The First Forum is an initiative which focuses on covering the latest happenings going around in the world in a brief format. This is in lieu with the importance of catching up with these events in this fast changing world.
In this Twenty Fifth Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Gunika Vij, Ashika Deb and Shitij Goyal)

Business

SEBI increases scrutiny of FPIs from 11 Asian countries
Spooked by Chinese companies including the country’s central bank and its sovereign funds shopping in Indian stock markets, the government has dropped foreign direct investment (FDI) coming from its neighbours from the automatic approval list. Such investments will now need prior government approval. Read MoreTweaking rules governing FDI in Indian companies, a release by Department of Promotion of Industry and Internal Trade (DPIIT) said this was being done to prevent hostile takeovers of Indian companies whose market values have taken a severe hit due to covid-19 related uncertainties. In a follow up, The Securities and Exchange Board of India (Sebi) on Friday intensified its scrutiny of foreign portfolio investors (FPIs) from Asian countries in the wake of fears that Chinese investors could be investing in India’s blue-chip stocks at cheap valuations through indirect routes.SEBI sent its third communication of the week to custodians, seeking details of FPIs which have beneficiaries in Mongolia, Pakistan, Bhutan, Nepal, Afghanistan, Bangladesh, Myanmar, Taiwan, North Korea, Yemen and Iran.

Tencent’s mobile game is world’s top seller in March
Tencent’s battle royale title PlayerUnknown’s Battlegrounds (PUBG) Mobile was the world’s highest-grossing mobile game in March, as demand for online entertainment increased during the coronavirus outbreak. PUBG Mobile, and its Chinese mainland version, Peacekeeper Elite, pocketed $232 million, more than three times the amount the game earned in the same period last year, according to a report by research firm SensorTower. Read MoreApproximately 61% of PUBG Mobile’s revenue came from China, followed by the U.S. with 11% and Japan with 3.6%. March was the second straight month for PUBG Mobile and Peacekeeper Elite to break new revenue records in both the domestic and overseas markets, SensorTower said. Another Tencent title Honor of Kings, and its overseas version raked in $112 million in revenue during the month, claiming the second spot. More than 90% of the game’s revenue was generated in China, according to the report. Other titles performing well in March included Mixi’s Monster Strike, King’s Candy Crush Saga and Moon Active’s Coin Master.

Qatar Airways and Standard Chartered sign $850 million aircraft financing agreement
Standard Chartered, close banking partner of Qatar Airways, has successfully signed a US$ 850 million financing agreement in respect of seven Boeing 787-9 aircrafts. It appears that Qatar Airways has put forward seven of its Boeing 787-9 Dreamliners as collateral, in order to secure immediate cash to run its operations. Read MoreThe general idea of an agreement like this is that if the airline is unable to pay back the loan, the bank can take possession of the aircraft. This deal appears to be similar to the one secured by Qantas at the end of March. Qatar Airways is one of the few airlines still operating in many parts of the world right now but this agreement is a sign of just how cost-intensive operations are in the midst of COVID-19.

Relief to small businesses
The Central Board of Direct Taxes (CBDT) said that income tax refunds to nearly 8.2 lakh small businesses worth Rs 5,204 crore have been issued since April 8, 2020. These income tax refunds would help MSMEs to carry on their business activities without pay cuts of employees or layoffs. Read MoreThe income tax department has till date issued nearly 14 lakh refunds up to Rs 5 lakh each in order to help taxpayers deal with the current situation. Keeping its focus on providing relief to the small businesses in MSME sector, CBDT will further issue refunds of Rs 7,760 Crore at the earliest. In around 1.74 lakh cases, the CBDT has said that responses are awaited from taxpayers regarding reconciliation with their outstanding tax demand for which reminder emails have been sent, asking them to respond within 7 days so that the refund can be processed at the earliest.

Local sanitiser brands flood market after lockdown
There has been a surge of local brands launching hygiene products and as many as 152 new hand sanitiser manufacturers entered the fray in March. This has led to market leaders such as Hindustan Unilever Limited (HUL) and Reckitt Benckiser which had an 85 % market share in February, seeing a drop in their shares to 39% by March. Read MoreApart from local brands, FMCG majors such as Marico, Cavinkare, Emami and P&G, which were not present in hand sanitisers segment, have launched their respective sanitiser brands.  FMCG companies have reduced the prices of hand sanitisers following the government directive and have also increased their production to meet the sudden spike in demand amidst the COVID-19 scare.

Economics

Economic Stimulus Package by India
India announced an economic stimulus package worth 1.7 trillion rupees ($22.5 billion), designed to help millions of low-income households cope with lockdown due to the coronavirus outbreak. The package will be disbursed through food security measures for poor households and through direct cash transfers, said India’s Finance Minister Nirmala Sitharaman. Read MoreDaily wage earners, small business owners and low-income households are said to be the most vulnerable during the lockdown. Sitharaman explained that the government does not want anyone to remain hungry or go without money in hand. The food security measures will likely affect 800 million people. Under an existing scheme, low-income earners get 5 kilograms of rice or wheat per month at a heavily subsidized rate. Now, the government will top that up with an additional 5 kg of either rice or wheat per person for the next three months, and 1 kg of pulses per household for that same period — for free.Cash transfer measures are set to benefit farmers, rural workers, poor pensioners, construction workers, low-income widowers and more. Additionally, India will provide a medical insurance cover of 5 million rupees per person for front-line workers in the coronavirus outbreak. They include nurses, doctors, paramedics, and sanitation workers in government hospitals.

RBI provides Rs. 10,000 Cr refinancing to NHB
In a bid to provide liquidity support to the national economy during the Coronavirus lockdown extension, the Reserve Bank of India (RBI) today announced special Rs 10,000 crore refinancing package to the National Housing Banks (NHBs) and Non Banking Financial Companies (NBFCs). The move has gone down well among the real estate sector as they feel that the RBI’s step will benefit both housing and commercial real estate. Read MoreReal estate experts also hailed RBI for allowing NBFC loans to delayed commercial real estate projects to be extended by a year without restructuring. Hailing the RBI move for providing liquidity to boost the national economy, Anuj Puri, Chairman – ANAROCK Property Consultants said, “In a major move to boost liquidity in the market, the RBI today announced several additional measures to accelerate the economy and facilitate bank credit flows in Lockdown 2.0. Among the various measures announced, commendably its allotment of Rs 10,000 crore to National Housing Bank is a big move for the real estate sector reeling under the liquidity crisis. It will help provide capital to HFCs and eventually provide major relief to developers battling liquidity issues in COVID-19 times.” Also, in another major relief to developers, the RBI has further extended the date of commencement of commercial operations (DCCO) of project loans for commercial real estate projects which are delayed for reasons beyond the control of promoters. This is indeed a big move and will bring much-needed relief to cash-starved developers. It will help in easing out time for maintaining and managing cash flows for these developers.

Liquidity Adjustment by RBI through reducing Reverse Repo Rate
The Governor of RBI said, ‘the surplus liquidity in the banking system has risen significantly in the wake of government spending and the various liquidity enhancing measures undertaken by the RBI. On April 15, the amount absorbed under reverse repo operations was ₹6.9 lakh crore. Read MoreIn order to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4.0 per cent to 3.75 per cent with immediate effect. The policy repo rate remains unchanged at 4.40 per cent, and the marginal standing facility rate and the Bank Rate remain unchanged at 4.65 per cent.”

China’s GDP shrank 6.8 percent in Q1, first in decades
China reported today a 6.8% drop in gross domestic product (GDP) for the first quarter of 2020 compared with the same period last year. Even as life has started going back to normal in most of China, the road ahead for its economy still looks challenging. China also reported a slew of other key economic data, which look equally grim. Read MoreRetail sales, which declined by 20.5% on-year for January and February, decreased by 15.8% in March from a year ago. Fixed-asset investment outside rural households, which reflects construction activity, as well as industrial output, an important indicator for measuring economic performance, extended their losing streak from the first two months to drop 16.1% and 1.1% in March from the previous year, according to China’s National Bureau of Statistics. Among the obstacles Beijing faces for reviving its economy, the most notable one is probably declining exports, which accounted for around 20% of the country’s GDP in 2018.

.Trump plans to reopen virus ravaged US economy
With United States President Donald Trump stating that Coronavirus has passed its peak in the country, the White House has issued guidelines outlining a phased approach to restore normal commerce and services, but only for places seeing a decrease in Covid-19 cases. Places with declining infections and strong testing would begin a three-phased gradual reopening of businesses and schools, which each phase lasting at least 14 days, meant to ensure that the virus outbreak doesn’t accelerate again. Read MoreThose most susceptible to the respiratory disease would be advised to remain sheltered in place until the final phase. Trump has tussled with governors over who has the ultimate authority to mandate a re-opening of states’ economies .In the first phase of re-opening, the guidelines say groups of more than 10 people should be avoided if appropriate distancing measures are not practical. Non-essential travel should be minimized, telework should be encouraged, and common areas in offices closed. Schools remain closed in phase 1, but large venues such as movies theaters, restaurants, stadiums, and places of worship can open with “strict physical distancing protocols.” In the second phase, applicable to states and regions with “no evidence of a rebound” in cases, the guidelines recommend groups of more than 50 be avoided where social distancing is not practical. Non-essential travel can resume, while schools and youth camps can reconvene and bars with “diminished standing-room occupancy” may re-open. Phase three includes unrestricted staffing of workplaces.

Finance

First Islamic bank to complete digital trade finance transaction
Abu Dhabi Islamic Bank (ADIB) becomes the first Islamic bank to successfully complete a trade finance distribution transaction using blockchain technology.  It had completed a transaction on TradeAssets, a trade finance marketplace powered by distributed ledger technology. Read MoreADIB sold part of its trade finance portfolio to partner banks through the TradeAssets platform. This process known as financial distribution happens when financial institutions, upon hitting the maximum figures they can take on their balance sheets, sell off part of the business at hand to other banks. This transaction is the product of a year’s worth of work between ADIB and TradeAssets. The partnership is geared towards automating trade finance transactions through blockchain technology. ADIB launched ADIB Direct eFX in March. It’s a platform that allows its clients to secure online foreign exchange rates for international transfers and payments. The new platform includes features like customisable dashboards, cash flow forecasting and online trade issuance and financing which are accessible across all devices.

Stimulus of 5% of GDP needed
In the current economic crisis due to COVID-19, NITI Aayog has proposed a massive fiscal stimulus of over Rs 10 lakh crore or 5% of the gross domestic product (GDP) to address the situation which includes income support to the poor, equity support to corporate India, absorption of a portion of NPAs in MSME sector and additional investments in healthcare. Read MoreThe proposed fiscal stimulus could widen it to an unheard-of 10.5% of GDP, although the potential decrease in GDP size itself will raise the Centre’s fiscal deficit expressed as fraction of it to 4% in financial year 21 from the budgeted 3.5%. Since the Centre’s fiscal resources are constraints, RBI might have to finance a portion of it. With Germany and UK at over 20% and Singapore and USA at 15% of their respective GDPs, many economies have announced much bigger stimulus and stabilisation measures.

IMF to deploy $1 trillion in lending capacity to covid hit countries
This is the worst recession since the Great Depression – a 3% contraction of global GDP is expected and 170 countries are going to see income per capita falling. In this crisis, an unprecedented 102 of the International Monetary Fund’s 189 member nations are seeking assistance from to combat the coronavirus, so IMF has proposed to deploy its full $1 trillion in lending capacity to support them.Read More It is also proposing to double emergency financial assistance having disbursed for 15 countries in a record short time. It has also approved debt relief for 25 of its poorest members. There is an emerging consensus that existing Special Drawing Rights (SDRs) could be deployed to help in developing countries.

SIDBI, NABARD, NHB provided Rs 50,000 crore liquidity
Since it has become difficult for institutions like NABARD, SIDBI, NHB to raise resources from the market during the pandemic, they have been provided with a liquidity facility of Rs. 50,000 crores to enable lending to SMEs and the housing sector. Read MoreRBI’s support will comprise Rs 25,000 crore to NABARD for refinancing regional rural banks (RRBs), and rural cooperative banks, micro finance institutions (MFIs), Rs 15,000 crore support to SIDBI for on-lending/refinancing and Rs 10,000 crore to NHB for supporting housing finance companies (HFCs). Advances under this facility will be charged at the RBI’s policy repo rate (4.4%) at the time of availing it. The refinancing facility will boost liquidity in the system. It is further expected to infuse liquidity to small agriculture-driven businesses and low income housing. Alongside this, the RBI will also launch long term repo operations (LTROs) worth Rs 50,000 crore to help non-banking financial companies (NBFCs).

Covid impact worse than 2008 crisis for Middle East
The impact of the coronavirus pandemic could be worse than the 2008 financial crisis or the 2015 oil price shock for the Middle East. Countries that rely heavily on oil exports will suffer the additional pressure of collapsing oil prices caused by reduced demand. Real GDP among regional oil exporters could contract by 4.2% and their oil exports are expected to decline by more than $250 billion. Read MoreOverall economic growth in the region is expected to fall from 1.2% in 2019 to a 2.8% contraction this year. According to IMF, Saudi Arabia is expected to see its economy shrink 2.3% this year from 0.3% growth in 2019. Iran – the Middle East country worst hit by the disease – is seeking $5 billion in emergency funding from the IMF. Given heavy employment in hospitality, tourism and retail, which have come to a halt due to the pandemic, there could be significant second-round effects on domestic demand across the region if unemployment rises and wages and remittances fall. Other economic activities are being hit by supply chain disruptions, and a plunge in business and consumer confidence.

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