Trade war rumbles hit emerging stocks sending Indian rupee to record low

An Indian cycle rickshaw driver waits for customers next to a busy road in New Delhi. Facing a widening emerging market selloff, India’s rupee plumbed a fresh record low, with nationwide protests adding to the pressure. (AFP)
Updated 10 September 2018
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Trade war rumbles hit emerging stocks sending Indian rupee to record low

  • MSCI’s emerging market equity index slipped as much as 1 percent to hit its weakest level since July 2017
  • Markets in Asia chalked up hefty losses after US President Donald Trump warned on Friday he was ready to slap tariffs on virtually all Chinese imports to the US

LONDON: Fears over a rapid escalation of trade wars hit emerging markets on Monday, sending stocks to a fresh 2018 low and hurting major currencies with India’s rupee tumbling to record lows and Russia’s rouble at its weakest in two years.
MSCI’s emerging market equity index slipped as much as 1 percent to hit its weakest level since July 2017 with markets in Asia chalking up hefty losses after US President Donald Trump warned on Friday he was ready to slap tariffs on virtually all Chinese imports to the US.
Beijing warned it would retaliate.
Chinese mainland stocks ended as much as 1.5 percent lower with shares in suppliers to Apple dropping after Trump tweeted on Saturday that Apple should make products in the US if it wanted to avoid tariffs on Chinese imports.
Bourses in export heavyweights such as Hong Kong and Taiwan as well as India’s BSE index nearly matched those declines.
Emerging currencies painted a similar downbeat picture, with the EM currency index falling around 0.5 percent and edging back toward a 17 month low hit last week.
“Emerging economies have borne the brunt of the market stress since the start of the year,” Didier Saint-Georges, managing director at French asset manager Carmignac wrote in a note to clients.
“In drying up the global flow of dollars, the Fed has weakened the entire EM asset class and literally wrecked those countries most reliant on dollar financing. The trade standoff initiated by the Trump administration thus amounts to a double whammy, with contagion doing the rest of the damage.”
Facing a widening emerging market selloff, India’s rupee plumbed a fresh record low, with nationwide protests adding to the pressure while an official at the country’s finance ministry pledged the government would take measure to stem the slide in the currency.
With a general election less than nine months away, demonstrations against record high petrol and diesel prices shut down businesses, government offices and schools in many parts of India while in some places protesters blocked trains and roads and vandalized vehicles.
Russia’s rouble weakened beyond 70 versus the dollar for the first time since March 2016 before recovering its losses, buckling under pressure from uncertainty about US sanctions and concern ahead of a central bank meeting on Friday.
Governor Elvira Nabiullina said rates could stay on hold or go higher. But Kremlin economic aide Andrei Belousov said a rate increase would be “highly undesirable,” echoing comments by Prime Minister Dmitry Medvedev who stated late last week that lending rates should be lower.


Etihad proposes to invest in Jet Airways at 49% discount

Updated 16 January 2019
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Etihad proposes to invest in Jet Airways at 49% discount

  • The 25-year-old Indian airline has been roiled by financial difficulties, racking up a pile of dues to pilots, lessors and vendors
  • Jet will not be able to continue funding operations beyond the next week and Etihad is willing to inject $35 million if some conditions are met

Etihad Airways has offered to pick up shares of debt-laden Indian carrier Jet Airways Ltd. at a 49 percent discount and to immediately release $35 million after certain conditions are met, CNBC-TV18 reported on Wednesday.
Shares of Jet Airways, in which Etihad already owns a 24 percent stake, tumbled as much as 7.5 percent to 271.75 rupees ($3.83) in their biggest intraday drop since early December.
The Abu Dhabi carrier has offered 150 rupees for each Jet share, CNBC-TV18 said, citing a letter from Etihad’s CEO.
Tony Douglas has written to the State Bank of India (SBI) , Jet’s biggest lender, on the restructuring plan for the Indian airline, the report added.
The 25-year-old Indian airline has been roiled by financial difficulties, racking up a pile of dues to pilots, lessors and vendors, at a time when intense pricing competition, a weak rupee and rising fuel costs are weighing on the broader airline sector in the country.
Jet will not be able to continue funding operations beyond the next week and Etihad is willing to inject $35 million if some conditions are met, the CNBC-TV18 report cited Douglas as saying in his letter.
Jet and Etihad representatives are due to meet in Mumbai with lenders, led by SBI, on Wednesday to discuss the restructuring proposal that involves Etihad increasing its stake, a source with knowledge of the matter told Reuters on condition of anonymity.
Etihad wants Jet’s founder and Chairman, 69-year-old Naresh Goyal to step down from the board and his stake to be slashed to 22 percent from 51 percent, according to CNBC-TV18.
Goyal’s penchant for control, according to people who have worked with him, has emerged as a major obstacle as the airline tries to negotiate a rescue deal, Reuters reported last month.
Etihad is also seeking an exemption from the market regulator on preference pricing and open offer guidelines to invest more for the bailout, the report added.
Under India’s capital markets regulations, Etihad is required to make an open offer to shareholders for a majority of the shares once its stake goes past 25 percent, unless it obtains a rare exemption from the market regulator.
India Ministry of Civil Aviation Secretary R N Choubey on Wednesday told reporters that the aviation ministry had not yet received an official request from Jet and Etihad for an exemption from an open offer.
Jet and Etihad were not immediately available for comment.