Asian stocks are showing some signs of stability this morning with hopes that the impact of the coronavirus pandemic may stabilize.
News coming out this week will also help us better gauge the economic impact of the global pandemic.
Meanwhile Indian markets are closed today on account of Mahavir Jayanti.
Join us as we follow the top business news through the day.
Can a lockdown actually make economic sense?
Telcos' finances expected to improve after tariff hike
Finally a little good news for telecom companies in the country which have been under extreme duress due to multiple pressures from the government and consumers.
After the tariff hike in December, Airtel and Jio are expected to report better revenue and EBITDA figures.
PTI reports: "Revenue and EBITDA for wireless telecom service providers are expected to improve sequentially during March quarter 2019-20 fuelled by tariff hike in December, but the full impact is likely only in first quarter of the current fiscal when majority users come for recharge, according to Axis Capital.
Axis Capital, in its recent report outlining Q4FY20 preview, has also anticipated a soft quarter for infrastructure providers, impacted by the COVID-19 outbreak.
The report said Reliance Jio and Bharti Airtel are expected to benefit from the price hike as well as subscriber addition, while subscriber loss is expected to continue for Vodafone Idea.
“We expect revenue and Earnings before Interest, Tax Depreciation and Amortisation (EBITDA) for wireless service providers to improve led by tariff hike taken in December 2019, though the full impact is expected only in Q1FY21 when most users come for recharge,” it said."
COVID-19 lockdown: Better to renegotiate business contracts, say legal experts
The 21-day lockdown amid the COVID-19 outbreak, has impacted businesses across sectors, and some have started to invoke the ‘Force Majeure’ clause in the contracts to protect themselves against performance obligations. However, according to experts, the best way to deal with the situation is to re-negotiate the contracts, rather than terminate them.
The term ‘Force Majeure’ is a French term, which means ‘superior force.’ It refers to an event or effect that can be neither anticipated nor controlled. The term includes both acts of nature and acts of people, including but not limited to natural disasters, riots etc. In such conditions, the force majeure clause in the contract/agreement, if present, will define the scope of applicability of this principle, Anant Merathia, a Chennai-based corporate lawyer said.
Microfinance institutions put growth plans on hold
After demonetisation in 2016, the microfinance industry in India is now faced with another major shock due to the coronavirus pandemic.
PTI reports: "The microfinance institutions (MFIs), which are currently feeling the pinch of the coronavirus pandemic with their operations being suspended during the nationwide lockdown, are concerned about the near-term growth of the industry, officials said on Monday.
The MFIs will concentrate more on protecting their existing portfolios, once the lockdown will be lifted, and many of them may shelve their expansion plans for the time being, a self-regulatory organisation of the sector, Microfinance Institutions Network (MFIN) chairperson Manoj Kumar Nambiar said.
During the lockdown period, the operations of the MFIs have been mostly suspended. Branches are closed and no field- work is going on. Staff of the institutions are currently working from home and engaging with the customers over phone, Nambiar said."
Growth rates in the EU expected to crash
Mukesh Ambani’s net worth drops 28% to $48 billion in 2 months
The bloodbath in markets last month has caused the wealth of many billionaires, which depends on the market value of the shares owned, to take a heavy beating.
PTI reports: "The net worth of India’s richest man Mukesh Ambani dropped 28 per cent or USD 300 million a day for two months to USD 48 billion as on March 31 due to the massive correction in stock markets, a report said on Monday.
The chairman and managing director of the diversified Reliance Industries saw his wealth decline to USD 19 billion, taking his global ranking down eight places to 17th, the Hurun Global Rich List said.
Other Indian businessmen who have seen a major drop in wealth include Gautam Adani whose wealth eroded by USD 6 billion or 37 per cent, HCL Technologies’ Shiv Nadar (USD 5 billion or 26 per cent) and banker Uday Kotak (USD 4 billion or 28 per cent), it said.
All the three have dropped off the top 100 list, leaving Ambani as the only Indian in the league.
The Indian market has corrected by 25 per cent in the last two months as the economic costs and impact of the COVID-19 pandemic on companies led to a sell off across the world."
‘Force Majeure’ will not apply in case of COVID-19 death claims
After confusion among customers regarding whether life insurance companies are obliged to settle claims related to deaths due to the coronavirus pandemic, the Life Insurance Council has clarified on the matter.
PTI reports: "The Life Insurance Council on Monday said all the insurers are duty-bound to settle claims if a death occurs due to COVID-19.
All life insurers, both public and private, are committed to process any death claim pertaining to COVID-19 at the earliest, the Council said in a statement.
It said the clause of ‘Force Majeure’ will not apply in case of COVID-19 death claims.
Force Majeure is described as an event or effect that can be neither anticipated nor controlled.
This step was taken to reassure customers who had reached out to life insurance companies seeking clarity on this clause in their contract as well as to dispel rumours to the contrary, it said."
Here's why Indian farmers are feeding strawberries to cows
The breakdown of the food supply chain has affected the supply of essential goods across the globe, and excess produce is being wasted in many ways.
Reuters reports: "In the fertile Satara district in western India, farmers are putting their cattle on an unorthodox diet: Some feed iceberg lettuce to buffalo. Others feed strawberries to cows.
It's not a treat. They can either feed their crops to animals or let them spoil. And other farmers are doing just that - dumping truck loads of fresh grapes to rot on compost heaps.
The farmers cannot get their produce to consumers because of lockdowns that aim to stop the spread of coronavirus. In India, as in many parts of the world, restrictions on population movement are wreaking havoc on farming and food supply chains and raising concern of more widespread shortages and price spikes to come.
Across the globe, millions of laborers cannot get to the fields for harvesting and planting. There are too few truckers to keep goods moving. Air freight capacity for fresh produce has plummeted as planes are grounded. And there is a shortage of food containers for shipping because of a drop in voyages from China."
US job market not in free fall, says Fed official
An official at the US Federal Reserve has doubted estimates that say that unemployment in the US could soar to record levels.
IANS reports: "While a recent study showed that US unemployment rate could jump to 32 per cent due to the COVID-19 pandemic, the American job market was not in “free fall”, a senior Federal Reserve official said.
“I would push back against the idea of the economy or the job market being in free fall,” Xinhua news agency quoted James Bullard, president of the Federal Reserve Bank of St. Louis, as saying on Sunday in a CBS program.
“We’re asking people to stay home to invest in national health, and we’re asking them to use the unemployment insurance program in order to get the transfers they need to be able to pay bills while they’re at home, while they’re not able to work because health authorities are trying to get the virus under control,” he said.
Bullard’s comments came after a study from the Federal Reserve Bank of St. Louis estimated in March that the pandemic could cost 47 million American jobs in the second quarter, bringing the unemployment rate to 32 per cent."
When regulators bluff to prevent a bank run
India's March services activity contracts amid coronavirus disruptions
The impact of the 21-day lockdown of the economy is beginning to show in the data being released this week.
Reuters reports: "India's dominant services sector, the lifeblood for economic growth and jobs, contracted in March as new business and export demand fell sharply as the coronavirus pandemic wreaked havoc globally, a private survey showed.
The Nikkei/IHS Markit Services Purchasing Managers' Index fell sharply to a five-month low of 49.3 in March from February's seven-year high of 57.5, below the 50-mark separating growth from contraction for the first time since October.
A strong service sector is crucial for Indian growth as it contributes over 60% to the country's gross domestic product. If the lockdown is extended, economists say it could drag Asia's third-largest economy to either no growth or a contraction this quarter."
India faces greatest economic emergency since Independence, says Raghuram Rajan
Former Reserve Bank of India Governor Raghuram Rajan believes the current economic crisis amid the nation-wide lockdown could well be India's "greatest emergency since Independence".
Here he offers the reasons for his conclusion.
Reuters reports: "Former RBI Governor Raghuram Rajan has said that due to the coronavirus crisis, India currently faces the greatest economic emergency since its independence.
He noted that although the global financial crisis in 2008-09 had a severe impact on the country, economic activity was going on and India’s financial system was largely sound. Currently, none of the fundamentals are positive, he observed.
“Economically speaking, India is faced today with perhaps its greatest emergency since Independence. The global financial crisis in 2008-09 was a massive demand shock, but our workers could still go to work, our firms were coming off years of strong growth, our financial system was largely sound, and our government finances were healthy. None of this is true today as we fight the coronavirus pandemic,” Rajan said in a note on LinkedIn."
Oil drops, stocks stabilize
Here's a quick summary of how global markets have opened this morning.
From Reuters : "Oil prices skidded on Monday after Saudi-Russian negotiations to cut output were delayed, keeping oversupply concerns alive, while stocks jumped as investors were encouraged by a slowdown in coronavirus-related deaths and new cases.
In currency markets, sterling fell 0.4% early in Asia after British Prime Minister Boris Johnson was admitted to hospital following persistent coronavirus symptoms 10 days after testing positive for the virus.
Brent crude fell as much as $4 after Saudi Arabia and Russia postponed their meeting, initially scheduled for Monday, to Thursday even as the virus pandemic pummels demand.
Equity investors, however, took solace as the death toll from the coronavirus slowed across major European nations including France and Italy."
Why has India reacted to declining global crude prices by raising excise duties?
The story so far: Till U.S. President Donald Trump’s tweet the past week, on his conversation with Saudi Arabia’s Crown Prince Mohammed bin Salman, Brent crude prices had been declining in an unprecedented manner, touching an 18-year low. Mr. Trump’s assurance that the West Asian kingdom and Russia, major oil producers, would soon announce a production cut sent prices up again. Earlier this year, Saudi Arabia and Russia had fallen out on agreements to cut production which would have kept oil prices up.
More people will die from hunger than pandemic in India, says PE investor
Some grim warnings coming from a meet of private equity investors.
IANS reports: "The situation during the ongoing COVID-19 will be grim and the recovery thereafter will also take time as private equity experts fear that more people will die from hunger than pandemic in India with most people under estimating the gravity and period of impact, which at the very least will take two to three quarters.
At a private equity webinar, Shailendra Singh, Managing Director at Sequoia Capital flagged that fear that more people will die from hunger than pandemic in India.
He added that most people are under estimating gravity and the period of impact, which will be the at the very least two to three quarters."
