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 Thirty Fifth Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Shruti Jha, Nikunj Gulati and Kanika Meena)

Business

Alibaba’s Jack Ma quits board of Japan’s struggling SoftBank
Chinese billionaire Jack Ma is stepping down from the board of SoftBank Group Corp., as the Japanese technology company struggles over its risky investments such as office-sharing venture WeWork. Ma, the co-founder of Chinese e-commerce giant Alibaba, has been focusing on philanthropy lately, such as donating masks and test kits to help in the efforts against the new coronavirus pandemic. Read MoreSoftBank announced three new board members, including SoftBank Chief Financial Officer Yoshimitsu Goto and Waseda University professor Yuko Kawamoto. Another new member is Lip-Bu Tan, founder of Walden International, a venture capital firm focused on computer chips, cloud, and artificial intelligence. He is also chief executive of Cadence Design, a US electronic design automation software, and engineering services company. Also on 18th May, SoftBank said it was buying back its own shares, of up to 500 billion yen (USD 4.7 billion) in value, to shore up its bottom line. Earlier in April, Jack Ma Foundation and Alibaba Foundation announced the donation of essential medical supplies, including face masks and COVID-19 test kits to India and six other nations to help combat the spread of coronavirus. Besides India, the medical supplies will be donated to Azerbaijan, Bhutan, Kazakhstan, Kyrgyzstan, Uzbekistan, and Vietnam.

Uber lays off 3,700 workers over 3-minute long Zoom calls
Ride-hailing app Uber has laid off nearly 3,700 employees or about 14% of its workforce via multiple Zoom calls and each call lasted less than three minutes, with a common message: “Today will be your last working day with Uber”. Last week, Uber Technologies announced to lay off some 3,700 full-time employees, in a move to reduce operating expenses in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic and its impact on the company’s business. Read MoreIn a regulatory filing with the US Securities and Exchange Commission (SEC), Uber said due to lower trip volumes in its rides segment and the company’s current hiring freeze, it is reducing its customer support and recruiting teams by approximately 3,700 full-time employee roles. The ride-hailing major Uber reported a net loss of $2.9 billion in the first quarter of this year, even as its revenue reached $3.54 billion in Q1 2020 from $3.1 billion a year ago, a growth of 14 percent. In Q1 2019, Uber’s net loss was $1 billion, which includes $11 million in stock-based compensation expense. Uber also announced it is folding its JUMP e-bike and e-scooter business into Lime. “Our customers will continue to have access to e-bikes and e-scooters in our apps. As part of the transaction, we made an additional convertible note investment of $85 million in Lime,” Uber said

Jeff Bezos could be the world’s first trillionaire by 2026. Ambani, Jack Ma to follow
Even as the coronavirus pandemic rages across the world, the world’s richest are estimated to grow their wealth in the coming years. According to a report, Amazon founder and CEO Jeff Bezos could potentially become the world’s first trillionaire as early as 2026, at which point he will be aged 62, says a study. Despite losing an estimated $38 billion as part of his recent divorce, Bezos is still by far the world’s richest person and his net worth has grown by 34 percent on average over the last five years, said the study by Comparisun, a company which helps organizations compare different business products. Read MoreIndia’s Mukesh Ambani could become a trillionaire in 2033 when he will be aged 75, according to the research which said that Chinese real estate tycoon Xu Jiayin will follow Bezos to become the second trillionaire in the world in 2027. Alibaba’s Jack Ma could become a trillionaire in 2030 when he will be aged 65. Facebook founder Mark Zuckerberg could gain a trillionaire status almost a decade later than Bezos. But Zuckerberg’s current rate growth would see him worth $1 trillion aged 51, said the study.

Facebook is planning to do permanent WFH, salaries will be based on employees’ locations
Facebook said Thursday that it would allow many employees to work from home permanently. But there’s a catch: They may not be able to keep their big Silicon Valley salaries in more affordable parts of the country. Mark Zuckerberg, Facebook’s chief executive, told workers during a staff meeting that was live-streamed on his Facebook page that within a decade as many as half of the company’s more than 48,000 employees would work from home. Facebook’s decision, the first among tech’s biggest companies, is a stark change for a business culture built around getting workers into giant offices and keeping them there. Read MoreUsing free shuttle buses, free cafeterias, and personal services like dry cleaning, tech companies have done as much as possible over the years to give employees little reason to go home, let alone avoid the office. Zuckerberg’s announcement followed similar decisions at Twitter and the payments company Square, both led by Jack Dorsey. Dorsey said last week that employees at his companies would be allowed to work from home indefinitely. At Google, employees have been told they can work from home through the end of the year, but the company has not made any indications about permanent plans. After Dorsey’s announcement, Google searches for “Twitter jobs” spiked, according to Google Trends. Housing costs in the Bay Area, for example, have fallen since the pandemic began, according to the rental firm Zumper.. Starting in January, Facebook’s employee compensation will be adjusted based on the cost of living in the locations where workers choose to live.

Foreign investors pull out $26 billion from Asian economies; $16 billion from India
Amidst the global economic recession due to the coronavirus pandemic, foreign investors have pulled out an estimated $26 billion from developing Asian economies and over $16 billion out of India, according to a Congressional report. In Europe, over 30 million people in Germany, France, the UK, Spain, and Italy have applied for state support, while the first-quarter 2020 data indicates that the eurozone economy contracted by 3.8%, the largest quarterly decline since the series started in 1995, it said. Read MoreIn the U.S., preliminary data indicated that the GDP fell by 4.8% in the first quarter of 2020, the largest quarterly decline since the fourth quarter of 2008 during the global financial crisis, the CRS said. The drop in business and tourist travel is causing a sharp drop in scheduled airline flights by as much as 10%; airlines are estimating they could lose USD 113 billion in 2020 (an estimate that could prove optimistic given the Trump Administration’s announced restrictions on flights from Europe to the United States and the growing list of countries that are similarly restricting flights). Airports in Europe estimate they could lose USD 4.3 billion in revenue due to fewer flights. Industry experts estimate that many airlines will be in bankruptcy by May 2020 under current conditions as a result of travel restrictions imposed by a growing number of countries.

Economics

Fiscal deficit of centre and states likely to be at 12% of GDP
A report by DBS Bank says the combined fiscal deficit of the centre and states will top 12% of the GDP because of the recent economy-boosting measures, and higher borrowings by the states to meet COVID-19 exigencies. Thus, the combined fiscal gap will increase by 480 basis points (bps). In the case of the centre, the fiscal gap will increase by 200bps as it hiked market borrowings by a whopping Rs.4.2 lakh crore or 54 per cent over the budget estimated to Rs.12 lakh crore, citing the pandemic. Read MoreAnother 80 bps increase will be on account of the fiscal boost. And in the case of states, the fiscal gap will rise by 200 bps after the Centre hiked the borrowing limit of states to 5% of the GSDP (Gross State Domestic Product). While the much-hyped Rs.20 lakh crore economic package will have a minimum impact on the fiscal cost, estimated to have 1% of the GDP instead of 10% claimed by the government. This is because 99% of the package is either part of the budget or in the loan form and the loan will definitely raise the liquidity but it cannot act as a stimulus.

Indian American CEO supports Trump in the phased opening of the economy
The Indian American CEO of a leading restaurant chain in the US has supported President Donald Trump’s move to open the American economy in a phased manner amidst the COVID-19 pandemic, saying that is the “right thing to do”. The U.S. has started opening-up after two months of lockdown. Moreover, the deadly coronavirus pandemic is having a devastating toll on the American economy. Read MoreWith increasing Covid-19 cases the health crisis has now become a financial crisis with 36 million American unemployed and a humanitarian crisis as well, with about 54 million American fighting hunger. In the past few weeks, Trump has emphasised on a safe and gradual opening of the US economy. And with this more than 50 states have announced their plans to reopen the businesses amidst the growing number of coronavirus cases and deaths.

Petrochemical, Chemical import likely to face 15% as COVID tax
India is proposing to impose 15% as a COVID-19 tax on all chemical and petrochemical imports to safeguard the domestic industry. The provisional duty on the imports may be imposed from May 1 to Mar31,2021. The government had initially rolled out the plan to tax chemical and petrochemical imports early in April but was not implemented given strong opposition from downstream industries and Associations as several industries are dependent on chemicals, for raw materials or intermediate goods. Read MoreIt should be noted that India imported $86.82 billion of these products between April 2019 and Jan 2020 with almost 14% of the inward shipments coming from China alone. There is a drawback from imposing a 15% tax because it is feared that imposition of such a levy on imports could inspire other countries to impose such levies on Indian exports, which could be a setback for the domestic industries.

FPIs pulls money out of the economy amidst the global recession
After a report about the foreign investors turning net sellers in March quarter and pulling out $6.4 billion from the Indian equity market largely due to COVID-19 outbreak and ensuring risk-averse environment, a US Congressional Report said that foreign investors have pulled out an estimated $26 billion from developing Asian economies and over $16 billion out of India. According to the report, the pandemic crisis is challenging the government to implement monetary and fiscal policies that support the credit market and sustain economic activity. Read MoreMoreover, the differences in policies are also straining relations between developed and developing economies and between southern and northern members of the eurozone, challenging alliances and raising questions about the future of global leadership, the report added.

RBI cuts interest rate extends loan moratorium by another three months
RBI’s monetary policy committee (MPC) has cut repo rate by 40 basis points to 4%. It is a rate at which the RBI lends funds to the commercial banks. This is the second emergency rate cut in the last two months. On March 27, the RBI had cut interest rates by 75 basis points from 5.15% to 4.4%. Following this, banks had also reduced their lending and deposit rates. This is good news for the borrowers whose loans are linked to external benchmarks like the repo rate.Read More But for the fixed deposits (FD) investors, the interest rate cut is likely to further reduce the interest rates on deposits and pinch their pockets. In addition, in a much-needed relief to the borrowers, the RBI extended the moratorium period on payment of all term loans by another three months, that is from Jun1 till Aug 31. The EMI payments will restart once the period expires on Aug31.

Finance

KKR takes stake in Reliance Jio
The US private equity company KKR is set to become the latest high profile foreign investors to help bankroll billionaire Mukesh Ambani’s ambition to turn Jio platforms into an Indian tech giant. It is set to invest Rs.11,365 crore in Jio platforms for a 2.32% stake. This will be the fifth big-ticket deal announcement by the oil-retail-to-telecom conglomerate in the past month. This transaction values Jio platforms at an equity value of Rs.4.91 lakh crore and an enterprise value of Rs.5.16 lakh crore. Read MoreThis is KKR’s largest investment in Asia. Over the last month, leading technology investors such as Facebook, Silver Lake, Vista, General Atlantic and KKR have announced aggregate investments of Rs. 78,562 crore into Jio platforms. The deals are all part of the plan to make the company net debt-free before Mar31,2021.

Aditya Birla Sun Life Mutual Fund suspends new investment in two schemes
Aditya Birla Sun Life Mutual Fund has decided to suspend new investments into its two of its debt schemes. It will not accept any fresh investment in the Aditya Birla Sun Life Medium Term Plan and Aditya Birla Sun Life Credit Risk Fund schemes from May 22 till further notice. The Medium-Term Plan is an open-ended debt scheme while the Credit Risk Fund is a debt scheme which invests in ‘AA’ and below rated corporate bonds. Read MoreThe cumulative assets under management (AUM) of the two schemes are around Rs.50,000 crore. Fresh systematic investment plans (SIPs) and systematic transfer plans (STPs) will not be registered in the two schemes. However, the existing STPs and SIPs will continue. It is done to protect the interests of its investors and it is an investor-friendly move stopping fresh inflow into their credit risk fund and medium-term funds.

Sri Lanka seeks USD 1.1 billion currency swap facility from India amidst depleting forex reserves
Sri Lankan President Gotabaya Rajapaksa has requested India to provide a special USD 1.1 billion currency swap facility to boost the country’s draining foreign exchange reserves in view of the economic slowdown due to the coronavirus pandemic. Rajapaksa’s office said that the new request is in addition to the USD 400 million amount Sri Lanka has sought from the Indian government under the South Asian Association for Regional Cooperation (SAARC) framework. Read MoreSri Lanka had previously asked India for a 40-million-dollar foreign exchange swap under the SAARC arrangements. Rajapaksa also asked the prime minister to expedite investments in Colombo port’s east terminal. According to the Sri Lankan president’s office, Rajapaksa asked Modi to “direct those responsible from India’s side to expedite construction of the east terminal of the Colombo port as soon as possible”. Facing issues in its foreign exchange during the coronavirus pandemic, Sri Lanka has taken drastic measures to keep its foreign reserves and currency stability. Import restrictions announced are meant to stop the flow of foreign reserves. The Opposition has accused the government of printing money to create liquidity in markets. The deadly coronavirus has claimed nine lives and infected 1,068 people in the country. India has sent four shipments of essential life-saving medicines and medical supplies weighing over 25 tonnes to Sri Lanka in the last few weeks as a goodwill gesture.

Rupee falls 34 paise to close at 75.95 against US dollar
The rupee depreciated 34 paise to provisionally close at 75.95 against the US dollar on Friday as the Reserve Bank of India’s rate cut move failed to cheer investor sentiment. Forex traders said weak domestic equities, strengthening American currency overseas, rising coronavirus cases in the country and US-China trade tensions also weighed on the local unit. The rupee opened weak at 75.72 at the interbank forex market, fell further, and finally settled at 75.95, down 34 paise over its last close. It had settled at 75.61 against the US dollar on Thursday. During the trading session, it touched an intra-day high of 75.71 and a low of 75.95. Read MoreThe Reserve Bank of India (RBI) on Friday slashed interest rates, extended moratorium on loan repayments and allowed banks to lend more to corporates in an effort to support the economy which is likely to contract for the first time in over four decades. “RBI’s rate cut move couldn’t cheer forex traders. The 40 bps repo rate cut move was in line with market expectations, but it didn’t provide full-fledged restructuring of loans and also didn’t give the FY21 GDP (outlook) figure,” said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services. Gupta further said that “the RBI will have to take sector-specific measures to bring in this transmission”. Going ahead, the investors’ focus will be on KKR and Reliance Industries’ Jio related inflows of nearly USD 1 bln and foreign institutional investor (FII) participation in Reliance Industries NSE -0.67 % Limited (RIL) rights issue, he noted. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose by 0.35 per cent to 99.72.

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