Day: August 4, 2017

Rajeev Sakhuja has kept a hectic schedule in recent months as he makes scores of presentations in Delhi and surrounding towns about why and how to invest in equities.

The investment adviser has an attentive audience as traditional avenues of gold and real estate lose their luster and as stock markets trade at record highs. Tens of thousands of ordinary Indians are now investing more money into mutual funds.

“That old-fashioned investment, people are not interested. So where should they switch, where to invest, what to do, nobody has any clue,” said an upbeat Sakhuja, whose firm, PTIC India, is doing brisk business.

India’s stock markets have been among Asia’s top performers this year. The benchmark BSE Sensex has gained more than 16 percent since the start of the year, buoyed by optimism about the world’s fastest-growing economy. But unlike the past, when foreign investors were at the helm of a bull run, there has been a huge pickup in domestic investment.

That’s good news, say economists. The government has long fretted that most of the country’s household savings go into unproductive assets such as gold and real estate and has been trying to nudge domestic investors toward channeling more of their savings into equities, a source of corporate finance.

There is a huge market to be tapped. The total investment of Indian household savings into stocks is much smaller compared with those in many other countries.

Gaurav Mehta, portfolio manager at Ambit Investment Advisors in Mumbai, said the rising interest of domestic investors is part of a structural shift that signals a more modernizing and transparent economy.

“Till five, six years ago, physical assets were a good two-thirds of all household savings,” Mehta said. “That ratio now has swung in favor of financial assets.”

‘More formalized’ savings

The trend has been accelerated by a crackdown on the black economy. Last November, the government banned high denomination notes in a bid to flush out illegal cash.

“As savings become more formalized, then obviously you don’t need to park them in spurious places like land, real estate, et cetera,” Mehta said. “So a lot of this money is now moving into financial assets.”

And to tap that market, the mutual fund industry is reaching out to potential investors through television advertisements, social media and billboards, pitching the funds as attractive alternatives.

The sales pitch is not difficult: In the last four years, the Sensex has climbed 60 percent, whereas gold has fallen by 5 percent, real estate markets are down sharply and declining bank interest rates cannot keep pace with inflation. And the government is offering favorable tax policy for investors in mutual funds.

Most small investors are opting for mutual funds, hoping to grow their savings to beat inflation.

After hearing from friends about investment avenues in stock markets, Kumar Gautam, 31, opted for a $50 monthly plan. “Bank interest rates were coming down 4, 5, 6 percent … people told me to opt for a monthly plan. I will have tax savings and get better returns,” he said.

Some, like Bharti Gupta, 33, have been bolder and chosen to trade directly in stocks. “I studied some books, there are courses also that I joined, and there is a WhatsApp group that I have joined, which has some 150 to 200 people, so that is also quite helpful.” She said she had been able to make her investment grow quite well.

And whereas most investors lived in big cities in the past, small-town residents are also investing in equities now.

Vidya Bala, head of research at FundsIndia.com, said one-third of the firm’s customers now are from outside the country’s 15 big cities.

According to Bala, even in very remote places where there are no financial firms or mutual fund offices, people are investing online. “People who are away from the happening cities can also have access to good, regulated products as long as they are digitally aware. This is really set to take off,” Bala said.

Reassurance

Economists say the greater participation of domestic investors is also reassuring for a country that has long worried about the predominant role of foreign money in equities, because that used to play a decisive role in the movement of stock markets.

Meanwhile, ordinary, first-time investors are simply keeping their fingers crossed, hoping that stock markets will continue to do well in the long run and that their investments will be safe.
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As many as 100 elephants are being killed every day for their tusks, according to the United Nations. The United States implemented a near-total ban on the commercial trade of African elephant ivory last year, and in New York this week, conservation groups gathered to destroy merchandise that came from the illegal ivory trade. Faith Lapidus narrates this report from VOA’s Kevin Enochs.
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The head of German automaker Volkswagen’s engineering and environment office pleaded guilty Friday in a U.S. court to charges connected to an emissions scandal involving the company.

Volkswagen executive Oliver Schmidt pleaded guilty to conspiracy and fraud charges that could land him in prison for up to seven years. He will be forced to pay a fine of between $40,000 and $400,000 for his role in a scheme, dubbed Dieselgate, to mislead U.S. environmental regulators.

In March, the company admitted to using software to fool regulators into believing Volkswagen cars complied with U.S. emissions standards. It was ordered to pay $4.3 billion in penalties and another $17.5 billion in civil settlements.

The government said diesel cars that Volkswagen claimed were clean were, in fact, releasing 40 times more nitrogen oxide emissions than is allowed by law.

Schmidt is the second Volkswagen employee to plead guilty to charges related to the scandal. Last year, company engineer James Liang admitted to helping design the devices used to beat emissions tests. The FBI now cites him as a cooperating witness.

Most Volkswagen employees charged in the scheme are in Germany and can’t be prosecuted by U.S. authorities. The company still faces legal issues in countries across the globe and has put aside more than $24 billion to handle costs related to the scandal.
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The U.S. economy had a net gain of 209,000 jobs in July, while the unemployment rate fell slightly to 4.3 percent. That matches the lowest jobless rate in 16 years.

Friday’s Labor Department report says job gains were seen in restaurants, business services and health care. The average hourly wage rose nine cents an hour in July, to reach $26.36. That is up 65 cents over the past year, or growth at a 2.5 percent rate.

The chief economist for the job search company “Indeed” says slow wage growth may reflect job gains in low-paying areas like food service. Jed Kolko also says the job gains are well above what is needed to keep up with growth in the workforce.

While Friday’s newest government unemployment report shows strong job growth and rising wages, it also shows 7 million Americans out of work and another 5.3 million who want full-time work but can only find part-time employment.

On Twitter Friday, President Donald Trump called the official government job numbers “Excellent” and wrote that cutting regulations helped job growth.

During the campaign, when the official jobless rate was around 5 percent, candidate Trump called the job numbers “phony” and said they should not be believed. Back then, he insisted that the actual unemployment rate was far higher, perhaps as high as 42 percent. 
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U.S. employers hired more workers than expected in July and raised their wages, signs of labor market tightness that likely clears the way for the Federal Reserve to announce next month a plan to start shrinking its massive bond portfolio.

The Labor Department said that nonfarm payrolls increased by 209,000 jobs last month amid broad gains. June’s employment gain was revised up to 231,000 from the previously reported 222,000.

Average hourly earnings increased nine cents, or 0.3 percent, in July after rising 0.2 percent in June. That was the biggest increase in five months. Wages increased 2.5 percent in the 12 months to July, matching June’s gain.

Average hourly earnings have been trending lower since surging 2.8 percent in February. Lack of strong wage growth is surprising given that the economy is near full employment, but July’s monthly increase in earnings could offer some assurance to Fed officials that inflation will gradually rise to its 2 percent target.

Action by Fed

Economists expect the Fed will announce a plan to start reducing its $4.5 trillion portfolio of Treasury bonds and mortgage-backed securities in September.

Sluggish wage growth and the accompanying benign inflation, however, suggest the U.S. central bank will delay raising interest rates again until December. The Fed has raised rates twice this year, and its benchmark overnight lending rate now stands in a range of 1 percent to 1.25 percent.

Economists polled by Reuters had forecast payrolls increasing by 183,000 jobs in July and wages rising 0.3 percent.

Wage growth is crucial to sustaining the economic expansion after output increased at a 2.6 percent annual rate in the second quarter, an acceleration from the January-March period’s pedestrian 1.2 percent pace.

The unemployment rate dropped one-tenth of a percentage point to 4.3 percent, matching a 16-year low touched in May. It has declined four-tenths of a percentage point this year and matches the most recent Fed median forecast for 2017. July’s decline in the jobless rate came even as more people entered the labor force.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose one-tenth of a percentage point to 62.9 percent.

Still, some slack remains in the labor market, which is restraining wage growth. A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, was unchanged at 8.6 percent last month.

July’s employment gains exceed the monthly average of 184,000 for this year. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

Trump administration

Republican President Donald Trump, who inherited a strong job market from the Obama administration, has pledged to sharply boost economic growth and further strengthen the labor market by slashing taxes, cutting regulation and boosting infrastructure spending.

But after six months in office, the Trump administration has failed to pass any economic legislation and has yet to articulate plans for tax reform and infrastructure spending as well as most of its planned regulatory roll-backs.

The jobs composition in July mirrored June’s. Manufacturing payrolls increased by 16,000 jobs. Employment in the automobile sector rose by 1,600 despite slowing sales and bloated inventories that have forced manufacturers to cut back on production.

U.S. auto sales fell 6.1 percent in July from a year ago to a seasonally adjusted rate of 16.73 million units. General Motors Co and Ford Motor Co have both said they will cut production in the second half of the year.

Construction firms hired 6,000 workers last month. Retail payrolls increased by 900 in July as hiring by online retailers more than offset job losses at brick-and-mortar stores.

Companies like major online retailer Amazon are creating jobs at warehouses and distribution centers. Amazon this week held a series of job fairs to hire about 50,000 workers.

Government payrolls gained 4,000 in July.
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Japanese automakers Toyota Motor Corp. and Mazda Motor Corp. said Friday they plan to spend $1.6 billion to set up a joint-venture auto manufacturing plant in the U.S. — a move that will create up to 4,000 jobs. 

The plant will have an annual production capacity of about 300,000 vehicles and will produce Toyota Corollas for the North American market. Mazda will make cross-over models there that it plans to introduce to that market, both sides said.

The companies will split the cost for the plant equally. 

Toyota said that it changed its plan to make Corollas at a plant in Mexico, now under construction, and instead will produce Tacoma pickups there. 

EV rumors

The Japanese automakers were reportedly planning to work together to develop electric vehicles. 

EVs have become an increasingly competitive market segment because of concerns about global warming and the environment.

Japanese rival Nissan Motor Co., which is allied with Renault SA of France and Mitsubishi Motors Corp., is the global leader in electric vehicles.

Better batteries

In the past, Toyota, which makes the Prius hybrid, Camry sedan and Lexus luxury models, was not overly bullish on electric vehicles, noting the limited cruise range of the technology. But recent breakthroughs in batteries allow for longer travel per charge.

In 2015, Toyota and Mazda agreed to find new areas where they can work together, but they had not announced specifics.

Toyota already provides hybrid technology to Mazda, which also makes compact cars for Toyota at its Mexico plant.

Mazda, based in Hiroshima, Japan, used to have a powerful partner in Dearborn-based Ford Motor Co., which bought 25 percent of Mazda in 1979, and raised it to 33.4 percent in 1996. But Ford began cutting ties in 2008, and has shed its stake in Mazda.
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Nigeria will legalize illegal mini refineries in the Niger Delta oil hub by the end of the year and supply them with crude at a reasonable price, the presidency said Thursday, fulfilling a demand from community leaders.

On Monday, Niger Delta leaders threatened to pull out of peace talks with the government unless their demands were met by Nov. 1.

“The Federal Government has started the process of replacing illegal refineries in the region with modular ones,” the presidency said in a statement as Acting President Yemi Osinbajo met Niger Delta community leaders in Abuja.

Each of the Niger Delta states would receive two modular refineries to start up in the fourth quarter, the statement said.

Swampland poverty

The government has been in talks with community leaders since last year to end militant attacks on oil production facilities, which cut the OPEC member’s output by 700,000 barrels a day for several months last year.

But a military crackdown on thousands of illegal refineries in the southern swamps, which process crude oil stolen from oil majors and state oil firm NNPC, has raised tensions.

The refineries process stolen crude in makeshift pipes and metal tanks hidden in oil-soaked clearings deep in the southern swampland’s thick bush land.

Working on other demands

The Niger Delta leaders had presented President Muhammadu Buhari a list of 16 demands last November to drag the southern swampland out of poverty. The militants then halted attacks to give the talks a chance.

The presidency said it was also discussing with oil majors to move their regional headquarters to the Niger Delta, another demand from communities complaining they do not benefit from the crude in their region.

Osinbajo was appointed by Buhari to head Nigeria while Buhari is on medical leave in Britain for an undisclosed ailment.

Oil exports are now set to exceed 2 million barrels per day (bpd) in August, the highest in 17 months, up from just more than 1 million bpd at certain points last year, thanks to a steady decline in attacks on pipelines. 

 
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