BusinessDay 19 Oct 2017

Thursday 19 October 2017
C002D5556
BUSINESS DAY
A7
Mnuchin has an
important warning for
stock-market investors
MARK DECAMBRE
Beware, stock market investors!
Tax cuts are crucial
to maintaining their
record-setting ways, according
to Steven Mnuchin.
The Treasury secretary made
his comments during a recent
interview with Politico and said
stocks could take a significant
tumble if tax cuts aren’t implemented
soon.
“There is no question that
the rally in the stock market has
baked into it reasonably high expectations
of us getting tax cuts
and tax reform done,” Mnuchin
told Politico Money in a podcast.
Wall Street equity benchmarks
have been on a tear since
President Donald Trump’s surprise
election victory in November,
on a campaign promising
Wall Street-friendly policies, including
infrastructure spending
increases, loosening of crisis-era
regulations and the aforementioned
changes to tax policy,
which includes cuts.
The Dow Jones Industrial Average
DJIA, +0.66% has gained more
than 26% since last year’s presidential
election, the S&P 500 index
SPX, +0.13% has rallied nearly
20%, the Nasdaq Composite Index
COMP, +0.14% has climbed
almost 28%, while an index of
small companies, the Russell
2000, the most likely to benefit
from tax reform, has gained more
than 25% over the past 11 months,
according to FactSet data.
It isn’t clear, however, that
the hope of tax cuts have been
the sole cause of those gains.
Corporate earnings have so far
been healthy and the global
economy is taking part in a rare
synchronized uptick that has
seen Germany’s stock market,
the DAX 30 index DAX, +0.25%
and the Nikkei Stock Average
NIK, +0.13% trade at or near
record territory, market participants
point out.
An unscientific Twitter poll
by MarketWatch showed 68% of
respondents believe tax-policy
changes are baked into markets,
while 32% say the rise to records
is a function of better-thanexpected
quarterly results.
Read Ambitiously
Stocks climb, putting Dow back
on track to close above 23000
RIVA GOLD & AMRITH RAMKUMAR
The Dow Jones Industrial
Average rallied
Wednesday and was
back on course to close
above 23000 for the
first time.
The Dow industrials rose 136
points, or 0.6%, to 23133. The
S&P 500 climbed 0.1% and the
Nasdaq Composite advanced
0.1%. The Dow industrials closed
about three points shy of 23000
on Tuesday after briefly climbing
above that level during the day.
Shares of International Business
Machines propelled the
blue-chip index higher Wednesday,
rising 9.2% after exceeding
Wall Street’s profit and sales
expectations in the most recent
quarter. Gains in its hardware and
artificial-intelligence divisions
encouraged analysts even though
George Soros transfers $18bn to his
foundation, creating an instant giant
JULIET CHUNG & ANUPREETA DAS
George Soros, who built
one of the world’s largest
fortunes through a
famous series of trades,
has turned over nearly $18 billion
to Open Society Foundations,
according to foundation officials,
a move that transforms both the
philanthropy he founded and
the investment firm supplying its
wealth.
Now holding the bulk of Mr.
Soros’s fortune, Open Society has
vaulted to the top ranks of philanthropic
organizations, appearing
to become the second largest in
the U.S. by assets after the Bill and
Melinda Gates Foundation, based
on 2014 figures from the National
Philanthropic Trust.
Soros Fund Management LLC’s
87-year-old founder now shares
influence over the firm’s strategy
with an investment committee of
Open Society. Mr. Soros set up the
committee and is its chairman, but
it is meant to survive him, people
familiar with it said.
A new chief investment officer
at the Soros firm is less a trader than
an allocator of capital to various in-
revenue and earnings declined.
Robust earnings growth
around the world has propelled
major indexes throughout the
year. With the world’s major economies
growing in sync for the first
time in a decade, many analysts
and investors say conditions are
favorable for stocks to continue
ternal and external asset managers.
Unlike past investment chiefs, the
official, Dawn Fitzpatrick, doesn’t
report to Mr. Soros or others at
his firm but to the philanthropy’s
investment committee.
Mr. Soros doesn’t plan to trade
the billions that now belong to
Open Society, according to the
people familiar with the situation.
Mr. Soros was trading his own
money, held separately within the
Soros firm, as recently as last year,
when he bet—wrongly, it turned
out—that stocks would slump
after Donald Trump was elected
president.
“It’s an ongoing process of migration
from a hedge fund toward
a pool of capital deployed to support
a foundation over the long
term,” said Bill Ford, a committee
member and the chief executive
of General Atlantic LLC, a firm that
invests in growth-stage companies.
Though the $26 billion Soros
Fund Management was a pioneering
hedge fund, it returned outside
investors’ money several years ago
and became a family office—a type
of structure, largely free of regulation,
that is increasingly popular
with wealthy clans.
to rise.
“We finally have everything
clicking at once,” said Ryan Detrick,
senior market strategist at
LPL Financial. “What we’ve seen
this year is really a global resurgence,”
he said.
In the U.S., third-quarter earnings
season has gotten off to a
DANIEL STACEY
strong start, investors say. Of the
S&P 500 companies that have
reported third-quarter earnings
so far, more than 80% have beat
analyst expectations, compared
with the five-year average of 69%,
according to FactSet.
Expectations for U.S. tax cuts
have also delivered a boost to Wall
Street in recent sessions, according
to some analysts.
“We now think there’s an injection
of risk and enthusiasm
because people are starting to
price in corporate tax reform,”said
Michael Thompson, managing
director at S&P Global Market
Intelligence. “People are generally
feeling a little bit better about
the broad-based economy and
therefore investing,” he said.
The financial sector was among
the best performers Wednesday,
buoyed by big banks that recently
reported strong earnings despite
a slowdown in trading revenue.
Investors’ response to bank earnings
has been mixed.
Morgan Stanley shares rose
1.9% Wednesday and Goldman
Sachs Group advanced 1.8%, after
Goldman shares fell following
earnings the previous day.
New ‘Smart City’ hatches
solutions to India’s urban chaos
The government planners
now dreaming up India’s
first “smart city” realize
they have a problem.
To solve it they are planning to
dispatch a fleet of drones, bury the
power grid and link a biometric
database to every square foot of
land here in India’s newest state
capital.
The problem is that none of
India’s modern-day planned cities
have lived up to their hype.
Instead, they have succumbed to
slums, crowding and chaos.
Amaravati was named the new
capital of Andhra Pradesh after the
Telangana region broke away as a
new state in 2014. Since then, $1
billion in loan pledges from the
World Bank and Asia Infrastructure
Investment Bank, alongside
another $2.3 billion from state
and federal government agencies,
have breathed life into the project.
Planners envision a city of 3.5
million people on land currently
home to 100,000 farmers and rural
laborers living in 29 villages.
Farmers are exchanging their
land for smaller, more valuable
plots in the new city. Poorer farm
hands who don’t own land have
been promised a place in new government
housing. For low-income
business owners such as small restaurants
and retailers, government
developers plan to offer “microplots”
as small as 50 square meters
in size for $3000 and up.
Two of Singapore’s largest
developers, Ascendas-Singbridge
and Sembcorp Industries , have
signed on to build the city’s commercial
district, while British
architects Foster + Partners are
designing a sprawling government
complex to spread over two
square miles.
Prime Minister Narendra Modi
has pledged to build or redevelop
100 “smart cities” in coming years,
sparking a wave of interest from
offshore developers, and skepticism
from those who view the
plans as unrealistic.
Mr. Modi and other leaders
are striving to avoid the mistakes
of past grand urban development
plans. In Navi Mumbai, a satellite
city of 1.1 million next to financial
capital Mumbai, the latest
national census determined that
around one of every five residents
now lives in a slum—defined in
India as at least 300 people or
about 60-70 households living in
poorly built, congested dwellings
without basic infrastructure such
as drinking water.
Gurugram, a new city previously
known as Gurgaon south
of the capital Delhi, is likewise
dotted with slums and struggles to
provide services such as sewerage,
water, drainage and firefighting.
Efforts to provide such services
to slum residents—who rarely pay
for property taxes or for utilities—
have left many cities financially
crippled, unable to do more or
raise money to upgrade infrastructure.
Only one Indian city
has managed to raise a municipal
bond in the last decade.