India enters worst of major economy recessions

India enters worst of major economy recessions
Farmers shout slogans after police blocked them from marching to New Delhi to protest against the central government's recent agricultural reforms at the Delhi-Haryana border in Kundli on November 27, 2020. (AFP)
Short Url
Updated 28 November 2020

India enters worst of major economy recessions

India enters worst of major economy recessions
  • The shutdown in the country of 1.3 billion people left many jobless almost overnight, including tens of millions of migrant workers in the shadow economy

MUMBAI: India’s economy contracted 7.5 percent between July and September, the poorest among major advanced and emerging economies, entering a technical recession for the first time since independence.
Although an improvement on the record 23.9-percent contraction recorded last quarter, data indicates that Asia’s third-largest economy is in for a tough fight as it attempts to revive itself as coronavirus infections climb.
The two successive quarters of contraction mean the country has now entered a “technical recession” for the first time since 1947.
After virus-led lockdowns ravaged the globe, growth recorded by major economies including the US, Japan and Germany during the quarter ending on September 30 raised hopes India’s would grow too.
But, while consumer businesses saw a boost due to increased spending in the run-up to the October-November festive season, hopes of a broader recovery were dashed.
Farming continued to be a relatively bright spot, while manufacturing activity also increased during the July-September period after plunging nearly 40 percent during the previous quarter.
New Delhi has struggled to kick-start an economy expected to shrink 9.5 percent this year, according to estimates released by India’s central bank governor, Shaktikanta Das, last month.
The International Monetary Fund has meanwhile predicted that India’s economy would contract by 10.3 percent this year, the biggest slump for any major emerging economy and the worst since independence.
A report by Oxford Economics said India would be the worst-affected economy even after the pandemic eases, stating that annual output would be 12 percent below pre-virus levels until 2025.
India’s economy had struggled to gain traction even before the pandemic, and the hit to global activity from the virus and one of the world’s strictest lockdowns combined to deal it  a severe blow.
The shutdown in the country of 1.3 billion people left many jobless almost overnight, including tens of millions of migrant workers in the shadow economy.
The government has since been easing restrictions to revive activity, announcing two stimulus packages to offer farmers easier access to credit and dole out benefits to small-scale businesses.
The relaxation measures have come even as the virus continues to rage, with more than 9.3 million infections, and over 135,000 deaths so far.
In a speech Thursday, Das warned the recent surge in virus cases and the imminent threat of new lockdowns posed further risks to the economy. “We need to be watchful about the sustainability of demand after the festivals and a possible reassessment of market expectations surrounding the vaccine,” Das said.


Jack Ma video reappearance fails to soothe all investor concerns

Jack Ma video reappearance fails to soothe all investor concerns
Updated 51 min 30 sec ago

Jack Ma video reappearance fails to soothe all investor concerns

Jack Ma video reappearance fails to soothe all investor concerns
  • Ma had not appeared in public since Oct. 24, after he blasted China’s regulatory system
  • Chinese regulators have set about reining in Ma’s financial and e-commerce empires

HONG KONG: Billionaire Jack Ma’s 50-second video reappearance has done little to resolve Alibaba Group’s troubled relationship with regulators that is making some investors hesitate about owning the Chinese e-commerce giant’s stock.

Relief at Ma’s first public appearance added $58 billion in market value on Wednesday as Alibaba’s Hong Kong-listed stock soared, though doubts crept in a day later and the stock fell more than 3 percent as the broader market steadied near two-year highs.

Ma had not appeared in public since Oct. 24, when he blasted China’s regulatory system. That set him on a collision course with officials and led to the suspension of Alibaba fintech affiliate Ant Group’s blockbuster $37 billion IPO.

A source familiar with the matter said Ma cleared his schedule late last year to keep a low profile, prompting discussion at Alibaba about when and how he should reappear to assure investors.

It was decided he should do something that would appear as part of his normal routine, rather than anything overt that could irk the government.

While Ma has stepped down from corporate positions, he retains significant influence over Alibaba and Ant, and the regulatory crackdown on his business empire coupled with his absence was a concern for some investors.

There was skepticism that Ma’s brief reappearance meant all was well with his businesses.

“The coast is not all clear for Alibaba and it is a judgment call whether you believe the company can still thrive in the changing environment,” said Dave Wang, a portfolio manager at Singapore’s Nuvest Captial, which owns Alibaba stock.

“Without some skepticism, the price would be a lot higher,” he said, adding his firm had increased exposure to China and with it Alibaba, which he believes can prosper over the medium to longer term.

Two of the company’s investors in the US who have sold out or reduced positions in Alibaba said they needed more reassurance about the company and the regulatory environment before reconsidering the stock.

“One of our top criteria is leadership and we were investing in Alibaba because I really respect Jack Ma as a leader,” said William Huston, founder and director of institutional services at independent investment advisory firm Bay Street Capital Holdings in Palo Alto, CA, with assets under management of $86 million.

“We all know that just because he showed up ... doesn’t necessarily explain what is going on.”

Huston, whose firm cut its holding in the Chinese firm last year from 8 percent of its portfolio to less than 1 percent, said the halting of the Ant IPO in November had caused uncertainty, and that Alibaba was “not a prudent investment” for it going forward.

David Kotok, chairman and chief investment officer at Cumberland Advisers, Florida, which has about $4 billion in assets, said he held Alibaba last year but also sold as the Ant IPO was pulled.

“When you don’t know what to do in an evolving situation like this you can’t use traditional securities analytics to reach decisions. We are standing aside and watching,” Kotok said.

Chinese regulators have set about reining in Ma’s financial and e-commerce empires since the Ant IPO suspension, which has weighed on its stock that remains below levels prior to the cancelation of the Ant IPO.

“What his actual state is will be completely up to Beijing to reveal to us,” Leland Miller, CEO of US-based consultancy China Beige Book.

“What we do know is whether Jack is running around, Jack is hiding or something else, Alibaba is not in the clear. There is a lot more of the story still to see.”

Some investors are, however, betting on long-term potential for Alibaba in the world’s second-largest economy.

Dennis Dick, a proprietary trader at Bright Trading, who holds Alibaba shares, said he had protected against a potential fall when speculation about Ma’s whereabouts began by buying put options.

He covered those puts earlier in January on a report that Ma was OK and retains a long position in the stock.

“We have been investors for many years ... there’s a very strong team of executives and Alibaba is bigger than just one person,” said a Hong Kong based long-only investor, declining to be named as he was not authorized to speak to the media.