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www.abplgroup.com - Asian Voice 18th October 2014
Dear Financial Voice Reader,
With the FTSE falling I’ve been asked if it’s seen the last of the highs for the year. And how do we profit from these falls if it has? I fear that the highs a couple of weeks ago, may be the highs of the year. Although company profitability remains strong, which would push up prices, the markets move in herds and people will take money off the table and sell stocks and take profits because others are too. That seems what is happening and less to do with reports of a global slowdown. So how do we profit. If your view is market falls, for say the next month, you don’t mind selling ‘short’. That means selling in order to buy back cheaper later. This is easy to do with all online brokers. What you would sell is the value of the FTSE 100. But, how do you profit on a day to day basis, rather than just selling now and hoping for the best one month later. This is where your longer term one month view comes in very handy. Brokers nowadays allow you to sell short and also at the same time have a long position. Why would you do that? 1. You may consider this when you have a longer term negative view, but on a, say, one minute chart, see the price rising, so you go long. The long position is for the short one minute chart and the short position is for the longer term down view. This way you are making more profit than the long alone. 2. The benefit of this is it allows you to make more profits than just a short position as mentioned, but also allows you to be hedged whilst the one minute chart is rising. So whilst the FTSE is rising temporarily you profit from the rises, even though your longer term short is losing by a corresponding amount. So you are hedged, but as soon as the price starts falling again, you close the buy/long position and hey presto have a profit pocketed even during the time the market moved against your short position. Traders like this because it gives them the psychological pleasure of not closing a losing position (the short) whilst they think it will pay off in the longer term, but want to profit from the shorter term gain. I like this because it allows me to hedge the FTSE when despite believing it will fall eventually it rises along the way. Is this too complicated? Describing such things on paper can look complicated. One seconds practice shows you how easy it is. I also wanted to mention this because I want readers to be aware of tactics used by professional traders and understand why the markets sometimes rise before resuming their falls – because some people will buy even when things are bleak!
Sebi bars DLF from market for 3 years
India's market regulator Sebi has barred Delhibased real estate major and six of its top executives, including promoter-chairman K P Singh, from the capital market for three years due to lack of disclosure in the company's IPO prospectus when it went public in 2007. The Sebi order follows a Rs 6.30 billion fine imposed by fair play regulator Competition Commission of India (CCI) against DLF for abusing its dominant position to seriously discomfit flat owners in three Gurgaon apartments. The case is now in the SC. The order, which relates to nondisclosure of an FIR against Sudipti Estates - a subsidiary of DLF -during
the IPO process, now curtails DLF's ability to raise funds from the market. In its order, Sebi said that it found DLF and its directors, including Singh's son Rajiv and daughter Pia, guilty of “active and deliberate suppression” of material information at the time of its public offer. The three others banned by Sebi are T C Goyal (MD), Kameshwar Swarup and Ramesh Sanka, both former directors on its board. Sebi, however, did not pass any order against G S Talwar, who was a nonexecutive director at that time, and gave him `benefit of doubt'. According to sources, DLF will likely contest the order in Securities Appellate Tribunal.
Vodafone wins $490 mn tax dispute in Bombay High Court
The Bombay High Court ruled in favour of Vodafone in a long-running dispute with the Indian taxman, a boost for the British telecoms group whose tax battles have been seen as emblematic of the troubles facing foreign investors in India. Vodafone, the biggest foreign corporate investor in India, has been caught in a string of tax disputes since it entered the country seven years ago, hoping to tap the world's second-biggest mobile phone market by customer numbers. Vodafone's treatment, seen by many investors as heavy-handed, has fuelled debate over India's unpredictable rules and regulations. In the case decided on Friday, India's tax office
had accused Vodafone India Services Private Ltd - a unit of the group - of under-pricing shares in a rights issue to its parent, and had demanded tax of about 30 billion rupees ($490 million). The tax demand was for two financial years to March 2011, Vodafone said. "Vodafone has maintained consistently throughout the legal proceedings that this transaction was not taxable," the company said in a statement welcoming the ruling.
Transfer pricing is the value at which companies trade products, services or assets between units in different countries - a regular part of doing business for a multinational, but a practice which tax authorities often feel can be exploited. Rules require all crossborder transactions between group companies to be valued at arm's length - or as if the transaction was with an unrelated company. Several other multinational including IBM Corp, Royal Dutch Shell Plc and Nokia Oyj are also fighting transfer-pricing cases in India. Tax claims on foreign firms in the past year has been a major concern for investors. "The decision will set to rest a lot of controver-
sies and would go a long way in encouraging foreign investments," S P Singh, a senior director at Deloitte Haskins and Sells, said after the court ruling. Separately, Vodafone is contesting a more than $2 billion tax demand over its acquisition of Indian mobile operations in 2007 from Hutchison Whampoa. The lure of India's growing market, however, has continued to attract Vodafone. This year it spent $1.7 billion to fully own its main Indian unit, Vodafone India Ltd, which is India's No.2 mobile phone carrier. Vodafone India bought radio airwaves worth more than $3 billion in a government auction in February to beef up services.
for investment.” Now the closing down and stagnation of Nokia's mobile handset factory in Chennai - the company has been prevented from transferring assets in India to Microsoft and mothballing of the building will lose more than 6,000 people their jobs will fuel the ongoing question about the Indian government's multinational taxing policies. Although India is not alone in its frustration with large US companies exploiting the structure of developing market economies, 'The Financial Times' comments that Prime Minister Modi 'has set about the problem in the wrong way. A particu-
lar bugbear has been unpredictability.' This includes apparently picking and choosing when to file a suit depending on respective revenue targets rather than a blanket implementation of a financial regime, and opening cases retrospectively. Acting on such advice is of course easier said than done, especially because of combating the re-routing of foreign and domestic investments through tax havens such as Mauritius or Monaco and the fact that ascertaining regional rights with transfer pricing is a nebulous area. However, as deputy chief executive of KPMG in India stated concessions such as the
ruling with Vodafone is “quite a momentous judgement” for keeping international investors interested. An ever respectable authority on the matter, 'The Financial Times' implored Modi to address “capricious tax demands” first and foremost in the next budget plans. In the wake of the “make in India” campaign that drives for manufacturers to set up in Asia's third-largest economy where Modi plans to increase the manufacturing sector's share of gross domestic product from 15 to 25 per cent, it is important that there is no enforcement dispute when there is tax-dispute.
2012. The moderation in price pressures was driven by cheaper food and fuel. Wholesale food inflation dropped in September to 3.52 per cent on lower vegetable prices from 5.15 per cent a month ago. Falling global crude oil prices, meanwhile, drove fuel inflation down to 1.33 per cent last month from 4.54 per cent in August. Notwithstanding the deceleration in inflation,
the RBI is concerned that poor monsoon rains and geopolitical tensions that affect oil could drive up prices, making it tougher to reduce retail inflation to 6 per cent by 2016. As a result, analysts widely expect it to keep interest rates on hold until the April-June quarter. "Going into next year, we expect RBI to assess the diminishing upside risks to its 6 per cent target closely and press the trigger only when it is convinced of a meaningful correction in prices," said Bhardwaj. The RBI sent a strong signal last month that it would hold off cutting rates until it was confident that consumer inflation could be reduced to a target of 6 per cent by January 2016.
Will India rise to corporate tax conundrum?
Sunetra Senior
The Indian government under Narendra Modi has been placed under corporate tax scrutiny again after another dispute with a mobile phone company; this time with Finnish multinational Nokia. The news came forging into the headlines just as Vodafone won its seven-year long conflict with the New Delhi government. “It's a big deal because any company in any industry which is investing in shares of an Indian company, it impacts all of them,” confided Vijay Iyer, a tax expert at Ernst and Young in India, in a statement. “It was kind of a barrier
India's Sept wholesale price inflation eases further
India's wholesale price inflation eased to a near five-year low in September, helped by a moderation in food and fuel prices, but the risk of price shocks is expected to prevent the central bank from cutting interest rates soon. The wholesale price index (WPI) rose an annual 2.38 per cent last month, its slowest pace since October 2009, compared with a 3.3 per cent jump forecast by economists. In August, wholesale prices rose 3.74 per cent. The reading for July WPI inflation was revised to 5.41 per cent from 5.19 per cent earlier. "The sharp moderation in inflation has been a culmination of a favourable base effect, moderation in food prices,
softening crude oil prices and weak growth," said Upasna Bhardwaj, an economist at ING Vysya Bank. Data released on Monday showed consumer price inflation, which the Reserve Bank of India (RBI) tracks to set policy lending rates, dropped sharply to 6.46 per cent in September, the lowest since the latest data series started in January