In the news this week

Author: Amélie Labbé, John Crabb, Karry Lai | Published: 10 Aug 2018
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Americas: for the record

It has been a good week for the US economy, which broke with the news that a good number of its largest companies are recording excellent profits unlike those seen since prior to 2008, citing tax boosts as a major contributing factor. This was followed by a record-breaking $26 billion 10-year Treasury bond issuance, indicative of investor appetite.

Enthusiasm was also strong for Tesla and Elon Musk, who announced intentions to take the electric car company private, at a price of $420 per share. Stock price increased following Musk’s Tweet, which was followed by an apparent desire for existing shareholders to remain, despite warnings that the Securities and Exchange Commission may reprimand the decision as a result of the method of communication.

Elsewhere, President Trump announced a fresh, and strong, round of economic sanctions on Iran. This comes three months after the US withdrew from the Joint Comprehensive Plan of Action, and has been called a breach of international law by certain sources. China, which has chosen to ignore this threat, suggests it will carry on trading with Iran, and has also taken steps to reduce sanctions imposed on North Korea and increase tariffs on US goods.

In Colombia, new President Ivan Duque was sworn into office following his 54% victory over rival Gustavo Petro. Duque has promised to turn the country’s economy around, and his policies are likely to see an increase in foreign direct investment as the country looks to rebuild.

Asia Pacific: setting the record straight

China’s Ministry of Commerce is consulting on its draft rules to ease restrictions on foreign investors in China’s A-share market. The A-shares investment rules apply to those made through agreements, the issuance of new shares and tender offers. The proposed changes stipulate that a foreign investor must hold assets above $50 million or have $300 million in assets under management, which is a reduction from the $100 million and $500 million required previously. Additionally, the lock-up period is proposed to be reduced to 12 months from the present 36 months. The consultation period ends on August 29.

China Tower, the world’s largest telecom tower operator, began trading its shares on the Hong Kong Stock Exchange on Wednesday at HK$1.26 ($0.14 approximately) per share, the lower end of its proposed range, to raise $6.9 billion. This is the world’s largest initial public offering in two years, ever since Postal Savings Bank of China’s $7.6 billion own deal in 2016. 

The Hong Kong Exchange has published its consultation conclusions on the Corporate Governance Code and guidance for boards and directors. New measures that will come into effect January 1 2019 aim to strengthen the transparency and accountability of the board and election of directors, including independent non-executive directors (INEDs); improve the transparency of INEDs’ relationship with issuers, promote board diversity, and require greater dividend policy transparency.

EMEA: like a broken record

It may be the summer, a period associated with a lull in activity, but the financial markets don’t seem to have got the message.

Brexit discussions and agreements – or a lack of – continue dominating the headlines, as a number of banks announced this week they were moving staff or setting up new headquarters outside of the UK. Bank of America is reportedly moving some staff including research analysts to Paris, while HSBC said it was relocating seven offices to the French capital, a move which would help it run its EU-focused businesses out of Europe. While the UK and the EU agree on roughly 80% of the shape of the future relationship, a financial services consensus remains elusive.

One area the UK is seeing some success in is fintech, with the Financial Conduct Authority announcing plans for a 'global version of its domestic regulatory sandbox’. The regulator has joined forces with 11 of its counterparts including the Dubai Financial Services Authority, the Guernsey Financial Services Commission, the Monetary Authority of Singapore and the Central Bank of Bahrain.

The Turkish lira has fallen 12% against the US dollar, prompting concerns that some EU lenders are over-exposed to the fragile currency, including in Spain, Italy and France. The fall comes ahead of President Erdogan announcing a new economic model amid growing economic and monetary instability.

Abu Dhabi Islamic Bank has reportedly appointed a roster of banks to arrange the sale of a $750 million perpetual tier 1 sukuk. The announcement comes after months of subdued activity in the Islamic finance market.

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