02nd March 2024 – 09th March 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,123.69 | 16,085.11 | 14.74 | 38,722.69 | 2,810.12 | 17,889.62 |
| -0.26% | -1.17% | 12.43% | -0.93% | -0.24% | 0.91% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 22,493.55 | $2,186.20 | $24.52 | $82.05 | 82.75 | 90.53 |
| 2.32% | 4.52% | 5.05% | -1.69% | -0.11% | 0.80% |
Source: MarketWatch
Hello Saturday,
This week, China amplifies its effort to delete American tech from its digital landscape, FPIs take a liking to India’s GIFT city and Jeff Bezos speeds past Elon Musk to become the world’s richest person.
- A Chinese push to muscle US tech giants out of its digital landscape was unearthed recently by the Wall Street Journal. The newspaper put the spotlight on a Chinese dossier that mandated Chinese state-owned firms to replace foreign software in their IT systems by 2027.
- US jobs data complicates the rate cut plot further
- The total number of Foreign Portfolio Investors (FPI) registered at GIFT City doubled in the last four months as Indian markets scaled new record highs
- Amazon Founder Jeff Bezos races past Elon Musk to top the Bloomberg Billionaires Index for the first time since 2021.
- Auto retail sales in India witnessed a revival jumping by as much as 13% in February
Taking stock | Chinese Checkers | Complications choke-up | A gift that keeps on giving | Rich-ing for the top | Car sales hit the fast-track | Invest wisely | Another week in the markets
Taking stock
The run-up in tech stocks took a halt this week as a mixed bag jobs data dampened the fiery rally of the three major indices. The S&P500, the Dow and the Nasdaq reported marginal falls. The information technology sector remained the worst-performing segment on the S&P500 as Broadcom, Intel, Microchip Technology and ON Semiconductor fell by at least 4%.
Chinese Checkers
A recent report by the Wall Street Journal unearthed China’s 2022 secretive bid to weed out the deployment and use of business software offered by US tech giants in the IT systems of China’s state-run companies.
These digital detox directives were deemed so sensitive that high-ranking officials and party functionaries were only shown the orders, and were not allowed to take copies of the document, the WSJ reported.
The document called ‘Document 79’ — so named for the page number on which it appears — targets American companies that furnish daily business-enabling software to Chinese companies. The document emphasises the replacement of American software with locally-sourced alternatives.
Hardware companies like Dell, IBM and Cisco were, unfortunately, first on the target list. These companies, over the years, have lost much of their market share in China, and have witnessed their products gradually being replaced by Chinese goods.
The ‘Document 79’ initiative falls squarely within Chinese leader Xi Jinping’s larger goal of self-sufficiency in spaces ranging from semiconductor manufacturing and fighter jets to the production of crops and pulses.
The end goal, as envisioned by Jinping, is to steer China away from reliance on the West over energy and raw material requirements, and strengthen China’s domestic supply chains.
As per WSJ, the document was issued in Septemeber 2022, at a time when the US was cobbling up chip export restrictions, and pressing ahead with imposing sanctions on Chinese tech companies.
Document 79 mandates that state-run companies have to furnish quarterly updates to a Chinese supervisory authority on the progress made in replacing foreign business software with domestic alternatives.
Document 79 is the official avatar of a drive that has been gaining currency in the Chinese economy, for the past few quarters. The prevailing negative sentiment against America is captured by the popular phrase “Delete A”, which stands for ‘Delete America’.
Complications choke-up
US employers added 275,000 jobs in February outstripping economists’ jobs growth expectations of 198,000. However, markets drew marginal relief from the fact that the unemployment rate rose to a 25-month high of 3.9% from 3.7% in January.
The February jobs data will further complicate the plot on whether the Federal Reserve can push ahead with a rate cut in the coming quarters. The jobs data also made big revisions to the total number of jobs created in December and January.
The total number of new jobs created in December and January was revised downwards by 167,000.
For December, the previous jobs’ growth figure of 333,000 was revised lower to 290,000. For January, the jobs growth data was revised downwards from 353,000 to 229,000.
For those wondering how the US government’s job growth data can be revised so drastically, it is helpful to note that the government sends out a survey to business establishments every month. Not every establishment responds on time, and even after the reporting of the job data, new information keeps streaming in from business units across the nation. Large discrepancies in the data reported and the responses received force the Labour Department to issue subsequent revisions to its jobs growth data.
Exacerbating the data collection task further is the fact that the initial response rate of businesses has been disproportionately low since the pandemic.
A gift that keeps on giving
Operational challenges in jurisdictions like Singapore and Mauritius are luring in FPIs by the droves to GIFT City, apparent from the doubling of the total number of FPIs in the last four months.
As per data furnished by the National Securities Depository, the number of FPIs registered at the GIFT IFSC leapfrogged from 21 in October last year to 41 in February.
Legal experts believe that FPIs are making a beeline for GIFT City because of the clarity it offers on tax structures and regulations compared to tax havens. Many other experts have also pointed out that the requirements and compliances demanded at GIFT City are leaner compared to other advanced jurisdictions.
As far as funds focussing on India are concerned, GIFT City opens up a new avenue to being invested in India, while simultaneously remaining outside of its tax jurisdiction. Additionally, if the hedge fund in question or the FPI runs purely derivative operations, statutory provisions can help it secure tax exemption on the derivatives’ income.
Market stakeholders have stated that apart from fund managers, several Family Investment Funds (FIFs) have also expressed a keen interest in shifting to IFSC after the fund management regulations were implemented.
Reportedly, Azim Premji’s family office has received in-principle approval for establishing a FIF in GIFT City.
Rich-ing for the top
Amazon founder Jeff Bezos clinched the position of the world’s richest person last week.
Bezos raced past Tesla CEO Elon Musk with a net worth of $200 billion, reported Bloomberg. Meanwhile, Musk with a net worth of $198 billion stood second, and LVMH chief Bernard Arnault worth $197 billion was in the third position.
These three men have rotated positions in the Bloomberg Billionaires Index in the past couple of years. The index measures personal wealth based on market and economic developments, and other parameters.
Bezos reclaimed the title of the richest man in the world at a time when he has been reported as selling a chunk of his Amazon stake, motivated by tax considerations. Last year, Bezos said that he was moving from Seattle to Miami to be closer to his parents. However, legal experts indicate that the move might have to do with Florida’s tax structure, which does not impose income or capital gains tax on individuals.
Experts believe that Bezos managed to save as much as $600 million in taxes by selling shares after moving to Florida.
As per the rankings, Bezos’ net worth increased by a massive $23 billion in 2023. At the same time, Musk’s net worth has taken a beating, dropping by $31 billion as shares of his EV company Tesla have fallen by as much as 24% this year. In 2021, when Musk overtook Bezos as the richest man on the planet, the Tesla CEO tweeted Bezos an emoji of a silver medal with number 2 etched on it.
Car sales hit the fast-track
A combination of factors like higher vehicle availability, improved economic conditions and the marriage season contributed to elevated auto retail sales in February, which spiked by 13% on a YoY basis.
The total number of units sold surged from 2.03 million units in February compared to 1.79 million units in February last year. The total number of cars sold also leapt by 12% in February to 3,30,107 units compared to 2,93,803 units sold in the same month last year.
Things seem to be brightening up for the auto sector as the sales of two-wheelers, three-wheelers, tractors and commercial vehicle segments also grew by 13%, 24%, 11% and 5% respectively.
Interestingly, February stood out as the month with the highest-ever sales recorded for commercial vehicles, three-wheelers and tractors. A resurgence in rural demand also boosted the sales in the 2-wheeler segment.
The impressive performance in the auto retail sector is reflected in the stock returns delivered by the auto majors. While Tata Motors has made investors richer by 140% in the last year, Mahindra & Mahindra investors have enjoyed gains of 52%. Maruti Suzuki India has been somewhat of a laggard with returns of 35%.
Source: Google Finance
Invest wisely
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Warm regards,
Another week
in the markets
