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THIS WEEK IN FINANCE: OCT 30- NOV 5, 2023

By Kendrick Low


WASHINGTON: Fed chair Powell finally stabilises rates, relieving the global economy

Yes, Jerome Powell has seemingly relaxed his constant and tight grip on interest rates ongoing across the previous months. While he maintained the possibility of another rate hike, it seems he is less than enthusiastic to continue the economic contraction, stating risks were now ‘more two sided’ and almost ‘balanced’, Reuters reports. He explicitly remarked, critically, the Fed’s predictions regarding inflation ‘were in a good place’. This led the estimated probability of a rate cut by June 2023 to shoot up to almost 70%, rallying markets once more. Other central banks like the Bank of England will be closely watched but are ‘seen as odds-on to hold rates’. This is certainly a clear sign of relief for many investors and observers.

DELHI: Record-breaking numbers of Indian firms going public in 2023

According to Yahoo Finance and Bloomberg, there have been 184 Indian business going public this year, more than any other. In October, 30 firms have begun trading in India, outperforming numbers seen in the US, Hong Kong, and China. Even with high interest rates, business and investor confidence is high, with economic growth being sustained along with the growth of firms, which is likely the main cause driving the national IPO buzz. Demand once channeled towards Chinese firms has switched to India as the former experiences an economic slowdown. However, proceeds are down 15% year-on-year to US$4.9bn and there has been an investing pullout after other leading firms saw paltry returns and higher-for-longer interest rates reduced demand for risk.

TOKYO: SoftBank raises $800m through Japan’s first listing of bond-type shares

After being listed on the Tokyo Stock Exchange on Thursday, Reuters reports, SoftBank garnered 120 billion yen via ‘strong retail and institutional investor demand’, trading at 4035 yen above the offered price of 4000 yen. CEO Junichi Miyakawa stated the funds would be used to support its medium-term plans, including developing ‘next generation social infrastructure’, allowing for the development of ‘Japanese homegrown’ large language models, similar to the currently ubiquitous ChatGPT. SoftBank stated on Tuesday that it had begun operating a computing platform in order to develop one such model in 2024. While technically a form of equity, the current shares offer set dividends of 2.5% where investors can redeem it after a period of 5 years. As the shares are also publicly listed, they can be bought via the notably tax-efficient Nippon Individual Savings Account, differentiating it from corporate bonds, making it more appealing.

Conclusions:

  • Huge impact of the Fed’s seemingly pausing or even completely ending rate hikes, spurring the markets to see further growth after Powell’s statement.

  • India seemingly a promising avenue for growth to replace China; however, observers should not forget the current market turmoil, but this may soon return due to the Fed relaxing its stance.

  • Intriguing opportunities for investing in bond-like stocks, with SoftBank, a stable blue-chip firm offering reliable returns from its shares, giving it an edge over conventional bonds via tax efficiency.


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