fabric

0.53

USD/Meter

-0.80%

3/18/2020

45S    T/C Fabric

0.66

USD/Meter

0%

3/18/2020

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14280 USD dtd. 18/03/2020). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

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Crude sinks below US$30 a barrel as recession fears weigh

SINGAPORE (BLOOMBERG) - Oil briefly traded below its lowest settlement price in almost 17 years on Wednesday (March 18) as the coronavirus pandemic threatens to bring the global economy to a standstill, battering demand just as supply explodes. Futures in New York fell as much as 2.8 per cent in the Asian morning, touching as low as US$26.20 a barrel, which would be the lowest close since May 2003 if prices settle at that level. Oil clawed back some of their initial losses but remain more than 15 per cent weaker this week in the most volatile trading on record. While policymakers around the world take unprecedented steps to shore up their economies from the fallout of the virus, the meltdown in oil demand and concurrent supply free-for-all by the world’s biggest producers continue to pull crude prices ever lower. “I don’t think we have hit peak demand devastation yet,” said Stephen Innes, Asia Pacific market strategist at AxiCorp, who predicts oil may fall to US$18-US$20 a barrel. “If cases exponentially increase, especially in the US, its going to spook the hell out of oil traders.” The market is finding little succor in global efforts to stem the economic fallout. The US Federal Reserve on Tuesday announced the restart of a financial crisis-era program in an effort to stem the economic impact from the virus. While US stocks rebounded from the biggest rout since 1987 on the plan, oil continued its slide as Saudi Arabia signaled its intention to ship a record 10 million barrels a day in April. West Texas Intermediate for April delivery added 11 cents to US$27.06 a barrel on the New York Mercantile Exchange as of 10:33 a.m. in Singapore. Brent crude climbed 30 cents to US$29.03 after slumping 4.4 per cent on Tuesday. US gasoline prices recovered some ground after the biggest daily drop on Monday since 2005. The motor fuel was up 3.8 per cent at 73.85 cents a gallon in light volumes on Wednesday. The supply and demand shocks have hammered Wall Street’s outlook for oil. Goldman Sachs Group said consumption is down by 8 million barrels a day and cut its Brent forecast for the second quarter to US$20 a barrel. Standard Chartered Plc predicted the low for the global benchmark crude will likely be well below US$20 next quarter, while Mizuho Securities warned prices could go negative as Russia and Saudi Arabia flood the market. The rout amid ruthless competition between exporters has forced Iraq to urge Opec and its allies to regroup for negotiations. Before OPEC+ talks collapsed earlier this month, Iraq had routinely disregarded the supply cutbacks it had promised. Now the producer has asked the cartel to hold a meeting to consider steps for re-balancing the global oil market as a massive glut emerges, according to a delegate.

Source: Business Line

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Covid-19 impact: Economists’ forecasts have wide variations

President Donald Trump now sees the risk of a U.S. recession due to the coronavirus, warning on Monday “this is a bad one.” His frankness, which contradicted his previous optimism and the view of Treasury Secretary Steven Mnuchin one day earlier that the nation could skirt this fate, rattled investors, with stocks closing 12% lower for their steepest losses since 1987.  Forecasts for the U.S. vary wildly, with some guessing economic activity could decline by as much as an annualized 5% or even 10% in the second quarter. An even harder question is how long the slowdown will last: a short, sharp shock or something lingering or nasty. “The middle two quarters of this year are going to be very challenging even if we get the spread of the coronavirus under control quickly,” said Carl Tannenbaum, chief economist at Northern Trust Corp. in Chicago and former Fed staffer. The news cycle has delivered a cascade of increasingly alarming developments. Trump’s advice that Americans should avoid gathering in groups larger than 10 and stop eating out at restaurants came as cities banned crowds and closed clubs and bars. San Francisco Bay Area counties ordered people to stay home unless for essential needs. Major League Baseball pushed the season’s open back to mid-May from late March. The effects of the virus are already reflecting in data: Investor confidence in the German economy plummeted to levels last seen during the European debt crisis, while U.S. retail sales fell the most in a year in February, even before coronavirus containment measures began rippling through the economy. American jobless claims for the week ending March 14, due for release Thursday, will probably jump to the second-highest level this year, according to the median estimate in a Bloomberg survey, and are likely to rise further in coming weeks. Wells Fargo’s acting chief economist, Jay Bryson, wrote Monday that a global downturn is imminent with GDP growth poised to fall to about 1% this year. Economists at JPMorgan Chase & Co. said they expected a “sharp and broad-based” global recession in the first half of the year, “with limited labor market damage as policy supports build and virus impact fades into midyear.” In the U.S., they pencil in declines of 2% in the first quarter and 3% in the second. A recession is typically defined as two consecutive quarters of economic contraction, though in America a panel of academics are viewed as the arbiters of business cycles and so a recession can be deemed to occur if there is a short but substantial drop in activity. It could get a lot worse, but more dire predictions wander quickly into speculative territory.

Downward Spiral

“This situation is the first time since the 1930s where we are having a global calamity of a scale that the policy markets are just not ahead of or anticipating,” Guggenheim Global Chief Investment Officer Scott Minerd said in a Bloomberg Television interview Monday. “The risk we are facing is that this thing could spiral into something akin to a global depression.” Economists at Goldman Sachs Group Inc. expect the economy to shrink 5% in the second quarter after zero growth in the first three months of the year. Those at Morgan Stanley said on Tuesday that they see the U.S. shrinking 4% in the second quarter before recoverying. Worse still, Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note to clients that the economy could slide 10% in the April to June period before rebounding in the third quarter. Uncertainty is so high the U.S. central bank drew praise from several commentators for taking the unprecedented step of scrapping the planned release on Wednesday of its quarterly Summary of Economic Projections, which is one of its most important communications tools. Speaking Sunday after the Fed slashed interest rates to nearly zero, Chairman Jerome Powell said the next forecasts would probably be published in June. He warned the second quarter will “probably be pretty weak,” but declined to give any concrete predictions on the outlook.

Not Knowable

“It really is depending heavily on the spread of the virus, and the measures taken to affect it and how long that goes on,” Powell said. “And that’s just not something that’s knowable.” Because the environment is changing so rapidly, Powell explained that publishing forecasts “could have been more of an obstacle to clear communication than a help.” Parts of Wall Street were nearly as cautious. “It will be a negative quarter” in the U.S., said Michelle Meyer, head of U.S. economics at Bank of America Securities in New York. “But to be able to say the extent to which it will contract is virtually impossible.”

Chinese Slide

Economists were a bit bolder with global forecasts following China’s release on Sunday of worse-than-expected data. Retail sales in January and February plunged more than 20% while industrial output dropped 14%. Since the outbreak originated in China, data were treated by many as a harbinger of what’s to come in other regions. Morgan Stanley’s economists said in their Tuesday report that a global recession was now their “base case” with the world expanding just 0.9% this year. That would be better than then 0.5% contraction of 2009 but worse than the slump of 2001. JPMorgan’s team forecast 1.5% growth this year, again weak enough to be called a recession.

Fiscal Action

Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up. While the Fed gets “full marks” for its recent response in cutting rates and moving to stabilize credit markets, Northern Trust’s Tannenbaum said Congress and the White House have so far failed to act boldly enough. “The other side of Washington really needs to step up with something as substantial in size and intelligent in design,” he said.

Source: Bloomberg

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COVID-19 could hit FDI in Myanmar; 4000 workers lose jobs

The flow of foreign direct investment (FDI) into Myanmar could be affected by the COVID-19 pandemic, hitting manufacturing businesses that rely on import of raw materials, according to U Thant Sin Lwin, secretary of the Myanmar Investment Commission (MIC). Currently, more than 10 garment factories have shut down due to losses caused by the outbreak. About 4,000 workers have lost their jobs since the start of the year due to closures and reduction of workforce in 15 factories, said U Thein Swe, minister of labour immigration and population. Twenty other factories have submitted requests for suspension of activities. Of the 15 affected factories, nine stopped operations permanently, six stopped temporarily, and two reduced the number of workers. Most of these factories are in Yangon, Bago, and Ayeyarwady regions, engaged in bag, shoe and garment manufacturing. The unemployed workers will continue to receive health care benefits, depending on their social security contributions, but not unemployment benefits, he added.

Source: Fibre2fashion

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Vietnam's garment export hits $5.3 bn in Jan-Feb

Vietnam’s export turnover of garment and textile products reached $5.3 billion in the first two months of this year, down 3.5 per cent year-on-year. Of the total, $4.2 billion came from the shipment of apparel and $512 million from yarn, down 2.3 per cent and 16 per cent respectively, according to the Vietnam Textile and Apparel Association (Vinatex). At present, the supply of raw materials meets production demand in March and April, according to a report in a Vietnamese newspaper. However, the sector is facing a lot of difficulties, as the world economy is hit by the COVID-19 outbreak, resulting in a decrease in global demand. Vietnam’s garment and textile exports fetched $39 billion in 2019, up 7.55 per cent over the previous year, but $1 billion lower than the target. In 2020, the industry aims to achieve an export turnover of about $42 billion.

Source: Fibre2fashion

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