In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 26 Oct 2018
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Asia Pacific: public v private 

China’s State Council released a statement emphasising China’s need for stable growth while managing risks and maintaining a prudent and neutral monetary policy. According to data released by the National Bureau of Statistics, China’s GDP growth rose 6.5% year-on-year in the July to September period, which is the weakest since the first quarter of 2009. Vice premier Liu He indicated that the government’s focus will be to take measures to reduce the burdens on private firms by expanding their access to financing and improving the financial sector’s ability to boost economic activity.

To restore market confidence after the Chinese equities markets fell to their lowest since 2014, the Chinese regulators are unveiling policies to bring more stability to the financial markets. The China Banking and Insurance Regulatory Commission is consulting on a draft plan to allow funds from products publicly sold by commercial banks’ wealth management subsidiaries to be directly invested in stocks. Additionally, the Securities Association of China is setting up a new RMB100 billion ($14.4 billion approximately) fund to lend to private companies that are relying on share pledging as collateral for loans.

Americas: instability is the word

This week brought us earnings season in the US, but also stock market instability. Most of the country’s exchanges ended saw trading hit lows not seen in nearly 10 years, as indices lost of the gains they had made since the start of the year. The general sell-off in the market came as little surprise to many, after rising interest rates, an uncertain and restrictive US trade policy and general overvaluation of stocks ramped up the pressure on trading.

The Securities and Exchange Commission’s Market Data Forum on October 25 and 26 signals the regulator is intensifying scrutiny of the fees that some exchanges charge brokers for access to market data. The event follows commissioner Robert Jackson’s recent criticism of exchange charges, and a recent decision by the SEC that Nasdaq and the New York Stock Exchange had to justify past fee increases and reviews decisions associated with fee decisions. "The US equity capital markets are the envy of the world," Nasdaq’s chief executive said. "The SEC should take a very careful and deliberate approach to considering the consequences of changing the structure that exists today and that clearly benefits millions of investors."

EMEA: taking stock

In an unprecedented step, the EU has rejected Italy’s budget, saying that the first draft presents a 'particularly serious non-compliance’ with its rules. The Italian government has three weeks to propose a new budget to the Commission, but there are no signs of the government backing down from their aggressive spending plans. The ruling party, Five-Star Movement, has been notoriously Eurosceptic ever since its formation and there are fears that the rejected budget will be seized upon as a basis for a referendum on Italy’s future within the EU.

The implementation of the General Data Protection Regulation (GDPR) has been harder for companies than initially first thought; this, despite it being widely acknowledged as one of the most widespread changes to data protection ever, before it came into force last year. "The exponential increase in individual requests for accessing data and deleting data has caught many companies by surprise," said Eduardo Ustaran, partner at Hogan Lovells. 

The ongoing appeal case involving the International Bank of Azerbaijan could lead to the reversal of a century old UK insolvency rule, which could make financing in smaller jurisdictions more expensive. While the future of the Gibbs rule is not at stake in the current case in the Court of Appeal, if it goes to the Supreme Court the state of UK insolvency law could be fundamentally altered. "In the event that Gibbs is overturned by the Supreme Court, the starkest scenario and most extreme outcome would be if this has retrospective effect. This would cause many people to revisit existing English law contracts and to think about other protections might be available to them," said Dechert partner Adam Silver.

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