SEBI READIES P-NOTE FRAMEWORK FOR GIFT CITY

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Market regulator Sebi is readying a framework for issuance of participatory notes (p-notes) from international financial services centres such as GIFT City. It is in talks with FPIs, which act as issuers of p-notes, sources said. The move comes at a time when Indian bourses have terminated licensing of indices and data-feed agreements with their foreign counterparts. This will force overseas investors to either invest directly or come through GIFT City to trade in Indian securities.

The Securities and Exchange Board of India (Sebi) is readying a framework for issuance of participatory notes (p-notes) from the international financial services centres (IFSCs) such as GIFT City. P-notes are derivative instruments that allow overseas investors to invest in a domestic security without having to directly register with Sebi. The market regulator is in talks with foreign portfolio investors (FPIs), which act as issuers of P-notes, according to sources.

The move comes at a time when Indian bourses, including the National Stock Exchange (NSE), have terminated licensing of indices and data-feed agreements with their foreign counterparts.

The snapping of ties will force overseas investors, which use platforms like the Singapore Exchange (SGX) to trade in Indian securities, to either invest directly or come through GIFT City.

GIFT City is designed like an offshore trading platform with low transaction cost. Know-your-customer (KYC) documentation for p-notes issued from the IFSC would have to adhere to anti-money laundering laws, sources privy to the development said. The regulator, however, is expected to do away with strict trading restrictions on these instruments.

At present, no p-note subscriber is allowed to take a derivatives position in

■ Sebi to soon come up with a framework for issuance of p-notes from IFSC, Gujarat

■ The KYC documentation for p-notes from IFSC is likely to be on parwith p-notes issued by on-shore FPIs

■ However, Sebi is expected to relax the trading restrictions on p-notes issued from IFSC

■ On-shore subscribers of pnotes are not allowed to take any position in the Indian derivatives market

■ Indian stock exchanges recently terminated

the market for any other purpose apart from hedging. Also, there are restrictions on transfer of p-notes from one investor to another. According to experts, since the IFSC is a typical offshore destination where only derivatives are traded, Sebi is open to a less-stringent licensing of indices and data-feed agreements with foreign bourses

■ FPIs looking to invest in India can either invest directly or through the IFSC GIFT City, which offers tax benefits and liabilities

“Sebi recently conducted a meeting with some of the big FPIs that had sought the regulator’s permission to issue p-notes from the IFSC. The idea was to provide an entry to those investors who had lost trading opportunity due to the closing of offshore derivatives trading platforms like the SGX,” said another source privy to the development.

There was still a huge appetite among global funds for instruments such as p-notes because these did not amount to direct exposure, experts said. Despite the high KYC requirement, pnotes are still handy for investors that do not want to have a direct exposure to the Indian market due to restrictive laws in their own countries. P-notes also offer a cost advantage for funds that invest a marginal amount of their portfolio in Indian securities.

“The initial rules for p-note issuance from the IFSC could be much simpler with fewer restrictions on issuers since the whole concept was at an evolutionary stage. Once the instruments gain traction, the regulators concerned could consider tightening rules further,” said Tejesh Chitlangi, partner, IC Legal Universal.

The share of p-notes in total FPI investment has gone down significantly in the last decade with Indian regulators cracking down on their misuse. A decade ago, p-notes accounted for half of total FPI inflows. Now they just account for just 3.7 per cent.

Sebi in 2016 tightened KYC norms for p-notes. P-note issuers were asked to follow Indian anti-money laundering rules. Sebi also made it mandatory for FPIs to disclose the end beneficiary of Pnote subscribers.

Source: Press Reader

Qatar economy resilient, continues to perform well, says Seetharaman

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Qatar’s economy has proven its resilience and continues to perform well amid the blockade, improving local liquidity and gaining the confidence of international investors, said Doha Bank CEO Dr R Seetharaman.

“The blockade (on Qatar by a quartet of nations) came as a rude shock to us. But Qatar has withstood… it has proven to be a resilient model. Qatar’s economy was performing around 2.5% last year.

This year we are not expecting less than 3.1% growth,” Seetharaman told Gulf Times in an interview.

He said Qatar improved local liquidity by disinvestment last year.

“If you look at Qatar economy, liquidity was under stress to start with. The government improved local liquidity. Now international investors have reposed confidence in Qatar. The banking system as a whole is improving.

“The loan to deposit ratio in the Qatari banking system has significantly improved and now stands at 112%. This is an improvement of the level, immediately post blockade, which was at 116%.”

Qatar’s banking sector had witnessed credit expansion of around 9%, the deposit book has grown of more than 10.4%, he noted.

He said in the days that followed the blockade, there were challenges in terms of international investors slowing down on Qatar.

“They were concerned about the Qatar economic momentum. Even the rating agencies looked sceptical, which explains the negative outlook on the sovereign.”

But, Seetharaman said, Qatar’s ‘AA’ rating, which is still very high, has not been challenged although the international rating agencies have changed the sovereign outlook to negative. The high rating (A) of Qatar’s banks is also not challenged.

Currently, Qatar holds Aa- by Fitch, AA- by S&P and Aa3 by Moody’s.

“With strong exports, positive economic outlook, and natural gas markets unaffected by the economic blockade, the overall growth for Qatar remains sustainable,” Seetharaman noted.

The International Monetary Fund (IMF) in its latest World Economic Outlook revised up its forecast for world economic growth in 2018 and 2019, saying sweeping US tax cuts were likely to boost investment in the world’s largest economy and help its main trading partners.

Seetharaman also said new global forecast has a 3.9% growth this year and next. The advanced economies are expected to grow by 2.3% in 2018 and 2.2% in 2019.

The emerging and developing economies are expected to grow by 4.9% in 2018 and 5% in 2019.

India is projected to grow at 7.4% of its gross domestic product (GDP) in 2018 making it the fastest growing economy among emerging economies following last year’s slowdown due to demonetisation and the implementation of goods and services tax.

China, which is spearheading the ‘Belt and Road’ concept is expected to grow up to 6.6% this year, he added.

Source: Gulf Times

Forex reserves surge by $4.1 bn to a new high of $421 bn

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India’s foreign exchange reserves swelled by USD 4.12 billion to a new high of USD 421.914 billion on a healthy increase in the core currency assets and uptick in the gold stock, the Reserve Bank said today.

 

The total reserves had risen by USD 3 billion to USD 417.89 billion in the previous reporting week.

 

The reserves had crossed the USD 400-billion mark for the first time in the week to September 8, 2017 but have been fluctuating since then.

 

However, there has been a continuous surge since the start of this year for the fifth straight week. In reporting week to February 2, foreign currency assets, a major component of the overall reserves, rose by USD 3.025 billion to USD 396.769 billion, the RBI said.

 

Expressed in US dollar terms, the foreign currency assets include the effect of appreciation or depreciation of the non-US currencies such as the euro, the pound and the yen held in the reserves.

 

The value of gold reserves rose USD 1.092 billion to USD 21.514 billion during the week, the central bank said.

 

The country’s special drawing rights with the International Monetary Fund rose by USD 3.2 million to USD 1.547 billion, while the country’s reserve position with the Fund jumped by USD 4.3 million to USD 2.084 billion during the reporting week, the central bank said.

 

Source: Business Standard

 

Foreign investors pump $3 billion into capital markets, forex at record high in January

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Foreign portfolio investors (FPIs) have invested a phenomenal $3 billion (close to Rs 18,000 crore) in India’s capital markets this month on expectations of high yields as corporate earnings are expected to pick up with the economy gathering momentum after the slowdown due to the chaotic implementation of GST.

 

The sharp increase in inflows comes after an outflow of over Rs 3,500 crore by foreign portfolio investors (FPIs) from the capital markets in December, data compiled by depositories shows. According to market analysts money pumped in by FPIs has played a key role in fuelling the bull run in the stock markets that saw both the Sensex and Nifty on a record breaking spree in recent weeks.

 

FPIs infused a net amount to the tune of Rs 11,759 crore in stocks and Rs 6,127 crore in debt during January 1-25 — translating into net inflows of Rs 17,866 crore. For the entire 2017, FPIs invested a collective amount of Rs 2 lakh crore in the country’s equity and debt markets.

 

The inflow in the current month can be attributed to anticipation of earnings recovery and attractive yields which is expected to further strengthen inflow from foreign investors in the current financial year, said Dinesh Rohira, CEO of 5nance, an online platform providing financial planning services.

 

However, Quantum MF Fund Manager-Fixed Income Pankaj Pathak believes that FPIs may not be able to repeat this showing in 2018 as withdrawal of liquidity and rate hikes in developed economies pick up. This would provide them with alternative avenues of investment.

 

The FPI investments have also helped to bolster the country’s foreign exchange reserves which touched an all-time high of USD 414.784 billion in the week to January 19, Reserve Bank data showed. The RBI data showed that the forex reserves rose by USD 959.1 million to touch a record high during the reporting week. In the previous week, the reserves had touched USD 413.825 billion after it rose by USD 2.7 billion.

 

The reserves had crossed the USD 400-billion mark for the first time in the week to September 8, 2017 but have since been fluctuating. But for the past four weeks the figure has shown a continuous rise. Higher foreign exchange reserves lead to a stronger rupee which in turn reduces the cost of imports as fewer rupees have to be paid to buy the same amount of dollars to pay for items such as crude oil.

 

A higher foreign exchange kitty also provides a comfortable cushion to finance imports especially at a time when crude prices are shooting up in the international market and the country’s trade deficit has been growing. However, while FPI inflows add to the forex reserves they are considered “hot money” as they can leave Indian shores at short notice and this could send the rupee into a tailspin.

 

A senior finance ministry official said that foreign direct investment (FDI) is a more stable source of funding for the economy and since it also creates jobs and incomes the government is keen to see an increase in such investments. The Prime Minister’s trip to Davos was aimed at achieving this goal, he pointed out. He said that the government has been working on the ease of doing business which has seen a sharp increase in FDI inflows and this policy will continue in the forthcoming budget. At the same time the government is keen FPI inflows are not disrupted due to tax levies on stocks that create uncertainties, he added.

 

Source: Business Today

FPIs pump over Rs 19,700 crore in November, highest in eight months

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After taking a break from buying into Indian equities in August and September, FPIs bought equities in abundance in November.

Foreign investors pumped over Rs 19,700 crore into the country’s stock markets in November, the highest in eight months, mainly due to government’s plan to recapitalise PSU banks and surge in India’s ranking in the World Bank’s ease of doing business.

In addition, such investors put in Rs 530 crore in the debt markets during the period under review.

According to depositories data, foreign portfolio investors (FPIs) invested a net amount of Rs 19,728 crore in equities last month.

This is the highest net investment by FPIs since March, when they had poured in Rs 30,906 crore in the equity market.It has been a tremendous journey for the Indian equity markets in 2017. After taking a break from buying into Indian equities in August and September, FPIs bought equities in abundance in November.

The strong inflow could be largely attributed to the government’s decision to recapitalise public-sector banks, which is expected to enhance lending and propel economic growth, said Morningstar India’s senior analyst manager (research) Himanshu Srivastava.

“This is particularly seen as a positive step after the questions have been raised from various quarters on the government’s ability to effectively implement economic reforms. Further, the slow pace of economic growth was also believed to be due to rising non performing assets (NPAs) problem in public sector banks, hence this decision provided a much-needed impetus to FPIs to again look back at Indian equity space,” he added.

Finance Minister Arun Jaitley had announced the PSU bank recapitalisation plan of Rs 2.11 trillion, out of which Rs 1.35 trillion will come from recapitalisation bonds, and the rest from markets and budgetary support.

Additionally, the news about India faring well in the World Bank’s Ease of Business index and a jump in core sector growth also turned the tide in India’s favour, Srivastava said.

India gained 30 places in the World Bank’s ease of doing business index for 2018 to 100th among 190 nations.

“These (bank’s recapitalisation plan and world bank’s ranking) and positive developments in the recent times provided a much-needed breather to FPIs who were concerned about the short-term impact of demonetisation and goods and services tax (GST) on the domestic economy and sluggish pace of economic recovery,” he added.

Yet another positive piece of news has come from Moody’s Investor Services, which upgraded its India rating by a notch to ‘Baa2’ from ‘Baa3’ with a stable outlook, citing improved economic growth prospects driven by the government reforms.
Overall, FPIs have invested Rs 53,800 crore in equities so far in 2017 and another Rs 1.46 lakh crore in debt markets.

CBDT signs first ever two Indian APAs with Netherlands in Nov-2017

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CBDT signs first ever two Indian APAs with Netherlands in Nov-2017. The total number of APAs entered into by the CBDT has gone up to 186

CBDT signs first ever two Indian APAs with Netherlands in Nov-2017. The total number of APAs entered into by the CBDT has gone up to 186

 

 

 

Press Information Bureau
Government of India
Ministry of Finance
01-December-2017 11:53 IST
Central Board of Direct Taxes (CBDT) signs two Indian Advance Pricing Agreements (APAs) in November, 2017

The Central Board of Direct Taxes (CBDT) has entered into 2 Bilateral Advance Pricing Agreements (APAs) during the month of November, 2017. These Agreements are the first ever Bilateral APAs with The Netherlands. With the signing of these Agreements, the total number of APAs entered into by the CBDT has gone up to 186. This includes 171 Unilateral APAs and 15 Bilateral APAs.

These two APAs pertain to the Electronics and Technology sectors of the economy. The international transactions covered in these agreements include Distribution, Provision of Marketing Support Services, Provision of Business Support Services, etc.

The APA provisions were introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. The APA Scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Since its inception, the APA Scheme has been well-accepted by taxpayers.

The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

*****
DSM/SBS/KA 

Source: http://abcaus.in/income-tax/cbdt-signs-first-ever-two-indian-apas-with-netherlands-in-nov-2017.html

M&M opens $230-m manufacturing facility in Detroit

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Will roll out in early 2018 off-highway vehicle Roxor

Automotive major Mahindra & Mahindra broke fresh ground as an Indian multinational when it inaugurated its factory in the original Land of Automobile Manufacture, Detroit.

As Executive Chairman, Anand Mahindra, and the Lt. Governor of Michigan, Brian Calley, cut the ribbon to declare open the plant of Mahindra Automotive North America (MANA), they heralded the first investment in 25 years in a new OEM operation in Detroit.

That this is a major breakthrough for the city, which was badly hit by the financial and housing crisis, was evident from the official turnout at the inauguration. Two members of Congress, the Michigan Lt. Governor and a State Department official were all not only in attendance but also spoke evocatively about the investment.

M&M has invested $230 million and created 250 jobs in the plant, which will have a capacity to produce 10,000 units of Roxor, an off-highway vehicle.

MANA will invest another $600 million in the facility by 2020, adding a further 400 jobs.

The Roxor, designed and developed by MANA, was not unveiled but Richard P Haas, President and CEO, MANA, said that it would be launched in the market early 2018.

Speaking at the inauguration, Anand Mahindra struck a personal note on how he first came to the US in 1973 as a freshman student and how this was his way of giving back to the country for all that he had learnt as a student, which he said he had applied in his business.

Answering a question at a media interaction on whether the next step is to enter the US utility vehicles market Mahindra said that it is “not imminent, though it remains an aspiration”.

“Americans are familiar with Korean brands and the logical step is for Korean group company Ssangyong to come in with its models. But it is for the Ssangyong board to take the call,” he said.

Richard Haas added: “We’re watching how people react to the brand and are preparing for different scenarios. Over the next year or two we’ll learn, understand and move forward.”

Mahindra emphasised that MANA was not playing the volumes game saying that sometimes scarcity works better and that the days of requiring enormous scale to succeed are over.

He explained the rationale for the business as bringing together the engineering expertise of Detroit and a start-up culture.

“We’ve created an incubator here — Richard (Haas) has come with rich start-up experience from Tesla and the operation is based in Detroit to leverage conventional manufacturing skills. MANA will be an asset-light operation with a start-up mentality.”

Source: The Hindu Business Line