Tag Archives: asia

North Korea says U.S. drills have pushed situation to ‘extreme red-line’ -KCNA

SEOUL, Feb 2 (Reuters) – North Korea’s Foreign Ministry said on Thursday that drills by the United States and its allies have pushed the situation to an “extreme red-line” and threaten to turn the peninsula into a “huge war arsenal and a more critical war zone.”

The statement, carried by state news agency KCNA, said Pyongyang was not interested in dialogue as long as Washington pursues hostile policies.

“The military and political situation on the Korean peninsula and in the region has reached an extreme red-line due to the reckless military confrontational maneuvers and hostile acts of the U.S. and its vassal forces,” an unnamed ministry spokesperson said in the statement.

In Washington, the White House rejected the North Korean statement and reiterated a willingness to meet with North Korean diplomats “at a time and place convenient for them.”

“We have made clear we have no hostile intent toward the DPRK and seek serious and sustained diplomacy to address the full range of issues of concern to both countries and the region,” said a spokesperson for the White House National Security Council.

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The North Korean statement cited a visit to Seoul this week by U.S. Defense Secretary Lloyd Austin. On Tuesday Austin and his South Korean counterpart vowed to expand military drills and deploy more “strategic assets,” such as aircraft carriers and long-range bombers, to counter North Korea’s weapons development and prevent a war.

“This is a vivid expression of the U.S. dangerous scenario which will result in turning the Korean peninsula into a huge war arsenal and a more critical war zone,” the North Korean statement said.

North Korea will respond to any military moves by the United States, and has strong counteraction strategies, including “the most overwhelming nuclear force” if necessary, the statement added.

More than 28,500 American troops are based in South Korea as a legacy of the 1950-1953 Korean War, which ended in an armistice rather than a peace treaty.

“We reject the notion that our joint exercises with partners in the region serve as any sort of provocation. These are routine exercises fully consistent with past practice,” the White House statement said.

Last year, North Korea conducted a record number of ballistic missile tests, which are banned by United Nations Security Council resolutions. It was also observed reopening its shuttered nuclear weapons test site, raising expectations of a nuclear test for the first time since 2017.

In New York, South Korea’s foreign minister, Park Jin, met with the United Nations Secretary-General Antonio Guterres on Wednesday and called for the U.N.’s continued attention to North Korea’s recent provocations and efforts to implement sanctions on the reclusive regime.

Guterres said any resumption of nuclear testing by North Korea would deal a devastating blow to regional and international security, and reaffirmed support to build lasting peace on the Korean peninsula, according to Park’s office.

Park is on a four-day trip to the United States, which will include a meeting with U.S. Secretary of State Antony Blinken in Washington on Friday.

On Wednesday the United States and South Korea carried out a joint air drill with American B-1B heavy bombers and F-22 stealth fighters, as well as F-35 jets from both countries, according to South Korea’s Defense Ministry.

“The combined air drills this time show the U.S.’ will and capabilities to provide strong and credible extended deterrence against North Korea’s nuclear and missile threats,” the Defense Ministry said in a statement.

Reporting by Josh Smith; Additional reporting by Soo-hyang Choi and Steve Holland; Editing by Jonathan Oatis, Bill Berkrot and Gerry Doyle

Our Standards: The Thomson Reuters Trust Principles.

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Hindenburg bet against India’s Adani puzzles rival U.S. short sellers

Feb 1 (Reuters) – When Hindenburg Research revealed a short position in Adani Group last week, some U.S. investors said they were intrigued about the actual mechanics of its trade, because Indian securities rules make it hard for foreigners to bet against companies there.

Hindenburg’s bet has been lucrative so far. Its allegations, which the Indian conglomerate has denied, have wiped out more than $80 billion of market value from its seven listed companies and knocked billionaire Gautam Adani from his perch as the world’s third-richest man. On Wednesday, a $2.5 billion sale of shares by one of its companies Adani Enterprises ADEL.NS was called off.

The short seller has said it held its position, which profits from the fall in the value of Adani Group shares and bonds, “through U.S.-traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities.” But it has revealed little else about the size of its bets and the kind of derivatives and reference securities it used, leaving rivals wondering how the trade worked.

“I wanted to short it myself, but I was not able to find a way to do it with my prime broker,” said Citron Research founder Andrew Left, referring to Adani Enterprises and other companies .

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Hindenburg declined to comment to Reuters on the method it used to place its bets against Adani. Adani Group and the stock market regulator the Securities and Exchange Board of India (SEBI) did not respond to a request for comment.

DIFFICULT TO SHORT

Typically, investors who want to bet that the company’s stock will fall borrow shares in the market and sell them, hoping to buy them back at a lower price, in a practice called short selling.

Short sellers such as Hindenburg like to build positions quietly before unveiling their thesis about the company to maximize profits. Discretion is necessary for them, as word of their presence in the stock sometimes can be enough to cause the shares to fall.

In India, however, securities rules make it hard to quietly build positions. Institutional investors are required to disclose their short positions upfront and there are other restrictions and registration requirements on foreign investors.

With the Adani Group, there are added complications: the shareholding is concentrated in the hands of the Adani family and its shares do not trade on exchanges abroad.

Nathan Anderson, Hindenburg’s founder, has been coy even with peers about his bet against Adani. Left and Carson Block, the founder of Muddy Waters Research and another prominent short seller, told Reuters that they got a single word response – ‘thanks’ – to messages of congratulations they sent to Anderson, when usually they would talk shop.

Cracking the code of how Hindenburg did the trade could lead to more short sellers taking positions against Indian companies, which have been rare, analysts said.

“Once these things (short-seller attacks) begin there are others who could be looking,” said Amit Tandon, managing director of proxy and governance firm Institutional Investor Advisory Services (IiAS) in India.

DERIVATIVE TRADES

Reuters could not learn details of Hindenburg’s trades. But several bankers familiar with trading in Indian securities said the more profitable piece of the short seller’s bet would likely lie in the derivative trades it had placed.

Some of Adani’s U.S. dollar corporate bonds , , fell 15-20 cents in the days after the report was released, which would make that bet profitable.

But there are limits. Only a few billion dollars of bonds in total were outstanding and they were not easily available to borrow, one debt banker said.

A more profitable way, these bankers said, would be to place the bet via participatory notes, or P-notes, which are lightly regulated offshore derivatives based off shares of Indian companies.

The entities that create the P-notes are registered with the Indian stock market regulator, but anyone can invest in them without having to directly register with SEBI. An investor can further use intermediaries to obscure its position.

Moreover, the market for P-notes is large. Billions of dollars’ worth of P-notes are traded every year, regulatory data shows, making it possible to place large bets, the bankers said.

(This story has been refiled to add dropped word ‘to’ in the lead paragraph)

Reporting by Shankar Ramakrishnan, Svea Herbst-Bayliss and Carolina Mandl; additional reporting by Jayshree Pyasi in Mumbai and Anshuman Daga in Singapore; Editing by Paritosh Bansal and Anna Driver

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Airbus and Qatar Airways settle bitter A350 jet row

PARIS, Feb 1 (Reuters) – Airbus (AIR.PA) and Qatar Airways have settled a dispute over grounded A350 jets, the companies said on Wednesday, averting a potentially damaging UK court trial after a blistering 18-month feud that tore the lid off the global jet market.

The “amicable and mutually agreeable settlement” ends a $2 billion row over surface damage on the long-haul jets. The spat led to the withdrawal of billions of dollars’ worth of jet deals by Airbus and prompted Qatar to increase purchases from Boeing.

The cancelled orders for 23 undelivered A350s and 50 smaller A321neos have been restored under the new deal, which is also expected to see Airbus pay several hundred million dollars to the Gulf carrier, while winning a reprieve from other claims.

Financial details were not publicly disclosed.

The companies said neither admitted liability. Both pledged to drop claims and “move forward and work together as partners”.

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The deal heads off what amounted to an unprecedented public divorce trial between heavyweights in the normally tight-knit and secretive $150 billion jet industry.

The two sides had piled up combined claims and counter-claims worth about $2 billion ahead of the June trial.

French Finance Minister Bruno Le Maire welcomed the deal, which came in the wake of increasing political involvement amid close ties between France, where Airbus is based, and Qatar.

“It is the culmination of significant joint efforts. It is excellent news for the French aerospace industry,” he said.

Airbus shares closed up 1% before the announcement.

Qatar Airways had taken the unusual step of publicly challenging the world’s largest planemaker over safety after paint cracks exposed gaps in a sub-layer of lightning protection on its new-generation A350 carbon-composite jets.

Airbus had acknowledged quality flaws but, backed by European regulators, had insisted that the jets were safe and accused the airline of exaggerating flaws to win compensation.

DAMAGES

Supported by a growing army of lawyers, both sides repeatedly bickered in preliminary hearings over access to documents, to the growing frustration of a judge forced to order co-operation.

Analysts said the deal would allow both sides to feel vindicated, with Qatar Airways winning damages and recognition that the problem lay outside the manual and therefore required a new repair, and Airbus standing its ground on safety and spared the difficult task of finding a home for cancelled A350s.

Qatar will get the in-demand A321neos needed to plan its growth, albeit three years later than expected, in 2026. Airbus’ decision to revoke that order, separate from the disputed A350 contract, had been criticised by global airlines group IATA.

Airbus said it had done its best to avoid pushing Qatar too far back in the queue, though some experts question whether it could have met the earlier schedule because of supply problems.

The settlement is also expected to stop the clock ticking on a claim for grounding compensation that had been growing by $6 million a day, triggered by a clause agreed upon after the repainting of a jet for the World Cup revealed significant surface damage.

Originally valued at $200,000 per day per plane, Airbus’ theoretical liability was ratcheting upwards by a total of $250,000 an hour for 30 jets – or $2 billion a year – by the time the deal was struck, based on court filings. Neither side commented on settlement details.

Airbus said it would now work with the airline and regulators to provide the necessary “repair solution” and return Qatar’s 30 grounded planes to the air.

Confirmation of a settlement came after Reuters reported a deal could arrive as early as Wednesday. In 2021, a Reuters investigation revealed other airlines had been affected by A350 skin degradation, all of whom said it was “cosmetic”.

The dispute has focused attention on the design of modern carbon-fibre jets, which do not interact as smoothly with paint as traditional metal ones, and shed light on industrial methods.

Additional reporting by Leigh Thomas, Michel Rose
Editing by David Goodman, Diane Craft and Gerry Doyle

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Nikki Haley, once Trump’s UN ambassador, to take him on in 2024

WASHINGTON, Feb 1 (Reuters) – Former South Carolina Governor Nikki Haley will kick off her campaign for the 2024 Republican presidential nomination this month, squaring off against her one-time boss, former President Donald Trump, two sources familiar with her plans said on Wednesday.

The move would make her just the second declared Republican candidate and could set the stage for a more combative phase of the campaign, potentially putting her in the sights of the combative former U.S. president.

Haley’s campaign sent an email to supporters on Wednesday inviting them to a Feb. 15 event in Charleston. There she will declare her candidacy, the sources said.

South Carolina is expected to host one of the first Republican nominating primaries in 2024 and will play an important role in picking the eventual candidate.

The daughter of two Indian immigrants who ran a successful clothing store in a rural part of the state, Haley has gained a reputation in the Republican Party as a solid conservative who has the ability to address issues of gender and race in a more credible fashion than many of her peers.

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She has also pitched herself as a stalwart defender of American interests abroad, having served as U.S. ambassador to the United Nations under Trump from 2017 to 2018. During that time, the United States pulled out of the Iran nuclear deal, which was inked under Democratic President Barack Obama and was highly unpopular among Republicans.

One Haley associate said she chose to launch her campaign this early to try to grab voters’ attention and shake up a race that had so far been dominated by Trump and Florida Governor Ron DeSantis, who has not yet declared whether he will run.

Many key Republican donors and elected officials in South Carolina have been looking for alternatives to Trump amid concerns about his electability, according to conservations in recent weeks with more than a dozen party officials and strategists.

Several prominent Republicans, including Haley and U.S. Senator Tim Scott opted to skip a Trump campaign appearance in Columbia on Saturday, which was intended to showcase his support in the state.

Trump told reporters on Saturday that Haley had called him to say she was considering a run and that he told her “go by your hear if you want to run,” according to multiple media reports.

Haley received national attention in 2015 when, as governor, she signed a bill into law removing the Confederate battle flag from the grounds of the South Carolina state capitol, following the murder of nine black churchgoers by white supremacist Dylann Roof.

If she were to win the nomination, Haley would be the first woman at the top of the Republican presidential ticket in history, as well as the party’s first non-white nominee.

Among her major challenges will be nailing down a consistent message. Even in a field where most candidates have changed their mind about key issues multiple times, Haley is particularly chameleonic.

She has distanced herself from Trump several times, only to later soften her rhetoric, saying he has an important role to play in the Republican Party.

While she has criticized Republicans for baselessly casting doubt on the results of the 2020 presidential election, she campaigned on behalf of multiple candidates who supported Trump’s false election fraud claims during the 2022 midterms.

Even as she has at times adopted a conciliatory message on racial issues, she often opts for a less measured tone. In November, she said at a campaign rally that Democratic Georgia Senator Raphael Warnock, a Black man born in Savannah, should be “deported.”

Playing into Haley’s hands may be geography: South Carolina is historically the third state to host the Republican nominating contest, and it often plays an outsized role in the race. Haley, who governed the state from 2011 to 2017, is popular there, polls show.

Trump and DeSantis have both been active in the state.

While Haley comes into the race as an underdog – most national polls show her support in the single digits – she is used to running from behind, having gained a reputation in political circles for coming out on top in tough-to-win races.

A campaign spokesperson declined to comment on Wednesday.

Reporting by Trevor Hunnicutt and Gram Slattery; Editing by Ross Colvin, Daniel Wallis and Andrew Heavens

Our Standards: The Thomson Reuters Trust Principles.

Gram Slattery

Thomson Reuters

Washington-based correspondent covering campaigns and Congress. Previously posted in Rio de Janeiro, Sao Paulo and Santiago, Chile, and has reported extensively throughout Latin America. Co-winner of the 2021 Reuters Journalist of the Year Award in the business coverage category for a series on corruption and fraud in the oil industry. He was born in Massachusetts and graduated from Harvard College.

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Adani abandons $2.5 billion share sale in big blow to Indian tycoon

NEW DELHI, Feb 1 (Reuters) – Gautam Adani’s flagship firm called off its $2.5 billion share sale in a dramatic reversal on Wednesday as a rout sparked by a U.S. short-seller’s criticisms wiped billions more off the value of the Indian tycoon’s stocks.

The withdrawal of the Adani Enterprises (ADEL.NS) share offering marks a stunning setback for Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years in line with stock values of his businesses.

“Today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct,” Adani said.

“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans,” the billionaire added in a statement to Indian exchanges.

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Adani, whose global business interests span ports, airports, mining, cement and power, is battling to stabilise his companies and defend his reputation.

“Once the market stabilizes, we will review our capital market strategy,” he added.

A report by Hindenburg Research last week alleged improper use by the of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.

The Jan. 24 report has since triggered a $86 billion erosion in market capitalisation of seven listed Adani Group companies.

Adani Group has denied the allegations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.

REFUNDS

Adani Group was working with its bankers to refund the proceeds received by in the secondary share sale of Adani Enterprises. Anchor investors who had supported the issue included Maybank Securities and Abu Dhabi Investment Authority.

The company aims to protect the interests of its investing community by returning the proceeds, it said.

Adani Group had on Tuesday mustered enough support from investors for the share sale to proceed, in what some saw as a stamp of investor confidence amid the storm.

But after a brief respite, the selloff in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone (APSE.NS) dropping 19%, the worst day on record for both.

The fundraising was critical for Adani, not just because it would have helped cut his group’s debt, but also because it was being seen by some as a gauge of confidence as he faced the biggest business and reputational challenge of his career.

Wednesday’s stock losses saw Adani slip to 15th on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries (RELI.NS) who ranks ninth with a net worth of $83.7 billion.

The share sale had succeeded on Tuesday even when the Adani Enterprises stock price in Mumbai markets traded below the offer price of the share sale.

“I do not know how the markets will behave in short term. But this is a measure to enhance (Adani’s) reputation since the investors were staring at a 30% loss even before the shares were alloted,” said Rajesh Baheti, chief executive, Crossseas Capital Services, an algo trading firm.

Reporting by Aditya Kalra and Jahnavi Nidumolu in Bengaluru; Editing by Anil D’Silva, Kirsten Donovan and Alexander Smith

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Ukraine raids home of billionaire in war-time anti-corruption crackdown

  • Security services make sweeping raids before EU summit
  • Homes of billionaire, former interior minster searched
  • New U.S. weapons would nearly double Ukraine’s range
  • Ukrainian soldier says fighting Russian forces in Bakhmut

KYIV, Feb 1 (Reuters) – Security services searched the home of one of Ukraine’s most prominent billionaires on Wednesday, moving against a figure once seen as President Volodymyr Zelenskiy’s sponsor in what the authorities called a war-time anti-corruption purge.

The action, days before a summit with the European Union, appears to reflect determination by Kyiv to demonstrate that it can be a steward of billions of dollars in Western aid and shed a reputation as one of the world’s most corrupt states.

It came as Kyiv has secured huge pledges of weapons from the West in recent weeks offering new capabilities – the latest expected this week to include rockets from the United States that would nearly double the firing range of Ukrainian forces.

Photographs circulating on social media appeared to show Ihor Kolomoiskiy dressed in a sweatsuit and looking on in the presence of an SBU security service officer at his home.

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The SBU said it had uncovered the embezzlement of more than $1 billion at Ukraine’s biggest oil company, Ukrnafta, and its biggest refiner, Ukrtatnafta. Kolomoiskiy, who has long denied wrongdoing, once held stakes in both firms, which Zelenskiy ordered seized by the state in November under martial law.

Separate raids were carried out at the tax office, and the home of Arsen Avakov, who led Ukraine’s police force as interior minister from 2014-2021. The SBU said it was cracking down on “people whose actions harm the security of the state in various spheres” and promised more details in coming days.

“Every criminal who has the audacity to harm Ukraine, especially in the conditions of war, must clearly understand that we will put handcuffs on his hands,” Ukraine’s security service chief Vasyl Malyuk was quoted as saying on the SBU Telegram channel.

The prosecutor general’s office said the top management of Ukrtatnafta had been notified it was under suspicion, as were a former energy minister, a former deputy defence minister and other officials.

Kolomoiskiy, who faces a fraud case in the United States, has been at the centre of corruption allegations and court disputes for years that Western donors have said must be resolved for Kyiv to win aid.

Zelenskiy, who first came to fame as the star of a sitcom on Kolomoiskiy’s TV station, has long promised to rid Ukraine of so-called oligarchs, but had faced accusations that he was unable to move decisively against his former sponsor.

In an address overnight before the raids, he alluded to new anti-corruption measures in time for Friday’s summit, at which Ukraine is expected to seek firm steps towards joining the EU.

“We are preparing new reforms in Ukraine. Reforms that will change the social, legal and political reality in many ways, making it more human, transparent and effective,” he said, promising to reveal the details soon.

LONGER RANGE MISSILES

Ukrainian forces which recaptured swathes of territory from Russian troops in the second half of 2022 have seen their advance stall since November. Kyiv says the key to regaining the initiative is securing advanced Western weaponry.

Two U.S. officials said a new $2 billion package of military aid to be announced as soon as this week would for the first time include Ground Launched Small Diameter Bombs (GLSDB), a new weapon designed by Boeing. (BA.N)

The cheap gliding missiles can strike targets more than 150 km (90 miles) away, a dramatic increase over the 80 km range of the rockets fired by HIMARS systems which changed the face of the war when Washington sent them last summer.

That would put all of the Russian-occupied territory on Ukraine’s mainland, as well as parts of the Crimea peninsula seized by Moscow in 2014, within range of Kyiv’s forces.

Kremlin spokesman Dmitry Peskov said the arrival of longer range U.S. weapons would escalate the conflict.

Western countries pledged scores of advanced main battle tanks for the first time last week, a breakthrough in support aimed at giving Kyiv the capability to recapture occupied territory this year.

But the arrival of the new weapons is still months away, and in the meantime, Russia has gained momentum on the battlefield, announcing advances north and south of the city of Bakhmut, its main target for months.

Kyiv disputes many of those claims and Reuters could not independently verify the full situation, but the locations of reported fighting clearly indicate incremental Russian advances.

Troops were fighting building to building in Bakhmut for gains of barely 100 metres (yards) a night, and the city was coming under constant Russian shelling, a soldier in a Ukrainian unit of Belarusian volunteers told Reuters from inside the city.

Ukraine’s general staff said late on Tuesday its forces had come under fire in Bakhmut and the villages of Klishchiivka and Kurdyumivka on its southern approaches.

South of Bakhmut, Russia has also launched a major new offensive this week on Vuhledar, a longstanding Ukrainian-held bastion at the junction of the southern and eastern front lines. Kyiv says its forces have so far held there.

PURGE

The infusion of Western military and financial aid creates new pressure on Zelenskiy to demonstrate his government can clean up Ukraine.

Last week, he purged more than a dozen senior officials following a series of scandals and graft allegations in the biggest shakeup of Ukraine’s leadership since the invasion.

Following Wednesday’s raids, the parliamentary leader of Zelenskiy’s Servant of the People party, David Arakhamia, wrote on Telegram: “The country will change during the war. If someone is not ready for change, then the state itself will come and help them change.”

Reporting by Reuters bureaux
Writing by Peter Graff
Editing by Philippa Fletcher

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India hikes spending, shuns ‘outright populism’ in last pre-election budget

  • Capex to rise 33% to 10 trillion rupees in 2023/24
  • Govt targets gross borrowing of 15.43 trillion rupees
  • Eyes fiscal deficit of 5.9% in 2023/24, 4.5% by 2025/26

NEW DELHI, Feb 1 (Reuters) – India announced on Wednesday one of its biggest ever increases in capital spending for the next fiscal year to create jobs but targeted a narrower fiscal deficit in its last full budget ahead of a parliamentary election due in 2024.

Prime Minister Narendra Modi’s party has been under pressure to create jobs in the populous country where many have struggled to find employment, although the economy is now one of the world’s fastest-growing.

“After a subdued period of the pandemic, private investments are growing again,” Finance Minister Nirmala Sitharaman said as she presented the 2023/24 budget in parliament.

“The budget makes the need once again to ramp up the virtuous cycle of investment and job creation. Capital investment is being increased steeply for the third year in a row by 33% to 10 trillion rupees.”

Reuters Graphics

The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22.

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Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1.

Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year and slightly lower than a Reuters poll of 6%. The aim is to lower the deficit to 4.5% by 2025/26.

Reuters Graphics

STEADY ‘MACRO BOAT’

Brokerage Nomura said the budget “prudently pushes for growth, without rocking the macro boat”.

“In the event, the government has presented a good budget. It has pushed for growth via public capex and continued on the path towards fiscal consolidation, without offering much in terms of outright populism.”

Capital Economics said the “absence of a fiscal blowout”, a recent drop in inflation and signs of moderating growth could convince India’s central bank to slow the pace of rate hikes next week.

It said there was still a chance of fiscal slippage as campaigning kicks off for the election, in which Modi is widely projected to win a third straight term.

The finance ministry’s annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% next fiscal year, down from 7% projected for the current year, while warning about the impact of cooling global demand on exports.

Sitharaman said India’s economy was “on the right track, and despite a time of challenges, heading towards a bright future”.

India’s real GDP is forecast to grow in the range of 6-6.8% in FY24

Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at 3.75 trillion rupees. The government cut spending on a key rural jobs guarantee programme to 600 billion rupees – the smallest in more than five years – from 894 billion rupees for this fiscal year.

Reuters Graphics

The government’s gross market borrowing is estimated to rise about 9% to 15.43 trillion rupees next fiscal year.

Reuters Graphics Reuters Graphics

CONSTRAINTS

Moody’s Investors Service said the narrower fiscal deficit projection pointed to the government’s commitment to longer-term fiscal sustainability, but that a “high debt burden and weak debt affordability remain key constraints that offset India’s fundamental strengths”.

Among other moves to stimulate consumption, the surcharge on annual income above 50 million rupees was cut to 25% from 37%.

Indian shares reversed earlier gains to close lower on Wednesday, led by a fall in insurance companies after the budget proposed to limit tax exemptions for insurance proceeds, while Adani Group shares tumbled again as it struggles to repel concerns raised by a U.S. short seller.

Since taking office in 2014, Modi has ramped up capital spending including on roads and energy, while wooing investors through lower tax rates and labour reforms, and offering subsidies to poor households to clinch their political support.

A lack of jobs for young people, and meagre wages for those who do find work, has been one of the main criticisms of Modi.

Sitharaman also said the government was allocating 350 billion rupees for energy transition, as Modi focuses on green hydrogen and other cleaner fuels to meet India’s climate goals.

($1 = 81.7725 Indian rupees)

Reporting by Shubham Batra, Nikunj Ohri, Shivangi Acharya, Sarita Singh, Nigam Prusty, Manoj Kumar, Rupam Jain and Indian bureaux; Writing by Krishna N. Das; Editing by Kim Coghill, Jacqueline Wong and Gareth Jones

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Adani loses Asia’s richest crown as stock rout deepens to $84 billion

BENGALURU, Feb 1 (Reuters) – Shares in Indian tycoon Gautam Adani’s conglomerate plunged again on Wednesday as a rout in his companies deepened to $84 billion in the wake of a U.S. short-seller report, with the billionaire also losing his title as Asia’s richest person.

Wednesday’s stock losses saw Adani slip to 15th on Forbes rich list with an estimated net worth of $76.8 billion, below rival Mukesh Ambani, the chairman of Reliance Industries Ltd (RELI.NS) who ranks ninth with a net worth of $83.6 billion.

Before the critical report by U.S. short-seller Hindenburg, Adani had ranked third.

The losses mark a dramatic setback for Adani, the school-dropout-turned-billionaire whose business interests stretch from ports and airports to mining and cement. Now, the tycoon is fighting to stabilise his businesses and defend his reputation.

It comes just a day after the group managed to muster support from investors for a $2.5 billion share sale for flagship firm Adani Enterprises on Tuesday, in what some saw as a stamp of investor confidence.

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The report by Hindenburg Research last week alleged improper use by the Adani Group of offshore tax havens and stock manipulation. It also raised concerns about high debt and the valuations of seven listed Adani companies.

The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.

Shares in Adani Enterprises (ADEL.NS), often described as the incubator of Adani businesses, plunged 30% on Wednesday. Adani Power (ADAN.NS) fell 5%, while Adani Total Gas (ADAG.NS) slumped 10%, down by its daily price limit.

Adani Transmission (ADAI.NS) was down 6% and Adani Ports and Special Economic Zone (APSE.NS) dropped 20%.

Adani Total Gas, a joint venture with France’s Total (TTEF.PA), has been the biggest casualty of the short seller report, losing about $27 billion.

“There was a slight bounce yesterday after the share sale went through, after seeming improbable at a point, but now the weak market sentiment has become visible again after the bombshell Hindenburg report,” said Ambareesh Baliga, a Mumbai-based independent market analyst.

“With the stocks down despite Adani’s rebuttal, it clearly shows some damage on investor sentiment. It will take a while to stabilise,” Baliga added.

Reuters Graphics

SCRUTINY

Underscoring the nervousness in some quarters, Bloomberg reported on Wednesday that Credit Suisse (CSGN.S) had stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients.

Deven Choksey, managing director of KRChoksey Shares and Securities, said this was a big factor in Wednesday’s share slides.

Credit Suisse had no immediate comment.

Scrutiny of the conglomerate is stepping up, with an Australian regulator saying on Wednesday it would review Hindenburg’s allegations to see if further enquiries were warranted.

Data also showed that foreign investors sold a net $1.5 billion worth of Indian equities after the Hindenburg report – the biggest outflow over four consecutive days since Sept. 30.

Headaches for the Adani Group are expected to continue for some time.

India’s markets regulator, which has been looking into deals by the conglomerate, has said it will add Hindenburg’s report to its own preliminary investigation.

State-run Life Insurance Corporation (LIC) (LIFI.NS)said on Monday it would seek clarifications from Adani’s management on the short seller report. The insurance giant was, however, a key investor in the Adani Enterprises share sale.

Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group.

Reporting by Chris Thomas in Bengaluru and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran and Aditya Kalra; Editing by Edwina Gibbs and Mark Potter

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Suspects arrested over Pakistan mosque blast, police focus on how bomber got in

PESHAWAR, Pakistan, Feb 1 (Reuters) – Police investigating a suicide bombing that killed more than 100 people at a Pakistan mosque said on Tuesday that several people had been arrested, and they could not rule out the possibility that the bomber had internal assistance evading security checks.

The bombing was the most deadly in a decade to hit Peshawar, a restive northwestern city near the Afghan border, and all but three of those killed were police, making it most suffered by Pakistan’s security forces in a single attack in recent history.

The bomber struck on Monday as hundreds of worshippers gathered for noon prayers in a mosque that was purpose built for the police and their families living in a highly fortified area.

“We have found some excellent clues, and based on these clues we have made some major arrests,” Peshawar Police Chief Ijaz Khan told Reuters.

“We can’t rule out internal assistance but since the investigation is still in progress, I will not be able to share more details.”

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Investigators, who include counter-terrorism and intelligence officials, are focusing on how the attacker managed to breach the military and police checkpoints leading into the Police Lines district, a colonial-era, self-contained encampment in the city centre that is home to middle- and lower-ranking police personnel and their families.

Defence Minister Khawaja Asif had said the bomber was in the first row in the prayer hall when he struck. Remains of the attacker had been recovered, provincial Police Chief Moazzam Jah Ansari told Reuters.

“We believe the attackers are not an organised group,” he added.

The most active militant group in the area, the Pakistani Taliban, also called Tehreek-e-Taliban Pakistan (TTP), has denied responsibility for the attack, which no group has claimed so far. Interior Minister Rana Sanaullah had told parliament a breakaway faction of the TTP was to blame.

The blast demolished the upper storey of the mosque. It was is the deadliest in Peshawar since twin suicide bombings at All Saints Church killed scores of worshippers in September 2013, in what remains the deadliest attack on the country’s Christian minority.

Peshawar sits on the edge of the Pashtun tribal lands, a region mired in violence for the past two decades.

The TTP is an umbrella group for Sunni and sectarian Islamist factions opposed to the government in Islamabad. The group has recently stepped up attacks against police.

Reporting by Jibran Ahmad in Peshawar and Asif Shahzad in Islamabad; Writing by Miral Fahmy; Editing by Simon Cameron-Moore

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Austin’s Manila visit to bring deal on expanded base access – Philippines official

WASHINGTON/MANILA, Feb 1 (Reuters) – U.S. Defense Secretary Lloyd Austin’s visit to the Philippines this week is expected to bring an announcement of expanded U.S. access to military bases in the country, a senior Philippines official said on Wednesday.

Washington is eager to extend its security options in the Philippines as part of efforts to deter any move by China against self-ruled Taiwan, while Manila wants to bolster defense of its territorial claims in the disputed South China Sea.

Austin arrived in Manila on Tuesday night, and will meet his Philippine counterpart and other officials on Thursday “to build on our strong bilateral relationship, discuss a range of security initiatives, and advance our shared vision of a free and open Pacific,” he said on Twitter.

On Wednesday morning, Austin visited U.S. troops stationed at a Philippine military camp in the southern city of Zamboanga, according to Roy Galido, commander of the Western Mindanao Command.

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“Our working relationship to them is very strong,” Galido told reporters, adding that U.S. troops help in counter terrorism, and humanitarian and disaster response missions.

U.S. officials have said Washington hopes for an access agreement during Austin’s visit, which began on Tuesday, and that Washington has proposed additional sites under an Enhanced Defense Cooperation Agreement (EDCA) dating back to 2014.

“There’s a push for another four or five of these EDCA sites,” the a senior Philippines official said. “We are going to have definitely an announcement of some sort. I just don’t know how many would be the final outcome of that.”

The official declined to be named because of the sensitivity of the matter.

Manila and Washington have a mutual defense treaty and have been discussing U.S. access to four additional bases on the northern land mass of Luzon, the closest part of the Philippines to Taiwan, as well as another on the island of Palawan, facing the disputed Spratly Islands in the South China Sea.

EDCA allows U.S. access to Philippine bases for joint training, pre-positioning of equipment and building of facilities such as runways, fuel storage and military housing, but not a permanent presence. The U.S. military already has access to five such sites.

The Philippines official said increased U.S. access needed to benefit both countries.

“We don’t want it to be directed to just for the use of the United States purely for their defense capabilities … it has to be mutually beneficial,” he said.

“And obviously, we want to make sure that no country will see … anything that we’re doing … was directed towards any conflict or anything of that sort,” he added.

Manila’s priorities in its agreements with Washington were to boost its defense capabilities and interoperability with U.S. forces and to improve its ability to cope with climate change and natural disasters, the official said.

He said that after cancelling an agreement for the purchase of heavy-lift helicopters from Russia last year, Manila had reached a deal with Washington to upgrade “a couple” of Blackhawk helicopters that could be used for disaster relief.

“The deal with Russia was very attractive because for a certain budget we were able to get something like 16 of these heavy-lift helicopters,” the official said. “Now with the United States, obviously their helicopters are more expensive, so we’re looking at how we can fit in the budget that we’ve had.”

Gregory Poling, a Southeast Asia expert at Washington’s Center for Strategic and International Studies think tank, said access to sites in northern Luzon would help U.S. efforts to deter any Chinese move against Taiwan by putting the waters to the south of the island within range of shore-based missiles.

He said the U.S. and Philippine marines were pursuing similar capabilities with ground-based rockets, with Manila’s particular interest being to protect its South China Sea claims.

The Philippines is among several countries at odds with China in the South China Sea and has been angered by the constant presence of vessels in its exclusive economic zone it says are manned by Chinese militia. China is also Manila’s main trading partner.

Reporting by David Brunnstrom; additional reporting by Idrees Ali in Washington and Neil Jerome Morales and Karen Lema in Manila; Editing by Gerry Doyle

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