In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 22 Jun 2018
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Asia Pacific: cleaning up

The Securities and Exchange Board of India (Sebi) has created an expert panel to examine the norms for direct listing of Indian companies abroad. The listing of equity share capital of companies that are incorporated in India is not allowed on foreign exchanges and vice versa. Although companies incorporated in India can list debt securities on international exchanges through masala bonds, equity share capital can only be listed overseas through an American depositary receipt or global depositary receipt (ADR/GDR) while foreign companies listing on Indian exchanges needs to go through the Indian depositary receipt (IDR) route.

Sebi has also created a panel to look into options that can help make stock market listing more attractive for Indian startups. The panel will look into the existing institutional trading platform (ITP) framework to identify areas for improvement. The framework was created in 2015 to facilitate the listing of companies in popular startup sectors, including e-commerce, data analytics and biotechnology. This follows similar moves made by Hong Kong, which is keen to attract so-called new economy companies and those with weighted voting rights structures to list.

In China, the government has released new rules targeting asset management companies in its wide-ranging efforts to tackle non-performing loans (NPLs). While the rules were originally planned for implementation by mid-2019, the deadline has now been pushed back to the end of 2020 to give asset management companies more time to prepare. The regulation will limit credit risk from investments in non-standard credit assets that ultimately provide financing to corporate borrowers. Another aim is to end the implicit guarantee provided by financial institutions to investors of asset management products, which will clarify financial institutions’ contingent liabilities.

Americas: I really don’t care. Do you?

The US President threatened to slap $200 billion of new tariffs on China, a threat that was quickly met with the PRC promising to impose tariffs of their own in the event that he followed through. Staying in China, a Senate vote re-established legislation that would impose restrictions on telecoms giant ZTE – which Trump had sought to have removed.

There was some tension after  an INET paper called out Isda for reportedly sharing details amongst its members about how they could avoid certain aspects of Dodd-Frank by sending their swap trades overseas after execution. The paper called on state attorney generals and regulators to utilise the Commodity Exchange Act and bring actions within federal district courts to close the loophole. Isda has responded that the so-called 'loophole’ referred to in the paper 'simply reflects that some European counterparties prefer for their financial transactions to be governed by EU regulations, which are very similar to those in the US’.

Other regulatory developments saw the 5th circuit court give the order to kill the Department of Labor’s fiduciary rule, although the saga is more than likely to continue; and a judge in New York ruled the structure of the Consumer Financial Protection Bureau to be illegal. The SEC also released its priorities for the next five years, requesting comment.

In Colombia, some good news for the business community as Ivan Duque won the Presidential election race on Sunday. The former banker campaigned on improving the economy and eradicating the country’s cocaine industry.

EMEA: approach with caution 

President Vladimir Putin has said Russia does not consider cryptocurrency as a means of payment nor a store of value in his annual Q&A session with the Russian public last week. He said that cryptocurrencies should be treated cautiously as they are not backed by anything and said rumoured plans to issue a state-backed cryptocurrency are unfounded. Estonia were rumoured to be on the verge of launching their own cryptocurrency, but denied that Estcoin will be a currency.

The new Russia Sanctions Bill, set to be debated in the US Congress in the coming weeks, has received criticism from the EU, suggesting that coordination between the two jurisdictions over Russia is over. There is fear that the bill will impact companies financing the new Nord Stream 2 pipeline which carries natural gas from Russia to Germany. EU president Jean-Claude Juncker said that action will be taken if assurances are not given about protecting European companies from penalties. The extra-territorial effect of US sanctions means that European courts would have little choice but to accept the legislation if implemented.

The European Central Bank (ECB) announced last week it is to end its asset buying programme by the end of the year, ceasing a programme that lasted for nearly six years. Economist Daniel Burgos Zarozo said: "It kept the economy stable, limited the contagion effect and limited the credit crunch effect. It is ideally not the role of a central bank in a developed economy, but it served its purpose in preventing the economy from collapsing."

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