Global business Trends April 2015

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India's Forex Reserve Swells to All-Time High 
Foreign investors appear to be back with a bang in Indian markets and pumped in dollars leading to a massive USD 4.262 billion jump in the country's foreign exchange reserves in the week to March 20. Reserve Bank of India said forex reserves rose to USD 339.99 billion, a new record. The central bank bought dollars to prevent volatility in forex market and prevented the local currency from gaining against the Greenback. The rupee closed at 62.47 a dollar, almost flat compared with last week's 62.41. 
 
Overseas investors had slowed investment in emerging markets including India a week preceding this after the US Federal Reserve signaled that it would raise interest rate this year as it is comfortable with economic revival. India's foreign exchange reserves dipped by a tad over USD 2 billion in the week ending March 13 after Reserve Bank of India intervened to sell the US greenback during the week to prevent a sharp depreciation of the rupee amid concerns over the rate hike stance by the Federal Reserve. 
 
Negotiations on Trade Deal 'Changing Gears': Azevedo
World Trade Organization chief Roberto Azevedo said today efforts are intensifying to end more than a decade of stalemate in negotiations for global trade liberalisation. "The negotiations are changing gears, very visibly, very clearly," Azevedo told reporters in Geneva. The WTO launched the Doha Round of trade liberalisation talks in 2001, with the stated aim of underpinning development in poorer nations. The talks have repeatedly faltered, but the organisation's 160 members have given themselves until the end of July to agree on a way forward by finalising a work programme for the negotiations. Azevedo said member countries up until the end of last year had simply been identifying problems and restating their positions and concerns. "That clearly changed," he said: "Right now you will see a number of delegations exploring new approaches... Proposals are being put on the table." He stressed, "That doesn't mean yet that we are converging. We're still putting things on the table and testing all the different options." "At least we are moving into a solution-finding mode." 
 
While an overall Doha agreement has until now remained elusive, WTO members reached a landmark deal in Bali in late 2013 on overhauling global customs procedures. Bali was the first multilateral agreement concluded by the WTO since its inception in 1995, and marked the first concrete progress on Doha. Last November, countries began ratifying the Bali agreement, and it is due to take effect once two thirds have gone through the ratification process.
 
Brazil's Economy Grew 0.1% in 2014
Brazil, the world's seventh largest economy, narrowly avoided contracting in 2014 with a growth rate of just 0.1 per cent for the year. The economy had been growing at a fast pace for the past decade but has slowed considerably in the past four years. The slowdown is a result of low commodity prices, sluggish global growth and low investor confidence. Under new Finance Minister Joaquim Levy, the country has moved from stimulus to austerity. From 2011 until last year, Brazil's government had been trying to stimulate the economy by offering labour tax breaks, subsidising petrol and lowering the price of electricity. Levy has reined in government spending and raised taxes in order to balance government finances. As a result, analysts predict 2015 is likely to be a difficult year for the country.
 
Report Says China Manufacturing at Lowest in Nearly a Year
China's manufacturing fell to the lowest level in nearly a year as new orders shrank, according to a report published on Tuesday, March 24 that underscored the weakening outlook for the world's second biggest economy. HSBC's preliminary manufacturing index based on a survey of factory purchasing managers dropped to an 11-month low of 49.2 in March from February's 50.7. The index is based on a 100-point scale on which numbers below 50 indicate contraction in activity. The numbers signaled a "slight deterioration" in Chinese manufacturing, said the report, which found decreases in sub-indexes for new orders, new export orders and employment. It was the first report since the Lunar New Year holiday, which tends to distort economic data because it falls at a different time in January or February each year. "
 
A renewed fall in total new business contributed to weaker expansion of output while manufacturing companies continued to trim their workforce numbers," said Annabel Fiddes, an economist at Markit, which conducted the survey. The weakness in China's massive manufacturing industry, which employs millions, is a challenge for Beijing as it tries to prevent the economy from slowing too sharply. China's economy expanded 7.4 percent last year, its slowest pace in nearly a quarter century, and economists predict growth will slow further this year and the next.
 
Japan may be Set for World’s Biggest IPO
Last year, China’s Alibaba Group unleashed a monster of an IPO, the world’s biggest to date. But this year, Japan has a monster of its own that by all accounts could blow past the Alibaba listing to become the most massive offering of stock ever seen. It is easily the hottest topic around the boardrooms and izakayas (after-work drinking halls) across Tokyo: the highly anticipated initial public offering of Japan Post Holdings, the finance-ministry-held behemoth that combines the national postal service with the country’s biggest savings bank and major insurer. Its financial arm alone had 205 trillion Yen (USD 1.71 trillion) worth of assets under management as of December, roughly one-third the entire annual GDP of Japan. 
 
The offering has been more than a decade in the making, surviving fierce political controversy since the idea of privatization was first introduced. The issue was a sensitive one because not only does Japan Post bring in a massive amount of revenue, but also it’s the nation’s largest employer. Finally, with the government determined to shore up Japan’s debt-bedraggled finances, the stock appears ready to go to market sometime this autumn, with the ministry having set a goal of ¥4 trillion yen, or about $33 billion, for the divestment proceeds. It has earmarked the funds for rebuilding parts of northeastern Japan destroyed by the 2011 earthquake and tsunami.
 
Putin Urges Billionaires to Bring Money Back to Russia
Russian President Vladimir Putin has urged a gathering of billionaires and business leaders to bring money back to the country from offshore accounts, warning that funds kept abroad could be frozen. In an apparent reference to the possibility of further U.S. and European Union sanctions on Russia for its involvement in the Ukraine crisis, Putin warned of a possible "limit on the use of these capital amounts which are located in foreign jurisdictions." Citing "disturbing information from a number of countries," Putin said he suspects that "attempts could be made to obstruct" efforts to return capital to Russia. "Just bear that in mind," he told the assembled audience. 
 
The speech was followed by a private meeting with several top oligarchs, at which Putin emphasized funds should be brought to Russia promptly, billionaire Oleg Deripaska told local TV. "The president said that businessmen who have taken the decision to return money to Russia should not delay. That was his main message," Deripaska said. As a record amount of USD 151.5 billion was pulled out of Russia last year, Putin in December proposed a capital amnesty, under which funds brought back to the country would not face questions on tax and other issues. He insisted the amnesty would have to comply with international money-laundering rules to prevent "capital earned in an illegal manner" from being amnestied.
 
Germany, France, Italy to join Chinese-led Asian bank
Germany, France and Italy followed Britain on Tuesday, March 17, in announcing that they plan to join a proposed Chinese-led Asian regional bank, swinging Europe's biggest economic powers behind a project that is viewed with concern in Washington. Britain last week became the first major Western country to seek membership in the Asian Infrastructure Investment Bank. Tuesday's announcement brings three more members of the Group of Seven industrial powers on board. China proposed the bank in 2013 to finance construction of roads and other infrastructure. It has pledged to put up most of its initial USD 50 billion in capital. Twenty-one other governments including India, New Zealand and Thailand have said they want to join, but the US and close allies Japan, South Korea and Australia have not.The United States has expressed concern the new bank will allow looser lending standards for the environment, labor rights and financial transparency, undercutting the World Bank and International Monetary Fund. The Europeans appeared at pains to counter those concerns.A German Finance Ministry statement announcing the three European countries' plan to join the AIIB said that, working in partnership with existing development banks, it "could play an important role to provide funds for addressing the large infrastructure needs in Asia."
 
Eurozone Business Activity Near Four-Year High
Business output in the eurozone grew at its fastest rate in nearly four years in March, a closely watched survey suggests. The CIPS/Markit composite purchasing managers' index (PMI) rose to 54.1, compared with 53.3 a month earlier - it's highest level in 46 months. Any reading above 50 indicates growth while a reading below 50 points to a fall in activity. Markit said the survey pointed to first-quarter economic growth of 0.3 per cent. That would match the eurozone growth figure for the final three months of 2014. It said the improvement in business output was the result of growth in new orders that had increased at their fastest rate since 2011. Employment also grew at its fastest rate since August 2011. Job creation in the service sector "held steady" near February's four year high, Markit said, while in the manufacturing sector it grew at its quickest pace since April last year. Crucially, the survey showed that deflationary pressures eased in March with prices falling at the slowest rate since July. Markit said this reflected the need for some firms to pass on costs to customers.

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