#Episode17 Daily Updates with Sridhar – US, India, 2+2, QUAD and more

#DailyUpdatewithSridhar #Episode17 with Sridhar Chityala - US, India, 2+2, QUAD and more

Sree Iyer: This is Sree Iyer from PGurus and welcome to the Daily updates with Sridhar. Sridhar ChityalaJi, Namaskar and welcome to PGurus channel.

Sridhar Chityala:  Namaskar and good morning and very happy to be here again.

Sree Iyer: We have several interesting topics for you to talk about today. One of them being, the on-going 2+2 Summit, that’s going on in India. Dr Mark Esper and Mike Pompeo Secretary of Defense and Secretary of State respectively are visiting India. It is expected that they’re going to sign some significant agreements such as the BECA. India is also in the process of buying a lot of equipment from American companies in terms of Ammunition and Drones and other technology. So, there is a feeling of anticipation that no matter who comes to power in January next year that these agreements will be already in place and that quad is going to keep moving forward. Sridharji, what are your thoughts on the on-going 2+2 meeting? Do you think real progress is being made?

Sridhar Chityala: Well, I think that first and foremost, I think one of the great reforms and transformative programs under the Trump-Modi-Abe coalition is the establishment of the quad. This 2+2 dialogue, I think it’s a masterstroke that was constructed between India and the United States. Now coming to your point which is, are we doing well?  We’re doing exceptionally well.  You can see on three specific fronts the 2+2 dialogue has now provided the security platform which covers from Pacific to the South China Sea to the Indian Ocean and is no touching even the northern borders of India and integrated into the one Tibet policy. So, therefore I think is exceptional in terms of what it has accomplished thus far. It is also established that trade, for the first time, India is importing close to 40 million barrels of crude, which has put the bilateral trade equation with the United States in excess of 15 billion dollars. Nobody is able to kind of fathom this huge volume that has come in, the United States is also the Strategic security within the context of the energy policy of India. So to answer your question with all these kinds of details. Yes, it is working very effectively the fact that they are meeting here just in the last week prior to elections and signing the BECA agreement, but also Mike Pompeo’S statement that the unusual build-up of the Chinese augur well and the United States will be supporting India is another telling endorsement. The United States has also worked very closely with India as part of the Quad in terms of normalizing step on security matters with Bangladesh, Sri Lanka, Indonesia, Maldives as part of this integrated effort that is going on. So, this 2+2 Mike Pompeo and Mark Esper being in India having a dialogue with the Prime Minister, having a dialogue with the Foreign Secretary, having a dialogue with the Defense Minister in India is a reflection and then following on shows how important they place to the platform called quad and the agenda of the platform.

Sree Iyer: Sir, while we are on the topic of the United States politics, we are days away from an election and the race seems to have tightened. What are your thoughts on the Rasmussen poll that puts Trump slightly ahead of Biden today?

Sridhar Chityala: Well, I think it all boils down to samples. The samples that you pick up and nobody kind of qualifies the sample. So, Rasmussen poll is probably reflective of a sample that’s picked up in the battleground States and is clearly an indication that the Battleground States seem to point towards a positive momentum shift towards Trump. Especially after the last debate and his continued and sustained efforts. There have been some policy issues and blunders like fracking and taxes and minimum wages etc., some of these things resonate especially the fracking will resonate in the markets of Texas, Pennsylvania and Ohio. So, probably some of the sentiments that are seen in the polls is a reflection of that.

Sree Iyer: Now, China is coming out with a five-year strategy and that seems very interesting. What do you make of this strategy? They’ve already exposed their hand they have been rattling all their neighbours, whether it is sabre-rattling or something more serious, we’ll have to wait and see. What are your thoughts on this five-year strategy, sir?

Sridhar Chityala: The five-year strategy is the on-going thing which has been going for years, but the most important outcomes that are coming out of the current five-year strategy is a reflection of China’s thinking under Xi Jinping and the direction they’re taking. So, they have laid emphasis on three important aspects: first, they believe that they are now under security threat and it is the single focus of the Western Nations and the neighbours, therefore security is the number one parameter. Number two, a number of their technology companies are slowly saying, being targeted and banned, a most recent one being the 5G technology from Huawei as well as the world developing an alternative platform and number of their applications have been banned. So, they feel they must take charge and build your own technology and which will be its core competency as it drives the agenda. The third important facet which is a big shift to reliance on exports to domestic consumption. So, therefore they are beginning to accept in case, the world imposes bans, targets restrict the exports then how do they keep the economy growing and you know people being empowered and people per capita growing is to build a very strong domestic economy. This is what West had been saying all along but necessity seems to have driven them towards that. So, three important facets are very much reflected in some of the outcomes and actions that we see on the ground.

Sree Iyer: Now, one of the biggest technological groups in China – The Ant Financial Group is planning to go public and this is got companies like Ali Baba. I have an interesting observation to make, Ali baba used to be owned by Jack ma, not so anymore looks like the assets of the whole company had been transferred to the Chinese Communist Party and people are even saying that Jack Ma may not be there anymore. So, you know, it’s a very intriguing fact. Is he still alive? I’m just sorry to ask your blunt question, is Jack was still around or is he being side-lined? And is this company going to be really listing well,  I have no idea? What are your thoughts, Sir?

Sridhar Chityala:  I think there are a lot of questions there. So, I think that any large corporation becoming part of the Chinese Communist Party asset is the norm of the game and I don’t see any exceptions to that rule. Therefore the largest company is part of the CCP. I stand to be corrected, that I think Jack Ma is formally a member of the Communist party? I think he was received and given the membership, whether he has chosen, I don’t know. That’s number two. I think the third point, is he around? He is very much around and I think he is the advocate which is making his speeches about his company and investments and about China as a whole. Also, he’s very much making his rounds. He clearly is not in the matters that pertain to the ANTS group. So he becomes an investor, is one of the investors and if there’s new management which is sitting and you know running the ship and financial IPO is one of the most successful IPOs. It’s market valuation, market cap exceeds some of the big companies in the United States like Wells Fargo and so on. So it was a very successful IPO. Just yesterday it was announced and launched, it’s called running the book, so they take orders, pre-orders and then they close the book. In Hong Kong institutional booking is closed, which means there’s plenty of demand. And the way they launched the program is very interesting because they have equally split the shares between Shanghai listing and Hong Kong listing leaving the door open for things to normalize because remember there’s a ban now imposed by President Trump on Hong Kong. So the story is that they expect things to be normalized so they have listed equally between the two markets which is an interesting sentiment. So again, that is part of China’s five-year technology market participation. I mean pretty much one of the largest Fintech in the world. It runs payments, it runs banking, it runs mobile payments, it runs money market fund. It also has a limited kind of credit transaction. Therefore, it’s almost like the Next Generation. it connects a number of banks products into the platform. So it’s not a product manufacturer, but it’s one hit. 1/3 of Chinese market uses the ANT, the Ali Payment Processing platform.

Sree Iyer: I just want to touch back upon the United States. Amy Barrett has been confirmed as a Supreme Court judge. And with that, the Supreme Court bench now has a very conservative bent and this is not unusual many court systems have these kinds of events except that countries like India, it is not out in the open, in the United States it’s out in the open they know the biases of the judges and it’s good to know where they stand in terms of issues. What do you make of it? Especially in light of some of the mail-in ballots in Pennsylvania and one other state where it could be going either way where  Amy Barrett might be required to weigh in. Do you think that could make a difference for Toms re-election?

Sridhar Chityala: Well first congratulations Amy Barrett, congratulations republican party. .They focused. They ran a 40-day successive marathon and they ensured that Amy Barrett is confirmed notwithstanding its not bipartisan its part of most of the decisions are partisan of this nature. For example, Affordable Care Act was one of the most partisan both house and Republican so very much similar, there’s two or three Republicans abstained, but otherwise, it’s a kind of good number for Republican. One of the important elements of the presidency is about these judicial appointments, right? So they wait and they seize the opportunities to see that, the sentiments of the government in power are reflected in the Supreme Court, which as you rightly said it’s open it’s transparent. It’s very well-known. It goes to the rigours of a process. So everybody gets to know the person. It’s not secretive something that happens and I think I forget the name. Dianne Feinstein prevailed made a statement that she found she was one of the best-run programs notwithstanding the differences that existed between the Republic and Democratic party and she lauded Lindsey Graham for that who is the Judiciary Committee chairman. Now in terms of the specific question that pertains to the voter, ballots and registration, all these decisions do play a part and the opinions as interpreted matters. So to some extent, these appointments do play a role in objectively, about have used the word but my Democratic friends would say objective, there’s no objective. It is very much a biased and opinion based it’s fine, but that’s how the structure works. But the other more important point is that in his tenure Trump has appointed close to 60 judges, which is quite remarkable by the number of people who have made it to the Supreme Court. So I think the Republican side is generally happy. Yes, your point on Pennsylvania, Michigan, I think she’s already there’s already a Michigan ruling which the Supreme Court has overruled in terms of the deadline. So yes, the most important decision is yet to come in the event of a contested outcome where you know where you need to recount where you need to go back and re-poll, any of these issues these judges are going to play a significant role.

Sree Iyer: And might I remind our viewers that people are still talking about 2000 Supreme Court decision that threw the election in favour of George Bush and I leave it at that. The last thing that we need to look at, we’re running a little bit behind but let’s take a quick look at the markets for today and then we can wrap it up.

Sridhar Chityala: Well I think the market was very much reflective of the sentiments yesterday. We were down 650 points driven by the known fact that stimulus is not going to occur before Nov 3rd. So, there was a pullback of close to 2% from the market and it’s reflecting the day sentiments. But having said that today it is back around 0.6% Dow is back and then S&P is somewhere around 0.3 per cent up when I last looked at it. It is just that sentiments drive markets and yesterday a sentiment was, hey, you know, we expected stimulus, but it did not come. So, you kind of people dumped and took some power profits, but it’s also a reflection of the other adjacent fact, there is rising coronavirus situation that’s developing and yesterday’s market corrections or market factors were driven by what happened over the weekend, especially in the United States where we saw 83,000 cases over two days, the average was about 40-44 thousand and 83,000 cases is a fairly significant kind of a number. But, you also have White House making a statement which is to say look guys, this is going to be the way of life because cause and cure are unknown and we’ll have to deal with it as things go. So, that’s reflected in the market. I expect things to stabilize this week, unless, we have more bad news of the pandemic side. There’s nothing in the fundamentals and there’s nothing in the underlying financial ecosystem that says that there is something that has to have the financial. By the way, the economy is expected to be growing around 3.6 per cent next year that’s a reflection of imminent Stimulus – be it Democrats or Republicans at Power in White House.

Sree Iyer: Thank you very much, Sir, and that brings an end to today’s daily update with Sridhar and do subscribe to our Channel and also donate to our Channel. Thank you very much and see you all tomorrow.

Sridhar Chityala: Thank you, Sir.


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