Monday Digest #107
Weekly summary of finance, economic and tech news. Vision from DreamTeam. With 💜
India completes the reform of the monetary system, which was launched in November last year and was conducted for the purpose of combating corruption and the shadow economy.
Last week the Reserve Bank of India (RBI) has cancelled most of the restrictions on cash withdrawals from Bank accounts. Also it abolished restrictions on cash withdrawals at ATMs, which is very important for tourists.
Recall that monetary reform in India was carried out in order to combat the shadow economy, corruption, fake notes and the financing of terrorism. The population of the country were invited to exchange the largest currency notes in denomination of 500 ($7.50) and 1000 rupees ($15) as at the beginning of the reform to a new banknote in denomination of 500 and 2000 rupees. The government’s decision caused a stir among the population. ATMs and banks could not cope with the large number of people wanting to exchange money.
Bloomberg, citing a report of the Central Bank of India announced that in the end, banks in India have withdrawn from the population the amount which by 600 billion rupees ($9 billion) exceeds the amount of banknotes of 500 and 1000 rupees in circulation. According to preliminary data, the total amount of cash seized amounted to 9.7 trillion rupees.
Many experts predict negative impact of the reform, since the seized notes amounted to 85% of all cash in the economy of India, based mainly on cash payments.
Despite the fact that the government of India formally collapses the currency reform, the Reserve Bank urged banks “to encourage customers to continue the transition to digital methods of payment and switching from cash payments to cashless”.
On an evening trading session, on February,2, the ruble suddenly strengthened locally to minimum values over the past year, reaching the value of 58,60 rubles per dollar.
The reason for this sudden and dramatic strengthening — the news of the cancellation of sanctions against Russia concerning the FSB and related with Obama’s administration attacks on the United States. Such a dramatic strengthening of the ruble occurred in the absence of big players at that time, i.e., on the illiquid market. By the end of trading day (02/02), the ruble returned to the levels of 59.5 per U.S. dollar.
The US Treasury: the US Administration has extended sanctions against Iran. This is due to the fact that the Iranian military on January, 29 proceeded with the launch of a ballistic medium-range missiles.
Donald trump on Twitter:
13 individuals and 12 organizations were included in the sanctions list. In particular, some companies from Iran, China, Libya and the UAE fell under the sanctions.
Eurostat: in 2016, the GDP of 19 countries using the single currency — Euro, grew at an annual rate of 1.7% and the GDP of all 28 EU countries — by 1.9%.
Bureau of economic analysis, USA: in 2016, the country’s GDP increased in 2009 prices by 1.6%.
This is the first time since 2008, when the Eurozone economy grew faster than the U.S. economy. The last time the EU was able to circumvent the US was in 2011 (1.7% against 1.6%), and Eurozone countries — only in 2008 (0.4% against minus 0.3%).
#macro #finance
Even three years ago, there was a view that China increased its debt burden too much. However, since then the total debt of China has increased by another $12 trillion.
The growing debt burden of China can be explained, in particular, by the misallocation of resources, which will lead to lower productivity and economic growth in the long term and the spent resources will mean further growth of debt. Eventually too much debt will become a problem that must be solved by the financial sector and investors, and this can lead to a real crisis.
In order to avoid crisis, Beijing needs to stabilize growth and slower credit expansion gradually, in particular due to the write-off of bad debts and the closing of “zombie companies”.
The government should support the banks and the financial sector, so they can improve their balance sheets in case of problems. For China, apparently, the control over capital and liquidity is an important factor in combating the crisis, as this hinders the outflow from the banking system.
There is an opinion that within the next two years, the debt of China will exceed 300% of GDP. The reason is the government that continues to rely on the credit growth, which in turn “feeds” investments to offset the downward pressure on the economy.
Net profit of Facebook by the end of 2016 increased by 177% — to 10.2 billion U.S. dollars. Revenue increased by 54% — to $27.6 billion, including advertising — by 57%, to 26.9 billion us dollars
The founder and head of the social network Mark Zuckerberg:
“2016 was a good year for our business, but we still have much to do to make people closer to each other.”
The number of active users of Facebook at the end of the IV quarter totaled $ 1.86 billion against 1.59 billion a year earlier. The number of daily users in December averaged 1.23 billion people, which is 18% higher than in December 2015, while the number of mobile users totaled 1.15 billion people.
Bloomberg: amid reports, Mark Zuckerberg made a fortune of about $3 billion. His fortune has reached $59 billion — Zuckerberg is the fifth richest in the world in the Bloomberg Billionaires Index.
#Commodities
In Saudi Arabia the start of receiving applications for participation in the first stage of the tender for the development of alternative energy in the amount of $ 30–50 billion was announced, stated the Minister of Energy of Saudi Arabia Khalid Al-Falih.
The tender will be held for 400 MW of wind power and 300 MW of solar energy. It will cost about $ 700 million, and the application for participation will be accepted until February, 20, and the auction itself is scheduled for April, 17th.
In that way, the largest producer of OPEC has finally decided to get off the “oil needle” and plans to produce by 2023 about 10 “giants” of renewable energy, particularly solar and wind energy. The Saudis stressed that the start of the tender process is a sign that Saudi Arabia is serious about achieving its goals.
#INTERESTING
The Commonwealth Bank of Australia, CBA has created a system built on the blockchain for the bond market, which was tested by the Treasury of Queensland in the issuance of government bonds.
New technology, which requires the approval of regulators before commencement of its use in actual transactions, eliminates the risk during the clearing of transactions, because the transfer of securities is linked to a simultaneous payment, and the transaction is performed instantly.
The structure in the CBA is called a “virtual cryptoblepharus”.
The governments of several other States of Australia are exploring the technology, it is of interest to them, since the blockchain provides a not variable time and date stamp for all stakes and provides a clear record of all deductions made.
Sophie Gilder, the head of the blockchain direction at CBA:
“The semi-government bond market is a very opaque market, and there are many intermediaries required to bring a deal to market. There are a lot of steps, most of which the market doesn’t see. We wanted to explore building an entire market place in digital form. What we have done with this experiment is prove the use and effectiveness of the technology.”
Note that the blockchain on the debt capital markets may also be used for other relatively liquid debt instruments such as syndicated loans, to help banks manage risks, and increase liquidity in this market.
On February, 1 Brand Finance research company published its latest list of 500 most expensive and 10 most influential brands in the world (.pdf).
The most expensive brand is Google, which pushed Apple from the first place.
The most influential brand is Lego, which bypassed such brands as Nike and Google.
Brand Finance explains this by success of the feature film “The Lego Movie”, released in 2014, which was supported by the successful sales of related products, the launch of a social network and Lego Life application. In addition, the new film is rolling out on February, 9: “The LEGO Batman Movie”, whose campaign has attracted massive public attention and allowed the Lego brand bypass last year’s leader Walt Disney, which fell back to sixth place.
The list of 500 most valuable brands includes three Russian — Sberbank (156th place), “Gazprom” (344th) and LUKOIL (375 th).
Now, Brand Finance estimates Google brand at $ 109.5 billion, and Apple’s — at $ 107.1 billion.
Brand Finance:
«Apple has excessively exploited trust of its customers, yet could not derive enough revenue from new products such as Apple Watch, — explained the paper’s authors. — Its brand has lost its shine and is now forced to compete in the smartphone market not only with traditional rivals, like Samsung, but also with Chinese brands such as Huawei. At that, smart phone market is the main source of income for Apple.”
Amazon, assessed at $ 106,4 bln., keeps holding the third place.
CNN: the Government of India has decided to hold free Wi-Fi in 1050 villages across the country. This will take place in the framework of the project Digital Village. For the next six months in each of these villages there will be provided a Wi-Fi access point, to which residents will be able to connect using their mobile phones.
The first phase of the program will require about $62 million, then this practice will be extended to other regions of the country.
The Ministry of electronics and information technology of India:
“The program is aimed at “providing services for rural development with the use of digital technology”, they include interactive learning and medical services, and basic Internet access”.
#OPINION [dti in the media]
Managing partner at DTI Alexander Butmanov on Kommersant on 31.01.2016:
“Venezuelan Bolivar has at least three rates: “white”, “gray” and “black”. The real market rate is a “black” one. But there has appeared a fourth market — really “black-black”. There the so-called bolivars currency is given away, because the half of it is fake. I would caution from exchange transactions: it swells up for the purpose of creating an “information background”, and so people would buy this currency on some supposedly favorable exchange rate. There appear these rumors on the market, and people sell some obscure securities denominated in bolivars, and the bolivars themselves. It is not recommended to touch it.”
Read more: Kommersant (in Russian)
