Home Blog Page 39

India approves new finance panel to suggest sharing of federal taxes

0

New Delhi (Reuters) – The Indian government on Tuesday approved the setting up of a new Finance Commission that will recommend how federal taxes will be shared with states.

The federal cabinet has approved the so-called terms of reference for the 16th Finance Commission, Information and Broadcasting Minister Anurag Thakur said on Wednesday.

The government has not yet announced the composition of the commission or the detailed terms of reference.

“Due process” will be followed for the appointment of the chair and members of the commission, minister Thakur told reporters.

Every five years, India sets up a Finance Commission to suggest the formula for sharing of taxes between the federal and state governments, and make recommendations on public finances.

Presently, India shares 42% of federal taxes with states.

The next Finance Commission will submit its report by October 2025 and its recommendations will be implemented from fiscal year 2026-27.

The panel will recommend grants given by the federal government to states, and suggest ways to shore up states’ consolidated funds, among others, minister Thakur said.

Turkey freezes assets of 82 organisations, people for alleged ties to Kurdish militants

Ankara (Reuters) – Turkey froze the local assets of 20 organisations and 62 individuals based in various European countries, Australia and Japan, citing alleged ties with Kurdish militant group PKK, a decision published in the Official Gazette showed on Wednesday.

Turkey’s Ministry of Treasury and Finance said the decision was “based on the existence of reasonable grounds” that they committed acts falling within the scope of the law on preventing the financing of terrorism.

The list included 3 organisations each from Germany and Switzerland, where there is a large Kurdish diaspora. It also named 2 organisations each from Australia, Japan and Italy.

Other affected organizations spanned across Austria, Belgium, the United Kingdom, Denmark, France, Sweden, Norway, Iraq-Syria.

Sweden’s NATO Ratification

The list included one organisation from Sweden, namely the Insamlingsstiftelsen Kurdiska Roda Solen, whose social media accounts say is a humanitarian aid organization.

Both Sweden and Finland requested to join NATO in May last year following Russia’s invasion of Ukraine.

Turkish President Tayyip Erdogan raised objections at the time to both requests over what he said was the Nordic nations’ protection of those whom Turkey deems terrorists, as well as their defence trade embargoes. Turkey endorsed Finland’s bid in April, but has kept Sweden waiting.

Turkey has demanded that Sweden take more steps to rein in local members of the Kurdistan Workers’ party (PKK), which is considered a terrorist group by the European Union and the United States.

Advertisement · Scroll to continueReport this ad

Turkish Foreign Minister Hakan Fidan told NATO counterparts on Tuesday he was working hard on Sweden’s NATO ratification which is currently being debated by the Turkish parliament and provided a likely timeline of before year-end for the Nordic country to formally join the alliance, a senior State Department official said.

Asia’s first ETF tracking Saudi equities debuts in Hong Kong

Hong Kong (Reuters) – A new exchange-traded fund (ETF) tracking Saudi equities made its trading debut in Hong Kong on Wednesday, becoming the first product of its kind in Asia amid warming bilateral relations between China and Saudi Arabia.

The ETF, called CSOP Saudi Arabia ETF (2830.HK), is managed by Hong Kong-based CSOP Asset Management. It counts Saudi sovereign wealth fund, Public Investment Fund (PIF), as an anchor investor, CSOP said in a press release.

The fund price rose 0.9% on its debut, while the broader Hong Kong market index (.HSI) was down more than 2%.

“It (the ETF) makes it possible for mass investors in our part of the world to invest and participate in the development of the Saudi Arabia’s economy,” said Hong Kong Financial Secretary Paul Chan at a launch event.

“We can expect to see more products to be made available in both the Hong Kong and the Saudi markets for our respective investor bases.”

The fund tracks the performance of the FTSE Saudi Arabia Index, whose 56 constituents’ total market value reached $276.8 billion at end-October. The index posted a return of 45.3% over the past three years, according to a CSOP statement.

Through the ETF, investors in Hong Kong will be able to trade Saudi stocks including the oil giant Saudi Aramco (2222.SE) and the Saudi National Bank (1180.SE) in Hong Kong dollars or Chinese yuan.

“Our aim is to continue to attract foreign investors into the Saudi capital markets… To show our commitment, PIF would act as the lead investor of this fund,” said PIF Deputy Governor Yazeed A. Al-Humied at the launch event.

HSBC, which is offering services including trustee and custodianship to the fund, said it expected assets under management of the fund to surpass $1 billion.

Reuters reported in August that the Hong Kong Stock Exchange (0388.HK) and a mainland bourse were in separate talks with the Saudi stock exchange for pacts that would allow investors on both sides to trade equities and bonds in each other’s markets.

The ETF launch comes as China’s government, frustrated by what it sees as the U.S. weaponisation of economic policies, has sought to expand ties with countries in Europe, the Middle East and Africa.

That diplomatic push includes courting U.S. ally Saudi Arabia.

While economic cooperation between Beijing and Riyadh remains anchored on energy interests, ties in trade, investment and security have been expanding. China is Saudi Arabia’s top trading partner with trade worth $87.3 billion in 2021.

The People’s Bank of China and the Saudi Central Bank this month signed a local currency swap agreement worth 50 billion yuan ($6.93 billion) or 26 billion Saudi riyals, to strengthen financial cooperation, and promote trade and investment.

Suspected fake Ozempic causes hypoglycemia in 11 in Lebanon

(Reuters) – Eleven people suffered bouts of dangerously low blood sugar in Lebanon this year, one of whom required hospitalization, after injecting suspected fake versions of Novo Nordisk’s (NOVOb.CO) diabetes drug Ozempic, according Lebanese health officials.

A director for the Lebanese Ministry of Public Health, Rita Karam, said officials suspected the drugs were fake after discovering the doses were different from the ones calibrated for authentic Ozempic injector pens.

Explosive demand for Ozempic and other drugs used for weight loss, including Eli Lilly’s (LLY.N) Mounjaro and Novo’s Wegovy, is fueling a global surge in counterfeit versions, Reuters interviews with law enforcement, anti-counterfeiting and public health officials showed last month.

Counterfeit Ozempic has already been found in at least 17 countries, including the UK, Germany, Egypt and Russia. Several have issued warnings to pharmacies and consumers to be vigilant about counterfeits, since it is not clear what they actually contain.

Advertisement · Scroll to continue

Karam said the ministry had begun investigations into the 11 cases, but that the source and batch numbers of the drugs in question had not been identified in most, which made it hard to determine what the victims may have taken.

Three of the people who took the suspected fake Ozempic did so to control their diabetes, while four took it for weight management, Karam said. The other four injected the drug for an ‘unspecified indication.’

Advertisement · Scroll to continue

People with diabetes need to closely manage their blood sugar, which can be done with a variety of medicines including Ozempic. When blood sugar, or glucose level, gets too low they can suffer hypoglycemia, with symptoms that may include headaches or dizziness and can progress to a loss of consciousness or seizures.

Lebanon’s Ministry of Public Health issued two recalls related to Ozempic in January 2023, according to its website. No cases of potentially counterfeit Ozempic were reported in Lebanon in 2022, Karam said.

Novo Nordisk said it investigates and reports every counterfeit case it finds to local authorities, and that it has created a guide for healthcare providers in the Middle East to show how to spot fake drugs.

More than a quarter of Lebanese adults are obese, according to 2017 figures from the World Obesity Federation. Obesity has been closely linked with type 2 diabetes, by far the most common form of the disease.

Data from the International Diabetes Federation showed that almost 9% of adults in Lebanon had diabetes in 2021, compared to nearly 14% in the United States.

Karam said Ozempic is neither purchased nor provided by the Ministry of Public Health.

Wegovy, Novo Nordisk’s weight-loss drug with the same active ingredient – semaglutide – as Ozempic, was shown to help patients lose an average of 15% of their weight in a late-stage trial.

The scramble for supplies of the powerful pound-shedding molecule has led to shortages of Ozempic in several countries including Britain, Germany, Belgium and the United States.

A source familiar with anti-counterfeiting efforts told Reuters last month that markets where sales of fake weight-loss drugs were most prevalent included Lebanon and other countries in the Middle East.

Several people have been hospitalized in Austria for hypoglycemia after taking potentially fake versions of Ozempic. The health safety regulator there said the side effects indicated the product contained insulin instead of semaglutide.

Last month, Belgium’s drug regulator said it had seized counterfeit versions of Ozempic in which the injector pens were confirmed to contain insulin.

Disease could be bigger killer than bombs in Gaza – WHO

Geneva (Reuters) – More people could die from disease than from bombings in the Gaza Strip if its health system is not repaired, a World Health Organization spokesperson said on Tuesday, warning of a surge in infectious diseases and diarrhoea in children.

In figures deemed reliable by the United Nations, Gaza health authorities say more than 15,000 people have been confirmed killed in Israel’s bombardment of the narrow enclave, around 40% of them children, with many more feared to be lost under rubble.

Israel has sworn to annihilate Hamas, the militant group that rules Gaza, after its gunmen burst through the border killing around 1,200 people and seizing 240 captives on Oct. 7.

“Eventually we will see more people dying from disease than we are even seeing from the bombardment if we are not able to put back (together) this health system,” the WHO’s Margaret Harris said at a U.N. briefing in Geneva.

She repeated concerns about a rise in infectious diseases, particularly diarrhoea in infants and children, with cases for those aged five and older surging to more than 100 times normal levels by early November.

“Everybody everywhere has dire health needs now because they’re starving because they lack clean water and (they’re) crowded together,” she said.

Under the terms of a pause in fighting, Israel has allowed more aid to flow into Gaza including food, water and medicine although aid agencies say it is not enough to meet the immense needs.

James Elder, a spokesperson for the U.N. Children’s Agency in Gaza, told reporters by videolink that hospitals in the strip were full of children with burns and shrapnel wounds and gastroenteritis from drinking dirty water.

“I met a lot of parents… They know exactly what their children need. They don’t have access to safe water and it’s crippling them,” he said.

He described seeing one child with part of his leg missing lying on the hospital floor for several hours, without receiving treatment for lack of medical staff. Other injured children were lying on makeshift mattresses in car parks and gardens outside, he said.

“Everywhere doctors having to make horrendous decisions on, you know, who they prioritise,” he said.

Citing a U.N. report on the living conditions of displaced residents in northern Gaza, Harris said: “(There are) no medicines, no vaccination activities, no access to safe water and hygiene and no food,” she said.

She described the collapse of Al Shifa Hospital in northern Gaza as a “tragedy” and voiced concern about the detention of some of its medical staff by Israeli forces during a WHO evacuation convoy. Nearly three quarters of hospitals, or 26 out of 36, have shut down entirely in Gaza, she added, due to bombings or lack of fuel.

Hospital chain Aster DM to sell majority stake in Gulf business for $1 bln

Bengaluru/Hyderabad (Reuters) – Hospital chain Aster DM Healthcare (ATRD.NS) has agreed to sell a majority stake in its Gulf business to an investor group based in the region for $1 billion as part of a plan to separate the unit from its Indian entity.

The offloading of a 65% stake in the business to a consortium led by private-equity firm Fajr Capital brings to a close a year-long sale process after the business was seen as undervalued by some of its investors.

The investor group also comprises UAE sovereign wealth fund Emirates Investment Authority, Al Dhow Holding Co, Wafra International Investment Co and Saudi Arabian billionaire Olayan family’s Hana Investment.

Aster promoter, Moopen Family, will hold the remaining stake in the unit

The move will help Aster focus more on its India business, in which it also plans to sell a 30% stake for about $300 million as it plans to go on an expansion spree.

Alisha Moopen, managing director of Aster’s Gulf business, told Reuters that the stake sale gives the company more flexibility to pursue growth.

“I think there is a lot of opportunities for inorganic growth in India which we haven’t been able to pursue so actively because of this conflicting requirements and investment in capital requirements between the two regions,” Moopen said.

Aster DM currently operates 32 hospitals, 127 clinics and 521 pharmacies in India and the UAE. Shares of Aster DM closed down 1.48%, valuing the company at about $2 billion.

The company also plans to scale up expansion in Saudi Arabia, planning to open 180-200 pharmacies in the next four years, Moopen said.

Reuters, in July, reported Aster confirming it was in talks with Fajr and other parties as part of exploring a potential carve-out of its Gulf unit.

Muslims in Europe feel vulnerable to rising hostility over Israel-Gaza

Paris/Berlin/London (Reuters) – Jian Omar, a Berlin lawmaker of Kurdish-Syrian background, feels unprotected by police after suffering hate-filled flyers mixed with glass and faeces, a broken window and a hammer-wielding assailant since the deadly Oct. 7 Hamas attack in Israel.

The three incidents at Omar’s constituency office form part of increased hostility to Muslims in Europe fanned at times by politicians since the Hamas assault, more than 30 community leaders and advocates consulted by Reuters said, adding that incidents were under-reported because of low trust in police.

“I feel really alone and if somebody with the status of an elected official can’t be protected then how must others feel?” said Omar. He said police were investigating but had told him they could not offer extra security at his premises.

“Imagine if a white German politician was attacked by a migrant or a refugee,” he said, suggesting security forces would do more in such cases. Berlin police did not reply to a request for comment.

Hate crime has risen dramatically in Europe since the Oct. 7 assault killed around 1,200 Israelis and the subsequent Israeli invasion of Gaza which has killed around 14,800 Palestinians, with registered antisemitic incidents up 1,240% in London and steep rises also seen in France and Germany.

Official data shows a significant, smaller increase in anti-Muslim incidents in Britain and is patchy for the other two countries. It does not fully capture the extent of attacks and hostility against individuals and mosques, including children targeted at school, according to the people Reuters consulted, some of whom asked not to be named citing fear of retaliation.

Under-reporting is also prevalent among victims of antisemitism, Jewish groups and leaders in the three countries said.

Zara Mohammed, secretary general of the Muslim Council of Britain, said government language, such as calling pro-Palestinian protests “hate marches,” had made the fight against antisemitism and for the rights of Muslims or Palestinians a zero-sum game in many people’s minds.

“Ministers have been really reckless, this peddling of the culture wars and pitting communities off one another is really unhelpful and it is very divisive and dangerous as well,” she said. The British government did not respond to a question about official use of such language.

European Muslims’ sense of vulnerability was further heightened with the electoral victory last week of Dutch far-right populist Geert Wilders, who previously called for mosques and the Koran to be banned in the Netherlands. In the United States, there has been deadly anti-Palestinian violence since Oct. 7.

At the Ibn Ben Badis Mosque in Nanterre, Paris, elderly worshippers fear attending the dawn prayer in the dark, two worshippers there said, after a written arson threat against the mosque in late October apparently from a far-right sympathiser.

Rachid Abdouni, the mosque president, said a request for extra police protection was not met. Local police said they were patrolling the area but were low on resources, he said. The police did not immediately respond to a comment request.

“Do I want my daughter to grow up in this climate?” said Khalil Raboun, 42, a French-Moroccan taxi driver, speaking after Friday prayers outside the mosque.

Under- Reporting

Attempted arson, verbal abuse, vandalism and a pig’s head left at a mosque site were among more than 700 reports of Islamophobic incidents in Britain the month after the Hamas attack, campaign group Tell Mama said, a sevenfold increase over the previous month. Tell Mama only reports some incidents to the police, with the consent of the complainant.

The French Muslim Council received 42 letters containing threats or insults between October 7 and November 1 but has not reported any of them, said council vice president Abdallah Zekri, among a wave of hate mail and racist graffiti on mosques.

“The vast majority of Muslims do not file a complaint when they are victims of such acts. Even the heads of mosques don’t want to. They don’t want to spend two hours or more in a police station to file a complaint that in the end is often going to be dismissed,” Zekri said.

In Germany also, police often do not register Islamophobic crime as such due to a lack of awareness, for example attacks on mosques are sometimes registered simply as damage to property, said Rima Hanano of Claim, an NGO.

“People affected by racism like Muslims and those perceived to be Muslim often fear to go to authorities because they are afraid of secondary victimization, that they will not be believed or made out to be the perpetrators,” she said.

A British government spokesperson said “there must be zero tolerance for antisemitism, anti-Muslim hatred, or any other forms of hatred,” adding that police were expected to fully investigate such attacks.

Germany’s interior ministry said it “confronts all kinds of hate, including Islamophobia explicitly” and noted it conducted a survey this year it said gave greater understanding of anti-Muslim racism.

In France, interior minister Gerald Darmanin acknowledged additional anti-Muslim acts since Oct. 7, however French official figures for 2023 appeared on track for a drop, with 130 incidents through Nov. 14, compared to 188 incidents recorded all last year. The ministry did not respond to a request for comment.

A spokesperson for France’s national police acknowledged data on anti-Muslim incidents was “incomplete”, and relied on victims filing a complaint. Security services are actively monitoring for antisemitic incidents, the spokesperson said.

History

Both France and Germany developed institutional mechanisms to respond to antisemitic acts in the aftermath of the Holocaust of World War Two and in response to continued prejudice against Jews.

Western Europe’s colonial and religious past has also cast Islam as regressive and foreign, contributing to entrenched prejudice among parts of the population and in institutions, said Reza Zia-Ebrahimi, historian at Kings College London and author of ‘Antisemitism and Islamophobia: an entangled history’.

Attacks by Islamist militants in Europe or abroad often bring repercussions for the general Muslim population.

After mosques were defaced and the spread of anti-Muslim commentary by pundits on TV, French President Emmanuel Macron said last week that “to protect French people of Jewish faith should not be to pillory French people of Muslim faith.”

However, historian Zia-Ebrahimi said, the decision by France’s interior ministry to ban pro-Palestinian protests as a risk to public order in the aftermath of the Hamas attacks fomented a view that Arabs are aggressors and that supporters of Palestinians are motivated by antisemitism.

Amnesty International called the blanket ban disproportionate.

Aiman Mazyek of the German Muslim Council said a federal government commissioner on Islamophobia was needed to complement existing commissioners for antisemitism and anti-Roma racism.

“The fact that we have so many commissioners in Germany and no commissioner for Islam in particular is discrimination in itself,” he said.

Germany’s newly appointed commissioner on racism, Reem Alabali-Radovan, acknowledged a need for better monitoring after the interior ministry survey showed one in two Germans hold Islamophobic views.

For some Muslims in Germany, which has welcomed about a million Syrians and just under 400,000 Afghans in recent years, rising hostility came as a surprise.

Ghalia Zaghal came to Germany from Syria in 2015 and said she never had major issues with discrimination. But shortly after Oct. 7, she was shoved twice in one day, with one man shouting at her: “This is my street, not yours.”

“I was too shocked to go to the police,” said Zaghal, who owns a Berlin beauty salon.

Israel, Hamas due to release more people amid efforts to extend truce

Gaza/Jerusalem (Reuters) – Hamas and Israel were expected to release more hostages and prisoners on Wednesday, the last day of a prolonged six-day truce in the Gaza Strip conflict, as attention focused on whether mediator Qatar could negotiate another extension.

Israeli media, citing the prime minister’s office, reported that Israel received a list of hostages expected to be released by Hamas on Wednesday. The prime minister’s office had no immediate comment.

Israel has said the truce could be prolonged further, provided Hamas continues to free at least 10 Israeli hostages per day. But with fewer women and children still in captivity, keeping the guns quiet beyond Wednesday may require negotiating to free at least some Israeli men for the first time.

The Palestinian militant group Hamas and allied group Islamic Jihad freed 12 hostages on Tuesday, bringing the total released since the truce began on Friday to 81. Those have been mostly Israeli women and children along with foreign citizens.

The hostages – 10 Israeli women and two Thai citizens – were aged 17 to 84 and included a mother-daughter pair. All were given initial medical checks then moved to Israeli hospitals where they were to meet their families.

A short time later, Israel released 30 Palestinians from Ofer Prison in the occupied West Bank and a Jerusalem detention centre. The Palestinian Prisoner’s Club, a semi-official organisation, said half were women and the remainder were teenage males. That brought the total number of Palestinians released under the truce to 180.

The hostages were among some 240 people seized by Hamas gunmen during a rampage into southern Israel on Oct. 7 in which Israel says 1,200 people were killed. Israel’s bombardment of Hamas-ruled Gaza in retaliation has killed more than 15,000 Gazans, health authorities there said.

Qatar, which mediated indirect talks between Hamas and Israel that resulted in the ceasefire, on Tuesday hosted the spy chiefs from Israel’s Mossad and the United States’ CIA.

The officials discussed possible parameters of a new phase of the truce deal including Hamas releasing hostages who are men or military personnel, not just women and children, a source briefed on the matter said. They also considered what might be needed to reach a ceasefire lasting more than a handful of days.

Qatar spoke to Hamas before the meeting to get a sense of what the group might agree to. The Israelis and Hamas are now internally discussing the ideas explored at the meeting, the source added.

Separately, foreign ministers of the Group of Seven nations on Tuesday called in a joint statement for an extension of the ceasefire and more humanitarian aid.

About 159 hostages remain in Gaza. The White House said on Tuesday this includes eight to nine Americans. U.S. national security spokesperson John Kirby said the U.S. was hopeful Hamas would release more Americans, and the U.S. government would work with Qatar to extend the pause in fighting.

“We want to see all the hostages out. The way to do that is these pauses,” Kirby told reporters traveling on the president’s plane on Tuesday.

Warning Of More Deaths Due To Disease In Gaza

The truce has brought Gaza its first respite after seven weeks of fighting and bombardment that has reduced much of the seaside enclave to rubble. It had been due to expire overnight into Tuesday, but both sides agreed to extend the pause to allow for the release of more people.

Israel’s siege has led to the collapse of Gaza’s health care system, especially in the north where no hospitals remain functioning. The World Health Organization said more Gazans could soon be dying of disease than from bombing and many had no access to medicines, vaccines, safe water and hygiene and no food.

More than two-thirds of Gaza’s 2.3 million people have lost their homes to Israeli bombardments, with thousands of families sleeping rough in makeshift shelters with only the belongings they could carry. They are desperately short of food, fuel and clean water.

“We have a dramatic humanitarian situation. At the same time, we want to have the full release of all hostages, that we believe should be unconditional and immediate. But we need a humanitarian ceasefire in Gaza now,” U.N. Secretary-General Antonio Guterres told reporters on Tuesday.

The temporary ceasefire has allowed about 800 aid trucks to enter Gaza, and the first of three U.S. planes with humanitarian supplies for Gaza landed in Egypt on Tuesday.

U.N. aid chief Martin Griffiths was to travel to the Jordanian capital Amman on Wednesday to discuss opening the Kerem Shalom crossing to allow for humanitarian aid to enter Gaza from Israel.

Located at the intersection of Israel, the Gaza Strip and Egypt, the Kerem Shalom crossing transported more than 60% of the aid going into Gaza before the current conflict.

Aid for Gaza now comes through the Rafah crossing on the Egyptian border, which was designed for pedestrian crossings and not trucks.

Erdogan tells UN chief Israel must be tried in international courts for Gaza crimes

Ankara (Reuters) – Turkish President Tayyip Erdogan on Tuesday told United Nations Secretary General Antonio Guterres that Israel must be held accountable in international courts for what he called war crimes it committed in Gaza, the Turkish presidency said.

Israel has mounted an offensive by air and ground against Hamas militants in Gaza in which more than 15,000 people have been killed, according to Gaza health authorities.

The offensive was launched after Hamas went on a rampage in southern Israel on Oct. 7, killing some 1,200 people and taking 240 hostage.

In a phone call ahead of a U.N. Security Council meeting on Gaza planned for Wednesday, Erdogan and Guterres discussed the “expectations of the international community regarding Israel’s unlawful attacks”, access of humanitarian aid into the enclave, and efforts for a lasting peace, the Turkish presidency said.

“During the call, President Erdogan said Israel continues to shamelessly trample on international law, the laws of war, and international humanitarian law by looking in the eyes of the international community, and it must be held accountable for the crimes it committed in front of international law,” it said in a statement.

Turkey’s foreign ministry said Foreign Minister Hakan Fidan would attend the U.N. Security Council meeting in New York.

In a statement, it added that Fidan would hold also meet his counterparts as part of a so-called contact group of some Muslim countries, formed by the Arab League and Organisation of Islamic Cooperation (OIC) this month to discuss Gaza with Western powers and others.

Turkey has harshly criticised Israel’s attacks on Gaza and called for an immediate ceasefire to allow for discussions over a two-state solution to the wider Israel-Palestinian conflict.

Erdogan has called the Israeli attacks on Gaza a genocide and accused Israel of being a “teror state”. Israel rejects such charges and say it is acting in self-defence against a foe bent on it destruction.

Turkey also hosts some members of Hamas, which it does not consider a terrorist group, unlike the United States, European Union, and some Gulf countries. It has accused the West, apart from Spain and Belgium, of complicity due to their support of Israel.

As global rates turn, banks in India and Indonesia set to win

Singapore (Reuters) – As Asia’s banking sector navigates a peak in global interest rates and risks of slower growth, investors are wagering that banks in India and Indonesia have the strongest loan and profitability profiles to provide returns next year.

Over the past 18 months Asian central banks tracked the U.S. Federal Reserve tightening monetary policy to battle inflation, but their interest rates hikes were smaller and slower, resulting in better interest income for the region’s banks without loan growth suffering.

Banking indexes in India (.dMIIN0CB00PUS), Indonesia (.dMIID0CB00PUS) and Thailand (.dMITH0CB00PUS) have all outperformed the broader MSCI Asia ex-Japan index (.MIAPJ0000PUS) as well as the S&P banks index (.SPXBK) since March 2022, when the Fed started raising rates.

But now, as a steep global rates cycle peaks and the spectre of recession looms, investors are turning selective and focusing on banks that kept funding costs down while expanding loans.

“The hope is that we’re going to see a mild rate-cutting cycle coming into next year, nothing too aggressive … that should generally be positive for the financial sector in Asia because it should spur loan growth,” said Frederic Neumann, chief Asia economist at HSBC.

Neumann points to India, where banks have delivered double-digit loan growth over the past few months due to rising demand for credit in the world’s most populous but under-banked nation.

Loan growth at Asian banks is estimated to rise from 4.5% this year to 10% next year, LSEG data shows, with banks in India and Indonesia leading with 15% and 11% growth, respectively.

Analysts at J.P. Morgan say Asian banks, excluding China’s, have led in the global demand for aggregate loans, and their interest margins of 2.4% in 2022 were already at pre-pandemic levels.

Xin-Yao Ng, investment manager of Asian equities at UK fund manager abrdn, says the easy wins for banks from rising borrowing costs are over, which makes him selective.

“We think rates have peaked or are near peak, but the way down will be less steep than the way up. Thus, this headwind will be more gradual, not an earnings shock,” Ng says.

Ng likes banks in India and Indonesia, given the better economic growth in those economies and ability of banks to sustain margins.

LSEG data shows profits at banks in India and Indonesia will grow 13% and 11% respectively next year, nearly double the 6% average rise across Asia-Pacific banks.

Indian banking bellwethers HDFC (HDBK.NS), ICICI (ICBK.NS), Kotak Mahindra Bank (KTKM.NS) and Axis Bank (AXBK.NS) comprise a major part of the portfolio of Vinay Agarwal, Asia portfolio manager and director at FSSA Investment Management.

Agarwal said the increase in disposable income in India will mean consumers will more than just a bank deposit, leading him to pick banks which are market leaders even in asset management and insurance businesses.

Indonesia’s Bank Central Asia (BCA) (BBCA.JK) “is just a class apart,” said Agarwal.

Morgan Stanley added BCA to its focus list for Asia-Pacific excluding Japan this month, citing its strength in deposit franchise and loan pricing.

The risk for investors lies in the rich valuations of these banks. HDFC and ICICI trade at a price-to-book (P/B) ratio, a metric that compares stock price with underlying assets, of 3, while Axis trades at 2.3 and BCA at 5.

That compares to price-to-book ratio for MSCI’s index for all-country Asian banks (.dMIAS0CB00PUS) of 0.9.

India and Indonesia also face elections next year, which could mean more volatility in those markets.

Laggards are in markets such as Singapore, Hong Kong and South Korea, whose more mature financial sectors and low interest rates reduce the scope for banks to manoeuvre.

Profit growth expectations too are lower in these developed markets. Banks in Australia are estimated to see a drop of 5% in profit in 2024 while profits at Singapore banks will be flat. South Korean banks are expected to see a profit growth of 4%.

Reuters Graphics
Reuters Graphics

For banks in China where monetary policy is still being loosened, the market is in the process of pricing in continued net interest margin pressure, analysts at Morgan Stanley wrote this month, while retaining their underweight stance.