201512 CM December

INTERNATIONAL TRADE
INDIA SPICES UP ITS GROWTH
INDIA has just cut its repo rate a full half
point, from 7.25 percent to 6.75 percent, in
an attempt to spice up its economy.
Inflation, at 3.7 percent, is well below
target, but it’s weaker growth in both
external demand and domestic investment
that has the bankers worried – hence the
decision to provide some stimulus.
India can probably afford to do it. The
country has managed to lower its current
account deficit, and the Government’s
economic management appears pretty
credible, even if not all its promises have
been kept. Foreign investors have benefited
from changed regulations, which should
get investment funds flowing. So at the
moment, India looks to be one of the few
economies set for significant growth.
Definitely a market I’d be interested in.
ONE MAN’S MEAT IS ANOTHER MAN’S POISON
OR rather, one company’s problem is
another's opportunity. Trade Finance
Partners is doing excellent business in the
metals sector. While the mining giants and
the banks are stymied, TFP can provide
transactional financing for metals, timber
and other bulk commodities.
It can do it because it's not lending – it
actually buys the physical assets and owns
them till they've arrived at their destination.
HIGH LOW TREND
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And if they’re not paid for? It simply sells
them to someone else – and TFP makes
sure they already have a dozen phone
numbers to call.
As so often in the world of finance, the
small and nimble are prospering where the
big banks don’t want to get their fingers
burned, and offering a valuable alternative
source of financing for exporters, too. Good
luck to them!
YANKEE DOODLE NOT SO DANDY?
WATCH out! While investment managers
everywhere are telling us that bonds look
cheap following the summer sell-down,
the ratings companies aren't buying that
line – in the US, they're downgrading more
corporates than at any time since 2009.
Equities analysts, meanwhile, are warning of
a second consecutive quarter of declining
earnings from big companies.
While everyone's expecting a train crash
in China, it looks as if the US economy is
hitting the buffers. Oil and energy companies
account for about a third of the downgrades
- shale oil in particular has been badly hurt
by low prices – but the pain is everywhere,
with companies from Petsmart to McDonalds,
wireless phone company Sprint and Barbie
maker Mattel all downgraded. Some major
companies are now announcing layoffs,
particularly where they have been hit by lower
Asian demand. If I were exporting to the
US I'd be keeping a pretty close eye on the
ratings agencies and the next earnings season
- and on my customers’ balance sheets.
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NEWS IN IN BRIEF
IT'S GIN O'CLOCK
ANOTHER company which shows
the importance of good research is
Pickering's Gin. It’s a fledgling drinks
producer – it only launched in 2014
– but it’s already exporting from its
Edinburgh base to Canada, Hong Kong,
and Europe, having identified these
as key global gin markets it wanted to
break into. Germany, Austria, Benelux
and Switzerland have all proven good
markets; gin has become increasingly
popular in Germany in recent years, with
both local small producers and imported
gins on a roll. Pickering’s is now looking
down under for further export growth,
and will be joining the Edinburgh Tattoo
on an antipodean tour.
SPUDS YOU'LL LIKE
THINK of potatoes and you don’t
automatically think of the Middle East. But
King Edward Catering Equipment has found
the area a great export market for its potatobaking
ovens. The Herefordshire based
company sent a 20ft container full of spudbaking
equipment to Lebanon this summer,
and will be attending the next Gulfood Show
in Dubai to promote its wares.
I'm always surprised how some
companies I speak to say “Oh, there
won't be any demand over there” without
checking it out – and how many companies,
like King Edward, do well in what seem at
first glance like unlikely markets. A lesson to
do your research properly!
BRAZIL GETS JUNKED
BRAZIL has suffered the indignity of S&P
reducing its bonds from investment grade
to junk bond status. The reasons for the
downgrade included increasing public debt
and political infighting, but behind it all are
sliding commodity prices, which in a big oil
and soft commodity producing country have
hit exports and corporate profitability hard.
Latin America as a whole is suffering.
Coface has also downgraded Chile and
Ecuador, suffering from the impact of low
copper and oil prices, respectively. But it's
Brazil – erstwhile industrial powerhouse
of the region - that is the biggest
disappointment. Getting to investment grade
was a dream for many emerging markets,
and one that Brazil achieved; now it's all
gone wrong, and Brazil seems to be walking
backwards to Christmas.
GBP/JPY 187.6064 182.3902 Up
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www.cicm.com December 2015 39