Major International Business Headlines Brief::: 24 September 2019

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Major International Business Headlines Brief::: 24 September 2019

 


 

 


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*  Sudan will ask World Bank for $2 billion in support - finance minister

*  Thomas Cook customers to fly home after firm collapses

*  Judgement deferred in contempt of court case between Old Mutual, fired
CEO

*  South African rand firmer against dollar, seen on backfoot

*  Kenya central bank holds rates for the seventh time in a row

*  Tanzania fines five banks for lax anti-money laundering controls

*  Sudan launches 9-month economic rescue plans-finance minister

*  Nigeria's central bank keeps benchmark rate at 13.5%

*  Tanzania sees 2019/20 cashew nut output up 33 percent - minister

*  Nigerian state oil company says refinery revamps set for January

*  S.Africa's Grand Parade posts FY profit on Dunkin' closure

*  Fed's Bullard: U.S.-China trade relations probably had to come to a head

*  The 'Warren Buffett of China' could lose $1.5 billion in Thomas Cook's
bankruptcy

*  Google Cloud Bets $3.3 Billion More: Huge Opportunity

*  India Announces Tax Reforms to Spark Its Economy

 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

Sudan will ask World Bank for $2 billion in support - finance minister

KHARTOUM (Reuters) - Sudan’s prime minister will ask the World Bank for $2
billion in support during his current visit to New York, the country’s
finance minister said on Monday.

 

Finance Minister Ibrahim Elbadawi also said Sudan had asked the World Bank
to second and fund three Sudanese experts to work in Sudan during the
country’s political transition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

Thomas Cook customers to fly home after firm collapses

The first flights bringing Thomas Cook holidaymakers home to the UK have
landed amid some reports of disruption.

 

The government has said it will run a "shadow airline" for two weeks to
repatriate the 155,00 UK tourists affected by the firm's collapse.

 

Transport secretary Grant Shapps said its response to the crisis was "on
track so far" and "running smoothly".

 

But some people have complained of long queues and disruption at airports,
including one who waited nine hours.

 

Ricky Houston said his flight to Newcastle from Corfu was delayed by nine
hours on Monday.

 

"I feel sorry for the reps because I don't think they knew anything either.
It was the hotel which kept us up to date," he said.

 

Mr Shapps, who earlier attended an emergency Cobra government meeting on the
government's response, said: "People will experience delays, we're not
running the original airline, but we intend to get this done all in the next
two weeks and then end this phase of the rescue."

 

He also stressed people should not come home early from their holidays but
should "carry on and leave on the date they were supposed to leave, having
first checked the Thomas Cook website before leaving for the airport".

 

Thomas Cook, whose roots go back to 1841, went into liquidation after
last-ditch talks to raise fresh funding failed. It has left 22,000 jobs at
risk worldwide, 9,000 of them in the UK.

 

The Civil Aviation Authority (CAA) is coordinating the repatriation - which
is the biggest in peacetime - in an undertaking called Operation Matterhorn.
It has chartered 45 jets to bring customers home and will fly 64 routes on
Monday, from locations including Central America and Turkey.

 

Some 16,000 holidaymakers were booked to come back on Monday, and
authorities hope to get at least 14,000 of them back to the UK.

 

Operators including easyJet and Virgin have supplied some aircraft, with
jets coming from as far afield as Malaysia.

 

All Thomas Cook holidays are now cancelled, but some customers complain they
have not been given enough information.

 

All customer can seek compensation via the government's Atol scheme, or from
their credit card or insurance companies.

 

Customers seeking information can visit the CAA's special Thomas Cook
website. Those scheduled to return to the UK within the next 48 hours or who
are having problems with their accommodation or need special assistance can
ring 0300 303 2800 in the UK or +44 1753 330 330 from abroad.

 

Disneyland dreams dashed

Leanne Jones, a mother of two small boys, has found out that the Thomas Cook
vouchers she's been given as presents by her family towards a holiday are
worthless.

 

"I'm feeling rubbish. Every birthday and Christmas over the last two years
I've been saving Thomas Cook vouchers to take my two young children on their
first holiday abroad - Disneyland was the plan.

 

"I've got £800 worth and was planning to fly out next summer. I stand to
lose all the money from the vouchers and my children will no longer get
their holiday."

 

Ms Jones, who lives in Milton Keynes, has been in contact with Atol, but
says the vouchers are not covered by its protection scheme. "There is
nothing anyone can do to help.

 

"That's it, I'm going to have to start saving again. I have no other option.
We'll have to wait another two years for our next holiday."

 

It was her dad's idea that the family give holiday vouchers, and he's now
feeling a little guilty, she says. "It's not his fault at all. It was a good
idea at the time."

 

How will holidaymakers get home?

While an estimated 150,000 Britons are affected by Thomas Cook's collapse,
the company has up to a further 450,000 customers abroad, some of whom have
been affected.

 

In Germany, one of Thomas Cook's main markets, insurance companies will help
organise the response to its collapse.

 

UK customers will be brought home "as close as possible" to their booked
return date, the Department for Transport (DfT) has said.

 

Customers will be on special free flights or booked on to another scheduled
airline at no extra cost, with details of each flight to be posted on a
dedicated website as soon as they are available.

 

The DfT added that a "small number" of passengers might need to book their
own flight home and reclaim the costs.

 

The CAA is also contacting hotels accommodating Thomas Cook customers, who
have booked as part of a package, to tell them that the cost of their
accommodation will be covered by the government's Air Travel Trust Fund and
Air Travel Organiser's Licence scheme (Atol).

 

Tim Johnson, policy director of the CAA, told BBC News that customers whose
future holidays had been cancelled would be informed of how they can claim a
refund on the website.

 

Business Secretary Andrea Leadsom has said she will write to the Insolvency
Service urging them to "fast-track" their investigation into the
circumstances surrounding Thomas Cook's going into liquidation.

 

The investigation will also consider the conduct of top directors, who have
been paid a combined £20m in salaries and bonuses since 2014.

 

A Cabinet spokesman said: "People will rightly look at the size of bonuses
to some of the directors and have serious concerns about that.

 

"There's a broader issue at play about collapsing firms and director pay and
we are looking that more broadly as a government."

 

What is the government doing?

Thomas Cook asked the government for a £250m bailout, the BBC understands,
but this was denied. Mr Shapps defended the move on the BBC's Today
programme.

 

"I fear it would have kept them afloat for a very short period of time and
then we would have been back in the position of needing to repatriate people
in any case," he said.

 

The company's large debts and High Street-focused business made it a poor
candidate for survival, he said.

 

Overall, Operation Matterhorn will cost the taxpayer around £100m, he added.

 

Shadow chancellor John McDonnell told the BBC the government should have
bailed out Thomas Cook, "if only to stabilise the situation while a real
plan for the future of the company could be addressed".

 

Prime Minister Boris Johnson pledged to help stranded holidaymakers, but
also questioned whether company directors were properly motivated to "sort
such matters out".

 

What happens to staff?

Schapps said a task force would be set up to help the 9,000 UK employees who
stand to lose their jobs.

 

Workers at some Thomas Cook shops in Britain have already met with
representatives of the firm's administrators, who told them they would be
made redundant.

 

Jobs at the tour operator's airline and in its engineering division may also
go.

 

Some workers are being kept on, however, but there is no definite number.

 

Thomas Cook shops across the UK are not due to open on Monday.

 

What about Thomas Cook's international operations?

For now, Thomas Cook's Indian, Chinese, German and Nordic subsidiaries will
continue to trade as normal.

 

This is because, from a legal standpoint, they are considered separate to
the UK parent company and are not under the jurisdiction of the UK's
Official Receiver.

 

They do, however, share services - such as aircraft and IT - with their
parent company and will need to strike rescue deals in the coming weeks to
keep trading.

 

What went wrong?

Thomas Cook had secured a £900m rescue deal led by its largest shareholder
Chinese firm Fosun in August, but a recent demand from its banks to raise a
further £200m in contingency funding had put the deal in doubt.

 

Fosun said in a statement: "We extend our deepest sympathy to all those
affected by this outcome."

 

The holiday company spent all of Sunday in talks with lenders trying to
secure the additional funding and salvage the deal, but to no avail.

 

Thomas Cook has blamed a series of issues for its problems, including
political unrest in holiday destinations such as Turkey, last summer's
prolonged heatwave and customers delaying booking holidays because of
Brexit.

 

Speaking to BBC News from Manchester airport, travel expert Simon Calder
said Thomas Cook "wasn't ready for the 21st Century".

 

"Now everybody can pretend they are a travel agent. They've got access to
all the airline seats, hotel beds, car rentals in the world and they can put
things together themselves.

 

Mr Calder, travel editor at The Independent, added that planes at the
airport began to be impounded shortly after 00:00 BST.

 

While the company was closing shops to try and cut costs, closing 21 in
March, it still had more than 500 outlets, bringing large costs compared to
online competitors.

 

In another sign of its slow progress in mending its finances, it only
stopped dividend payments to investors in November.

 

What are your rights?

If you are on a package holiday, you are covered by the Atol scheme.

 

The scheme will pay for your accommodation abroad, although you may have to
move to a different hotel or apartment.

 

Atol will also pay to have you brought home if the airline is no longer
operating.

 

If you have a holiday booked in the future, you will also be refunded by the
scheme.

 

If you have booked a flight-only deal, you will need to apply to your travel
insurance company or credit card and debit card provider to seek a refund.

 

When Monarch Airlines collapsed in 2017, the government organised to bring
home all the stranded passengers, whether they were covered by Atol or
not.--BBC

 

 

 

Judgement deferred in contempt of court case between Old Mutual, fired CEO

JOHANNESBURG (Reuters) - A South African court on Monday deferred judgement
in a contempt of court case between the country’s No.2 insurer, Old Mutual
and the CEO it sacked, Peter Moyo, with the judge outlining a number of
steps the parties should take before a decision is made.

 

Old Mutual fired Moyo in June in a dispute related to a conflict of
interest, but he was later reinstated by a judge. The insurer however did
not allow him to return to work and took further measures to prevent this,
prompting Moyo to apply to have it declared in contempt of court.

 

It was not immediately clear how long the additional steps required by the
court to make a ruling will take.

 

 

 

South African rand firmer against dollar, seen on backfoot

JOHANNESBURG (Reuters) - South Africa’s rand firmed on Monday but traders
expected gains to be limited as uncertainty over the United States and China
reaching a trade deal any time soon and fears of a slowdown in global growth
kept investors on the sidelines.

 

The rand traded 0.6% firmer at 14.8450 per dollar at 1530 GMT.

 

Peregrine Treasury Solutions said in a note that while the rand had firmed
from a session low touched earlier, it had still started the week on the
“backfoot” as investors waited for more clarity over the U.S.-China talks.

 

Although Washington and Beijing labelled two days of talks last week as
“productive” and “constructive”, a deal appeared elusive after Chinese
officials unexpectedly cancelled a visit to farms in the U.S. on Friday.

 

Weaker-than-expected global economic data added to investor worries over the
trade dispute’s effects on the world economy.[MKTS/GLOB]

 

“Despite some perceived progress in U.S.-China trade negotiations, markets
remain hesitant on this front given the stop-start nature of the evolving
trade discussions, while Brexit too does not have a clear outcome yet,” said
Investec chief economist Annabel Bishop.

 

“The rand is likely to remain volatile, with September a month that can see
a lot of churn, and with the risk that slower global growth sees commodity
currencies such as the rand weaken further.”

 

The Top-40 stock index closed 1.55% lower at 49,559 points while the broader
all-share was down 1.39% at 55,622 points.

 

However, bucking the declines were mining shares, led by gold miners as
price of bullion rose.[GOL/]

 

Shares in Sibanye-Stillwater jumped 5.68%, Gold Fields shares rose 4.39%,
while AngloGold Ashanti was up 3.18%.

 

The yield on the benchmark 2026 government bond dipped 1 basis point to
8.285%.

 

 

 

Kenya central bank holds rates for the seventh time in a row

NAIROBI (Reuters) - Kenya’s central bank held its benchmark lending rate at
9.0% on Monday, saying inflation was well anchored within the government’s
preferred range and that the economy was operating close to its potential.

 

Policymakers have held the benchmark rate for seven straight meetings but
they said that stance could change soon.

 

“The Committee also noted the prospective tightening of fiscal policy which
would provide scope for accommodative monetary policy in the near term,” it
said in a statement.

 

The finance ministry has started cutting non-essential spending to reduce
the fiscal deficit from close to 6% of GDP although analysts have expressed
worry over the pace and depth of those cuts.

 

Year-on-year inflation dropped to 5.0% in August from 6.27% a month earlier,
helped by falling food prices, data from the statistics office showed.

 

“Overall inflation is expected to remain within the target range in the near
term mainly due to expectations of lower food prices with the expected
favourable weather conditions, and lower electricity prices reflecting the
reduced usage of expensive power sources,” the central bank said.

 

Despite the benign inflation, the economy has been hit by a slowdown in
private sector credit growth, mainly due to a cap on commercial interest
rates, which has locked out borrowers who are deemed by banks to be too
risky.

 

Private sector credit grew by 6.3% in the 12 months to August, compared to
6.1% in July, the central bank said, well below the ideal rate of 12-15%.

 

Lawmakers are expected to block the finance ministry’s request to scrap a
cap on commercial lending rates imposed by lawmakers in 2016.

 

In its budget proposals to parliament in June, the finance ministry sought
to repeal the rate cap, arguing that it has constricted private-sector
credit to small and medium-sized businesses.

 

 

 

Tanzania fines five banks for lax anti-money laundering controls

DAR ES SALAAM (Reuters) - Tanzania’s central bank said on Monday it had
fined five commercial banks over $800,000 for breaching anti-money
laundering rules, the latest in a series of moves aimed at tightening
regulation in the financial services sector.

 

The Bank of Tanzania (BoT) said in a statement the fines were imposed “for
failure to conduct proper customer due diligence and file suspicious
transaction reports to the (state-run) Financial Intelligence Unit (FIU).”

 

I&M Bank was slapped with the biggest fine at 655 million Tanzanian
shillings ($284,782.61), followed by Equity Bank (580 million shillings),
UBL Bank (325 million shillings), Habib African Bank (175 million shillings)
and African Banking Corporation (145 million shillings).

 

The banks were not immediately available for comment.

 

The regulator gave three months to the sanctioned banks to implement various
anti-money laundering measures, which include taking disciplinary action
against all staff members “who were involved in opening implicated deposit
accounts contrary to KYC (know your customer) requirements”.

 

Tanzania has tightened regulatory oversight over commercial banks and other
financial institutions over the past few years.

 

The central bank last month gave all banks and financial institutions in
Tanzania 90 days to establish primary data centres in the East African
nation, saying it will impose hefty fines on lenders that fail to comply.

 

The country’s financial services sector, which is dominated by lenders like
CRDB Bank and NMB Bank, has been hit by a spike in bad loans, which have
stifled the growth of credit to the private sector.

 

In December, the International Monetary Fund said nearly half of Tanzania’s
45 banks were vulnerable to adverse shocks and risked insolvency in the
event of a global financial crisis.

 

Tanzania’s central bank has revoked the licenses of at least nine banks
since 2017, saying the move was aimed at safeguarding the stability of the
sector.

 

The closure of the banks came after President John Magufuli ordered the
central bank to take action against failing financial institutions.

 

 

 

Sudan launches 9-month economic rescue plans-finance minister

KHARTOUM (Reuters) - Sudan’s transitional government will launch in October
a 9-month economic rescue plan to stabilise the economy, Finance Minister
Ibrahim Elbadawi said on Monday.

 

The measures will include rationalising spending and tackling of inflation,
Elbadawi said, adding that subsidies for bread or petrol would continue
until around June 2020.

 

 

 

Nigeria's central bank keeps benchmark rate at 13.5%

ABUJA (Reuters) - Nigeria’s central bank held its benchmark interest rate at
13.5%, its governor Godwin Emefiele said on Friday.

 

Most analysts polled by Reuters had predicted the central bank would ease in
September, though Emefiele has previously said the bank would maintain its
tight monetary stance in 2019.

 

Africa’s largest economy and top crude oil exporter emerged from its first
recession in 25 years in 2017. Growth remains fragile but higher oil prices
and recent debt sales have helped the country to accrue billions of dollars
in foreign reserves.

 

Emefiele, announcing the monetary policy committee’s decision in the capital
Abuja, said tightening credit could constrain fragile economic growth while
loosening it could allow inflation to rise.

 

He said holding rates steady would allow the bank to appraise the impact of
current policies, such as changes to the loan to deposit ratios at banks,
before determining what shift, if any, was needed.

 

Inflation fell to a nearly four-year low of 11.02% in August but the price
index remains outside the bank’s single-digit target.

 

The central bank in March cut its benchmark interest rate to 13.5% from 14%
in a surprise move as part of an attempt to stimulate growth and signal a
new direction. It was the first rate cut since November 2015.

 

 

 

Tanzania sees 2019/20 cashew nut output up 33 percent - minister

DAR ES SALAAM (Reuters) - Tanzania expects to raise cashew nuts production
by 33.5% in the year to September 2020, helped by favourable weather
conditions and increased plantings, its agriculture minister said on
Saturday.

 

Output in 2019/2020(October-September) is seen reaching 300,000 tonnes, up
from the 225,000 tonnes produced in the 2018/2019 season.

 

“We expect to get a bigger harvest in the coming season, with our cashew nut
production likely to rise to more than 300,000 tonnes,” the minister, Japhet
Hasunga, told Reuters.

 

“This forecast of increased output is attributed to good weather, widespread
availability of farming inputs and increased plantings.”

 

Last year, the government blocked traders from buying the crop from farmers
after they could not meet the minimum indicative prices set by the
president, and bought the entire crop itself.

 

President John Magufuli had ordered a 94 percent hike in prices, arguing
that farmers were receiving too little for the most valuable of Tanzania’s
crop exports.

 

He then deployed the army to collect the entire crop of over 200,000 tonnes
of cashew nuts from farmers.

 

But in November he sacked two ministers, saying they had failed to secure
buyers.

 

Hasunga told Reuters that the government had eventually sold the 2018/2019
crop to a Vietnamese firm, but would allow private traders to resume buying
in 2019/2020.

 

 

 

Nigerian state oil company says refinery revamps set for January

LAGOS (Reuters) - Full restoration work on all three of Nigeria’s
state-owned refineries will begin in January, the Nigerian National
Petroleum Corporation (NNPC) said in a statement on Saturday.

 

NNPC chief Mele Kyari said the company “will do everything possible between
October and December” to make the projects possible.

 

Restoring state-owned refineries in Port Harcourt, Warri and Kaduna has been
a long-sought, but elusive, goal for NNPC.

 

They have operated well under their 445,000 barrel-per-day capacity for
years due to neglect, mismanagement and a lack of crude, leaving the
oil-producing nation almost entirely reliant on imported fuel.

 

In March, Italian firm Maire Tecnimont won a $50 million contract to conduct
a “complete integrity check” and inspect equipment at Port Harcourt, with
Italian oil company ENI overseeing the work.

 

Tecnimont project manager La Mattina Carmelo, in the NNPC release, said the
work was “progressing efficiently”, with the inspection nearly finished and
the engineering, procurement, and construction proposal at 75% completion.

 

NNPC said all the refineries will operate at full capacity by 2022, but did
not specify which companies would work on upgrades and repairs at Warri or
Kaduna.

 

In August, Kyari told Reuters that NNPC is considering both government and
private funding, but that after the revamps third parties would maintain and
operate the refineries to ensure reliable production.

 

 

 

S.Africa's Grand Parade posts FY profit on Dunkin' closure

JOHANNESBURG (Reuters) - Grand Parade Investments (GPI) on Friday posted a
full-year profit as closure of its loss-making Dunkin’ Donuts unit lifted
the South African investment company’s earnings.

 

GPI, which runs the Burger King chain of fast-food restaurants in South
Africa and operates casinos, had reported a loss last year after its
struggling units - Dunkin’ Donuts and ice-cream business Baskin-Robbins -
dented the company’s earnings.

 

The closure of both units, announced earlier this year after GPI failed to
find a buyer, helped lift the investment company’s headline earnings per
share (HEPS).

 

The company’s HEPS - the main profit measure in South Africa that strips out
certain one-off items, came in at 8.91 cents per share compared with a
headline loss of 11.18 cents per share last year.

 

“We have made excellent progress in improving the overall profitability of
the business, and this will continue to be a strong focus, along with
driving new restaurant growth in Burger King,” CEO Mohsin Tajbhai said in a
statement.

 

In 2016, GPI signed a franchise agreement with Dunkin’ Brands Group, which
owns Dunkin’ Donuts and Baskin-Robbins, betting that South African demand
for snacks and drinks from international chains would hold up, despite
pressures on disposable income.

 

However, retailers have been struggling to boost sales as a slowing economy,
high unemployment rate and rising fuel costs reduced consumers’ spending
power.

 

The liquidation of Dunkin’ Donuts unit saw Grand Parade’s headline loss
narrow to 25.1 million rand ($1.70 million) from 36.6 million rand last
year, while Baskin-Robbins’ loss reduced to 11.5 million rand from 24.9
million rand in the year-ago period.

 

GPI said the company is planning to focus on its Burger King outlets, which
helped lift earnings to 38 million rand, compared with 27.1 million rand
loss posted a year earlier.

 

($1 = 14.7270 rand)

 

 

 

Fed's Bullard: U.S.-China trade relations probably had to come to a head

EFFINGHAM, Ill. Sept 23 (Reuters) - St. Louis Federal Reserve President
James Bullard said on Monday it was probably inevitable that the United
States and China would clash on trade, given that China has not lived up to
commitments made when it was allowed into the World Trade Organization.

 

“The Chinese were allowed into the WTO on an implicit promise that they
would abide not just with the letter but with the spirit of the WTO and that
they would transition toward democracy,” Bullard said. “Neither of those
things have happened.”

 

 

 

The 'Warren Buffett of China' could lose $1.5 billion in Thomas Cook's
bankruptcy

The company's largest shareholder, with an 18% stake, is China-based Fosun
International and its chairman Guo Guangchang.

The 52-year-old has sought to emulate Warren Buffett with his investment
style, but he could take a massive hit from Thomas Cook's bankruptcy.

Visit Business Insider's homepage for more stories.

When Thomas Cook, the storied British travel agency that filed for
bankruptcy on Monday, needed financial help in recent years, it turned to
the Chinese investment firm Fosun International.

 

Since 2015, the Shanghai-based conglomerate and its chairman, Guo
Guangchang, have built up a massive, 18% stake in Thomas Cook, The Guardian
reported. The stake was worth as much as $1.5 billion in recent weeks,
according to regulatory filings compiled by Bloomberg, before the company
became officially insolvent on Monday.

 

By August, Fosun and Thomas Cook had managed to agree on a deal that would
give Fosun 75% control of Thomas Cook's tour business and 25% of its
airline, Reuters reported at the time. However, that deal fell through in
September, The Guardian reported, as new debts piled up near the end of the
summer holiday season.

 

Thomas Cook is far from Fosun's only stake in Western companies as
52-year-old Guangchang seeks to emulate American "oracle" Warren Buffett. It
also owns major stakes in France's competing tour agency Club Med, Cirque du
Soleil, an English football club the Wolverhampton Wanderers, insurance and
real-estate companies, and more.

 

"Our goal is very clear. We need to create a Buffett-style investment
company, rooted in China but with global capabilities," he told the BBC in a
2014 interview.

 

Still, he has plenty of room to run. Forbes estimates Guangchang's wealth at
$6.3 billion, making him the 41st-richest person in China. For comparison,
Buffett is worth an estimated 10 times more, roughly $82.5 billion.

 

An earlier version of this story incorrectly said Fosun's 18% stake in
Thomas Cook was "controlling." It is not a majority stake, despite Fosun
being the company's largest shareholder. It also has no board
representation, a representative said.

 

*         Roughly 600,000 travelers are stranded around the world after
British travel provider Thomas Cook declared bankruptcy.

*         Boris Johnson says he refused £150 million bailout for Thomas Cook
because it risked 'moral hazard' for other firms

*         Passengers share vacation disasters from the Thomas Cook collapse,
including a ruined $41,000 wedding and 'being held hostage' by angry staff
at a Tunisian hotel

*         The UK expects to spend £100 million flying back stranded Thomas
Cook passengers, which is only £50 million less than bailing out the company

*         A Thomas Cook flight attendant says she only learned that she lost
her job with the company's collapse from Facebook--businessinsider.com

 

 

 

 

Google Cloud Bets $3.3 Billion More: Huge Opportunity

Google Cloud plans to spend $3.3 billion more to expand its data center
presence across Europe over the next two years. Google’s (GOOGL) planned
Europe data center investment includes $660 million that will go to expand
its Hamina data center in Finland. That move will bring Google’s investment
in the Hamina data center to about $2.2 billion since 2009.

 

As data centers underpin cloud computing, cloud providers typically open
more data centers or expand existing data centers to expand their cloud
computing capacity. I think that’s what Google’s trying to achieve with its
planned data center investments in Europe.

 

Europe is turning out to be a hot battleground for the top cloud computing
companies. Europe’s cloud market should expand 22% annually for the next
three years. As we discussed earlier at Market Realist, Alibaba (BABA) has
also been expanding its cloud capacity in Europe.

 

Meanwhile, Amazon (AMZN) and Microsoft (MSFT) also operate data centers in
Europe that support their cloud services. Microsoft, for instance, has
detailed plans for more data centers in the region to boost its cloud
capacity.

 

Huge revenue opportunity for Google’s cloud business

Demand for cloud services remains strong globally. I think that strength is
encouraging companies like Google to make huge investments and expand their
cloud infrastructure. Global spending on cloud services is set to rise to
over $214 billion in 2019 from $182.4 billion in 2018, Gartner estimates. By
2022, the global cloud market should surpass $330 billion.

 

Google’s planned Europe data center investment follows the company setting
its sights on attracting large cloud customers. As we discussed earlier,
Google has hired former SAP SE (SAP) executives to help attract big cloud
customers. Plus, Google’s expanding its cloud sales team to generally help
it grow its cloud market share.

 

Presently, Amazon and Microsoft rule the global cloud market with 33% and
16% market shares, respectively, according to Synergy Research. Google comes
in third with 8.0% market share. However, as we saw here, Google aims to
overtake Microsoft by 2024 and become the world’s second-largest cloud
company.

 

Diversifying revenue sources

I think Google needs a big break in the cloud market to reduce its
overreliance on advertising dollars. Currently, advertising contributes the
vast majority of Google’s revenue. While Google remains the top digital
advertising company, it’s no longer a sure bet. Amazon and other competitors
are gaining ground in the digital advertising market, threatening Google’s
base.

 

So Google is looking for new revenue sources outside advertising, and cloud
computing is one of the company’s target markets. Currently, Google’s tiny
share of the cloud market shows it has more growth potential than rivals
Amazon and Microsoft.--marketrealist.com

 

 

 

India Announces Tax Reforms to Spark Its Economy

On Friday, Nirmala Sitharaman, India’s Finance Minister, announced
significant tax reforms to reignite the country’s economy. The country
reduced the corporate tax rate by 8 percentage points to 22%. New
manufacturing companies would pay a 15% corporate tax rate, a reduction of
10 percentage points. These tax cuts are expected to cost the government
around $20 billion in annual revenues.

 

Indian stock markets rewarded the prospect of higher corporate profits and
investments. The benchmark Sensex index gained 5.3% on Friday and closed up
2.8% today.

 

Banks were some of the biggest beneficiaries of the tax reforms, with HDFC
Bank (HDB) closing up 4.9% today on India’s National Stock Exchange. ADRs of
HDFC Bank, which gained 9.4% on Friday, rose 4.4% at 10:35 AM EDT.

 

Howdy, Modi!

The announcement of the country’s tax reforms coincides with Indian Prime
Minister Narendra Modi’s visit to the US. Yesterday, Modi and President
Trump shared the stage at a gathering of more than 50,000 Indian-Americans,
dubbed “Howdy, Modi!” The event, which took place at Houston’s NRG Stadium,
carried the tagline, “Shared Dreams, Bright Future.”

 

India’s tax reforms: Eyeing the trade war?

India’s tax reforms come with the US-China trade war in the background.
Notably, India and the US have experienced a smaller trade spat. However,
Reuters reported on Saturday that India and the US might reach a limited
trade deal this week at the United Nations General Assembly. This could be a
win-win for India and the US, especially as the US-China trade war persists.

 

A trade deal with the US, coupled with its new tax reforms, could be a boon
for India. While the trade war is forcing American companies to move out of
China, India has not been the most favored destination for a manufacturing
base.

 

Google (GOOG) (GOOGL) is looking to move the production of its Pixel phones
to Vietnam. The trade war’s spotlight hit Google in May after it suspended
business with China’s Huawei. Huawei recently launched its latest smartphone
running on Google’s Android but without Google’s Play Store.

 

Amazon (AMZN) is also looking to produce its Echo devices in Vietnam. While
Amazon has invested heavily in India in its e-commerce battle with Walmart’s
Flipkart, it has not manufactured Echo products in India. Microsoft is
eyeing Thailand and Indonesia for relocating its production away from China.

 

Tesla (TSLA) is building a Gigafactory in China to cater to local demand and
escape the trade war. The company plans to produce its Model 3 in that
factory, allowing it to cut manufacturing costs while escaping 25% Chinese
tariffs on American cars. These tariffs should become effective on December
15.

 

While Tesla hasn’t mentioned any plans to build a Gigafactory in India, the
new tax reforms could encourage American companies to revisit their India
strategy. General Motors and Ford already have a presence in India. India’s
auto sector is battling an unprecedented slowdown.

 

Competing with ASEAN

Traditionally, China and the ASEAN (Association of Southeast Asian Nations)
countries have been the region’s manufacturing and export powerhouses. The
tax reforms put India’s corporate income tax rate closer to its southeast
Asian peers. The tax on new manufacturing companies may be lower than in
other countries in the region. India’s Finance Minister highlighted the
point in the press briefing.

 

India’s government expects to drive investments in the manufacturing sector
through tax reforms. Together with improving the ease of doing business in
the country, the favorable tax environment may make India a destination of
choice for companies hit by the trade war.

 

Apple (AAPL) plans to move some of its production to India, specifically
targeted at the local market. Apple manufactures most of its products in
China through contractors such as Foxconn.

 

The US tariffs on made-in-China smartphones, which are slated to become
effective on December 15, are expected to affect Apple’s profitability.
Apple is a vocal opponent of the trade war. Apple has been looking to move
some production out of China.

 

India’s tax reforms: Reigniting the economy?

With a population of 1.3 billion and the median age of 29 years, India’s
workforce size is second only to China’s. Not too long ago, India was the
fastest-growing major economy in the world. However, the Indian economy has
been losing momentum lately.

 

India’s economy grew 5% in the quarter ended June 30, the slowest pace since
2013. The country’s manufacturing PMI (purchasing managers’ index) is at its
lowest point in 15 months. Plus, job creation has slowed.

 

Tax reforms in India could help more people work in two ways. First,
increased corporate profitability could give companies the flexibility to
hire more workers. However, the most significant effect will be structural.
With the new tax cuts, companies could be more enthusiastic about building
new factories, generating employment as well as giving a push to the
manufacturing sector.

 

Can India become a manufacturing hub?

In terms of manufacturing as a percentage of GDP, India lags most of its
Asian peers. The World Bank data indicates that manufacturing accounted for
15% of India’s GDP in 2018 compared to 29% for China. Plus, its smaller
ASEAN peers score over India on these metrics. Manufacturing accounts for
27% of Thailand’s GDP while this metric stands at 22% for Malaysia.

 

The tax reforms and specific incentives for new manufacturing companies may
be a step toward boosting the share of manufacturing in India’s GDP.
Although Modi launched the Make in India program during his first term, the
program hasn’t experienced significant success. The new tax reforms may be a
step in the right direction to support the Make in India program. However,
skill development and efficiency are vital factors for making this happen.

 

Tax reforms and balancing the budget

With the government’s revenues shrinking due to tax reforms, the Modi
administration would need to turn to prudent measures such as balancing the
budget. While the current account deficit remains comfortable, the weaker
Indian rupee and the possibility of an oil shock could throw a wrench in the
works.

 

With tax revenues falling, at least in the short run, India’s government may
have to tap borrowing to fund its growth and welfare programs. External
borrowing against the backdrop of a weak rupee and a high oil import bill
may result in a widening current account deficit.

 

Time to take exposure to India?

In spite of the risks related to the government budget, I believe that the
new tax reforms open a great opportunity and a new chapter for India. Before
the tax reforms were announced, India’s BSE Sensex lagged the S&P 500 (SPY).
Year-to-date through September 19, the S&P 500 has returned 20% while the
Sensex has remained flat. If the tax reforms play out as intended, I believe
there is a great chance for further upside.

 

You can take exposure to India with India-specific ETFs. The WisdomTree
India Earnings Fund (EPI) invests in India’s large-cap companies. At 10:43
AM EDT, EPI was trading up 1.9%. The iShares MSCI India ETF (INDA) was up 2%
at the same time.

 

The iShares India 50 ETF (INDY) tracks India’s Nifty 50 index. At 10:46 AM
EDT, INDY was up 3.1%.--marketrealist.com 

 

 

 

 

 

 

 

 

 


 

 


 

INVESTORS DIARY 2019

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
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any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

 


 

 


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