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JP Morgan fined nearly $350 million

09th March 2024 – 16th March 2024 | Another week in the markets

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Source: MarketWatch 

Hello Saturday,

This week, TikTok finds itself in the middle of a US-China tussle, Foreign investors pump in an average of $4 billion in Indian real estate and India’s demat account tally surges to an all-time high of 14.8 crore.

  • TikTok is caught in a geo-political bind between the US and China as Washington approved a bill, this week, demanding that the company sell its business to US entities or risk facing a ban. Unhappy with the development, China has warned ByteDance — the company that owns TikTok — that it will face a regulatory crackdown if it proceeds ahead with the divestment.
  • Vodafone’s European portfolio restructuring bid ends with the sale of Italian business to Swisscom in a cash deal worth $8.71 billion.
  • JP Morgan forks out $350 million in fines for compliance failures
  • Foreign investors pump in an average of $4 billion in India’s real estate in the last five years.
  • Total demat accounts surge to a whopping 14.8 crore growing by 31% on a y-o-y basis.

Taking stock | Time’s running out for TikTok | Swisscom swoops in | Compliance complications | Real estate rush | No end to the demat dash | Invest wisely | Another week in the markets

Taking stock

Hotter-than-anticipated inflation data led to a consecutive weekly closing at a loss for the markets. The S&P 500 fell by 0.6% for the day, while the Dow Jones tumbled by 0.5%. The nasdaq took a beating of 1%. 

Time’s running out for TikTok

ByteDance, the owner of the wildly popular app TikTok, is in a bind trying to balance the wishes of the US and China, both of whom wish to control the future trajectory of the platform.

On Wednesday, the US House of Representatives passed a bill mandating that ByteDance should sell off TikTok or face a ban in the US. The members have argued repeatedly that the collection of American user data by TikTok owners poses a threat to America’s national security interests. 

Seeking to placate members of the US House of Representatives, TikTok management has emphasised that it won’t share user data with the Chinese government even if Beijing demands it. However, the placating hasn’t been to much avail considering that President Joe Biden has gone on the record to say that he will sign the bill, once and if it reaches his desk after clearing the Senate.

Meanwhile, the Chinese government is amplifying signals that it won’t stand idly by and allow a forced sale of TikTok, even as multiple parties in the US are eagerly lining up to bid for the app’s business. The US-China geopolitical bind that the app finds itself in is one of the biggest existential threats that TikTok has had the misfortune of coming across. America represents its largest market with a user base exceeding over 170 million.

On Thursday, a spokesperson for the Chinese Ministry of Commerce commented that the US should “stop unreasonably suppressing TikTok”, slipping in that the “relevant party should strictly abide by Chinese laws and regulations”

The message is being largely read by the commenteriat as an indication to ByteDance management to abide by Chinese regulations. It is also meant warn the company that the divestment of TikTok would invite a crackdown. Last year, China issued a warning stressing that the sale or divestiture of TikTok would amount to an export of technology and would require explicit government approval.

In 2020, then-President Donald Trump attempted to ban TikTok via an executive order, but the courts stayed the operation of that order. From that time onwards, the company has tried to implement an operation called Project Texas to ring-fence American user data.

Swisscom swoops in

The Vodafone Group sold off its Italian telecom business to Swisscom in a cash deal worth 8 billion euros or $8.71 billion. The deal marks the completion of the restructuring of the European portfolio of the UK-based telecommunications company.

The deal will effectively merge the user base of Vodafone’s Italian mobile network with the fixed line operations of Swisscom’s Fastweb subsidiary company. The market seems to be happy with the deal given that Vodafone was trading higher by 4.5% and Swisscom was up by 2.5% after the news broke.

Vodafone said that the sale of the Italian business marks the final culmination of its effort to rationalise its debt and streamline operational dynamics within the European region. The corrective initiative was launched under the leadership of CEO Margherita Della Valle earlier in May.

In 2023, the company struck a deal with Zegona Communications to sell its Spanish business and also agreed to merge its UK operations with  CK Hutchison Holdings’ Three. The agreement with Swisscom materialised after Vodafone, in January, turned down a bid from French billionaire Xavier Niel-led group called Iliad Group.

Vodafone’s operations have been lumbering under a heavy debt pile. As of Septemeber 30, the net debt of Vodafone stood at  36.24 billion euros, which was even higher at 45.52 billion euros a year prior.

After the Swisscom deal, the Vodafone business will be divided into five divisions spanning Germany, European markets, Africa, business and investments. The CEO of Vodafone Germany Philippe Rogge will step down to make way for Ahmed Essam, who will assume the position of the executive chairman of Vodafone’s Germany division and will function as the CEO of its European markets division.

Compliance complications

The Federal Reserve took J P Morgan to task and imposed a penalty of $350 million for its failure to appropriately monitor the trades that the bank has executed since 2019.

The Federal Reserve said that J P Morgan had failed in adequately surveilling trading and other activities that had been executed via the firm’s corporate and investment banking businesses. These trades were executed by JP Morgan on behalf of itself and its clients.

Federal regulations and law enforcement agencies mandate that banks should watch and record clients’ trades as a front-line measure aimed at controlling risks and monitoring unusual trades. As per the law, banks are required to report suspicious activities and pass on data and documents to investigators when requisitioned.

The investment banking firm agreed to pay over $348.2 million in penalty to the Fed and to the Office of the Comptroller of Currency, without admitting or denying the allegations levelled against it.

A spokesperson for JP Morgan pointed out that no employee was found guilty of misconduct and no harm was caused to the clients or the markets in their review. The bank also agreed to appoint a compliance committee that would ensure that the bank is monitoring its trading business. 

JPMorgan Chase & Co

Source: Google Finance

Real estate rush

Foreign investors are making a beeline for the Indian real estate sector.

Several new funds are aggressively eyeing the Indian realty segment, while old and established funds are amping up their total allocations and entering into fresh partnerships.

Long-running global and sovereign companies like Mubadala, PAG Credit & Markets, Korea Investment Corporation, PNB Malaysia and Mitsubishi Fudson are spreading their footprint in the Indian real estate sector, as per the Economic Times.

In 2023, foreign inflows scaled up by an impressive 20% on a y-o-y basis clocking over $3.6 billion. While office and commercial spaces enjoyed the maximum amount of attention from foreign investors, there is renewed interest in industrial, residential and alternative assets.

In 2023, a whopping 90% of the investments in India’s office sector came from foreign investors, indicating that demand in the Indian real estate sector is thriving within this particular investor class. As per Colliers, a diversified investment management and professional services company, investment inflows from the Asia Pacific region increased to 57% y-o-y to reach $1.8 billion, which is double the inflows clocked in 2019. 70% of the $1.8 billion investments were earmarked for office spaces.

Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India told the Economic Times that in the last five years, global investors have channelled an average of $ 4 billion.

No end to the demat dash

The total number of demat accounts in India by February end jumped to a whopping 14.8 crore, indicating a month-on-month jump of nearly 3% and a year-on-year jump of 31%. The total demat count in January stood at 14.4 crore and at 11.3 crore in last February.

Interestingly, new accounts added scaled up to 40.3 lakh accounts accounts in February 2024 compared to the average monthly addition of 20.1 lakh accounts in FY23. The total number of active clients at the NSE also increased by 4.8% on a month-on-month basis to 4.05 crore in February.

Central Depository Services (India) Limited continued to dominate the market and gained greater market share compared to NSDL. On a y-o-y basis, NSDL lost 3.8% market share in total demat accounts and 9.2% market share in incremental demat accounts.

Invest wisely 

Investment is a lifelong exercise, and those dreaming of overnight returns almost always come out singed by the experience. Just displaying patience with one’s investments isn’t enough. One also needs to be careful about investing in fundamentally strong stocks that can grow and deliver stellar returns in the long run. With the Appreciate app as your partner, new investors can take on volatility in the market with confidence and strength of conviction, and grow their wealth steadily over the long term.

Warm regards,
Another week
in the markets

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