Raphael Stevens

Adani Group losses have now surpassed $100 billion since the Jan. 24 publication of a scathing short seller’s report.
Market turmoil pushed Adani Enterprises to call off its intended $2.5 billion sale share.

Signage of Adani Group at company’s gas station in Ahmedabad, India, on Wednesday, Feb. 1, 2023.
Bloomberg | Bloomberg | Getty Images

India’s Adani conglomerate deepened market losses to exceed $100 billion on Thursday, which have snowballed since a short-seller’s scathing report triggered market turmoil and led the company to walk back its public share sale.
Losses across Gautam Adani’s main businesses hit $107 billion by 10 a.m. London time on Thursday since the Jan. 24 publication of an extensive critical report from New York’s Hindenburg Research, which has disclosed a short position in Adani Group companies.

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4 months ago

Market value loss for Adani companies

Company name
Market cap ($bn Jan 24)
Market cap ($bn Feb 2)
Total loss ($bn)
Total loss (%)

Adani Enterprises
48.03
21.80
26.23
54.61

Adani Green Energy
37.09
20.07
17.03
45.90

Adani Ports
20.11
12.18
7.93
39.45

Adani Transmission
37.62
21.20
16.43
43.66

Adani Total Gas
52.29
22.97
29.32
56.07

Adani Power
12.97
9.51
3.46
26.64

Adani Wilmar
9.12
6.68
2.43
26.67

Ambuja Cements
12.11
8.60
3.51
28.99

ACC
5.37
4.25
1.11
20.76

Sum total
107.45

Source: CNBC, FactSet, as of 10 AM UTC on Feb. 2

Alleging a two-year investigation, the report charged the conglomerate with engaging in a “brazen stock manipulation and accounting fraud scheme over the course of decades.”
The Adani firmly denied the accusations as “nothing but a lie” from the “Madoffs of Manhattan” in a 413-page riposte that failed to soothe skittish investor sentiment and rein in a rapid sell-off.
“It is tremendously concerning that the statements of an entity sitting thousands of miles away, with no credibility or ethics has caused serious and unprecedented adverse impact on our investors,” the Adani response said, describing Hindenburg as an “unethical short seller.”
“Hindenburg has not published this report for any altruistic reasons but purely out of selfish motives and in flagrant breach of applicable securities and foreign exchange laws,” it said.
Hindenburg on Jan. 29 retorted that the Adani commentary “predictably tried to lead the focus away from substantive issues and instead stoked a nationalist narrative, claiming our report amounted to a ‘calculated attack on India’.”

Forbes downgraded Gautam Adani from its Top 10 list of the richest men in the world.
The swift share decline of Adani Group companies has sparked concerns over broader systemic risk to Indian markets. India’s central bank has asked local banks for the details of their exposure to the Adani conglomerate, Reuters reported Thursday, citing government and banking sources.
“Unprecedented” market conditions and sharp fluctuations in the daily stock price pushed Adani Enterprises to axe its $2.5 billion follow-on public offering (FPO) on Wednesday.
“The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO,” Adani said in a statement.  
The FPO sale had achieved a full subscription.
Shares for Adani Enterprises shed 26.7% during Thursday’s session, with Adani Ports down 6.6% and Adani Green and Adani Transmission each losing 10%.
—CNBC’s Ganesh Rao contributed to this article.

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In october we examined the fortunes of Hikelandia. In this group of eight countries—Brazil, Chile, Hungary, New Zealand, Norway, Peru, Poland and South Korea—central banks have thrown the kitchen sink at inflation. They started raising interest rates well before America’s Federal Reserve and on average have done so more forcefully, too. Yet we found little evidence that their determination was being rewarded with lower inflation. Hikelandia’s experience raised questions about how quickly monetary policy can control prices. Policymakers at the Fed have been watching closely.The latest data offer little reason for optimism. Hikelandia’s inflation problems are still worsening. “Core” inflation excludes volatile components such as energy and food, and is thus a better measure of underlying pressure. In December this hit a new high of nearly 10% year on year (see chart). Higher borrowing costs are not yet crushing Hikelandia’s inflation, but they are crushing its economy. Output is shrinking at an annualised rate of about 1%, down from growth of 5% early last year.In some parts of Hikelandia central bankers are having more luck. Core inflation in Brazil is now clearly falling. There are signs of a turnaround in South Korea. Yet elsewhere there is less progress. In Chile average wages are growing by about 10% a year, far too fast when productivity growth remains weak. In Hungary prices are surging. Annual core inflation rose from 19% in August to 25% in December. We estimate that the prices of more than one-fifth of Hikelandia’s inflation basket are rising, year on year, by a remarkable 15% or more.When will prices in Hikelandia return to earth? Recent data suggest that it is unlikely inflation will move far into double figures. Yet the longer high inflation lasts, the more Hikelandia’s citizens will come to expect it. Just ask Hungarians, many of whom are obsessing about the cost of living. They now search on Google for “inflation” as much as they do for “Viktor Orban”. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

It can take a little imagination to see how some innovations might change an economy. Not so with the latest ai tools. It is easy—from a writer’s perspective, uncomfortably so—to think of contexts in which something like Chatgpt, a clever chatbot which has taken the web by storm since its release in November, could either dramatically boost a human worker’s productivity or replace them outright. The gpt in its name stands for “generative pre-trained transformer”, which is a particular kind of language model. It might well stand for general-purpose technology: an earth-shaking sort of innovation which stands to boost productivity across a wide-range of industries and occupations, in the manner of steam engines, electricity and computing. The economic revolutions powered by those earlier gpts can give us some idea how powerful ai might transform economies in the years ahead.In a paper published in 1995, Timothy Bresnahan of Stanford University and Manuel Trajtenberg of Tel Aviv University set out what they saw as the characteristics of a general-purpose technology. It must be used in many industries, have an inherent potential for continued improvement and give rise to “innovational complementarities”—that is, induce knock-on innovation in the industries which use it. ai is being adopted widely, seems to get better by the day and is being deployed in ever more r&d contexts. So when does the economic revolution begin?The first lesson from history is that even the most powerful new tech takes time to change an economy. James Watt patented his steam engine in 1769, but steam power did not overtake water as a source of industrial horsepower until the 1830s in Britain and 1860s in America. In Britain the contribution of steam to productivity growth peaked post-1850, nearly a century after Watt’s patent, according to Nicholas Crafts of the University of Sussex. In the case of electrification, the key technical advances had all been accomplished before 1880, but American productivity growth actually slowed from 1888 to 1907. Nearly three decades after the first silicon integrated circuits Robert Solow, a Nobel-prizewinning economist, was still observing that the computer age could be seen everywhere but in the productivity statistics. It was not until the mid-1990s that a computer-powered productivity boom eventually emerged in America. The gap between innovation and economic impact is in part because of fine-tuning. Early steam engines were wildly inefficient and consumed prohibitively expensive piles of coal. Similarly, the stunning performance of recent ai tools represents a big improvement over those which sparked a boomlet of ai enthusiasm roughly a decade ago. (Siri, Apple’s virtual assistant, was released in 2011, for example.) Capital constraints can also slow deployment. Robert Allen of New York University Abu Dhabi argues that the languid rise in productivity growth in industrialising Britain reflected a lack of capital to build plants and machines, which was gradually overcome as capitalists reinvested their fat profits. More recent work emphasises the time required to accumulate what is known as intangible capital, or the basic know-how needed to make effective use of new tech. Indeed, Erik Brynjolfsson of Stanford University, Daniel Rock of the Massachusetts Institute of Technology and Chad Syverson of the University of Chicago suggest a disruptive new technology may be associated with a “productivity J-curve”. Measured productivity growth may actually decline in the years or decades after a new technology appears, as firms and workers divert time and resources to studying the tech and designing business processes around it. Only later as these investments bear fruit does the J surge upward. The authors reckon that ai-related investments in intangible capital may already be depressing productivity growth, albeit not yet by very much. Of course for many people, questions about the effects of ai on growth take a back seat to concerns about consequences for workers. Here, history’s messages are mixed. There is good news: despite epochal technological and economic change, fears of mass technological unemployment have never before been realised. Tech can and does take a toll on individual occupations, however, in ways that can prove socially disruptive. Early in the Industrial Revolution, mechanisation dramatically increased demand for relatively unskilled workers, but crushed the earnings of craftsmen who had done much of the work before, which is why some chose to join machine-smashing Luddite movements. And in the 1980s and 1990s, automation of routine work on factory floors and in offices displaced many workers of modest means, while boosting employment for both high- and low-skilled workers. Gee, Pretty Terrificai might well augment the productivity of workers of all different skill levels, even writers. Yet what that means for an occupation as a whole depends on whether improved productivity and lower costs lead to a big jump in demand or only a minor one. When the assembly line—a process innovation with gpt-like characteristics—allowed Henry Ford to cut the cost of making cars, demand surged and workers benefited. If ai boosts productivity and lowers costs in medicine, for example, that might lead to much higher demand for medical services and professionals. There is a chance that powerful ai will break the historic mould. A technology capable of handling almost any task the typical person can do would bring humanity into uncharted economic territory. Yet even in such a scenario, the past holds some lessons. The sustained economic growth which accompanied the steam revolution, and the further acceleration which came along with electrification and other later innovations, were themselves unprecedented. They prompted a tremendous scramble to invent new ideas and institutions, to make sure that radical economic change translated into broad-based prosperity rather than chaos. It may soon be time to scramble once again. ■Read more from Free Exchange, our column on economics:Have economists misunderstood inflation? (Jan 26th)Could Europe end up with a worse inflation problem than America? (Jan 19th)Warnings from history for a new era of industrial policy (Jan 11th)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Given that his country is on the brink, Mohammad Ishaq Dar, Pakistan’s economy minister, is strangely serene. In the week to January 20th, his government burned through a quarter of its dollar reserves, leaving $3.5bn to cover loan repayments and imports that will probably come to more than twice that in the first quarter of the year. Two days later ministers turned off the electricity grid to preserve fuel. Policymakers then abandoned a currency peg. The rupee plummeted, but Mr Ishaq Dar remained cool. Pakistan’s prosperity, he said, is in God’s hands. Divinity usually takes the form of the imf, provider of 21 bail-outs to Pakistan since 1960, or Western governments. But the global infrastructure for dealing with irresponsible and unlucky economies is in crisis. China’s lending, growing for two decades, has reached a critical mass. Western financiers are in a stand-off with a lender too big to ignore but too irascible to involve in restructuring. Countries that have borrowed from China, and been battered by covid-19 and rising interest rates, are stuck in turmoil—few so firmly as Pakistan. Before China’s lending spree, Western countries built a framework to restructure troubled debts. Starting in 1956, lenders banded together on the basis that all would reschedule repayments on the same terms. Eventually debt forgiveness became the priority. This worked for as long as troubled countries mostly owed to the West. Now, however, at least half of the 38 countries which the World Bank counts as being in or near default have China as their biggest state creditor. And China is refusing to play by the old rules. In an attempt to bring it into the fold, the g20 drew up a new set in 2020. Yet the “Common Framework” has turned out to be an empty agreement. In theory, signatories agree to accept similar restructuring terms. In reality, they have too little in common to get the process going.Restructurings have all but disappeared since the pandemic. Four countries—Chad, Ethiopia, Ghana and Zambia—have asked for help under the framework. Only Chad has secured a deal, and it reschedules rather than cancels payments. Moreover, Chad’s debts were slight ($3bn) and China’s stake small ($264m, or 2% of Chad’s gdp). In 2017 the World Bank calculated that the average low-income country owed China an amount equivalent to 11% of gdp, a figure which will only have risen. China’s refusal to accept write-downs is the main issue. The reluctance has drawn ire from the likes of David Malpass, president of the World Bank, and Janet Yellen, America’s treasury secretary. Beijing’s various ministries are simply not set up for forgiveness. In order to write off a loan, civil servants in policy banks must first get permission from the State Council, the equivalent of China’s cabinet. If the borrowing country is not an ally, this is a risky manoeuvre. Being the face of a write down—in effect admitting that the bureaucracy made a mistake—is a professional stain that is hard to scrub. Rescheduling repayments leaves the mess for another day and someone else.Another disagreement between China and the West reflects different perspectives. In the Common Framework’s terms only loans by states are other states’ business. Private creditors and international institutions get off more lightly, rarely being called upon to cancel a dollar. But China does not separate its political promises to develop the world’s poorest countries from the country’s commercial activities. One of the government’s two main policy banks, China Development Bank, lends to poor countries at market rates. China is adamant that this disqualifies its loans from being bound by rules meant for states. Western lenders insist the opposite. A final problem is that China would rather work alone. Co-operating with other lenders involves sharing information. This may be necessary occasionally when borrowers are in enough trouble to default on lots of loans at once. But wary of appearing too soft and encouraging more defaults, China prefers to do its negotiations in private. Since 2008 the Chinese state has restructured the finances of more countries (71) than all the members of the Paris Club of mostly Western countries put together (68), according to World Bank researchers, but it has done so on its own terms. Often it takes repayments in commodities, or their future proceeds. At other times borrowers hand over stakes in the infrastructure they have borrowed to build. Western creditors view the first as little better than extortion and do not have the option of the second, as most of their loans plug directly into borrowers’ budgets. Vested interestSo long as lenders are in a stand-off, the imf is hamstrung. The organisation relies on countries to agree to bring down debts before it can risk a bail-out. This means officials are confined to tiny handouts for desperate borrowers. The deal it hopes to sort in Pakistan is worth $1.1bn—a drop in the country’s $275bn debt ocean. For years, Pakistan’s friends, many of whom do not get along, have stumped up debt relief and emergency funding for their valuable geopolitical ally. As a result, Pakistan’s politicians have come to expect last-minute miracles. But this time around China has not offered help. After suggesting a package, Saudi Arabia has gone quiet. The imf cannot do all the work. Each party is tempted to leave the rescue to someone else. With many more countries on the brink of default, the stalemate could be a harbinger of doom for the rest of the world’s distressed economies. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Two years ago the stockmarket was in the grip of speculative mania. Shares in GameStop, a struggling video-game retailer, hit an all-time intraday high of $483 on January 28th 2021, up from around $5 at the beginning of the month. Retail traders co-ordinated in a Reddit forum and snapped up shares using brokerage apps like Robinhood. Empowered by technology, newcomers piled into GameStop, ostensibly because the beleaguered chain was one Wall Street had heavily sold short (ie, bet that the firm’s shares would fall in price). Short-sellers were the villains. When GameStop spiked they lost their shirts. What could be better?The question at the time was how much of this would endure. Manias are as old as the hills, but this one seemed different: it was enabled by new technology that wasn’t going anywhere. For a time, the GameStop crew were unstoppable. They pumped up prices for companies that had attracted interest from short-sellers, such as amc, a cinema chain, and Bed, Bath & Beyond, a home-goods retailer. Battle-hardened short-sellers, including Andrew Left of Citron, a research firm, threw in the towel. Melvin Capital, a firm that had shorted GameStop, which the Reddit hordes made the cartoon villain of the saga, decided to close its doors in May 2022.When interest rates are zero the price of a dream can be infinite. Higher rates change the dynamic. Last year was therefore rough on the meme-portfolio, but its fans are nothing if not resilient, even when making losses. Matthias Hanauer of Robeco, an asset manager, tracks the most heavily shorted stocks in the msci Developed Index, a benchmark of global shares. Since December 31st 2020, a month before GameStop shares peaked, they have underperformed the market by around 15 percentage points. If 2022 was a reckoning with professional investors, then 2023 will be a reckoning with reality. A slowing economy is going to break many of the companies meme-stockers profess to adore. Monetary tightening slows the economy with a lag. As conditions worsen, struggling retailers, such as Bed, Bath and Beyond, are floundering. On January 26th the shower-curtain purveyor was served a slew of default notices by its bankers. Reuters, a newswire, has reported it may soon file for bankruptcy. The end of more than a decade of rock-bottom interest rates is also beginning to reveal corporate misdeeds and sometimes outright fraud. “Capital was free for 12 years,” says a former Wall Street tycoon. “We have no idea about all the places capital went that it should not have gone.” Some initial pockets of misallocation have become apparent. The pricking of the bubble in cryptocurrency markets has exposed businesses including Celsius and ftx, the founders of which have been charged with defrauding their investors. The stage is therefore set for the triumph of those the meme-stock lot profess to hate most of all: short-sellers, who try to sniff out this sort of stuff. Nathan Anderson, founder of Hindenburg Research and a famed short-seller, has already made quite a splash with an investigation into what he alleges is widespread fraud and market manipulation at the Adani Group, an enormous Indian conglomerate, which strongly denies the claims. What, then, is left of the retail era? Individual traders are more important than they used to be, even if they are far from the peak of their powers. In 2019 the retail share of stock-trading volumes hovered at around 15%. Then, in the first quarter of 2021, it peaked at 24%. This figure understated the true power of retail investors. Exclude marketmakers, who stand in the middle of most trades, and retail traders made up about half of volumes, with institutional investors accounting for the rest. Although retail traders’ share fell to an average of 18% in 2022, or around one-third excluding marketmakers, this is still above where things started. When the stockmarket rallies, it is faddish favourites, like GameStop and Tesla, leading the charge. Perhaps what will endure longest, though, is the levity. Investing is normally a serious business. But even as the hold-on-for-dear-life gang let go of their treasures and rethink their old grudges, their influence is still felt. There are already plenty of Hindenburg versus Adani memes on r/WallStreetBets, the Reddit forum where it all began. These echo the ones made about Melvin versus GameStop two years ago, with a small difference. This time Mr Anderson, the short-seller, is the hero.■Read more from Buttonwood, our columnist on financial markets:When professional stockpickers beat the algorithms (Jan 26th)Venture capital’s $300bn question (Jan 18th)The dollar could bring investors a nasty surprise (Jan 12th)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Deutsche Bank reported a 1.8 billion euro ($1.98 billion) net profit attributable to shareholders for the fourth quarter, almost doubling analyst expectations.
CEO Christian Sewing said the the bank had been “successfully transformed” over the last three and a half years.
Despite lofty net profit figures, Deutsche Bank shares slipped as analysts honed in on the uncertain macroeconomic outlook.

A statue is pictured next to the logo of Germany’s Deutsche Bank in Frankfurt, Germany, September 30, 2016.
Kai Pfaffenbach | Reuter

Deutsche Bank on Thursday reported its 10th straight quarter of profit, but shares retreated as analysts honed in on an uncertain outlook and weakness in the investment bank.
Deutsche Bank reported a 1.8 billion euro ($1.98 billion) net profit attributable to shareholders for the fourth quarter, bringing its annual net income for 2022 to 5 billion euros, a 159% increase from the previous year.

The German lender almost doubled a consensus estimate among analysts polled by Reuters of 910.93 million euro net profit for the fourth quarter, and exceeded a projection of 4.29 billion euros on the year.
Despite the lofty net profit figures, Deutsche Bank shares were 2.4% lower by mid-morning in Europe as analysts honed in on the uncertainty of the macroeconomic outlook, evidenced by the bank’s reluctance to issue a share buyback at this stage.
Amit Goel, co-head of European banks equity research at Barclays, characterized the results as “a bit mixed,” given that the strong revenue message for 2023 was offset by a weaker-than-expected fourth quarter in many other metrics, particularly the investment bank.
“The revenue miss vs consensus and our estimate was also largely driven by lower IB and corporate center result partly offset by better corporate bank; within the IB both FIC and origination and advisory were lower,” Goel noted.
Total revenues at the investment bank fell 12% year-on-year in the fourth quarter. Its contribution to Deutsche Bank’s core bank pre-tax profit fell 6% to 3.5 billion euros.

Restructuring plan

The bank’s full-year results follow a sweeping restructuring plan, announced in 2019, to reduce costs and improve profitability. It saw Deutsche Bank exit its global equities sales and trading operations, scaling back its investment bank and slashing around 18,000 jobs by the end of 2022.
The result marks a significant improvement from the 1.9 billion euros reported in 2021, and CEO Christian Sewing said the bank had been “successfully transformed” over the last three and a half years.
“By refocusing our business around core strengths we have become significantly more profitable, better balanced and more cost-efficient. In 2022, we demonstrated this by delivering our best results for fifteen years,” Sewing said in a statement Thursday.
“Thanks to disciplined execution of our strategy, we have been able to support our clients through highly challenging conditions, proving our resilience with strong risk discipline and sound capital management.”

Post-tax return on average tangible shareholders’ equity (RoTE), a key metric identified in Sewing’s transformation efforts, was 9.4% for the full year, up from 3.8% in 2021.
Other quarterly highlights include:

Loan loss provisions stood at 351 million euros, compared to 254 million euros in the fourth quarter of 2021.
Common equity tier 1 (CET1) ratio — a measure of bank solvency — came in at 13.4%, compared to 13.2% at the end of the previous year.
Total net revenue was 6.3 billion euros, up 7% from 5.9 billion euros for the same period in 2021 but slightly below consensus estimates, bringing the annual total to 27.2 billion euros in 2022.

Deutsche also recommended a shareholder dividend of 30 cents per share, up from 20 cents per share in 2021, but did not announce a share buyback.
“On the share repurchases, given the uncertainty of the environment today that we see, also some regulatory changes that we’d like to see both the timing and the extent of, we’re holding back for now. We think that’s the prudent action to take, but we intend to revisit that,” CFO James von Moltke told CNBC on Thursday.
He added that the bank would likely reassess the outlook in the second half of this year, and reaffirmed Deutsche’s target for 8 billion euros in capital distributions to shareholders through to the year 2025.
Deutsche’s corporate banking unit posted 39% growth in net interest income, aided by “higher interest rates, strong operating performance, business growth and favorable FX movements.”
Fourth quarter ‘tailed off’
The bank said some tailwinds were offset by a slump in dealmaking that has affected the wider industry in recent months.
“The fourth quarter tailed off a little bit for us in November and December, but still was a record quarter in our FIC (fixed income and currencies) business for a fourth quarter, 8.9 billion [euros] for the full-year,” CFO von Moltke told CNBC’s Annette Weisbach.
“We’re thrilled with that performance but … it came a little bit short of analyst expectations and our guidance late in the year.”
He said that January had been a month of strong performance for the bank’s trading divisions, as market volatility persisted.
“That gives us some encouragement that our general view, which was that volatility and conditions in the macro businesses would taper off over time, but would be replaced if you like from a revenue perspective with increasing activity in micro areas like credit, M&A, equity and also debt issuance,” he said.
“We see that still intact as a thesis of what ’23 will look like.”

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