The Poon Report - China relaxes rules for insurers to invest in stock markets
News Summary
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China relaxes rules for insurers to invest in stock markets
Taken from Reuters News Monday, 11 September 2023
China's financial regulator on Sunday reduced the risk weighting it attaches to insurance companies' holdings of blue-chip shares and tech stocks, encouraging them to invest more in the country's lagging stock market.
The National Administration of Financial Regulation (NAFR) said on its website that the risk weighting for CSI300 Index constituents would be reduced to 0.3 from 0.35, while that for stocks listed on Shanghai's tech-focused STAR Market would be cut to 0.4, from 0.45.
A lower risk weighting frees up more capital for insurers to invest.
In addition, the watchdog reduced the risk weighting it assigns to investments in Real Estate Investment Trusts (REITs), which in China channel money mainly into infrastructure projects.
It also set a relatively low risk weighting for private equity investments in China's strategic and emerging sectors.
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EU to unveil €1bn in N Ireland funding to boost reconciliation
Taken from FT Monday, 11 September 2023
UK, Irish and Brussels officials to use Belfast event to discuss increasing strains on relations
The EU will unlock more than €1bn in funding to boost reconciliation in Northern Ireland on Monday, days after military-grade equipment was seized that police believe was intended to be used to try to kill officers in the region.
Ireland’s taoiseach Leo Varadkar, EU vice-president Maro? ?ef?ovi? and Chris Heaton- Harris, the UK’s Northern Ireland secretary, will launch the new €1.14bn plan in Belfast, the latest instalment of a programme begun in 1995 to support peace and reconciliation.
Varadkar will also hold a bilateral meeting with Heaton-Harris amid rising tensions between London and Dublin rise over an amnesty bill that will end inquests into atrocities committed during Northern Ireland’s three decades-long conflict.
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The Irish government is weighing legal action against London over the bill at the European Court of Human Rights.
Varadkar will raise Dublin’s concerns with Heaton-Harris on Monday and discuss progress on the implementation of the Windsor framework with ?ef?ovi?.
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UK SMEs not ready for ‘avalanche’ of Brexit 2.0 rules and taxes
Taken from FT Monday, 11 September 2023
Business group warns small and medium-sized companies face significant new obligations
Small and medium-sized enterprises in the UK, including many exporters, are completely unprepared for an impending “avalanche” of new EU regulations and taxes, according to a new business survey.
The survey by the British Chambers of Commerce of 733 SMEs showed more than 80 per cent were unaware of reporting requirements under an EU green tax that takes effect next month, or obligations relating to the bloc’s value added tax regime that kick in from January 2025.
The BCC is urging the government to improve communications with British businesses as they grapple with what industry is dubbing “Brexit 2.0” — divergence between EU and UK regulations and taxes that creates additional red tape at the border.
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From October, EU companies must compile reports on the carbon emissions attached to some imported goods, including steel, aluminium and fertilisers, with businesses having to buy certificates to cover pollution embedded in products from 2026.
The paperwork and costs associated with the carbon tax will land on UK companies that supply products to EU businesses covered by the green tax.
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Meanwhile, the BCC survey found 87 per cent of UK exporters were unaware that changes to EU VAT rules will require businesses providing services — even electronically — to pay the tax where the customer resides.
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Ben Bernanke ready to mark Bank of England’s homework
Taken from The Times Monday, 11 September 2023
When experts at the Bank of England begin their next round of forecasting for the nation’s economy, they will be watched closely by an outside observer. Ben Bernanke, the Nobel prizewinning economist and former US Federal Reserve chairman, has been charged with leading an independent review of the Bank’s forecasting models.
He is the latest in a series of American economists to have been drafted in by the Bank to provide an independent evaluation of its work since it gained its independence from the Treasury in 1997. Before Bernanke, Don Kohn, David Stockton and Kevin Warsh were Fed officials to have written reviews of the UK’s monetary policy framework.
However, Bernanke, 69, is a superstar like few others in the world of central banking.
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Bernanke’s review, which started this summer and will present its findings next year, comes at perhaps the most critical period for the Bank’s credibility since its ratesetting monetary policy committee was formed 26 years ago.
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Bernanke, who is not getting paid for the role, will sit in on forecasting rounds with the Bank’s staff and the MPC ahead of November’s Monetary Policy Report, which is when new projections on growth and inflation are released.
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The UK economy is healthier than we thought, but that brings new problems
Taken from The Times Monday, 11 September 2023
Two weeks ago, the estimated size of the economy jumped by about 1.7 per cent, equivalent to about ￡38 billion a year. This wasn’t a sudden surge in activity over the summer months, but rather a reassessment by the Office for National Statistics of how rapidly the economy had recovered after the pandemic, particularly during 2021.
This is good news, plain and simple. It helps to explain a fast recovery in tax revenues that had been out of line with tepid economic growth. It also tells a more encouraging picture on productivity, given the rebound in employment since the end of the furlough scheme.
Nevertheless, there has been a gnashing of teeth at the Treasury, in the City and among business leaders. The figures that had framed economic commentary over the past two years — which suggested the economy had not recovered its pre-Covid size and had endured the slowest economic recovery in the G7 — were eviscerated at the stroke of a statistician’s pen.
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Jobs market’s ‘perfect storm fuelling inflation’
Taken from The Times Monday, 11 September 2023
A “perfect storm” in the jobs market risks generating a “wage-price spiral” that would make inflation tougher to bring down, a report has warned.
Resilient demand for workers, despite the economy slowing, is said to have strengthened employees’ confidence over pay rises. In research by Robert Half, a recruitment agency, and the Centre for Economics and Business Research consultancy, faith in future pay awards pushed its jobs confidence index into positive territory for the first time in more than a year.
Rising wages have made workers more confident that they can receive higher pay, aided by unemployment remaining low amid stuttering economic growth. Official statistics suggest that pay rose at the fastest pace in two decades over the past quarter, while the jobless rate, although up, is still low at 4.2 per cent.
New pay numbers tomorrow could exceed the rate of inflation in the consumer prices index for the first time since the early stages of 2022. Worker shortages have encouraged staff to leave their employers if pay rises disappoint. Staff scarcity means that companies are increasing wages.
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CLSA says sell-off in Chinese stocks ‘has passed strongest point’ and Beijing needs to address market risk, investor concerns
Taken from SCMP Monday, 11 September 2023
Chinese stocks have seen the worst selling pressure, indicated by many underweight positions among global funds, according to CLSA, a unit of China’s biggest securities firm. An imminent pause in the Federal Reserve’s tightening policy is likely to reverse market pessimism.
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China is still appealing to investors as the cheap valuation and secular growth could provide better returns relative to other equity markets, head of research Shaun Cochran said. It is time for Beijing to address “absolutely reasonable” concerns and real risks in the economy, he added.
“For my mind, the bulk of the selling pressure has passed its strongest point because most people are already underweight,” he said in a Post interview. “I have never seen investors so negative on the outlook for China. I would rather have my money in a Chinese index than a US index” over the long term, he added.
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US holds highest-level talks with China in months, with Biden-Li meeting at G20
Taken from SCMP Monday, 11 September 2023
US President Joe Biden said on Sunday that he met with Chinese Premier Li Qiang in India, his highest-level direct talks with the Chinese leadership in months, adding that he did not expect that the country’s economic difficulties would prompt it to invade Taiwan.
Biden also denied that the US was trying to box China in even as he cemented relations with Vietnam on China’s southern flank and paved the way for greater “de-risking” of vital technology supply chains, including semiconductors.
“What this trip was about – it was less about containing China. I – I don’t want to contain China,” Biden said in Hanoi, according to the White House. “I just want to make sure that we have a relationship with China that is on the up and up, squared away, everybody knows what it’s all about.”
Biden said, without going into detail, that he and Li talked about “stability” and the Southern Hemisphere. He added that the Chinese economy has struggled in part due to the international environment, real estate difficulties and domestic policy.
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China’s property bubble will cause drama, one way or another
Taken from AFR Monday, 11 September 2023
Property bubbles fuelled by surging debts tend to end in sharper economic downturns than what China has seen so far, so a crisis scenario is more probable than a big bounce back.
China fell off “the miracle path” years ago and now many are catching up to the story. An ageing population, high debt levels and a meddling government are turning the country into a fading power like Japan of the 1990s, when its economy slowed sharply but avoided an outright crisis.
Since the consensus call is reliably off – a year ago it was for a reopening boom in China and an inevitable recession in the US – it’s worth asking what the “Japanification” scenario is missing.
It could be flawed in two very different ways, at least in the short term. One plausible scenario follows the early years of Japan’s slowdown. After its property bubble crashed in 1990, heavy government stimulus led to a powerful comeback in the markets and economy.
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So it’s possible that China is also poised for a temporary comeback or two.
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The other plausible scenario is that China is where the US was in the late summer of 2008 – when the property market was faltering, but most analysts did not foresee an imminent crisis. Of course, the trouble came with a rush that September, forcing the government to do whatever it could to prevent an even deeper recession.
In this scenario, the next big step for China is a full-blown financial crisis.
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Thailand: High hopes for policy statement
Taken from Bangkok Post Monday, 11 September 2023
Officials should champion local economies to boost livelihoods
As the government spells out its policy statement in parliament on Monday, people have high expectations for it to make good on its promises to deal with bread-and-butter issues affecting their lives and turn the economy around.
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Call for economic stimulus
The private sector has called on the Pheu Thai-led coalition government to come up with stimulus packages to jump-start the economy and boost consumption as well as attract foreign tourists.
Thaniwan Koonmongkon, president of the Thai Restaurant Association, said she wanted the government to curb rising production costs, particularly high energy prices which in turn push up the prices of consumer goods.
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Singapore Says Laundering Probe Wasn’t Opened on China’s Request
Taken from Bloomberg News Monday, 11 September 2023
Singapore did not start an investigation on a money laundering scandal involving over S$1.8 billion of assets due to a request by Chinese government, the Minister for Home Affairs and Law said.
Singapore has been working on the probe for “many, many months,” and any suggestion that the investigation is related to Chinese Foreign Minister Wang Yi’s Aug. visit to Singapore “would be absurd,” K Shanmugam said in a Lianhe Zaobao interview.
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Russian regional vote delivers strong result for Putin amid claims of rigging
Taken from Reuters News Monday, 11 September 2023
Russia on Sunday wrapped up widely denounced regional and municipal elections, including in regions annexed from Ukraine, delivering strong support for President Vladimir Putin amidst criticism of vote rigging and Kyiv's push to reclaim its land.
The Council of Europe, Europe's leading rights group, called the week-long vote a flagrant violation of international law, and Kyiv and its allies say it was an illegal attempt to tighten Moscow's grip over regions in Ukraine's south and east.
The overwhelming vote across Russia and in the annexed regions for the dominance of Putin's United Russia party has delivered on the Kremlin's long-repeated domestic message that Putin is by far the strongest guarantor of stability.
But in the regions voting, electoral competition was limited, as strong candidates, including some from Russia's main opposition Communist Party, were blocked from running by authorities.
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Modi scolds Trudeau over Sikh protests in Canada against India
Taken from Globe and Mail Monday, 11 September 2023
Indian Prime Minister Narendra Modi conveyed strong concerns about protests in Canada against India to Canadian Prime Minister Justin Trudeau on the sidelines of the G20 summit in New Delhi, according a statement by India.
New Delhi has been long sensitive to Sikh protesters in Canada. In June, India criticized Canada for allowing a float in a parade depicting the 1984 assassination of Indian Prime Minister Indira Gandhi by her bodyguards, perceived to be glorification of violence by Sikh separatists.
“They are promoting secessionism and inciting violence against Indian diplomats, damaging diplomatic premises and threatening the Indian community in Canada and their places of worship,” the Indian statement said.
Relations between India and Canada remain tense, and Ottawa this month paused talks on a proposed trade treaty with India, just three months after the two nations said they aimed to seal an initial agreement this year. Modi, who held bilateral meetings with many world leaders during the G20 summit, did not hold one with Trudeau.
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Chevron appeals to workplace tribunal to halt Australia LNG strike action
Taken from Yahoo Finance (Reuters) Monday, 11 September 2023
Chevron said on Monday it would ask Australia's industrial relations tribunal to intervene to halt strike action at its Gorgon and Wheatstone liquefied natural gas (LNG) plants.
If an "intractable bargaining" declaration is approved by Australia's Fair Work Commission (FWC), the U.S. energy behemoth's unionised workers at the plants would be prohibited from legally taking any form of industrial action.
Instead, the workers would need to wait for the FWC to impose a new agreement over the facilities that account for more than 5% of global LNG supply.