David Fuller and Eoin Treacy's Comment of the Day
Category - General

    India Seizes Control of Indebted Lender in Surprise Move

    This article by Saloni Shukla for Bloomberg may be of interest to subscribers. Here is a section:

    India’s government will immediately seize control of a shadow lender whose defaults have caused widespread upheaval at mutual funds, a rebuke that’s only happened to one
    other firm.

    Government officials were granted approval to oust Infrastructure Leasing & Financial Services Ltd.’s board and a new six-member board will meet before Oct. 8, the National Company Law Tribunal said on Monday. India’s richest banker Uday Kotak and ICICI Bank Chairman G.C. Chaturvedi will be part of the proposed board, which will elect a chairperson themselves.

    The nation’s corporate affairs ministry has sought to take control of a company on just two prior occasions, and only followed through once, with Satyam Computer Services Ltd. in
    2009.

    The dramatic move, which unfolded within the span of a hectic day in Mumbai, underscores the government’s concern about IL&FS’s defaults spreading to other lenders in the world’s fastest-growing major economy. Considered systemically important, the group has total debt of $12.6 billion, 61 percent in the form of loans from financial institutions. The ripple effects of its defaults have already seen mutual funds post mark-to-market losses, a slump in corporate bond issuance and a brief but sharp sell-off in equities.

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    Australia's Property Downturn Chalks Up One-Year Anniversary

    This article by Matthew Burgess for Bloomberg may be of interest to subscribers. Here is a section:

    Australia’s property slump has reached the one-year mark as the nation’s two major cities have become the biggest drag.

    National dwelling values dropped 0.5 percent last month, weighed by declines in Sydney and Melbourne, according to CoreLogic Inc. data released Monday. Prices in the two east coast cities, which make up more than half of the national value of housing, have fallen 6.1 percent and 3.4 percent respectively from a year earlier.

    “Sydney and Melbourne are now the primary drag on the national housing market performance,” taking over from regions that were impacted by the mining downturn, CoreLogic’s head of research Tim Lawless said. Values have fallen greatest among the most expensive properties as lenders curb their appetite for high debt to income ratio lending, he said.

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    Italy's government agrees sharply higher public spending plan

    This article by Miles Johnson and Davide Ghiglione for the Financial Times may be of interest to subscribers. Here is a section:

    Mr Di Maio hailed the agreement as a “historic day”. “We made it!,” he said as he emerged from a balcony at Rome’s Palazzo Chigi, where the meeting took place.

    “Today we have changed Italy! . . . For the first time the state is on the side of the citizens,” he said as ministers and members of parliament from his party hugged each other on the square outside.

    Matteo Salvini, leader of the hard right League, part of the coalition and deputy prime minister alongside Mr Di Maio, also welcomed the agreement on spending, saying he was “fully satisfied with the objectives achieved”, which would include his party’s pledges for tax cuts and a reversal of unpopular pension reforms dating back to 2011.

    Mr Tria, who is not affiliated with either party and was installed only after Italian president Sergio Mattarella rejected the coalition’s first choice for finance minister, had been pressing for a deficit number as low as 1.6 per cent of GDP going into the meeting.

    A 2019 deficit of 2.4 per cent of GDP would represent a significant fiscal expansion from the 1.6 per cent target for this year agreed by the last centre-left government, and would be three times the 0.8 per cent number previously planned for next year.

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    Tax Court of Canada rules in favour of Cameco

    This press release from Cameco may be of interest to subscribers. Here is a section:

    The Tax Court ruled that Cameco's marketing and trading structure involving foreign subsidiaries and the related transfer pricing methodology used for certain intercompany uranium sale and purchase agreements are in full compliance with Canadian laws for the tax years in question.

    "We are very pleased with the Tax Court's clear and decisive ruling in our favour," said Tim Gitzel, Cameco's president and CEO. "We followed the rules, yet this dispute has caused significant uncertainty for our investors during a period of prolonged weakness in markets for our products. Now we hope CRA accepts the decision and applies it to other tax years in dispute, so we can focus on managing our business for the benefit of all our stakeholders."

    The court has referred the matter back to the Minister of National Revenue in order to issue new reassessments for the 2003, 2005 and 2006 tax years in accordance with the court's decision. The timing for the issuance of the revised reassessments along with refunds plus interest is uncertain.

    And

    Cameco will be making an application to the court to recover the substantial costs incurred over the course of this case.

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    Oil on Biggest Tear in Decade as Global Supply Cushion Vanishes

    This article by Samuel Robinson for Bloomberg may be of interest to subscribers. Here is a section:

    Fears are growing that the constriction of Iranian exports by U.S. sanctions and the collapse of Venezuela’s oil industry will leave a deep shortfall in the market. Those worries have only been stoked this week as key producers from Saudi Arabia to Russia and the U.S. signaled their reserves are off limits.

    Some of the world’s largest oil producers and traders are warning that triple-digit prices could soon return, with negative consequences for the economy.

    “There is concern in the market that the loss of barrels from Iran and Venezuela is not going to be made up for through extra supplies from particularly Saudi Arabia and Russia,” said Gene McGillian, manager of market research at Tradition Energy. “Worries about trade relations affecting economic growth have fallen away.”

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    H&M Soars Despite Record Inventories as CEO Says Worst Is Over

    This article by Anna Molin for Bloomberg may be of interest to subscribers. Here is a section: 

    H&M’s inventories have been a persistent problem, rising steadily as the Stockholm-based fast-fashion chain failed to keep up with consumers’ tastes and was struck by logistics woes.

    The company says it’s working through the excess stocks and will be able to scale back discounting as a result, even as it irons out its supply problems. “We are in a better position now than we were last year,” CEO Karl-Johan Persson said on a conference call Thursday. “We’re buying less and being smarter about our purchases.”

    The shares soared as much as 13 percent in Stockholm trading. Analysts at RBC Capital Markets pointed to H&M’s forecast that fourth-quarter markdowns will be about flat with last year’s, as well as a third-quarter gross margin that beat estimates.

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    Trump Is Looking for Quick Fix in Japan Talks, Abe Ally Says

    This article by Connor Cislo and Emi Urabe for Bloomberg may be of interest to subscribers. Here is a section:

    Abe and Trump agreed to open limited bilateral trade talks. Japan had resisted U.S. efforts at a more comprehensive bilateral trade deal, saying it preferred that the U.S. return to the TPP.

    The two leaders agreed to work to increase car production and auto-related jobs in the U.S., and that Japan wouldn’t be pressed to offer better access to its agricultural markets than it did under the original TPP. Trump also agreed not to place tariffs on imports of Japanese cars while the talks are taking place. The talks, limited to trade in goods, are aimed at seeking to "produce early achievements," according to a joint statement released by the White House.

    Amari also said Trump’s focus on selling autos in Japan is misplaced, noting that Japan does not levy tariffs on auto imports, unlike the U.S. He said Japanese consumers simply don’t want American cars, making talks on the subject "pointless."

    As Trump takes on China’s trade practices, it’s still possible that he brings the U.S. back to the TPP, given that it addresses many of the U.S. concerns -- such intellectual property theft, forced technology transfers and state-owned enterprises, Amari said.

    "But that’s just my modest hope," he said. "I’d put the odds at less than 50 percent."

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