Aberdeen Standard defensive on India, deems Centre's measures insufficient

Prime Minister Narendra Modi last month declared a $265-billion rescue package - equivalent to 10 per cent of the gross domestic product.

Aberdeen Standard Investments has adopted a “defensive stance” towards India in the short term, as government measures to support the economy have fallen short of reviving demand with lacking key reforms.

Prime Minister Narendra Modi last month declared a $265-billion rescue package — equivalent to 10 per cent of the gross domestic product — to help support businesses hit by one of the world’s strictest stay-at-home order as the nation grapples with an increase in coronavirus infections. Yet, almost half of the stimulus comprised monetary measures announced since February.

“We view the package as a tad underwhelming, given that it does little to boost demand or relieve stress for companies and sectors that have effectively come to a standstill during the lockdown,” Kristy Fong, senior investment director for Asian Equities, said in an email. It also lacked tax breaks or a plan for infrastructure spending and reforms to support the manufacturing sector.

The money manager, which oversees over $644 billion of assets globally, now has “heaviest exposure” relative to the benchmark in software exporters, materials, especially cement, and consumer staples. It expects stocks to remain volatile while the outbreak likely to be a hindrance to global economic recovery.

“State coffers have been hurt by the coronavirus relief measures, further limiting fiscal levers,” Fong said.

Jaguar's bond risk fourfolds on e-vehicle popularity, weak demand in China

Tata Motors posted a larger-than-expected loss in the second quarter and announced a cost savings plan for Jaguar.

Jaguar Land Rover Automotive Plc’s bond risk quadrupled this year as the automaker plays catch-up on electric vehicles and is hit by weakened demand in China. Moody’s Investors Service is warning of more tough days ahead.

Moody’s on Nov. 13 cut its rating on Jaguar, owned by India’s Tata Motors Ltd., to Ba3, three levels below investment grade. Jaguar’s weak operating performance “will likely continue over at least the next 12-18 months” and it will weigh on the parent’s performance too, it said.

Tata Motors posted a larger-than-expected loss in the second quarter and announced a cost savings plan for Jaguar.

Diesel vehicles account for just under 90 percent of Jaguar’s sales in Europe at a time when consumers are increasingly choosing more environmentally friendly options. By 2040, more than half of all new car sales and a third of the planet’s automobile fleet -- equal to 559 million vehicles -- will be electric, according to a global outlook published by Bloomberg NEF.

“JLR has an above average exposure to diesel engines which face a very uncertain demand outlook,” said Nicholas Harrison, credit sector strategist at RBC Capital Markets. “JLR has fallen from being widely viewed as a rising star a year and a half ago to now sitting comfortably in BB category.”

Credit-default swaps protecting Jaguar’s debt against non-payment using five year contracts surged to 582 basis points on Thursday, a six-year high. The cost to buy protection on Jaguar bonds was as low as 113 basis points in August of last year.

“Jaguar is pushing into EVs,” said Joel Levington, director of credit research at Bloomberg Intelligence. “That is coming at a heavy capex and R&D cost, which are key drivers behind its weakening credit. More like they need to take a step backwards before they can move forwards.”

Business Standard