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Chinese Inflation Data Takes Asia Down; TCS Results In Focus – Share Market Today

News Shots 

Wipro appointed Anis Chenchah as CEO, Asia Pacific, India, Middle East, and Africa region after N S Bala decided to move back to the US for personal reasons.

Tata Motors’ Jaguar Land Rover’s retail sales in Q4 continue to be hit by the global semiconductor shortage, but the company saw a gradual improvement in chip supply.

RBI imposed a monetary penalty of Rs 90 lakh on IDBI Bank for non-compliance with guidelines on fraud classification and reporting, strengthening the controls of payment ecosystem and cyber security framework.

RBI imposed a penalty of Rs 93 lakh on Axis Bank for non-compliance with RBI guidelines on loans and advances, know your customer, and levy of penal charges on non-maintenance of minimum balance in savings accounts.

Housing Development Finance Corp. sold 49.63 million shares of Bandhan Bank and  Society General bought 19.08 million shares: BSE

Results: TCS, Delta Corp, Kesoram Industries

What to expect? 

NIFTY opened with a gap-up at 17,706 on Friday and fell. But there was an up-move following the status quo in the RBI monetary policy. There was another breakout in the second half and NIFTY closed the day at 17,784, up 145 points or 0.82%.

BANK NIFTY opened flat at 37,643 and was wild. The up-move was quick in the beginning but slowed down later. Still, BNF managed to close higher at 37752, up by 195 points or 0.52%.

FMCG moved higher.

The US markets were mixed, weighed down by the IT sector. The European markets closed well in the green.

The Asian markets are down. The U.S. Futures and the European futures are trading lower.

SGX NIFTY is trading at 17,775. All the factors indicate a gap-down opening.

NIFTY has supports at 17,640, 17,600, 17,550 and 17,470. We can expect resistances at 17,860, 17,900 and 18,000.

BANK NIFTY has supports at 37,700, 37,450 and 37,150. Resistances are at 37,900, 38,250 and 38,650.

NIFTY has the highest call OI build-up at 18,500 followed by 18,000. The highest put OI build-up is at 17,000 followed by 17,700.

BANK NIFTY has the highest call OI build-up at 38,000 and the largest put OI build-up is at 37,500.

INDIA VIX is at 17.7.

Foreign Institutional Investors net sold shares worth Rs 575 crores. Domestic Institutional Investors net sold shares worth Rs 17 crores. 

RBI maintained the accommodative stance and status quo in the interest rates. The inflation forecast was revised from 4.5% to 5.7%. Gdp forecast was brought down from 7.8% to 7.2%. This led to the up-move on Friday.

There is negativity in the global markets now with the Asian markets trading lower after Chinese inflation data were out. Consumer price inflation rose by 1.5% YoY against the expectation of a 1.2% rise. Producer price inflation was expected to grow at 7.9% but the data came out at 8.3%.

NIFTY is near 17,780 now. This is a major level as you can notice a swing point on 2nd February from where NIFTY fell by more than 2,000 points.

The OI in BNF is interesting with large build-ups at close strikes: 37,500 and 38,000.

We have TCS results today. Expectations are moderate as there has been sequential growth in the last two quarters.

Let us closely watch 17,600 on the downside.

Follow us on the marketfeed app’s Live Feed section to get real-time updates from the market. All the best for the day!

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Editorial

5 Things To Know About Sri Lanka’s Economic Crisis 

Sri Lanka is facing one of its worst economic crises in recent decades. Videos have surfaced on social media showing scores of protestors clashing against the army and the police. Even the army and police had a violent conflict against each other in one instance. After the entire Cabinet Ministry was dissolved, the newly appointed finance minister of the country resigned within a day of the appointment. 

India has close religious, cultural, and social ties with Sri Lanka, yet it has not been India’s best friend on economic grounds. The country is currently stuck in a financial crisis and an alleged debt trap laid by China. The economic crisis has been boiling over since 2018, and the incumbent government seems to have done nothing to contain it. What is the economic crisis all about? What does India have in store? Here are five things you need to know about the boiling economic crisis.

Sri Lanka Is Out Of Foreign Exchange Reserves. Retail Inflation Stands At 17.5%.

Sri Lanka has depleted 70% of its foreign exchange (forex) reserves in the past two years. As of February 2022, its forex reserves stood at USD 2.3 billion. The company has pending debt of around ~USD 4 billion in 2022, almost twice its forex reserves. Around ~ USD 1 billion of Sri Lanka’s debt is in the form of international sovereign bonds (ISB) maturing in July, most of which it owes to China, Japan, and the Asian Development Bank. The Total or Gross External Debt stands at around ~USD 50.7 billion as of Jan 2022. 

The country’s retail inflation stands at 17.5 percent, the highest in Asia. Food inflation stands at 25.7 percent. The President of Sri Lanka imposed an emergency on March 30, 2022, to contain protests due to the severe economic crisis. Such an emergency was imposed in August 2021 for similar reasons.

There Is Political Unrest. The Rajapaksa Clan Rules The Country. 

The island nation is led by the powerful Rajapaksa Clan. Nepotism seems to thrive, with the Rajpaksas holding influential positions in the cabinet, the government, and the judiciary. Mahinda Rajapaksa is the Prime Minister of Sri Lanka. His younger brother Gotabhaya Rajapaksa, who is now the President of Sri Lanka, was appointed as the Defence Secretary in the past without holding any elections for the post. He controlled the armed forces, the coast guard, and the police. Another brother, Basil Rajapaksa, was the Finance Minister until he was sacked by his own brother Gotabhaya Rajapaksa. 

Mahinda’s oldest brother, Chamal Rajapaksa, was appointed the Speaker of the Parliament of Sri Lanka between 2010-’15. He later became the Minister of Irrigation till April 2022, when the whole cabinet was dissolved. Mahinda’s nephew Shashindra Rajapaksa served as the Chief Minister of Uva from 2009 to 2015. Dozens in the Rajapaksa Clan have held many influential positions in Sri Lanka. Many of them hold citizenship (dual) from foreign countries and yet hold government positions. 

After the cabinet was dissolved, all 4 Rajpaksas who previously held ministerial positions refused them in the new government that was formed after the emergency. Reports suggest that there is an internal feud boiling in the family. It seems as if there is a distrust and a subsequent force that could mean an end for the powerful Rajapaksa family. 

Sri Lanka Is Running Out Of Power, Fuel, and Food

Sri Lanka has run out of power, fuel, and food. Thousands of people have queued up to buy essential goods. Prices of many commodities like kerosene, milk powder, rice, and sugar have doubled over a year. Sri Lanka has banned the import of fertilizers as well. The government is encouraging farmers to undertake ‘Organic Farming’. This fertilizer ban has caused a decline in crop production while impacting farmers’ financial conditions. Shortage of food has sent its prices skyrocketing. 

The country’s inability to generate electricity has resulted in day-long load shedding across Sri Lanka. While India has extended help by lending nearly 200,000 MT of fuel in the last 50 days by Line of Credit, it cannot sustain the country for long. 

Sri Lanka is in such a severe shortage of petrol that it has asked the armed forces to guard gas stations after two men collapsed and died while waiting in separate queues to secure fuel. 

Sri Lanka is a tourist economy. It depends on tourism and tea exports for dollars. It imports most of its essential items from other countries. After a two-year-long shutdown in terms of tourism because of the COVID-19 pandemic, the country’s forex inflow was severely impacted. This, coupled with poor governance and impractical debt overloading by the Rajapaksas, is a significant cause of the financial crunch. 

China Has Its Noose Around Sri Lanka. India At A Strategic Disadvantage

China has benefited immensely from Sri Lanka’s debt overloading. Close to 10% of Sri Lanka’s external debt is owed to China. In fiscal 2020, China beat India as Sri Lanka’s top import partner. Although Sri Lanka forms a tiny portion of India’s export basket, its location is strategically crucial. In a Sep 2021 issue, we have discussed how China has engulfed Sri Lanka in a debt trap. Read ‘Sri Lanka’s Economic Crisis And China vs India’ to know more.

India Could Be Sri Lanka’s Last Resort

India has extended a line of credit to Sri Lanka amounting to ~USD 1.5 billion. It has given a USD 500 million credit line to buy petroleum. It has also helped respond to the balance of payment crisis by extending a USD 400 million currency swap and deferred the USD 515 million Asian Clearing Union (ACU) settlement. Moreover, India agreed to increase its investment in Sri Lanka. While India has come to Sri Lanka’s rescue, its biggest partner and lender seem to be turning a blind eye to it. For years China has been giving out unsustainable debt to a country with one of the lowest revenues in the world– at around 8% of its GDP. With China turning a blind eye to the economically distraught country, the wave could favor India.

What do you think of Sri Lanka’s economic crisis? Let us know in the comment sections of the marketfeed app.

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Market News Top Crypto News

China’s Crypto Crackdown Strengthens – Top Crypto News

China’s crypto crackdown strengthens with potential fines, jail sentences

China’s years-long crackdown on crypto has stepped up another level. A new Supreme Court ruling paves the way for fines and potentially lengthy jail sentences for citizens found guilty of fundraising via crypto tokens. China previously banned crypto fundraising in 2017 amid the global surge in initial coin offerings (ICOs). 

Crypto prices today: Bitcoin rises 11%, ETH up 12%

Bitcoin is currently trading at $38,552, an 11.25% increase over the previous day. Ethereum jumped 12.9% over the last 24 hours to $2,622.29. Solana rose 12% to $88.79, while Cardano is up 12.5% to $0.84. Polygon (MATIC) rallied 15% to $1.44. The global crypto market cap stands at $1.72 trillion, a 10.6% increase over the previous day.

Coinbase posts record revenue, user numbers in Q4 

Crypto exchange platform Coinbase made nearly $2.5 billion in revenue last quarter (Q4 CY21), while its monthly active user base rose to 11.4 million. The company posted a profit of $840 million in Q4, which was double the previous one. The impressive numbers were driven by record-high crypto prices last October and November.

Bitcoin mining in Russia largely unaffected amid Ukraine invasion

Bitcoin mining in Russia remains mostly steady amidst the country’s invasion of Ukraine. Crypto industry participants are constantly checking for any disruptions to the network. However, sanctions imposed by various countries could affect miners. Bitcoin miners come into regular contact with exchanges and other entities connected to the traditional financial system as they exchange BTC for cash. 

Over half of the Bitcoin network’s computing power comes from the US, Kazakhstan, and Russia.

Russia could use crypto to blunt the force of US sanctions: Report

As per reports, Russian entities are preparing to blunt/weaken some of the worst effects of economic sanctions by making deals with anyone around the world willing to work with them. They can use digital currencies to bypass the control points that governments rely on (mainly transfers of money by banks) to block deal execution. As per estimates, sanctions imposed by Western nations cost Russia $50 billion a year.

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Editorial

Global Energy Crisis 2021: Can it Impact India?

For years, the world has been glorifying renewable energy or green energy. Many climate change accords have been signed, and countries have capped their carbon emission limits. However, the propensity towards ‘green energy’ seems to have left the globe in an energy crisis. The crisis that seems to have spread from Europe through Asia can have repercussions on other countries as well. In this article, we discuss the whole global energy crisis and its impact on India and other countries.

What Is The Energy Crisis All About?

Power Shortage in China

China is facing an extreme power shortage. Factories have been asked to stay shut, and cities have been facing blackouts. Simply speaking, China is facing a power shortage because of one reason— a coal deficit. China relies on coal for 60% of its electricity. It mainly gets this coal from Australia. 

China’s relationship with Australia has been shaky over the past year, with both countries fighting a trade war. Amidst all this, Australia restricted the supply of coal to China. Now, China has been relying majorly on Australian coal to power its factories. When Australia stopped supplying coal, the prices of domestic coal shot up. If this was not enough, China decided to ‘crackdown’ and ‘improve’ its current coal mines so that they are safe and do not contribute vastly to carbon emissions. The crackdown on establishments giving out emissions comes amidst China’s goal of becoming a ‘carbon neutral’ country by 2060. 

In 2022, Beijing is set to host the Winter Olympics. The country has set the goal to hold a ‘green’ Winter Olympics to leave a legacy in low emission urban development. 

UK Fuel Shortage

The United Kingdom’s fuel crisis is pretty severe. The supply chain has halted completely, gas stations have dried up, and the supply of essential goods disrupted. The shortage of fuel could last a few more weeks before things fall in place. Both electricity and gas station bills are getting fatter by the day. The country has failed to produce enough natural gas to meet demand. UK’s renewable energy assets have been unable to meet production targets due to low winds in the North Sea. The country heavily relies on these renewable resources, and therefore, a shortage has impacted prices. The army has been kept on standby to keep the situation in check.

Another reason why the UK is not able to replenish its gas stations is the shortage of qualified truck drivers. Throughout COVID-19, the country has put trucking licenses on hold. Before Brexit, many truck drivers in the UK came from European countries. Post-Brexit, these drivers were required to obtain a work visa to operate in the UK. The country has decided to relax its visa rules and grant 10,000 temporary visas to truck drivers to meet its supply chain needs. UK’s Road Haulage Association (RHA) says that the country currently faces a shortage of 100,000 truck drivers in total. 

European Energy Crisis

Apart from the UK, natural gas prices across Europe are on fire with electricity bills almost doubled or tripled. What seems to be worrisome is the approaching winter. Some fear that Europe might not have enough natural gas to power Europe if the winter is too cold. Just like the UK, Europe’s ‘green transition’ seems to be taking a toll on energy prices. The phasing out of coal and a grave year for wind energy production has skyrocketed the demand for natural gas. 

Global Supply Chain Disruption

After the COVID-19 pandemic, China became one of the first economies to open up. Naturally, it bagged more export orders where factories decided to pump up production capacity, which led to rising demand for power. China could not keep up with the demand when it faced a shortage of its primary source of energy, coal.

Globally, the supply chain has been hammered for the past year. If the shipping container shortage wasn’t enough, China decided to shut down the world’s third busiest port, Ningbo Zhoushan, after detecting one COVID positive case. According to Russel Group, the port shutdown could cost $17 billion per month and increase further every month the shutdown persists.

The Port of Los Angeles is facing a ‘historic’ backlog of ships waiting to unload cargo. The normal waiting time for a ship used to be 0-1 day in total, which has now gone up to weeks. Ships are being forced to park in the waters and await their turn to docks while the port functions 24×7.

Impact on India 

Organization of the Petroleum Exporting Countries (OPEC) is a cartel of countries that controls the supply and price of oil across the world. The organization faced turbulence when UAE and Saudi Arabia locked horns on production issues. We at marketfeed covered the topic in a July 2021 issue. 

Moving on, OPEC’s supply constraints have impacted petrol prices globally, more so in India. The Indian government refuses to decrease excise duty on fuel, eating into the household incomes and contributing to inflation. Lower the savings, lower the investment. A global energy and supply chain crisis could seriously impact inflation in India, eating away household savings eventually affecting investments in India. With US Fed interest rate hikes around the corner, increasing costs could compel Indians to dilute their investments, ultimately impacting broader markets.

India’s automobile sector could face some heat as well. With winter approaching, China has started to cut down on production to meet overall power requirements until it mobilizes enough resources. China cutting down on electronic equipment and chip manufacturing could fire the pre-existing semiconductor crisis in the automobile sector. Just like the rest of the world, India is staring at a shortage of fossil fuels as well. It won’t be long before the crisis starts impacting our economy. The only way the world can get out of the crisis is through mutual co-operation and focussing on improving the global supply chain. 

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Editorial

Beware! Instant Loans Can Be A Trap!

Instant loans can be a trap. High interest rates, opaque paperwork, intimidating phone calls, and a knock on your door by an unruly recovery agent are what may follow if you use one of these apps. How do instant loans work? Why can they be a trap? And how do you avoid getting trapped? Let’s find out.

How Do Instant Loans Work?

When a person takes a typical loan, they will have to leave collateral such as gold or mortgage their property. Instant loans have a simple mechanism. These loans do not require collateral and are therefore classified as unsecured debts. Instant loans make use of apps or websites to give out loans in a matter of minutes. Companies that give out loans without collateral charge very high interest rates of up to 40%. These apps mostly aren’t registered as non-banking financial companies (NBFCs), and thus, it is a tough task for RBI to regulate these. 

The reason why most people go for these instant loan apps is that they can get money instantly in a matter of minutes without any collateral. To assess risk, these companies look at the credit profile of the person they are lending money to. They look for factors such as salary, savings, investments, work profile, etc. 

Why Are Instant Loans a Trap?

  • While taking a loan is a matter of minutes, there are multiple things that can go wrong. Instant loan apps make a person agree to certain terms and conditions filed in a way that a common person may not understand. A person would agree to them without reading thoroughly since they are in urgent need of money. The terms might include a surplus charge or accruing interest rate, which might increase the interest payable for the borrower by a HUGE AMOUNT. 
  • Instant loan companies sell their debt to recovery agencies. The job of a recovery agency is to recover the loan money by hook or crook. Things can often get unruly at this stage since the only source of income for these agencies is the unpaid debt of people. 
  • There have been instances in the past where recovery agents have humiliated the borrower along with physically or mentally harassing a person. Such cases have come about even when the borrower might have made payments regularly or was just short of time before the payment was completed. 
  • When you install the instant loan app, you are giving them permission to read your text messages, view your gallery, see your location, and read emails. This can be dangerous as it can be used to empty your bank account or get sensitive information that can be later used against you. 
  • Sometimes, individuals borrow money from other instant loan apps to repay their previous debt out of pressure from recovery agents. 
  • Google, in a clean-up, has removed 200 money lending apps in India from Google Play Store that did not comply with RBI guidelines.

It’s China!

Many such instant loan apps are run by Chinese entities. In early January 2021, Hyderabad police unearthed a Rs 21,000 crore instant loan scam run by a Chinese company. A total of 4 individuals including Chinese-national were arrested for the scam. It involved getting people into a debt trap. 

Recently, the Enforcement Directorate (ED) seized Rs 131.12 crore lying in the bank and payment-gateway accounts of PC Financial Services Private Ltd (PCFS). The company was involved in a scam involving extortion of high interest rates against the micro personal loans provided via mobile apps. PCFS had been offering instant micro-loans through its app, “Cash Bean”. In the same case, ED had earlier seized Rs 106.93 crore linked to the company controlled by a Chinese national named Zhou Yahui. 

These Chinese apps are often based out of India and are therefore difficult to trace, and in case of fraud, prosecute. These apps have access to the borrower’s email account, phone book, and other such details. They then use these details to name-and-shame the borrower by calling up the contacts on your phonebook and by sending them lewd text messages. 

How To Avoid Being Trapped?

Most importantly, avoid taking instant loans. If the need for an instant loan does arise, do not resort to foreign or app-based instant loan applications. Use only authorized instant loan apps that have a good reputation online and fall under the judicial boundaries of India. Borrow only as much as you can pay back and ensure that you have an emergency fund in case of mishaps. 

In case of mental or physical harassment by recovery agents even before the due date, record your conversation as evidence and submit a complaint at your nearest police station. There are several guidelines that are laid down by the RBI for the recovery process. You can read them over here.

Stay safe and make informed decisions!

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Editorial

Global Steel Prices Volatility, China-Australia Trade War and Indian Metal Market: Analysis

India’s metal stocks and the NIFTY METAL index have been rallying. Steel prices are soaring and iron ore prices have started to slump. Iron ore is the key raw material used to manufacture steel, yet both are following opposite trends. In December 2020, we at marketfeed discussed the soaring steel prices and how it was impacting the Indian economy. While there have been some shortfalls that are globally driving down steel prices, one crucial factor is at play, China. This piece gives an overview of the steel market and how it could impact Indian metal stocks. 

China’s Economic Turbulence Impacts Global Steel Prices

The last few weeks have been tough for the Chinese economy. It first faced the Evergrande Crisis and is now facing a severe power crunch. Even though we are amidst a global energy crisis, it seems to have impacted China more than other countries. Nevertheless, there is a weird trend that exists right now in the metal market. Iron ore, a key ingredient for making steel, has its prices falling while steel prices are soaring. 

The story starts with China’s trade war with Australia. China produces ~51% of the world’s steel. To make this steel, it imports 60% of the iron ore from Australia, which controls ~38% of iron ore production. The trade war started in May 2020, when China restricted barley imports from Australia, accusing it of breaching WTO rules by subsidizing barley production in China below the domestic production cost. 

Australia further angered China by asking for an independent inquiry into the origin of the coronavirus. Essentially, Australia was accusing China of deliberately creating the COVID-19 pandemic. China retaliated by disrupting the imports of seafood, wood, beef, wine, and coal from Australia. Eventually, Australia restricted the supply of iron ore to China. This meant that China wouldn’t be able to produce as much steel as before. This sent steel prices on a rollercoaster globally. 

To correct the supply-demand mismatch of metals in China, it has decided to release metal reserves of copper, aluminium and zinc. It shall release 170,000 tonnes of this metal into the market and more depending on how the market reacts.

The iron ore that Australia would sell to China would go to other steel manufacturing economies like India, Brazil, the US, etc. Steel, aluminium, copper, and iron ore prices have slumped in India due to fears of weak demand from China amidst an economic crisis. Nevertheless, steel demand in India is healthy, since it has managed to revamp domestic production. India is boosting its economy with multiple infrastructure projects, which ultimately require a significant amount of steel. 

In Q1 FY22, India turned net exporter of finished and semi-finished steel to China for the first time in years. This could mean soaring profits for domestic steel companies in India and for their shareholders. China is currently focussing on reducing carbon emissions and is therefore importing semi-finished and finished steel from India. This would mean better profit margins for Indian steel players. 

India’s Metal Markets

International steel prices are much higher than domestic prices in India. This could mean a bumper export season for domestic steel and iron companies, eventually making good profits. For the past few days, the winds in the metal markets blew in favour of Indian companies. This caused a rally in the Indian metal stocks, followed by a major correction. Between September 1, 2021, and September 16, 2021, the NIFTY Metal Index rallied by 4% or 247 points before going down amidst uncertainties surrounding the US Interest rate hike and the Evergrande crisis.

Tala Steel, SAIL, NMDC, JSW Steel, APL Apollo Tubes are some big players that can benefit from the current situation in the global markets. These companies are players in the core steel industry. They have a replenished inventory of steel products and a large consumer base, both domestic and international

The government has advised SAIL and NMDC to sell off its ‘residual iron ore fines’ from all its mines. This will not only generate supply in the market but also add to revenue (even though a small amount) of the two companies. India’s domestic steel demand is likely to remain healthy as the government has announced many infrastructure projects and some incentive schemes for them. 

Currently, Indian steel companies have two marketplaces to benefit from. First, there is the global market where there is a shortage of steel supply. Second is the Indian market which is seeing fast growth in the number of infrastructure projects.

In a December 2020 issue, we discussed how India’s steel production shortage caused domestic prices to cross the international prices. India could neither export steel because of the price gap nor import it because of the import duties imposed in the country. The situation is now much better as India has plenty of steel and iron ore reserves that can be exported and meet domestic demand at the same time. Price fluctuations in the international market are not likely to impact the domestic metal market. An investor should watch out for core steel companies with high export numbers and no production bottlenecks. 

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Editorial

The Evergrande Crisis Explained

evergrand crisis

One of the biggest real estate companies in China is on the brink of collapse. There is speculation whether it could lead to a similar crisis as that of the Lehman Brothers downfall in the US in 2008. Stock markets around the world have already registered significant corrections as a result of the news from China. In this article, we take a closer look into the Evergrande crisis and how it could cause a ripple effect across global economies.

The Story

The Evergrande Group is China’s second-largest real estate developer. The company employs nearly 1.2 lakh people and has a presence in more than 280 cities. It has reportedly established over 1,300 projects across the country. Evergrande also has an electric car unit and investments in the sports, tourism, insurance, and health sectors. It is a Fortune Global 500 group enterprise and is listed on the Stock Exchange of Hong Kong. The real estate company reported sales of $110 billion last year. It was a company that aimed at providing affordable housing to the Chinese working class.

Unfortunately, Evergrande has now become synonymous with an imminent global financial crisis. Trouble has been brewing at the company over the past few months. It has piled up more than $300 billion in debt. Their liabilities are equivalent to 2% of China’s gross domestic product (GDP)! The company is now scrambling to raise funds to pay its lenders and suppliers. Evergrande was downgraded multiple times by credit rating agencies due to poor cash flow. Its shares have plummeted more than 80% this year. Their offices are now swarmed with investors, employees, and suppliers that want to claim what is owed to them.

Evergrande made headlines last week when Chinese authorities reportedly told banks not to expect the company to clear its interest dues. The real estate developer is likely to default on all upcoming payment obligations. The company makes up ~4% of total property sales in China. However, it has been pointed out that a slowdown in sales is the primary reason behind its present troubles.

What Led to the Crisis?

Over the past decade or so, the Chinese government has facilitated easy financing options to support real estate groups across the country. Borrowing costs have declined considerably, which allowed these companies to acquire a large number of land parcels. However, with a limited land stock in China, the buying spree of real estate firms created artificial scarcity. This ultimately led to a significant rise in property prices. Chinese citizens are now finding it difficult to afford houses and apartments. Moreover, real estate firms such as Evergrande have collectively piled up hundreds of billions of dollars in debt.

Recently, China’s regulators imposed new limits on real-estate borrowing as part of the Communist Party’s campaign to reduce dependency on debt. This crackdown on real estate developers is what damaged liquidity from Evergrande’s bonds.

Various analysts have also attributed the crisis at Evergrande to its ambitious expansionary moves. Within a few years, the company had diversified into the electric vehicles, sports, theme parks, food and beverage, groceries, and dairy products segments. It borrowed billions to acquire assets and fund new projects. They even sold apartments at low margins to raise capital quickly.

How Will Evergrande’s Collapse Affect Markets?

Evergrande Group’s suppliers, bondholders, and banks are hoping to receive repayments. The company’s customers have been waiting for years to move into their new homes. The realty firm is sitting on top of nearly 800 unfinished residential projects. The collapse of Evergrande will cause a ripple effect across the entire real estate industry in China. This is because one in five of the largest property developers in the country has breached all debt limits imposed by Chinese regulators. Property prices could crash if these companies try to get rid of unsold homes. Nearly 70% of the total wealth of the Chinese population is held in real estate, and a sharp decline in prices will adversely affect them.  

The global economy will also be impacted as foreign financial institutions and businesses have exposure to Evergrande. The Indian metals, steel, iron ore, textiles, garments, chemicals, and tyres sectors are likely to be severely affected if the Chinese government is not too keen on a timely bailout of Evergrande, according to analysts. We saw that our metal stocks fell sharply on Monday (Sept 20) due to rising fears that the housing sector slowdown may hit commodity demand in China— the world’s largest consumer of metals.

Recent Updates

Experts state that the Communist Party of China has the necessary resources and political power to mitigate the collapse of its real estate industry. The Evergrande situation is unlikely to develop into a full-blown decline of the global markets. As per a BloombergQuint report, China’s central bank has infused nearly $17 billion in short-term liquidity (cash) into the country’s financial system. This move is aimed at calming the markets amidst the Evergrande crisis. Further, the company has offered to repay debt in the form of property and parking spaces. 

The focus will now turn to whether the developer can pay $83.5 million (~Rs 615 crore) of interest due Sept 23 (Thursday) on a five-year dollar bond. Interestingly, Evergrande’s shares jumped more than 30% today on reports that one of its subsidiaries has negotiated interest payments on yuan bonds. Let us look forward to seeing how the situation unfolds in the days to come. 

Stock markets around the world will continue to keep a close watch on the events that transpire in China. What are our views on the Evergrande crisis? Let us know in the comments section of the marketfeed app.

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Editorial

Sri Lanka’s Economic Crisis And China vs India

Right now, the economic situation in Sri Lanka is grave. It has piled up external debt over the years, has run out of its foreign reserves, and is facing a food crisis. Two superpowers are plotting a strategic game amidst the crisis— India and China. In this piece, we discuss the economic crisis, what led to it, and how it could possibly impact India. 

The Situation

Simply put, Sri Lanka has taken a lot of loans from other countries. It accumulated a massive amount of debt over time. Between 2011 and 2021, Sri Lanka’s total external debt has more than doubled. The total debt owed by Sri Lanka in fiscal 2020 was USD 49.2 billion. This was close to ~57% of Sri Lanka’s total GDP. Sri Lanka did pay back a tiny part of the debt over time. In the process, it depleted its foreign exchange (forex) reserves. For a developing country like Sri Lanka, a forex reserve would help in three ways: 

  • To maintain confidence in its monetary policy and exchange rate in the foreign market for its own currency, the Sri Lankan Rupee (LKR).
  • To pay back the debt that it took from other countries.
  • For having a greater buying power that would enable Sri Lanka to import goods. 

India was in a similar situation in 1991. It had nearly depleted all of its forex reserves that would roughly last three weeks. That is when the government decided to liberalize and privatize the Indian economy to attract foreign investment. 

Coming back to Sri Lanka. The country is now facing a severe food shortage. Imports of essential goods were banned. These included motor vehicles, clothes, cosmetics, and even Sri Lanka’s staple item, turmeric. Sri Lanka imports 7,000 tonnes of turmeric every year, out of which 5,000 tonnes come from India. This has sent the price of turmeric skyrocketing, causing a row in Sri Lanka. Even its primary source of foreign currency was shut during the COVID-19 pandemic, the Tourism Industry. 

Sri Lanka has banned the import of fertilizers as well. The government is encouraging farmers to undertake ‘Organic Farming’. This fertilizer ban has caused a decline in crop production while impacting farmers’ financial conditions. Shortage of food has sent its prices skyrocketing. 

Sri Lanka has the daunting task of boosting economic growth, increasing forex reserves, and cutting down on its external debt. All of this is combined with the uncertainty of COVID-19. However, amidst Sri Lanka’s grim economic situation, two countries seem to play a tug of war amidst Sri Lanka’s grim situation, India and China.

China At Play

China is playing what is known as debt-trap diplomacy. In a debt trap move, China would target countries with poor economic conditions yet are rich in resources and raw materials. Chinese companies, banks, or financial institutions would then lend money to these countries for unsustainable projects, at commercial interest rates. Countries desperate enough for financial assistance would accept this deal, hoping to replenish forex reserves and boost economic activity. Unable to pay back the loan on time, these countries would then be ‘compelled’ to lease their essential assets to China. One such example is Sri Lanka’s port, Hambantota. 

Sri Lanka intended to develop the Hambantota seaport in Southern Sri Lanka. The only country that showed a willingness to fund the project was China, through its EXIM Bank. The bank extended loans to Sri Lanka between 2007-2016. For the first phase of the project, the bank lent USD 307 million to Sri Lanka at an interest rate of 6.3%, a considerably high interest rate. 

Sri Lanka did manage to complete the project, but there was no ship traffic to the port because of a rock in the sea bed that was blocking the way for ships. In 2016, low on forex reserves and unable to pay the loans, Sri Lanka was left with no choice but to lease it to China for a period of 99 years. There are reports that China is planning to turn around the project into a multipurpose port by 2022. Recently, a Chinese ship with radioactive material was intercepted by Sri Lankan authorities at Hambantota port. Is it possible that China is planning to convert it into a strategic military base?

When China took control of the Hambantota seaport, India initiated talks with Sri Lanka to run a joint venture and operate Hambantota Airport. This was an indicator of a power tiff between rivals India and China. 

What’s At Stake For India?

China has benefited immensely from Sri Lanka’s economic crisis. Close to 10% of Sri Lanka’s external debt is owed to China. In fiscal 2020, China beat India in being Sri Lanka’s top import partner. Although Sri Lanka forms a tiny portion of India’s export basket, its location is strategically crucial.  

India and China haven’t had the best trade relationships lately. China has now strategically surrounded India from all sides by acquiring important seaports and routes in all directions. This will not only give its Navy an advantage but will also help China in advancing its shipping route positions. Sri Lanka has till now been a small yet significant ally to India, in terms of diplomacy, military support, and trade. Nevertheless, China seems to be courting Sri Lanka.

India has had a bumpy relationship with Sri Lanka lately. In Feb 2021, India refused to extend a currency swap facility to Sri Lanka. Sri Lanka was allegedly responsible for the death of three Tamil Nadu fishermen that had apparently strayed into Sri Lanka waters.

To get out of a similar forex crisis in 1991, India took the help of the International Monetary Fund (IMF) but faced severe economic restrictions. Eventually, India got out of the crisis, and the rest is history. Sri Lanka has refused any help from the IMF and continues to take loans, grants, and currency swaps with China. Moving ahead, Korea, India, China, and even the Asian Development Bank have extended their support to Sri Lanka through grants and currency swaps. Banning imports cannot be the solution in the long term to maintain stability within the country. Sri Lanka will have to undertake some austerity measures to ensure sustainable growth. 

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China’s Attack on Edtech Companies: Explained

china edtech attack

As part of their continued crackdown on tech companies, the Chinese government has asked after-school tutoring institutions in the education technology (ed-tech) sector to convert into not-for-profit entities. Ed-tech companies would also be barred from raising funds, launching a public issue (IPO), or acquiring other educational services. This has led to a massive sell-off of popular tech stocks in the Asian markets over the past few days. Chinese tech companies have collectively lost nearly $1 trillion in market cap!

In this article, we shall understand why China has introduced such severe measures that could ultimately wipe out the country’s $100 billion ed-tech industry. 

Reasons Behind China’s Crackdown on Edtech Firms

Over the past year, Chinese authorities have asked all private educational institutions to scale back on operations. They are being forced to cap fees and suspend tutoring programs during the weekends and holidays. Many institutions were also fined for false advertising. Now, the government wants to limit the influence of ed-tech companies on the Chinese population. All these restrictions were formed as a result of changes in perceptions around education in China.

The country’s labour force is shrinking rapidly. Unfortunately, most college graduates are unemployable as there are very few white-collar jobs (lawyers, accountants, bankers, etc) available. China has been promoting vocational training for creating a skilled blue-collar workforce. These are practical courses that impart skills and knowledge on a specific trade or occupation (such as technician, machine operator, electrician). However, most people do not opt for such jobs as it is considered ‘inferior’ and the pay is terrible.

Edtech Firms Causing Social Inequalities?

The Chinese government has started questioning the very existence of private tutoring services. The ed-tech industry primarily targets students who are appearing for China’s main university entrance exam— the gaokao. It is a nine-hour-long test (spread over two days) that determines whether a student will attend an undergraduate institution or not. Similar to the IIT-JEE and NEET exams in India, the gaokao is considered a high-stakes exam. It is one of the most brutal educational assessments in the world. 

The Chinese strongly believe that passing the gaokao is the ultimate pathway to success. Students spend years preparing for it. As a result, ed-tech firms have capitalised on this opportunity to a large extent.

According to reports, major ed-tech companies have been accused of triggering social inequality among urban and rural citizens of China by providing additional coaching to those who can afford it. Moreover, excessive tutoring has led to increased pressure and anxiety among the country’s youth. It has also burdened parents with expensive fees. Now, the government authorities feel that the ed-tech industry does not serve any real purpose and may actually limit the country’s true potential.

The new regulations on ed-tech are also said to be in line with Chinese President Xi Jinping’s top priority at the moment— boosting the declining birth rate in the country. They had recently announced a three-child policy to counteract its aging population and declining workforce. The concerned authorities believe that restricting large ed-tech firms and providing affordable education is likely to encourage citizens to have more than one child. 

Similar Events That Have Transpired

Over the past year, Chinese officials have been suppressing large and upcoming tech companies. Jack Ma, the founder of the Alibaba Group, had alleged that Chinese regulators have been restraining innovation. Soon after making certain comments against the government’s anti-development policies, he disappeared from the public eye. His company, Ant Financial, was all set to launch a record-breaking ~$35 billion IPO during this period. Unfortunately, the IPO was called off as Chinese regulators tightened rules for companies to go public in American markets. 

In a more recent case, Didi (a cab-hailing company in China) launched a $4.4 billion IPO in the US, which received a great response from investors. Within two days of its listing, Chinese regulators launched a full-fledged investigation into the company. The Didi app was pulled off from all app stores as Chinese officials alleged that Didi was illegally collecting and using the personal data of its users.

Tencent, a well-known multinational technology conglomerate, was ordered to give up exclusive music licensing rights by China’s antitrust regulator. They also slapped a fine on the company for anti-competitive behavior. On July 26, the country’s State Administration for Market Regulation issued new guidelines for food delivery platforms as well.

These are all part of China’s efforts to minimise the interaction between Chinese companies and the Western markets. According to experts, President Xi Jinping and the Chinese Communist Party are sending messages to corporates and entrepreneurs to show them “who’s boss”. They simply do not want data collected from their citizens to fall into foreign hands. China will continue to introduce new policies and regulations that suppress all forms of innovation and development.  

Conclusion

Now you know why China has started an all-out war against tech companies to limit their influence. The country is returning to state-controlled capitalism in a holistic manner. It has caused quite a stir amongst global investors of these firms. As per the draft rules issued by the government, ed-tech companies will not be able to issue stock or raise money in the stock markets. Thus, large equity investors such as Tiger Global Management and Temasek Holdings Pte will not be able to get their desired exits. This has turned out to be one of the major factors for the bearishness in stock markets across the globe. 

There is another interesting point to be noted here. Currently, China is the largest education market in the world. Out of 28 edtech unicorns (valued at more than $1 billion) in the world, eight are Chinese companies. If their government enforces strict restrictions on the operations of edtech firms, global investors may turn to countries such as India. This would benefit our country’s popular edtech unicorns, BYJUS and Unacademy. As the saying goes, one man’s loss is another man’s gain.

Let us look forward to seeing how the situation unfolds in the days to come. Let us know your views on this topic in the comments section of the marketfeed app.

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China and the Fall in Commodity Prices

Since the beginning of 2021, many countries have reopened their economies and introduced large stimulus packages amidst the (ongoing) Covid-19 pandemic. There was also strong demand for various industrial raw materials from large importers such as China. As a result, the prices of commodities such as iron, steel, copper, and crude oil had skyrocketed and hit record highs. marketfeed had prepared a detailed article in February on the various factors that led to the rally in commodity prices. 

However, the monumental gains posted by certain commodities since January have been wiped out over the past week or so. Copper prices have corrected over 15% from their all-time highs. The prices of palladium, platinum, and even corn futures have also fallen sharply. Let us understand the primary reason behind the fall in commodity prices.

China’s Efforts to Slow Inflation

On June 16, the Chinese government asked state-owned companies to limit their exposure to foreign commodities markets. These firms will be forced to release strategic reserves of metals such as zinc, copper, and aluminium in batches to industrial consumers in order to stabilise prices. When China (the world’s top consumer of metals) cuts down on imports, it will surely lead to a decline in global prices. Soon after this announcement took place, the prices of metals fell heavily. We saw the Nifty Metal index fall by around 9% last week! 

Now, why did China introduce such a measure?

China’s Producer Price Index (PPI) increased by 9% in May, the highest growth in nearly 13 years. However, the rising prices of various industrial raw materials (inputs) are making Chinese products less competitive. The companies that manufacture these industrial commodities are unable to pass on their high costs to consumers. This is because inflationary pressures pose a risk to overall economic growth in China. 

The Chinese Communist Party’s Global Times (a state-owned publication) had reported that the country’s manufacturers were suffering because high input costs were deeply affecting their margins. For example, home appliances are usually sold at a discount around April, but companies were forced to raise prices. They can hike prices as their costs go up, but this practice/trend cannot last for a long period. Moreover, the end price is subject to certain contracts and other factors, which cannot be altered quickly. Thus, a strategic release of metal reserves will help China control prices and keep inflation in check.

Other Measures Taken by China

On May 24, 2021, Chinese regulators had warned metal manufacturers to maintain good market order. The regulators began to strengthen inspections of both futures and spot markets while cracking down on irregularities and malicious speculation. This had led to a sharp fall in metal prices. [Spot markets are where commodities are traded for immediate delivery. A commodity futures contract is an agreement to buy or sell a predetermined amount of a commodity at a specific price on a specific date in the future].

Why are Actions Taken by China so Important?

As most of you are aware, China is a major player in the global commodities markets. They import large quantities of iron ore, steel, and other metals for their development activities. The country is also notorious for hoarding steel and driving up its prices. Markets around the world keenly watch out for every statement or action made by Chinese authorities. When the country was industrialising rapidly at the turn of the century, its demand for raw material triggered a commodities supercycle. A supercycle is an extended period of high demand growth that producers (or suppliers) struggle to match. This ultimately leads to an increase in commodity prices.

Despite its high influence, experts say China may not be able to take on market forces (or cool down prices) in the long term. Investment banking firm Goldman Sachs believes that China ‘does not have the muscle to change the price trend’ of commodities. The firm further said prices were rising because of a global demand-supply mismatch. On June 22, ace investor Rakesh Jhunjhunwala said the steel supercycle had just begun and will last for 5-7 years. He is super bullish on the metals sector as a whole.

There is a complete lack of transparency over the quantity of reserves China holds, and how much would be sold over a certain period. Thus, experts and traders are unable to make an accurate forecast. Even though China does not have enough inventory to change the global outlook for commodities, it can certainly influence overall sentiment. 

Let us know your views on the topic in the comments section of the marketfeed app.

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Why Did The Cryptocurrency Markets Crash? What Next?

crypto crash

Cryptocurrencies have crashed. This time in a manner never seen before. The last time we saw Bitcoin was down ~32%, Ethereum down by ~40%, and Dogecoin down by ~41%. 

The crash has wiped out nearly USD 1 trillion of investor wealth globally. That is nearly Rs 73 lakh crore to speak in Indian Rupee(INR) terms. Let’s dig right into what caused the global crypto market to crash and find out how investors around the world perceive the future of cryptocurrencies.

Why Did The Crypto Market Crash?

To summarize, the crash happened because of a bunch of tweets by Elon Musk, and restrictions by China on cryptocurrencies.

  • Over the last year, cryptocurrencies all around the world were having a ball. Bitcoin gained more than ~400%, Ethereum gained ~1300%, Dogecoin came into the picture and doubled in less than a month. Other small-time cryptos came into the picture with Initial Coin Offerings, which is the crypto version of an IPO. Throughout the period, cryptos around the world gained clout on social media and some volatility in the markets. Major institutional investment firms started investing in Bitcoin. The bull run was never-ending, while the crypto prices refused to correct themselves. This seemingly never-ending bull run induced fear in the market which led to frequent ups and downs. 
  • Speaking of Elon Musk, who has been in the news for the popularity of a popular meme-based cryptocurrency, Dogecoin. While Musk made some tweets on Dogecoin, the price of the meme coin went skyrocketing until his appearance in the US talk show Saturday Night Live. Then, his comments on the coin sent Dogecoin crashing. Musk was publicly supportive of cryptocurrencies and continues to be so.

    Musk’s company Tesla Motors even had a sizable investment in Bitcoin. Tesla has announced that they were going to start accepting payment in Bitcoin but later changed their position. According to Musk, Bitcoin mining requires electricity which mostly comes from fossil fuels. This might be unsustainable for the environment. A series of tweets by Musk and Tesla’s decision to not accept Bitcoin payments contributed to the crash. All this information about high energy consumption was previously known as well.
  • Now coming to the major reason behind the crash. China has always moved its policy towards restricting cryptocurrencies in the country. The People’s Bank of China, National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China released a joint statement restricting the trade of cryptocurrencies almost completely. The directive said that companies offering crypto-related information, saving or pledging services stood banned. Additionally, any company offering crypto-related trading, insurance, and derivatives services would also be banned. China had previously almost completely banned crypto mining along with Initial Coin Offerings(ICOs) in 2017. 

What is surprising about China’s lockdown on cryptocurrency is that almost a month ago People’s Bank of China Deputy Governor, Li Bo had given a progressive statement on cryptocurrencies as an ‘investment alternative’. The associations responsible for the ban, justify the move by stating that cryptocurrencies are risky due to the volatility.

Exit Or Stay?

Cryptocurrency like any other traded security has the strategy of ‘Buy The Dip’, in which a trader accumulates cryptocurrencies after a fall in price. This is what would happen soon after the crypto crash, as is the case with any other traded security. 

Zerodha Co-Founder Nikhil Kamath tweeted on the crash saying “Averaging down or buying more of an asset, be it stock or crypto, as the price keeps going down and hoping that the price bounces to recover losses or make profits faster is a common behaviour among retail investors. While it is tempting to average down, the odds of this strategy working are significantly low in the long run.” He went on in saying, “I have zero knowledge or exposure to Crypto, but the rules for investing are the same: Reduce % exposure if the risk is high, & don’t Average down.”

There is also a high chance that institutions will rethink their exposure to cryptocurrency as the high volatility continues.

The crypto market right now is in chaos, from Tesla not accepting Bitcoins, to China restricting cryptocurrency trade and operations. In a market like this, one should neither be too optimistic nor be too pessimistic, one should stick to the fundamental rules of trading. Which in this case would be reducing exposure to cryptocurrencies as they get riskier and increasing it only as they get more stable. In case a majority of your portfolio is just cryptos, all it would take is one crash to wipe out a significant portion of your wealth, so give rebalancing a thought.

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How Will the Global Container Shortage Affect India?

One of the major problems caused by the Covid-19 pandemic is the disruption of global supply chains. Strict lockdowns that were imposed at the beginning of the year led to restrictions in important economic activities. The supply of essential commodities was affected at both the national and international levels.

Now, we see that countries are still facing difficulties in conducting their export activities. A major reason for this has been attributed to the shortage of shipping containers! Currently, there are not enough containers to meet the flow of global trade. Let us understand the specific details regarding the global container shortage, and how India is being affected.

The Disruption in Global Supply Chains

As the whole world entered into a lockdown in March-April, we saw that exports and imports of essential food items and manufacturing components took a big hit. The suppliers and logistics firms had no option but to stop or cut down their operations, due to restrictions imposed by their governments. The number of labourers who worked at ports had reduced drastically. This ultimately led to a huge reduction in the speed of cargo handling.

To reduce costs, shipping or logistics firms began to cut down on the number of cargo vessels. Such companies would otherwise make huge losses if they continue to send their ships without any cargo. This meant that exporters would have to pay very high freight charges for shipping their products to other countries.

What Led to a Shortage of Shipping Containers?

Since shipping lines were closed for a certain period, exporting companies were not able to collect empty containers that were held up in ports. In most countries, the containers are stored further away from the ports. These could not be returned to the ports at the required time. The reason for such a lag was because of a lack of manpower and a shortage of drivers- which was due to the lockdown restrictions. Thus, a large number of shipping containers were kept idle in countries around the world. Ultimately, the waiting time for the delivery of containers started increasing. 

Manufacturers, trading companies, retail businesses, and logistics firms all around the world are now facing container shortages. The cost of shipping goods has increased rapidly. In the case of India, the current waiting time for shipping containers is two weeks or more. Normally, it would have only taken 1-2 days. This is a very alarming situation indeed.

The Chinese Connection

Most countries started to remove lockdown restrictions around July-August. Global economies started to slowly recover. However, one country managed to show a much better recovery than others – China. As per reports, we know that coronavirus started in China in late 2019, and they did not disclose the information to other countries. At the same time, the country prepared strategic plans at an early stage and was able to manage Covid-19 very quickly. The Chinese Government provided support to their factories to ramp up production just after Covid. Do bear in mind that all factories around the world were closed during this period. Thus, China was able to increase its exports at a rapid pace.

Some industry experts have even raised concerns about a ‘Container Mafia’ that is present in China and various other South-East Asian countries. They state that these groups are hoarding containers and driving up global shipping costs. We will have to wait for more clarifications on these claims.

How Has India Been Affected?

According to the latest data from the World Trade Organisation, India’s exports fell 8.7% YoY in November. The total imports contracted by 13.3% YoY in the same month. These export figures are quite shocking. We are aware that most Indian sectors have shown a great rebound in their production activities since August-September. So, the fact remains that Indian exporters are finding it difficult to ship their products- as a result of the global container shortage.

As we all know, India is now reducing its imports from China due to the ongoing geopolitical tensions. Thus, our country will now have to pay a huge price for importing essential commodities from other countries.

Let us find out how the freight charges have increased for India over the last few months. [Freight charges refers to the price that is charged by a carrier for sending out cargo from the source location to the destination location]: The freight charges for a 20-foot container for shipments from Mumbai to Dubai has increased 25 times (from $10 to $250) in five months. The prices have surged 282% and 117% for Australia and Qatar, respectively. On average, the freight cost has gone up by 190% for West Asia and 159% for Europe. No wonder companies like SpiceJet are planning to focus more on cargo!

Specific Sectors that Could be Affected

We saw that the shipments of packaged foods and electronic items had surged in recent months. This had boosted expectations of a busy and profitable Christmas season. However, the Indian companies that manufacture these goods are facing major hurdles due to the global container shortage. These firms are unsure whether their orders will be shipped on time. As mentioned earlier, Indian firms will have to wait more than 2 weeks for the delivery of containers.

The automobile industry in India is witnessing a revival. It is currently a very booming sector. The domestic sales of all types of vehicles are seeing high growth. However, the industry is now facing a major problem with its exports due to the ongoing container shortage. There are also reports which state that certain automobile manufacturers are finding it difficult to import essential manufacturing components.

India is one of the largest exporters of agricultural products. The farm product exporters are also facing major cost-related issues. There had been reports stating that Diwali orders, that were received by Indian agro firms from various countries, reached only after the festival due to container shortage.

The Way Ahead

As we can see, all countries are facing difficulties with respect to the global container shortage. It is the logistics companies and exporters that have been the most affected due to the ongoing pandemic. The surge in shipping costs is a cause of worry for Indian exporters, who were already struggling with the adverse effects of the pandemic. As the Christmas season is upon us, these exporters have already received a major demand for certain products. However, they are worried that such orders will not be able to reach the specified countries on time. The Indian exporters have also stated that customers are not ready to obtain goods if prices are increased. 

Our country could be deeply affected if we do not find a solution to tackle this problem at the earliest. The revenue from exports, which are a major source of income for the country, could see a huge decline. 

Recently, the Indian government has asked shipping lines to ensure the capacity of 1,00,000 available containers per week. However, it is sure that this could take time to be enforced. Certain experts have stated that the global trade situation is expected to be back to normal only by February-March 2021. Let us hope that the container shortage problem is given more importance, and countries work hand-in-hand to solve this issue.