by admin | May 25, 2021 | Opinions
By Taponeel Mukherjee,
Emerging market forex volatility has dominated financial news headlines in the recent past. As the world emerges from a decade of expansionary monetary policy, one can expect a realignment of the risk metrics across the spectrum. What noted investor Benjamin Graham said — “In the short run, the market is a voting machine, but in the long run it is a weighing machine” — holds true as one tides over the volatility.
For countries such as India that are looking to create vital infrastructure to further boost economic growth — and for investors seeking long-dated investments that deliver requisite returns — such periods of volatility provide an opportunity to learn some critical lessons — lessons that help implement structural changes that prepare one better for future periods of volatility.
The decade after the Lehman debacle saw expansionary monetary policy, the likes of which is unprecedented in modern economic history. As central banks gradually withdraw liquidity from the financial system and economies such as the US hike interest rates, the emerging markets face significant pressures on their currencies. Besides the macro factors at play, each country — ranging from the likes of Turkey and Argentina to India — has its own story that impacts the currency to a large extent.
There is a “macro-impact” on emerging market currencies of rising interest rates in the developed economies. Then there is a “country-specific” impact driven by local dynamics, trade balances and political economy. For India, one major factor is the country’s dependence on energy imports. Debates around the taxation structure of energy are appropriate, but the larger structural solution is for India to move towards being less dependent on imports. This move can be through both building on the renewable energy programme and further utilising the oil and gas reserves in India.
To achieve both the objectives above we require innovative policies and consistent policy implementation. Policies such as the Open Acreage Licensing Policy (OALP) that bring flexibility to oil and gas exploration are a step in the right direction. Continually utilising feedback to improve on policy frameworks and their implementation is crucial for India to move towards promoting greater use of alternative energy sources that can be sourced domestically.
Macro-volatility also affects global investors who, in an increasingly globalised investment climate, have significant emerging market exposure. Firstly, as India and the rest of the emerging markets become more significant components of the global economy, investors must allocate an increasing part of their portfolios to the emerging markets across various asset classes.
The Wall Street Journal recently reported how Tennessee’s state retirement system is facing increased volatility in its portfolio as emerging markets face a volatile macro-environment. Such volatility is an issue that isn’t going away but must be dealt with effectively. Asset managers have increased their emerging market exposure over the years and will continue to do so as economic growth rates remain high in such parts of the world. Macro-volatility will have to be priced in better into the portfolios.
Secondly, asset managers in the developed world need to invest in high-growth economies to achieve their target returns. For example, a recent study by Moody’s Investor Service estimated that public pensions in the US are underfunded by $4.4 trillion. In common parlance, this means that the money such pension funds must payout is significantly more than the current value of their assets. This need for higher returns to meet investment targets implies that capital from pension funds must find optimal investment opportunities in high growth rate countries such as India.
The essential component of investing for investors in countries such as India is being able to ride out the short-term volatility and realising the value in their portfolios over the medium- to long-term. Given the linkages in the world economy, to not expect emerging market currencies to be volatile in the face of rising interest rates globally would be a bit naïve. Therefore, the key for investors is to have a long investment horizon and a risk management framework that prices in the volatility.
Periodic market volatility is in the very nature of financial markets. The crucial component is creating structural advantages that equip one better to handle such volatile periods. Both emerging market countries such as India as well as investors keen on emerging market exposure have some essential takeaways from the recent re-pricing of risk.
(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. The views expressed are personal. He can be contacted at taponeel.mukherjee@development-tracks.com or @Taponeel on Twitter)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
New Delhi : Prices of petrol and diesel, already at unprecedented levels in the country, rose for the ninth consecutive day on Monday.
In the national capital, petrol was sold at Rs 79.15 per litre, up from Rs 78.84 on Sunday.
In Kolkata, Chennai and Mumbai, the fuel was priced at Rs 82.06, Rs 82.24 and Rs 86.56 per litre respectively, all a new record, against Rs 81.76, Rs 81.92, Rs 86.25 on Sunday.
The surge in fuel prices is largely attributed to the rise in crude oil prices and high rate of excise duty in the country. Brent crude oil is currently priced over $78 per barrel.
The recent slump in rupee also has lifted the import cost of crude oil, subsequently raising fuel prices.
On Monday, the key transportation fuel was sold at Rs 71.15, Rs 74, Rs 75.19 and Rs 75.54 per litre in Delhi, Kolkata, Chennai and Mumbai respectively, up from Rs the previous levels of Rs 70.76, Rs 73.61, Rs 74.77 and Rs 75.12 per litre.
Diesel prices gain significance as the fuel is used in the transportation of farm products and a rise in the prices may puah up inflation.
—IANS
by admin | May 25, 2021 | Business, Commodities, Commodities News, Economy, Markets, News, SMEs
New Delhi : With the resumption of dynamic pricing system for transport fuels on Monday by the Indian Oil Corporation (IOC), petrol prices in the national capital shot up to 74.80 per litre.
The IOC had suspended dynamic pricing system for transport fuels for 19 days to “avoid creating unnecessary panic among the consumers”.
In Delhi, petrol was priced at Rs 74.80 per litre on Monday, highest since September 2013, when it had hit Rs 76.06 a litre. The price was last changed on April 24 when it was at Rs 74.63 per litre.
In the other metropolitan cities of Kolkata, Mumbai and Chennai also petrol prices were at multi-year high levels of Rs 77.50, Rs 82.65 and Rs 77.61 a litre on Monday.
The previous highs in these cities were Rs 78.03 (Kolkata, August 2014), Rs 83.62 (Mumbai, September 2013) and Rs 77.48 (Chennai, September 2013).
Apart from petrol prices, diesel also rose to a fresh record high after the last price movement on April 24. Prices of diesel on Tuesday, in Delhi, Kolkata, Mumbai, Chennai were Rs 66.14, Rs 68.68, Rs 70.43 and Rs 69.79 per litre, respectively.
Prices did not change in the last 19 days, despite rise in international crude oil prices, which observers cited as a deliberate political move ahead of Karnataka polls. Brent crude oil is currently priced over $76 per barrel.
However, IOC Chairman Sanjiv Singh on May 8, said the dymanic pricing was suspended temporarily despite a rise in international rates, to avoid panic among consumers.
“We have decided to temporarily moderate retail prices by not passing on the required increase as we believe the current international oil product prices are not supported by fundamentals. So we have decided to wait for a while,” Singh had said, adding: “Passing them on to consumers will unnecessarily create panic.”
This temporary relief to consumer seems to have come to an end with the rise in prices on Monday.
—IANS
by admin | May 25, 2021 | Economy, News, Politics
New Delhi : Noting that India will be a key driver of global energy demand in the next quarter century, Prime Minister Narendra Modi on Wednesday called for “responsible” pricing in the hydrocarbons market so as to balance the interests of oil and gas producers and consumers.
Inaugurating the 16th International Energy Forum (IEF) ministerial here, being held in India after a gap of 22 years, Modi said that a massive transformation has been underway in the energy market with consumption growth shifting from the developed world to the emerging and developing economies.
“The world has seen prices on a roller coaster for much too long. We need responsible prices to balance the interests of both producer and consumer,” Modi said.
The Prime Minister said energy demand in India is projected to grow at 4.5 per cent in the next 25 years, while gas demand was expected to triple.
“We need a transparent and flexible market…there has to be a mutually supportive relationship between producers and consumers. Efforts at artificially distorting prices are self-defeating as history has shown us,” he said.
“Let us build a global consensus on responsible pricing which will serve both producer and consumer. In a period of global uncertainty, India needs energy security,” Modi added.
He pointed to the transformation in the energy market with the Shale Revolution in the US that would soon make America the largest oil producer, the move by oil companies to invest more in renewables and the use of technology like the “internet of things (IoTs), artificial intelligence, robotic process, automation, machine learning and 3D printing” by the industry.
In view of these changes, “India provides a perfect setting for discussing the future of the energy section”, Modi said.
Hosted by India, and co-hosted by China and Korea, IEF16 aims to focus on how global shifts, transition policies and new technologies influence market stability and future investment in the energy sector around the theme of “The Future of Energy Security”.
Among ministers from overseas attending the meeting this year are those from Saudi Arabia, the UAE, Iran, Qatar, Nigeria, Japan, China, Russia and the US.
Saudi Arabian Petroleum Minister Khalid Al-Falih in his address called for creating “an enabling environment along the entire value chain” as fossil fuels “will be there for some time to come”.
Noting that the future supply situation of energy sources, particularly of oil, is “not reasssuring”, he said the producers in the Organisation of Petroleum Exporting Countries (OPEC) “remain committed to the long-term market”.
“Saudi Arabia and Russia are discussing extending the cooperation and monitoring of the market to extend stability,” he said referring to the crude output cuts agreed in 2017 between OPEC and Russia in a move to stop the slide in oil prices that had fallen to around $25 a barrel two years ago. Crude currently is averaging around $70 a barrel.
—IANS
by admin | May 25, 2021 | Muslim World
By Haydar Hadi,
Baghdad : Iraq is planning to build a new pipeline to export oil from its Kirkuk province to Turkey’s port of Ceyhan in the southern Adana province, an Iraqi Oil Ministry spokesman said on Sunday.
In a statement, Asim Cihad said, “Jabbar Ali Hussein Al-Luiebi, the minister of oil, has ordered the related authorities to start initial preparations for construction of a new pipeline from the city of Baiji [in the Saladin province, near Kirkuk] reaching to the Fish-Khabur border crossing with Turkey.”
Cihad said the new pipeline would serve to replace an old pipeline which suffered severe damaged in terror attacks.
Companies interested in building the new pipeline will be invited to the ministry, he said.
Unidentified attackers on several occasions blew up the strategic Kirkuk-Ceyhan oil pipeline in Iraq’s northern Kirkuk province.
Iraq is the second-largest crude oil producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, and holds the world’s fifth-largest proven crude oil reserves after Venezuela, Saudi Arabia, Canada, and Iran, according to the U.S. Energy Information Administration (EIA).
—AA