Brief India: 2019 Semiconductors: 5%+ Decline and more

In this briefing:

1. 2019 Semiconductors: 5%+ Decline
2. India Banks – Consumer and Mortgage Also a Risk
3. New US Sanctions Against Venezuela: Impact on the Oil Sector and Prices

1. 2019 Semiconductors: 5%+ Decline

An earlier post outlined the general direction of the Objective Analysis 2019 forecast but didn’t provide any numbers.  In this post I explain the 5%+ decrease in revenues that the market will experience and how and why various elements play into that number.

2. India Banks – Consumer and Mortgage Also a Risk

As new numbers are released, we have a better glimpse of where we are in the bad loan cycle, and the data is not reassuring. And we see that it is not only about risk with infrastructure or corporate loans in India, even if these are the most well-known credit risks. Housing loans are not immune from the economic malaise that remains in place. Non-bank financial company (NBFC) Can Fin Homes (CANF IN) shows exceptionally high quarterly bad loan growth in the latest period. Recalling our note on HDFC Bank, consumer loans more generally, may not be as robust as most believe.  And there are others.

3. New US Sanctions Against Venezuela: Impact on the Oil Sector and Prices

US sanctions against Venezuela’s central bank and PDVSA, announced on Monday (January 28), have sent refiners on the US Gulf Coast scrambling for replacement supplies of heavy crude. Though they do not cover the business of non-US entities with PDVSA, the move has put Venezuelan crude importers in China and India on notice.

For US refiners, the three main alternative suppliers of heavy, sour crude — Canada, Mexico and Saudi Arabia — are either constrained in their ability to step up supply or are deliberately reducing shipments.

Venezuela’s upstream oil sector has been limping for a long time now. But the sanctions against PDVSA may deal it a death blow. The crude market is keeping a wary eye on the situation but appears unwilling to price in the worst-case scenario for the time being, as it remains fixated on the global economic prospects and concerns over oil demand growth.

We look at the fallout of the latest move by Washington on the primary entities doing oil business with Venezuela: refiners in the US, China and India (the main markets for Venezuelan crude) and Russian giants Rosneft and Lukoil.

We also discuss the likelihood and impact of Venezuelan crude production grinding down from the current 1 million b/d to zero.