Tag: investors

PMC Bank depositors invested over ₹5 lakh to get their money back over 10-year period

Banking & Finance

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Depositors of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank with deposits over ₹5 lakh will get their money back in a piecemeal manner over an extended 10-year period, per the draft scheme of amalgamation of PMC Bank with Unity Small Finance Bank (Unity SFB).

Also, no further interest will be payable on the interest-bearing deposits of the transferor bank for five years from the appointed date

The aforementioned clauses are unlikely to go down well with depositors (having deposits over ₹5 lakh), especially senior citizens, who struggled to make ends meet amid the pandemic due to the ₹1 lakh per depositor cap on withdrawal during the entire two-year period their bank has been under directions.

Modalities

As per the scheme, Unity SFB (transferee bank) will pay the amount received from the Deposit Insurance and Credit Guarantee Corporation to all the eligible depositors of PMC Bank (transferor bank), which would be an amount equal to the balance in their deposit accounts or ₹5 lakh, whichever is less;

At the end of two years from the appointed date,over and above the payment already made, Unity SFB will pay an additional amount equal to the balance in their deposit account or ₹50,000, whichever is less, on-demand only to the retail depositors of the transferor bank.

The appointed date is the date when the undertaking of the transferor bank will stand transferred to, and vest in the transferee bank.

At the end of three years from the appointed date,over and above the payment already made, Unity SFB will pay an additional amount equal to the balance in their deposit account or ₹1 lakh, whichever is less, on-demand only to the retail depositors of the transferor bank.

At the end of four years from the appointed date,over and above the payment already made, Unity SFB will pay an additional amount equal to the balance in their deposit account or ₹3 lakh, whichever is less, on-demand only to the retail depositors of the transferor bank.

At the end of five years from the appointed date, over and above the payment already made, Unity SFB will pay an additional amount equal to the balance in their deposit account or ₹5.50 lakh, whichever is less, on-demand only to the retail depositors of the transferor bank.

The entire remaining amount of deposits (after the payments over five years) will be paid in the accounts of the retail depositors of transferor bank after 10 years from the appointed date, on demand.

Interest at the rate of 2.75 per cent per annum shall be paid on the retail deposits of the transferor bank which shall be remaining outstanding after the said period of five years from the appointed date. This interest will be payable from the date after five years from the appointed date.

The transferee bank will have time up to 20 years from the appointed date, to repay the amount received from DICGC towards payment to the insured depositors, which can be done in one installment or in several instalments.

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Board’s carry responsibility of being guardians of trust depositors have reposed in a bank: Das

Banking & Finance

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Calling attention to situations where both bank management and Boards had become cozy, RBI Governor Shaktikanta Das on Tuesday underscored the importance of the active role of the Board, especially in challenging the proposals of the management.

Avoid herd mentality

Banks should ensure that their business models and business strategies are conscious choices, following a robust strategic discussion in the Board, instead of being driven by mechanical ‘follow the market’ approach, Das said at the SBI Banking and Economics Conclave

Also see: Borrowers moving towards fixed rate loans: RBI chief

The Governor emphasised that in their endeavour to grow, banks should avoid herd mentality and look for differentiated business strategies.

Business strategies

He observed that the RBI has started taking a closer look at business models and strategies of banks.

“Certain banks had followed the high-risk and high-return business strategy, with a skewed priority for serving only the interest of their investors.

“The active role of the Board, especially in challenging the proposals of the management, thus becomes critical,” Das said, adding that this will contribute towards a more diligent and balanced approach to decision making.

Particular roles

The Governor observed that RBI’s intention is not to create divergence between the Board and the management.

The management has a certain role and the Board has a certain role. And each is expected to play that role, he said.

Also see: Don’t ban cryptos: Experts, stakeholders to House panel

Referring to his earlier remark that the Board should challenge certain norms, certain risk taking practices and certain models of the management, Das said this is only to ensure that the right decision is taken.

“And the Board, which is in charge of oversight of the bank, is expected to play that role as a guide and to discharge its oversight functions in a prudent manner…Let me clarify we don’t want a fight between the Board and the management,” he said.

Responsibility towards depositors

The Governor noted that the Board of Directors carry the responsibility of being guardians of the trust that depositors have reposed in a bank.

A bank’s responsibility towards depositors should, therefore, be weighed against its responsibility towards shareholders of the bank.

“To ensure good governance, the Reserve Bank has high expectations from the oversight role of the Board, its composition, Directors’ skill profile, strong risk and compliance structure and processes, more transparency and a robust mechanism of balancing various stakeholder interests.

“Thus, business priorities need to be complemented with responsible governance and ethical actions,” he said.

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3 mistakes to avoid when building your mutual fund portfolio

Personal Finance

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The market rally since the March 2020 lows has brought in many new investors into the mutual fund (MF) fold. But are you investing right?

Here are three traps you should not fall into on the path to wealth creation through MFs.

Lacking goal-oriented approach

Latest available AMFI data (June 2021) show that retail investors contribute 54.82 per cent of the total AUMs of actively managed equity schemes — much higher than contributions to categories such as hybrid, gilt, debt or even index funds. However, only 55.6 per cent of the retail AUMs in equity funds were held for more than 24 months. This implies that while putting money in equity funds is a preferred route for retail investors, at least half of them are adopting a tactical, short-term approach rather than a strategic, long-term, goal-oriented approach to equity MF investing.

This assumption is also vindicated by a BL Portfolio survey on impact of Covid on personal finances done earlier this year as well as by the reader queries we get on their MF holdings.

A striking fact noticed among many survey respondents as well as among readers, who send in their portfolios for review, is their lack of delineation between long-term goal-based savings and other savings. Many invest in MF SIPs without any particular time frame or goal in mind. When they have any requirement — be it an emergency, a lifestyle need such as a new phone or laptop or a foreign holiday, they sell out or at least book partial profits. And the process goes on. Whatever remains from the additions and drawings over the years is their savings in equity MFs towards longer-term goals such as children’s education or retirement.

The ideal way to go about MF investing is to create a core portfolio for long-term goals and not touch this investment for other reasons. The core portfolio should consist of a combination of categories such as index funds, flexi-cap/multi-cap funds, mid and small cap funds in a proportion that suits one’s risk appetite.

For other needs on the way, tactical investing can be adopted. Informed investors can use sector or thematic funds — where timing the entry and exit assumes importance — as part of their satellite portfolio, for instance. Similarly, investors who follow the markets closely can do lump-sum investments during market lows and tactically move the gains out when a short-term goal comes closer.

While creating a separate fund portfolio for short- or medium-term goals, one must remember though that a horizon of less than 5-7 years pegs up the risk of investing in equity funds. Hence, monitoring the performance closely and booking profits is a must. Otherwise, one can also consider appropriate debt funds depending on the time to goal.

Stagnating SIPs

Another oft seen behavioural tendency among MF investors is the failure to increase their savings in tandem with their income. ₹10,000 a month in SIPs by a 30-year-old till he/she retires at 60 will grow to ₹3.52 crore assuming a reasonable 12-per cent CAGR. Stepping up the SIP by just five per cent annually can leave one richer by more than a crore. Stepping up by 10 per cent annually will take it to over ₹8 crore. Saving more as you earn more can make up for lower than expected portfolio returns. Returns can be lower for reasons such as sub-optimal fund choices and failure to review portfolio in time, lower alpha generation by certain categories of actively managed funds or by plain market volatility or bearishness in the years closer to your goal. Stepping up also helps in case you decide to retire early – a decision which cannot be foreseen when you have just started working or just begun saving.

Thirdly, to some extent, stepping up SIPs can also take care of your failure to account for inflation or misjudging it – the cost of your child’s professional education say, 20 years down the line, will not be the same as it is today. If it requires ₹10 lakh in today’s scenario, it will be at ₹26.5 lakh then, assuming a five per cent inflation.

Fund houses offer step-up/top-up or SIP booster facilities which will help increase your amounts annually. If you are confident of your fund choices, you can use this facility on one or more of your existing SIPs. Else, this annual exercise can be done manually, too.

‘When’ to exit

Consider this. A 10-year SIP in a leading large-cap fund ending on February 1, 2020, for instance, would have yielded 12.75 per cent CAGR, assuming you sold the investments to meet your goal when the tenure ended. The same SIP ending on April 1, 2020 would have decimated your returns to about 5-5.5 per cent, thanks to the March 2020 market crash. Equity investments are indeed subject to such market risks and hence, staying invested until the day of retirement or until the week your child’s higher education fee has to be paid, is not a good idea. A cardinal rule in goal-oriented equity MF investing is moving out the corpus a bit in advance when the going is good and when you have also got returns commensurate with the risk ( 12 per cent plus CAGR on your portfolio can be a goalpost). The corpus can then be reinvested in short-term fixed deposits to preserve the capital.

That said, ‘when’ to move out is not an easy decision. You need to avoid falling short of the corpus because of cautiously moving out to preserve the gains. You should also keep the taxation rules in mind — your corpus is what you get after paying long-term capital gains tax on gains over ₹1 lakh on equity funds; SIPs made in the last year before selling out are subject to short-term capital gains tax too. In this whole process, you can avoid pain by arriving at your corpus requirement scientifically, beginning to invest early, choosing the right funds, monitoring their performance regularly and by increasing your savings as and when your income goes up.

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Bitcoin nears $60,000 as investors eye first US ETFs

Banking & Finance

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Bitcoin hit a six-month high on Friday,approaching the record hit in April, as traders became increasingly confident that US regulators would approve the launch of an exchange-traded fund based on its futures contracts.

The world’s biggest cryptocurrency rose nearly 4 per cent to as high as $59,664, its highest since mid-April. It has doubled in value this year and is near April’s record high of $64,895.

The US Securities and Exchange Commission (SEC) is poised to allow the first US bitcoin futures ETF to begin trading next week, Bloomberg News reported on Thursday, citing people familiar with the matter.

Ben Caselin, head of research and strategy at Asia-based cryptocurrency exchange AAX, said bitcoin’s spike above $59,000 wasn’t arbitrary and long-term investors had been accumulating it for a while.

“It is widely expected that Q4 will see significant progressaround a bitcoin ETF in the US,” he said.

Friday’s moves were also spurred by a tweet from the SEC’s investor education office, he said.

“Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the SEC tweet stated.

Wait for bitcoing ETF

Cryptocurrency investors have been waiting for news of approval of the country’s first bitcoin ETF, and some of bitcoin’s rally in recent months has been in anticipation of that move and how it could speed up its mainstream adoption and trading.

Several fund managers, including the VanEck Bitcoin Trust, ProShares, Invesco, Valkyrie and Galaxy Digital Funds have applied to launch bitcoin ETFs in the United States. Cryptocurrency ETFs have been launched this year in Canada and Europe.

SEC Chair Gary Gensler has previously said the crypto market involves many tokens which may be unregistered securities and leaves prices open to manipulation and millions of investors vulnerable to risks.

The Bloomberg report said that the proposals by ProShares and Invesco are based on futures contracts and were filed undermutual fund rules that Gensler has said provide “significant investor protections”.

The SEC did not immediately respond to a request for comment on the Bloomberg report.

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5 things investors should know, BFSI News, ET BFSI

Banking & Finance

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1. Banking and PSU debt funds are mutual fund schemes that invest debt and money market instruments issued by banks and PSUs and public financial institutions.

2. At least 80% of the corpus of the scheme needs to be in instruments issued by banks and PSUs, and PFIs.

3. All these entities are either backed, regulated or controlled by the government which reduces default risk and hence the scheme is supposed to have low credit risk.

4. Fund manager takes the call on whether to be in the short-term instruments or long-term debt instruments and hence the scheme carries interest rate risk.

5. These funds may give higher returns than Bank FDs of similar duration.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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5 things investors should know, BFSI News, ET BFSI

Banking & Finance

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1. Banking and PSU debt funds are mutual fund schemes that invest debt and money market instruments issued by banks and PSUs and public financial institutions.

2. At least 80% of the corpus of the scheme needs to be in instruments issued by banks and PSUs, and PFIs.

3. All these entities are either backed, regulated or controlled by the government which reduces default risk and hence the scheme is supposed to have low credit risk.

4. Fund manager takes the call on whether to be in the short-term instruments or long-term debt instruments and hence the scheme carries interest rate risk.

5. These funds may give higher returns than Bank FDs of similar duration.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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Should you invest in Hawkins Cooker FD opening for booking on September 15?

Personal Finance

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With interest rates bottoming out, fixed income investors have been scouting for options with higher returns. But higher returns invariably mean higher risk. Consider the case of the FD scheme of Hawkins Cookers. The company is offering 7.5 per cent per annum for deposits with a tenure of 12 months. For deposits of 24 and 36 months, the rates offered are 7.75 per cent and 8 per cent per annum, respectively. These rates are higher than many others in the market today.

But the flipside is that FDs of Hawkins are rated ‘MAA’/Stable rating by ICRA. While this rating implies high credit quality and low credit risk, it is a couple of notches below the highest rating of ‘MAAA’ — indicating that the Hawkins deposit has higher risk than the safest deposits in the market today.

Investors who can take such higher risk for higher returns can consider the FD scheme of Hawkins that opens on Wednesday, September 15, 2021. Interested investors should note that they should pre-register for the FDs on the company’s website (https://www.hawkinscookers.com/fd2021.aspx), beginning 9:30 am. Once you register, you will get a pre-acceptance number and the payment has to be made within 10 days, with a filled in FD application form. If the pre-accepted numbers cross the threshold amount (₹28.17 crore) which the company intends to raise through FDs, you will be put on a wait-list. Wait-listed applications will be considered if pre-approved applicants fail to pay within the stipulated time.

At the current juncture, locking into deposits with longer tenures could mean missing out on higher returns when the rate cycle begins to move up. A one- to two-year time-frame hence, seems better, as this could perhaps give the opportunity to reinvest at higher rates later on.

Why FD investors get the short end of the stick under waterfall mechanism

The company accepts a minimum of ₹25,000 as deposit and in multiples of ₹1,000 thereafter — up to a maximum of ₹20 lakh. Investors can choose from the cumulative and non-cumulative options. Under the former, interest will be compounded at monthly rests and paid on maturity, along with the principal. A deposit of ₹25,000 will fetch ₹26,941/ 29,177/31,756, at maturity, for tenures of 12/24/36 months, respectively. For non-cumulative deposits, interest will be paid out on half-yearly basis.

Given the relatively higher risk, it is recommended that investors restrict their investments to the minimum amount. Also, it will suit those with a bigger investible surplus on hand as they can park only a portion of their surplus here.

Better rates than others

The interest rates offered by Hawkins are relatively higher across tenures. For a 12-month deposit, while public sector banks offer 4.25-5.15 per cent, private banks offer up to 6 per cent, and small finance banks (SFBs) offer up to 6.5 per cent — Hawkins offers 7.5 per cent. For tenures of 24/36 months, banks currently offer up to 7 per cent, while Hawkins offers 7.75 and 8 per cent, respectively.

But the relatively lower rates offered by banks on their deposits are commensurate with their relatively higher safety. FDs with banks (including those with SFBs) are covered under the deposit insurance offered by DICGC, for up to ₹5 lakh per bank. This cover is not available for corporate FDs such as those of Hawkins.

The rates offered by Hawkins are 150 to 220 basis points higher than those offered by NBFCs, such as Bajaj Finance and Sundaram Finance. But these deposits have a higher credit rating (AAA), indicating better safety.

Even among its peers with about similar rating, the rates offered by Hawkins score better. For instance, Shriram Transport Finance’s deposits, rated MAA+ by ICRA (also rated FAAA by CRISIL), offer 6.5/6.75/7.5 per cent per annum and tenures of 12/24/36 months, respectively. JK Paper has a similar rating (‘FAA’/Stable by CRISIL), but the interest rates offered by it are 50-75 basis points lower than those offered by Hawkins, across tenures.

About the company

Hawkins is one of the leading manufacturers of pressure cookers in India with a wide distribution network (the brand has second highest market share of 34.9 per cent). The company has also diversified its product portfolio into other cookware products that constitute about 20 per cent of its turnover.

However, Hawkins is a small company, both in terms of turnover and market capitalisation (₹3,281 crore).

While the company’s revenue grew by 10.3 per cent compounded annual growth rate (CAGR) over FY16 to FY19, the growth was muted in FY20 — 3.2 per cent (y-o-y) to ₹674 crore, owing to the Covid-19 lockdown restrictions in March quarter. In FY21, however, with the company upping its online presence, sales saw a re-bound and grew by 14 per cent (y-o-y) to ₹768 crore.

Net profit grew by 14.5 per cent CAGR over FY16 to FY21 to ₹80.6 crore.

Hawkins plans to meet its working capital requirements from this FD scheme, apart from using the money as a buffer for any unforeseen exigencies. The company has unencumbered cash and liquid investments of ₹167 crore in FY21 compared to ₹48.5 crore as of March 31, 2020, owing to shorter debtor turnover days during the year (revised policy in FY21). Besides, as per ICRA’s rating rationale, the company also has largely unutilised working capital limits, which provide a liquidity cushion.

The company is net-debt free, and its debt to equity ratio is healthy at 0.13 times as of March 2021.

All you wanted to know about NRI bank fixed deposits

While the lockdowns initially impacted the sale of its products, the WFH scenario has helped boost their demand, thereafter. In the recent June quarter, the company’s top line soared by 50 per cent over the year ago period to ₹151.45 crore. Besides, while continuing fixed costs despite abysmal sale volumes and rising input prices dented its profits last year, the company raised prices by 5-10 per cent this year. Following the price rise and sales getting back to normal, its net profits inched up to ₹17.13 crore during June 2021 quarter, compared to ₹6.45 crore in the corresponding quarter last year.

Conservative investors who prefer full safety of capital over returns may avoid this offer, given its lower credit rating and the unsecured nature of the deposits.

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Interior-design startup Flipspaces raises $2 million from investors

Banking & Finance

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Interior-design startup Flipspaces on Tuesday said it has raised $2 million (around ₹14.6 crore) from investors to fund expansion and growth plans.

In a pre-series-B round, the company has raised $2 million from a consortium led by Prashasta Seth, ex-CEO, IIFL AMC, the company said in a statement.

The round saw participation from family groups and High Net Worth Individuals (HNIs).

Flipspaces is also backed by Carpediem Capital, a growth-stage PE fund for mid-sized ventures.

Founded in July 2015, by IIT Bombay alumni, the company provides interior design services and build projects for commercial spaces.

Growth

Kunal Sharma – Founder and CEO of Flipspaces said, the company’s US vertical has grown 25 times in the last four quarters and is now profitable at the Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) level.

“We are getting close to our vision of becoming the Zoho for Interior Design and Build domain which is a $1 trillion plus market globally,” he added.

Flipspaces said it has recently launched a B2B SAAS vertical called Vizstore which allows furniture and furnishing brands and retailers to virtualise their showroom experience.

“We have kept furthering our differentiation through tech-enablement in every vertical of business while keeping a sharp focus on profitability which has helped us tide through difficult times of Covid-infused shut-down. In many ways, we are a stronger and more diversified business now,” said Vikash Anand, Co-Founder and Head of Business Development.

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Should you go for Shriram Transport FDs that offer up to 7.5% interest?

Personal Finance

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Shriram Transport Finance Company (STFC) revised the interest rates on its fixed deposits last month. The company now offers 6.5 per cent and 6.75 per cent per annum, respectively on its one-year and two-year deposits. Three-year deposits can fetch you 7.5 per cent interest per annum. Senior citizens get an additional 0.3 per cent over these rates. Besides, the company offers an additional 0.25 per cent on all renewals.

At the current juncture, the STFC FD rates seem better than those offered by most banks and other similar-rated NBFCs. Though the company has never defaulted on its deposits, its current financials indicate some near-to-medium term stress in operations. Hence, investors with a high-risk appetite who seek additional returns, can invest in this FD. Do note, that unlike FDs offered by banks, those by NBFCs are not covered by the DICGC’s ₹5 lakh cover.

Investors can choose from monthly, quarterly, half yearly or annual interest payout options or the cumulative option where interest gets compounded and is paid at the time of maturity.

The minimum deposit amount is ₹5,000 and in multiples of ₹1,000 thereafter.

Investors who opt for the online route can choose from additional tenure deposits such as 15-month and 30-month deposits. The company offers 6.75 per cent and 7.5 per cent, respectively on such tenures, same as that offered on its two and three year deposits, respectively.

How they fare

As interest rates have bottomed out, rates are likely to inch up in the next two or three years. Hence, at the current juncture, it will be wise to lock into deposits with a tenure of one or two years only.

Currently banks (including most small finance banks) offer rates of up to 6.35 per cent per annum for one-year deposits and up to 6.5 per cent for two-year deposits. Suryoday Small Finance Bank however, offers 6.5 per cent on its one-to-two year deposits (both inclusive). While the rates offered by STFC are at par with those of Suryoday on the one-year FD, the former offers superior rates on deposits of other tenures. The rates on STFC’s deposits are also superior to those offered by similar-rated NBFCs.

The company’s FDs are rated FAAA(Stable) by CRISIL and MAA+ (Stable) by ICRA. Other AAA-rated NBFCs offer interest rates in the range of 5.25 to 5.7 per cent on their one-year deposits and up to 6.2 per cent on their two-year deposits.

About STFC

The company has a 42-year old track record of providing finance for commercial vehicles, predominantly in the high-yielding pre-owned HCV segment.

As of June 2021, its assets under management (AUM) totalled ₹ 1.19 lakh crore (up 6.75 per cent y-o-y ). About 90 per cent of the AUM was towards pre-owned vehicle loans and the rest was towards new vehicle loans (6 per cent), business loans (1.6 per cent), working capital loans (1.9 per cent) and other loans (0.1 per cent).

STFC has a strong branch network of 1,821 branch offices and 809 rural centres covering all states.

Given its heavy reliance on fleet and transport operators (HCV and construction equipment comprise about 48 per cent of its AUM and medium and light commercial vehicles constitute another 25.3 per cent), the company saw deterioration in asset quality in the recent quarter on account of lockdowns. In the June 2021 quarter, its gross Stage-3 assets worsened to 8.18 per cent from 7.06 per cent in the March 2021 quarter.

Even gross Stage-2 assets, which may slip to Stage-3 in the coming quarters, spiked to 14.53 per cent of the AUM compared to 11.9 per cent in the March quarter.

However, the company has a decent provision coverage ratio of 44 per cent and about 10 per cent for Stage 3 and Stage- 2 assets, respectively. Its is due to the spike in provisioning (up 35 per cent y-o-y) that the company saw a 47 per cent (y-o-y) drop in its net profit to ₹170 crore in the June 2021 quarter.

Besides, its proven past track record, strong capital and liquidity position offer additional comfort.

The company’s Capital to Risk Weighted Assets Ratio (CRAR) stood at 23.27 per cent in the June 2021 quarter and it has a positive asset liability mismatch in all buckets—ranging from one month to 5 years.

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World market themes for the week ahead, BFSI News, ET BFSI

Personal Finance

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Following are five big themes likely to dominate thinking of investors and traders in the coming week.

1. READY, STEADY, GO
New Zealand’s central bank meets on Wednesday and looks set to become the first major economy to lift interest rates since COVID-19 hit.

Super-strong jobs data have cemented expectations of a hike, which would be New Zealand’s first since mid-2014. What a contrast with 2020, when rates were slashed 75 bps to 0.25% and a move below zero became a real possibility.

Norway’s central bank, meeting on Thursday meanwhile, could reiterate it will increase rates in September.

Investors, focused on prospects for Fed tapering as labour conditions improve, have boosted the dollar. New Zealand and Norway are a reminder that the greenback is not the only currency standing to benefit from the monetary policy shift under way in the G10.

2. MALLRATS
The U.S. economy is growing robustly and the labour market is rebounding. However, COVID-19 remains a headwind and coming days should bring a fresh perspective on how consumers are faring.

U.S. retail sales likely fell 0.2% in July, after an unexpected rise in June, data on Tuesday is expected to show.

And several large retailers including Walmart (WMT.N), Target (TGT.N), Lowe’s (LOW.N) and Home Depot (HD.N) will report quarterly results. Earnings are due too from Ross Stores (ROST.O), TJX Companies (TJX.N) and Bath & Body Works (BBWI.N).

These come at the end of a stellar U.S. second-quarter results season. S&P 500 (.SPX) earnings are expected to have jumped 93.1%, well above prior expectations of 65.4%, according to Refinitiv IBES.

Fed policymakers, assessing when to start unwinding stimulus, will be watching.

3. DELTA BLUES

The Delta variant is close to breaching Asia’s COVID-zero fortresses, with outbreaks and lockdowns looming over what once appeared the world’s most promising regional rebound.

Save for Taiwan and New Zealand, where strict border controls appear to have kept the variant at bay, cities from Sydney to Seoul are finding it hard to contain infections.

In China, Delta has been detected in over a dozen cities, bearing down on a faltering economy, forcing economists to cut growth forecasts.

We will get a snapshot of how the economy fared in July as local activity and flight curbs bit – retail sales, industrial output and house price numbers are all due on Monday.

4. APOCALYPSE NOW

If this summer has shown us anything, it’s a glimpse of the sort of havoc the planet faces if the climate emergency is not fixed fast.

Apocalyptic forest fires, floods and drought are laying waste to swathes of Greece, Canada, Turkey, China, Argentina and the United States. Extreme weather consequences include deaths, homelessness, social unrest and rising government debt.

The climate emergency will raise costs everywhere: insurance covers just 60% of disaster-linked losses even in rich North America; it falls to 10% in China, Swiss Re estimates. Worse still, the fires are exacerbating emissions, while forests meant to act as carbon sinks will take decades to regrow.

Until now, warnings, including a recent United Nations one, have had limited impact. But with a global climate conference due in November, this summer’s climate disasters might well swing the pendulum.

5. AFGHAN ABYSS
The Taliban‘s rapid advance towards Kabul has raised alarm not only about Afghanistan’s future but also the wider spillover in what is already a dangerous neighbourhood.

Iran to the west, the central Asian republics of Tajikistan, Turkmenistan and Uzbekistan to the north may be at risk, but for markets, Pakistan to the east will be the immediate focus.

Pakistan has lots of debt and a sizable equity market. It also depends on a $6 billion IMF programme. The prospect of years of Taliban violence and mass waves of Afghan refugees will add to the struggle to repair its finances.



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