1 GCC credit cycle at tipping point (Issac John in
Khaleej Times) Corporate and infrastructure companies in the Gulf Cooperation Council
face a weaker operating environment as governments reduce spending on the back
of lower oil prices, which have more than halved since June 2014, Standard and
Poor's ratings services has said.
"Reflecting this weak economic climate, debt
issuance by corporate and infrastructure companies has fallen by 58 per cent in
the past 12 months to about $7 billion. This also reflects our view that the
credit cycle has reached a potential tipping point, with higher pricing
anticipated going forward," the ratings agency said in its latest
analysis.
S&P said there are various factors that could
tempt existing and new issuers to tap the capital markets over the coming year.
These include the gradually declining availability of liquidity at the local
banks, the opening up of markets to foreign investment - such as the Tadawul in
Saudi Arabia, along with the Iranian market if the nuclear deal with the P5+1
progresses as expected - and the refinancing by government-related entities in
2016.
It noted that energy subsidy cuts by Bahrain, Oman,
and the UAE governments could increase financial pressures on downstream
corporates in the region. World oil prices have dropped by more than 50 per cent
since June 2014. S&P expects Brent crude oil prices to remain at about $50
per barrel for the time being, which would prompt governments to postpone or
delay some projects.
The International Monetary Fund forecasts that the
oil price dip would result in a $300 billion drop in revenues this year for the
six GCC states. Globally, energy industry players had already cancelled $200
billion in investments over the past few months in the wake of the oil price
plunge.
A Barclays survey found that oil companies worldwide shed about 20 per
cent of their capital budgets to $521 billion this year and will cut another
three per cent to eight per cent from their investments next year, marking the
first time since the mid-1980s that oil companies will reduce spending two
years in a row.
2 Fraud, fools and financial crises (Robert Shiller
in The Guardian) Adam Smith famously wrote of the “invisible hand,” by which
individuals’ pursuit of self-interest in free, competitive markets advances the
interest of society as a whole. And Smith was right: free markets have
generated unprecedented prosperity for individuals and societies alike. But,
because we can be manipulated or deceived or even just passively tempted, free
markets also persuade us to buy things that are good neither for us nor for
society.
This observation represents an important codicil to
Smith’s vision. And it is one that George Akerlof and I explore in our new
book, Phishing for Phools: The Economics of Manipulation and Deception. Most of
us have suffered “phishing”: unwanted emails and phone calls designed to
defraud us.
A “phool” is anyone who does not fully comprehend
the ubiquity of phishing. A phool sees isolated examples of phishing, but does
not appreciate the extent of professionalism devoted to it, nor how deeply this
professionalism affects lives. Sadly, a lot of us have been phools – including
Akerlof and me, which is why we wrote this book.
Routine phishing can affect any market, but our most
important observations concern financial markets – timely enough, given the
massive boom in the equity and real estate markets since 2009, and the turmoil
in global asset markets since last month.
We found out many years ago, to the world’s great
regret, what happens when a financial epidemic is allowed to run its course.
Our analysis indicates that not only are there endemic and natural forces that
make the financial system highly volatile; but also that swift, effective
intervention is needed in the face of financial collapse. We need to give free
rein to fiscal and monetary authorities to take aggressive steps when financial
turmoil turns into financial crisis. One Dark Age is one too many.
3 Why India is concerned about Nepal’s constitution
(Sanjoy Majumder on BBC) Nepal's adoption of a new federal constitution is
being watched warily across the border by its giant neighbour India. The
document defines the majority Hindu nation as a secular republic divided into
seven federal provinces.
Although Delhi was one of the major backers of the
process over the past decade, it believes the new constitution is not
broad-based and is concerned that it could spur violence which could spill over
into its own territory. Reports in Indian media say that its ambassador in
Kathmandu spoke to Prime Minister Sushil Koirala hours before Sunday's
constitution ceremony to express Delhi's disappointment at the process going
through.
India's concern has been with the violent reaction
to the constitution in the low-lying southern plains, adjoining India, the
Terai. Communities living in the Terai, especially the Madeshis and the Tharu
ethnic minorities, have expressed concern that the proposed boundaries of the
new provinces could lead to their political marginalisation.
The two groups make up nearly 40% of Nepal's
population and the Madeshis share close ethnic ties with people in India. Prof
SD Muni, a strategic analyst who closely follows events in Nepal, says “India's
concern is genuine because whatever happens in the Terai will spill over into
India. So the violence is really worrying."
India shares a 1,751km-(1,088 miles)-long open
border with Nepal through which people pass freely but which has often
concerned the country's security agencies because of its use by smugglers,
human traffickers and terror suspects.
And then there is China, India's regional bugbear. In
recent years, China has been ramping up its involvement in Nepal mainly through
economic engagement much to India's discomfort in what it considers its
backyard. It is also wary of China's links with Nepal's Communists, never mind
that most of its leadership has either been schooled in India or has spent many
years in exile in this country.
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