South Africa’s new central bank governor took centre stage on Thursday, but the story was a familiar tale of caution and bleak growth for Africa’s most developed nation.
After heading his first monetary policy committee meeting, Lesetja Kganyago said the decision was taken to keep the bank’s repo rate on hold at 5.75 per cent.
Kganyago took up his post earlier this month, replacing Gill Marcus, who announced in September that she would not be seeking a second five year term. But little changed in the language and detailed delivery of the last MPC statement of the year. Read more
** FT News **
* US blasts banks’ commodities operations | Senators say Goldman, Morgan Stanley and JPMorgan exposed to catastrophic financial risks
* Eurozone recovery slows to 16-month low | Purchasing managers’ index suggests activity will remain weak Read more
By Xiao Qi, China Confidential
China’s shadow finance sector has become a global concern. The International Monetary Fund (IMF) and World Bank have both warned about the risks associated with the rapid build-up of assets within such an opaque sector, while central bankers now regularly reference Chinese shadow finance as a key potential risk to global economic stability.
But while concern over the lurking horrors in China’s financial shadows remains justified, regulatory actions mean that the systemic risks that they pose are finally starting to ebb. This is happening in spite of the fact that the overall scale of the shadow system is continuing to expand. Read more
A fascinating note has arrived in our inbox from Steven Holden of Copley Fund Research, which tracks the investments of 100 big global EM equity funds with about $285bn of assets under management.
Readers may remember a recent piece based on his monthly report in October, showing that big fund managers were predominantly underweight in China compared with the MSCI Emerging Markets index, and overweight in India. An analysis of data from his November report shows that, on average, managers are in line with the MSCI regarding Russia – but that, individually, they diverge greatly from the index, in ways that suggest contrasting views on the crisis in Ukraine and how to play it as an investor. Read more
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** FT News **
* Batista trial a landmark for Brazil | Former billionaire accused of using Twitter to encourage share buying in bankrupt OGX
* China and Russia to build military ties | Countries say they will strengthen military ties to counter US influence in Asia-Pacific region Read more
An article in today’s FT quotes some new research in which economists at the IMF and the World Bank warn that – in the parlance of our headline writers – the world may have reached ‘Peak Trade’.
So what are they talking about? Read more
Ghana has promised to bring its fiscal deficit sharply down next year with a combination of higher taxes and lower spending, in what the market took as an effort to secure up to $1bn in soft loans from the International Monetary Fund.
Seth Terkper, finance minister (pictured), on Wednesday pledged to reduce the fiscal deficit to 6.5 per cent next year, down from a better-than-expected 9.4 per cent in 2014. “[The] government is committed to addressing the short-term vulnerabilities that the economy faces,” Terkper told lawmakers presenting next year’s budget. Read more
Last week was a bad week for us sceptics of global governance, or so it seemed. The US and China struck a deal on reducing carbon emissions that some fairly serious people found not to be meaningless. (Others demurred.) The same two countries also agreed to update the Information Technology Agreement, a plurilateral trade deal that has not been reformulated since a decade before the release of the iPhone. Finally, the US and India made an apparent breakthrough in resolving a spat over food subsidies that had brought already desultory progress in the World Trade Organization to a halt.
But before the multilateral bunting is strung across the streets of Geneva in recognition of the US-India achievement, some caution is in order. For one, the “breakthrough” is a minor clarification over what a particular paragraph in an agreement means. Second, if the deal is used to lever open past WTO agreements on farm subsidies, it will turn out to be a very poor trade-off indeed. Read more
By Alastair Campbell and W. John Hoffmann, Exceptional Resources Group
“There is no difference between reform and anti-corruption: both must be implemented within the framework of law”.
So said Chinese leader Xi Jinping, and with the end of a high level Communist Party meeting last month, the significance of Xi’s “Rule of Law” campaign has become crystal clear. It is a key tool in his attempt to restructure the framework of Party political power and decision-making via the four new Party central leading groups which he chairs. Read more
** FT News **
* Shell wins $3bn India tax court case | Ruling follows string of battles between multinational companies and revenue authorities
* Five killed in Jerusalem synagogue attack | Netanyahu vows Israel will respond with a ‘heavy hand’ to action praised by Hamas Read more
Can China innovate its way out of a prolonged economic growth slowdown? Shaun Rein, managing director of the China Market Research Group, believes so. In his new book, “The End of Copycat China – The Rise of Creativity, Innovation and Individualism in Asia”, he argues that China will start innovating now because it has to – and that it didn’t before simply because it didn’t need to. That’s an interesting theory, but is he right?
Rein first does battle with common perceptions that the Chinese political system or culture limits its ability to innovate. It’s not because China is a communist-led country with limited individual freedom, that it does not come up with corporate inventions, he says. Read more
It might sound like more bureaucracy, not less: Instead of four operating units, Pemex, Mexico’s state oil company, now has two, plus five separate subsidiaries.
However, in a statement to the stock exchange, company officials said its market-oriented reorganisation would bring greater efficiency and transparency as it moves into a new era of competition.
The long-planned restructuring scraps Pemex’s four divisions – exploration and production; refining; petrochemicals; and gas and basic petrochemicals – and replaces them with just two: upstream and downstream, or exploration and production on one hand and industrial transformation on the other. Its five non-core subsidiaries – drilling, logistics, co-generation and services, fertilisers and ethylene – are destined to become affiliate companies in the coming year. Read more
Leaders from Kiev and Brussels were busy this weekend warming up their energy ties as Vladimir Putin bailed out early from the G20 summit in sunny Australia where he faced one could shoulder after another from international leaders over his actions in Ukraine.
Ukrainian president Petro Poroshenko spent Saturday and Sunday receiving a warm welcome from Visegard state leaders meeting in Slovakia (he is pictured above with his Czech, Polish, Slovakian and Hungarian couterparts). He also received guarantees from Bratislava that his country – still at odds with Moscow over fair natural gas prices – would be guaranteed what officials said could amount to 21bn cubic metres of annual reverse flow inflows, enough to meet a majority of the country’s import needs. Read more
Brazil and Mexico, Latin America’s two biggest economies, are engulfed in high-profile scandals that have involved their presidents and also touched on investor interests. So far, Dilma Rousseff has made a better fist of handling the fallout in Brazil than Enrique Peña Nieto has in Mexico – although that could easily change. Read more
** FT News **
* Space junk or Russian satellite killer? | Mysterious object launched by military perplexing astronomers
* Turkey’s age-old grievances re-emerge | Ankara’s rhetoric has become more anti-western since protests against the government last year Read more