Talking Points This Week: How Adani Group, Fed And China Dominated Global Discussions

Every week, Niraj Shah studies how top business leaders and market makers are navigating the fast-changing financial landscape.
<div class="paragraphs"><p>(Image source: Unsplash)</p></div>
(Image source: Unsplash)

If the narrative around interest rates dominated market thinking in the first half of the week due to the U.S. Federal Reserve's statements, China, the Adani Group - in more ways than one, and global trade took centrestage for the rest of the week.

Participants would be happy that the equity markets ended on a high, which might keep positive sentiment going early next week. Note that the sentiment has been subdued by and large, especially after the Fed's hawkish statements.

Atlanta Fed President Raphael Bostic had said early this week that interest rates would need to rise to between 5% and 5.25% and then remain there “until well into 2024”.

For an Indian market watcher, the monies coming to the Adani family meant the sentiment around banking improved dramatically. We also saw large orders on railways and defence, which kept those sectors in focus. We discuss all the key talking points in today's piece.

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Adani Group Covers Some Lost Ground

GQG Partners, a US-based boutique firm, invested Rs 15,446 crore ($1.87 billion) in the Adani Group. It acquired 3.39% in Adani Enterprises, 4.1% in Adani Ports and Special Economic Zone Ltd., 2.55% in Adani Transmission Ltd., and 3.51% in Adani Green Energy Ltd. from the SB Adani Family Trust via block trades on Thursday.

That action, and maybe even the anticipation of something like it, led to an increase of Rs 1.5 lakh crore of total market capitalisation of the Adani Group in the last three days. Rajiv Jain, the co-founder of GQG, said that the airports, ports, and energy assets owned by the Adani Group are "fantastic", "irreplaceable" and available at a good price.

Since the monies go to the promoters and not to the companies, it might be fair to assume that the deals are done to ensure liquidity at the family office level. A recent Kotak Institutional Equities conference drew attention to loans worth $1.79 billion against shares at the promoter level. This fundraise presumably squares off issues on that front.

This would also end the speculation around Ambuja and ACC being on the block, a rumour that has repeatedly done the rounds and has been repeatedly denied by the management at various conferences.

Lastly, the Supreme Court issued an order today on petitions that sought a probe into the Adani-Hindenburg issue, by forming a committee headed by former apex court judge, Justice Abhay Manohar Sapre, to investigate the causal factors and existence, if any, of regulatory failure which led to investors losing crores vdue to the volatility in the securities market following Hindenburg Research’s report against Adani Group. 

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Hindi Chini Bhai-Bhai?

China and India should maintain dialogue and properly handle differences to improve bilateral relations as soon as possible, Chinese Foreign Minister Qin Gang said when meeting S Jaishankar in New Delhi.

China is willing to accelerate the resumption of exchanges and cooperation with India and restart direct flights as soon as possible, Qin said in the statement posted by China’s foreign ministry. Qin reiterated that the two sides should help the border situation move to a regular, daily-based management phase.

It is something that should please the populace of both sides. Speaking of China, the National People’s Congress outcome would be important from an investor's perspective, considering that a lot of investors able to invest globally are long on China. 

The National People’s Congress (NPC), a rubber-stamp parliament for many people, begins its annual session on Sunday and will outline key government policy goals, including an annual economic growth target. A Bloomberg story notes that the potential beneficiaries are consumer, property and digital stocks.

An alternative view came from Rockcreek Capital Sudhir Krishnamurthy, who maintained that property will not be the driving force in China, and any kind of growth in China in 2023 will be driven by pent-up demand from the Chinese consumer.

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Advantage Rest of Asia?

Apple Inc.’s Chinese suppliers are likely to move capacity out of the country far faster than many observers anticipate to pre-empt fallout from escalating Beijing-Washington tensions, according to one of the U.S. company’s most important partners.

AirPods maker GoerTek Inc. is one of the many manufacturers exploring locations beyond its native China, which today cranks out the bulk of the world’s gadgets from iPhones to PlayStations. The company is investing an initial $280 million in a new Vietnam plant while considering an India expansion, Deputy Chairman Kazuyoshi Yoshinaga said in an interview.

U.S. tech companies in particular have been pushing hard for manufacturers like GoerTek to explore alternative locations. Aside from the diversification strategy, one also has to recognise that labour costs in China have risen dramatically. Over the years, the labour costs in China have not only gone beyond what most people would believe to be parity, but are also multiple times higher than the nearest Asian competitor, which may prompt many companies to move base for long-term economic reasons as well.

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Speaking of investment in other Asian markets, Taiwanese electronics giant Foxconn will establish a manufacturing facility in Telangana which will create employment generation potential for over one lakh people.

Indians would be hoping there are multiple such announcements waiting to happen in 2023, as job creation would ideally remain the top priority of the country.

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Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.


Niraj is the Executive Editor at BQ Prime with over 18 ...more
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