Evening wrap:
Indian banks are likely to see a rise in gross non-performing assets (NPA) to 8-9% of total lending at the end of this fiscal year from 7.5% last year, according to rating agency CRISIL. Retail, and the micro, small and medium (MSME) segments will lead the rise as they represent 40% of total bank credit.
In other developments, Sri Lankan economy faces substantial credit risk as the island nation’s external liquidity position remains stressed, with USD 26 billion in sovereign foreign-currency obligations coming due between now and 2026.
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The U.S. market will be waiting for quarterly earnings results from Tesla for indications of its performance in China. – John Xavier
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Sensex, Nifty end with marginal losses
Equity benchmark indices Sensex and Nifty broke their seven-day rising streak to end with marginal losses today.
Sensex settled 0.08% lower at 61,716.05, while Nifty ended 0.32% lower at 18,418.05. ITC shares were the top loser on the Nifty. Sensex touched the 62,000-crore mark earlier in the day.
ITC slumps 6% on government’s tax policy update
Consumer goods company ITC’s shares slumped more than 6% after the Health Ministry document showed that the government has decided to constitute an expert group to develop a comprehensive tax policy for all tobacco products.
Global bond allocation drops to record low
The Bank of America’s monthly survey showed that investor allocation to bond markets dropped to the lowest level on record in October, as inflation concerns and China further clouding the outlook for the global economy.
The survey added that investors are now very overweight inflation assets like commodities and banks relative to history while at the same time very underweight assets that are vulnerable to interest rate hikes like bonds.
HUL Q2 net profit rises over 10%
Retail giant Hindustan Unilever’s net profit rose 10.7% to ₹2,185 crore in the September-ended quarter.
Revenue from sales stood at ₹12,812 crore, up 11.31% against ₹11,540 crore a year ago.
CMD Sanjiv Mehta noted the company remains “cautiously optimistic about demand recovery”.
PM to interact with global oil industry CEOs, experts
Prime Minister Narendra Modi is scheduled to meet with oil industry experts and CEOs of global oil and gas companies on Oct 20 via video call.
The interaction is likely to include key issues facing the sector and potential areas of collaboration and investment with India. This is the sixth annual discussion which began in 2016.
The interaction comes against the backdrop of a global energy crunch due to a shortage of coal.
Sri Lanka faces substantial credit risk: Fitch
The Sri Lankan economy faces substantial credit risk with default “a real possibility”, according to Fitch ratings. The ratings agency revised Sri Lanka’s growth forecast for 2021 to 3.3% from 3.8% due to surge in COVID-19 cases. It also forecasted the country’s foreign exchange reserves to plummet $2.5 million by 2023.
The Sri Lankan government declared an emergency last month amid rising food prices, a depreciating currency, and rapidly depleting foreign reserves.
France’s central bank plays down Evergrande contagion
Bank of France Governor Francois Villeroy de Galhau has said that Evergrande Group’s problems may not lead to a wider contagion. “History is not in the process of being repeated,” Villeroy said in response to a question on whether the Chinese firm’s troubles could trigger a 2008 Lehman Brothers moment.
“I think that Evergrande is mainly a Chinese problem,” he added.
Chinese property bonds remain firm
Chinese property bonds remained firm after two major developers in the country, Sunac China and Kaisa Group, made coupon payments amid concerns over Evergrande's potential default.
Sunac China, which has a $27.14 million payment due, has paid its bondholders. And, Kaisa Group said it has paid a coupon due October 16 and it plans to transfer funds for a coupon worth $35.85 million due October 22 on Thursday.
Property bond issuers in the country responded positively after the People’s Bank of China said spillover effect from Evergrande Group’s debt woes were controllable.
Evergrande, which has over $300 billion debt, caused worries in the property sector after missing a series of bond payments. High-yield bonds issued by Chinese property developers have been especially hammered.
U.S. reviews sanctions policy
The U.S. Department of the Treasury released the results of a broad review of the economic and financial sanctions that it administers and enforces, and issued recommendations to preserve and enhance their effectiveness.
Treasury’s review found that while sanctions remain an essential and effective policy tool, they also face new challenges including rising risks from new payments systems, the growing use of digital assets like cryptocurrencies, and cybercriminals.
The Treasury warned that countries reducing the use of the U.S. dollar and exposure to the U.S. financial system could erode the effectiveness of sanctions.
Global power cost surge hits Singapore
Singapore is hit by the global energy crunch caused by rising natural gas prices and power scarcities in various parts of the world. The city-state relies on gas for its domestic power generation.
Three energy suppliers in the island state are exiting the market, and at least two others have stopped taking new clients. Retailers are unable to pass the high wholesale energy cost on to their customers.
Singapore’s energy regulator Energy Market Authority said it was working with retailers facing challenges from volatile electricity prices, which rose to record high levels this month, and said there will be no disruption to their customers’ electricity supply.
Oil prices fall
Oil prices ticked down after sky-high rally on weak economic data from the world’s top two oil consumers – the U.S. and China.
Brent crude fell 0.5% to $83.90 a barrel, while U.S. WTI slid 0.4% to $82.11 a barrel. Brent crude contract is still up nearly 7% this month, and WTI has risen nearly 10% this month.
Rising U. S. oil output is also keeping a lid on prices. Shale production in the U.S. is expected to increase next month, according to an official report.
Sensex crosses 62,000-mark
Indian indices opened on a strong note with Sensex crossing the 62,000-mark and Nifty going beyond 18,600 for the first time. The BSE Sensex hit a new all-time high of 62,159.78, after opening nearly 400 points higher than its previous close at 62,156.48. Similarly, NSE Nifty touched a fresh record high of 18,604.45 after opening at 18,602.35, up 125.30 points.
Asian markets update
Asian shares rose following a tech-driven rally in the U.S. market, and a rebound in Chinese markets after weak economic data raised investor concerns in the country.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.76%, and Japan’s Nikkei gained 0.65%. South Korea’s Kospi opened at 3,022.23, slightly higher than its previous close.
Chinese blue chips reversed early losses to rise 0.62%, a day after they fell 1.1% when the country reported its gross domestic product growth slowed in the third quarter. Hong Kong’s Hang Seng jumped 1.34%.
In U.S., the S&P 500 rose 0.34% to 4,486.46, the Nasdaq Composite advanced 0.84% to 15,021.81, while the Dow Jones Industrial Average slipped 0.10% to 35,258.61.
Morning note:
Major indexes in Asia finished mixed yesterday. China’s Shanghai Composite was down 0.1%. Hong Kong’s Hang Seng rose 0.3%. This morning, Asian shares are up following the rally in Wall Street, driven by tech stocks. Tesla, Facebook and Twitter gained, and shares of utility companies were pulled back.
In energy markets, Brent crude futures, the benchmark in global oil markets, ticked down 0.6% to $84.33 a barrel.
China has said it will issue dollar-denominated, multi-tranche bonds in tenors of three, five, 10 and 30 years. The issuance is expected to raise about $4 billion. Such bonds are typically in high demand from global investors due to their scarcity and high yields. – John Xavier
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---- Edited by John Xavier
(With inputs from Reuters, PTI and other news agencies.)