Mauritius’ Offshore Center Vertigo
Mauritian stocks continued lethargic as the global business corporation sector absorbed the implications of the Indian budget which seemed to herald further offshore-registered investor tax scrutiny for both current and past allocation. Tourism has already slowed on Europe’s troubles, putting the 4 percent economic growth forecast in jeopardy on inflation around the same level, with inflows also needed to bridge the 10 percent of GDP current account deficit and keep international reserves at just 4 months’ imports above the danger zone. Good share performance last year brought portfolio infusions spurred as well by capital gains levy removal, although the budget gap swelled toward 5 percent of output. With private credit demand slumping, special state loan facilities for small business could be activated, adding to the fiscal weight of numerous government-run enterprises which represent 15 percent of GDP. Interest rates are marginally positive, and rupee appreciation against the euro and pound has eased. Officials have unveiled an infrastructure upgrade program consistent with reducing public debt to 50 percent of national income by end-decade, and are considering pension revamp and steps to regain lost standing in the World Bank’s Doing Business rankings. Banks are well-capitalized and profitable, boosted by the recent advent of deposit insurance but ties to non-resident borrowers and related insurers remain murky, the IMF finds in its latest Article IV review. The central bank and securities market regulator should better pool risk information given lenders’ large government debt holdings and their status as big exchange listings, it suggests.
South Asian entities concerned about Gulf exposure during the Arab spring have looked at relocation to the island, but Dubai, with UAE stocks up double-digits, has offered reassurance of political and financial stability despite on-line petitions against the ruling family and debt rollover concerns still focused on the shipping unit of DW and other shaky issuers. The DIFC is seeking a loan to cover upcoming $1 billion bond redemption and the free trade zone is likewise in talks with a bank consortium to repay a $2 billion sukuk due at year end. Emirates NBD, the chief domestic creditor, has itself just floated $1 billion in 5-year dollar bonds after placing a smaller debut note in the yuan-denominated Hong Kong dim sum market. They were priced at 350 basis points over mid-swaps, reflecting an investment-grade rating and contrasting fortunes with Bahrain, where CDS rates are higher and an investment firm has just defaulted as violent demonstrations recur. Offshore banking operations have diverted to safer regional jurisdictions, and without oil the fiscal deficit on a bevy of social spending promises will hit 8 percent of GDP as the center tries to hold.
