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Mastercard, Visa quit Facebook’s Libra as global regulators air concerns

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Facebook Libra


Facebook Inc’s ambitious efforts to establish a global digital currency called Libra suffered severe setbacks on Friday, as major payment companies including Mastercard and Visa Inc quit the group behind the project.


The two companies announced they would leave the association on Friday afternoon, as did EBay Inc, Stripe Inc. and Latin American payments company Mercado Pago. They join PayPal Holdings Inc which exited the group a week ago, as global regulators continue to air concerns about the project.


The latest exodus leaves the Libra Association without any remaining major payments companies as members, meaning it can no longer count on a global player to help consumers turn their currency into Libra and facilitate transactions.





The remaining association members, including Lyft and Vodafone, consist mainly of venture capital, telecommunications, blockchain and technology companies, as well as nonprofit groups.


“Visa has decided not to join the Libra Association at this time,” the company said in a statement. “We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the Association’s ability to fully satisfy all requisite regulatory expectations.” Facebook’s head of the project, former PayPal executive David Marcus, cautioned on Twitter against “reading the fate of Libra into this update,” although he acknowledged “it’s not great news in the short term.”


Libra will press ahead with plans to formally charter the association in three days despite the setbacks, Dante Disparte, its head of policy and communication, said in a statement.


“We are focused on moving forward and continuing to build a strong association of some of the world’s leading enterprises, social impact organizations and other stakeholders,” he said.


“Although the makeup of the Association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient.” Facebook announced plans to launch the digital currency in June 2020 in partnership with other Libra Association members.


Almost immediately afterwards, the project faced relentless scrutiny from global regulators, who said it raised a host of serious questions that the group had yet to answer.


France and Germany last month pledged to block Libra from operating in Europe and backed the development of a public cryptocurrency instead. And US Federal Reserve Chairman Jerome Powell suggested the project could not advance before addressing serious privacy, money laundering, consumer protection and financial stability concerns that must be addressed.


The rapid succession of exits by major financial companies Friday afternoon suggested that scrutiny was taking its toll.


Three days earlier, a pair of senior Democratic senators wrote to Visa, Mastercard and Stripe, telling them to be wary of “a project that will forseeably fuel the growth in global criminal activity.”


“If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all activities,” Senator Sherrod Brown and fellow Democratic Senator Brian Schatz wrote in the letters.


Brown said in a statement after the announcements on Friday that the companies had been “wise to avoid legitimizing Facebook’s private, global currency.”


Facebook Chief Executive Mark Zuckerberg is scheduled to discuss the project when he testifies before the US House Financial Services Committee on Oct. 23. US Representative Maxine Waters, who chairs the panel, has repeatedly called on Facebook to shelve the project.

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MFs up the ante on private banks, increase weight to nearly 21%

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Mutual funds (MFs) have increased their weight on private banks to a new high of 20.8 per cent in September. With some of the players in the financial space facing heat on their loan exposures, money managers are of the view that better-run private banks are poised to corner higher market share.


Private banks are the top sector holding for MFs, followed by non-banking financial companies (8.9 per cent), technology (8.7 per cent), consumer (8.4 per cent), and capital goods (7.8 per cent), showed a report by Motilal Oswal Financial Services.



“More efficiently-run banks are likely to see increased market share, as weaker players may not be able to participate in the credit offtake cycle. Private banks tend to give better risk-adjusted returns on account of their superior risk management,” said A Balasubramanian, chief executive officer of Aditya Birla Sun Life MF.


The fund house launched its banking exchange-traded fund on Wednesday, which would track the Bank Nifty index.


Fund managers add that increased weight towards private banks might also be on account of a shift in institutional investors’ sentiments on non-banking financial companies (NBFCs).


“The concerns over NBFCs pertaining to their liabilities and growth, has prompted institutional investors to shift their allocation towards private banks, which might have also led to the uptick in weight,” said Akash Singhania, fund manager at Motilal Oswal Asset Management Company (AMC).


According to a brokerage report, HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank were among the top five stocks to see the highest net investments by MFs in September.


Net investments in HDFC Bank and ICICI Bank stood at Rs 7,400 crore and Rs 4,500 crore, respectively; Axis Bank and Kotak Bank stood at Rs 4,080 crore and Rs 3,730 crore, respectively.


Given the asset quality concerns in the overall financial space, the banking segment can also see polarisation with quality names drawing higher investor interest, and getting easier access to capital, say analysts.


In a one-year time-frame, banking sector funds have delivered returns of 10.6 per cent, outperforming most of the equity categories during this period.


“While we don’t have a banking fund in our basket at present, we feel the banking and financial space remains a strong long-term theme for investors,” said Swarup Mohanty, chief executive officer of Mirae AMC.


Analysts point out that the banking sector funds also offer a tactical opportunity as a benign interest rate scenario can lift stocks of state-owned banks.


“Public-sector banks being more sensitive to change in yield, compared to private banks, will remain major beneficiaries if further rate cuts lead to a decline in G-sec yields,” analysts at ICICI Direct said in a note. “Accordingly… aggressive investors may consider allocating some portion of their thematic allocation into banking funds,” the note added.

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India asks OPEC not to cut oil production; seeks better commercial terms

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India asks OPEC not to cut oil production; seeks better commercial terms


Battling a slowing economy, India on Tuesday implored oil cartel OPEC to not undertake deeper crude oil production cuts as it renewed its pitch for reasonable pricing of oil and stability in supplies.


In a meeting with OPEC Secretary-General Mohammad Sanusi Barkindo, Oil Minister Dharmendra Pradhan also pitched for better commercial terms for crude oil imports including reduction in official selling price, extension of credit period from existing 30 days to 90 days from bill of lading, freight discount and open credit based on creditworthiness of Indian state-run refineries.


“We discussed the present oil availability scenario,” he told reporters here. “Organization of the Petroleum Exporting Countries (OPEC) is now taking cognizance of consumer interest in deciding on its policies.”

The oil cartel, he said, will meet in December and hoped it would not announce new cuts in production.


“We hope that in the current geopolitical situation, OPEC does not exercise greater production cuts. We sincerely believe that crude prices should be left to market forces of demand and supply. We have been consistently advocating maintaining an optimal balance between the producers and consumers for responsible pricing, which balances the interests of both the producer and consumer,” he said.


Pradhan said the voice of India, the world’s third-largest energy consumer behind the US and China, is now being heard and OPEC Secretary-General has been taking its views to the meetings of the producers.


OPEC nations led by Iraq and Saudi Arabia supply more than 80 per cent of India’s oil needs and any cut in output is likely to push up prices – something that a slowing economy cannot afford.


He said OPEC members such as Abu Dhabi have been very supportive of making up any production shortfall in the aftermath of attacks on Saudi oil facilities.


Indian companies have started exploring alternate sources for crude oil, to ensure that import basket is widely spread out, to counter any eventuality of a sudden supply shortage.


The minister said he is encouraging Indian firms to look for investment opportunities in producing assets. “Our companies are engaged with OPEC member countries for further investment opportunities.”






India, he said, attaches a lot of importance to the IndiaOPEC Institutional Dialogue and New Delhi looks forward for the fourth round at mutually convenient dates.


Earlier speaking at the India Energy Forum of CERAWeek, Barkindo said India’s enthusiasm for producer and consumer dialogue has contributed enormously to OPEC’s success in restoring sustainable stability to the world oil market.


India, he said, is one of the major drivers of global economic and oil demand growth. “Our latest figures for India show that oil demand increased in August by 0.12 million barrels per day (mb/d) for the second month running with a total consumption of 4.61 mb/d. The country’s oil demand growth in 2019 is estimated at 0.14 mb/d year-on-year, accounting for 15 per cent of global oil demand growth.”

While world oil demand is expected to rise by 14.5 mb/d, increasing from 97.2 mb/d in 2017 to nearly 112 mb/d in 2040, India will account for oil demand growth of 5.8 mb/d, which represents an astonishing 40 per cent of the overall increase. “India is projected to see the largest additional oil demand and the fastest growth (3.7 per cent per annum) in the period to 2040,” he said.


He said OPEC demonstrated repeatedly its commitment to sustainable stability, even during unprecedented events like the attacks on Saudi Arabia’s oil facilities one month ago.


“In the immediate aftermath of these shocking attacks, Saudi Arabia moved swiftly to ensure a stable supply to the global market as it worked to restore its production capacity. Its exemplary handling of the situation very quickly stabilized markets and allayed concerns about supply disruptions,” he said. “Additionally, the oil industry is in a much stronger position today to deliver a sustainable energy supply than it was just three years ago.”

He said OPEC has been since 2016 adjusting productions by the ‘Declaration of Cooperation’ which provides for a durable foundation for the opportunity to facilitate dialogue with consumers; promote a better understanding of market fundamentals; support energy sustainability, and promote technological advancement.


“OPEC does not believe in one-way streets. Throughout the ‘Declaration’ process we’ve been diligent in listening to the views of India and other oil-consuming nations. The ‘Charter’ provides a further means to engage in a constructive and consultative process,” he said.

 

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Q2 preview: Refining margins may pump up Reliance Industries earnings

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(From right) Mukesh Ambani, CMD of RIL, with wife Nita Ambani and mother Kokilaben Ambani 	photo: bloomberg


With an improvement in refining margins, Reliance Industries (RIL) is expected to report a strong quarter for the July-September period. Analysts expect refining to offset weakness in petrochemicals (petchem) and a lower tax rate benefit for the retail and telecom businesses.


RIL will report its financial performance for the September 2019 quarter on Friday.



In a Bloomberg poll, 10 analysts estimated RIL’s consolidated net profit at Rs 11,256 crore and nine analysts estimated revenue at Rs 1.5 trillion. Brokerages like Centrum see the highest-ever consolidated earnings prospect for the company. In the September 2018 quarter, RIL reported a consolidated net profit of Rs 9,516 crore.


RIL’s refining business is expected to make a comeback in the September quarter, owing to higher margins. Analysts have pegged estimated gross refining margins (GRMs) in the range of $9.5 per barrel and $10.5 per barrel. This would be a turnaround from the $8.1 per barrel GRM reported in the June quarter, which was the lowest since October-December 2014.


“We expect September quarter GRMs at $9.5 per barrel, up from $8.1 per barrel during the June quarter, on the back of higher key product margins of diesel, gasoline, and jet fuel. The attack on Saudi Aramco oil processing facilities pushed gasoline margins to its highest level since 2018,” said analysts with BNP Paribas in their note. Analysts expect refining strength to offset petchem weakness.


Q2 preview: Refining margins may pump up Reliance Industries earnings


While the petchem segment is expected to be weak, other businesses like retail and telecom are expected to show steady results. “ While the petchem environment has weakened, we believe RIL’s ability to switch feedstock to gas for as much as 60-70 per cent of its requirement should limit the petchem margin decline quarter-on-quarter (QoQ),” said analysts with JPMorgan. They added, “Retail should be another strong quarter, though year-on-year (YoY) growth rates should come off essentially on a higher base. We forecast Reliance Jio’s earnings before interest, tax, depreciation and amortisation at Rs 5,010 crore, up 7 per cent QoQ, driven by continued strong subscriber growth.”


The telecom and retail business is also expected to benefit from lower tax rates, according to analysts with Nomura. At the consolidated level, in the Bloomberg poll, only one brokerage shared a pre-tax profit estimate for RIL, which was at Rs 15,560 crore for the September 2019 quarter. In a Kotak brokerage report, analysts pegged estimated profit before tax at Rs 14,918 crore for the September quarter, compared to Rs 13,197 crore in the same quarter a year ago.


Analysts with Bank of Baroda expect RIL’s retail earnings growth to witness slowdown, in line with macro trends across India. The brokerage estimated earnings before interest and tax at Rs 1,500 crore, a rise of 18 per cent YoY, but down 17 per cent sequentially.


In the post-results management guidance, analysts will look for further update on the company’s deleveraging plans. At RIL’s annual general meeting (AGM) in August, Group Chairman Mukesh Ambani announced plans to become zero net-debt company in 18 months. At the same AGM, Ambani also announced a proposed investment by Saudi Aramco in RIL’s oil-to-chemicals division.


Analysts on Friday will look for more details on this proposed deal and a commentary on expectations with regard to the Indian Maritime Organization (IMO) regulations.


The new IMO regulations require ships to use cleaner fuel starting January 2020, which are expected to improve the refining prospects for RIL.

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