Apr 15 FT Coinbase and Digital, HSBC focus on Asia, Toshiba, Ma's rectification. PPE implications for China


15 Apr

MARKETs @ 3:30pm Hong Kong time
AUSTRALIA 
ASX200 opened lower and initially tested the support around 6,990 level but worked better from about 10:30am for the rest of the day on good employment data to close just off the day high +36pts (+0.5%) @ 7,058
Data
Consumer Inflation Expectations Apr +3.2% vs +4.1% Mar (F/cast was +4.2%)
Part time employment Mar +91.5k vs -0.4k Feb revised from -0.5k (F/cast was +10k)
Unemployment rate Mar 5.6% vs 5.8% Feb (F/cast was 5.8%)
Employment change Mar +70.7k vs 88.7K Feb (F/cast was +20k)
Full time employment change Mar -20.8k vs 89.1k Feb (F/cast was +10k)
Participation rate Mar 66.3% vs 66.1% Feb (F/cast was 66.3%)
JAPAN
Nikkei opened lower but spiked higher to 29,720 in early trades, consolidated and then tested to. 29,790 before easing back into lunch.  PM opened lower around yesterdays close and traded sideways to close+22pts (+0.1%) @ 29,643  
Topix traded in a similar pattern but above yesterday’s closing level. Closed +7pts (+0.4%) @ 1,959
|Data
Foreign Stock investment ¥640.9B vs ¥977.6B prior
Foreign Bond investment ¥1714.4B vs ¥375.1B prior
Tomorrow we get the Tankan Index pre Market
S KOREA  
BoK left interest rate unchanged at 0.5% as expected
Kospi opened flat but rallied to test 3,205 around 10 am, it failed to break above and eased back to 3,185 around midday and then worked higher to retest 3,200 before easing slightly to close +12pts (+0.4%) @ 3,194
Kosdaq sold down initially to 1,008 before rebounding too 1,013 and then traded sideways to until around 2pm when it rallied to test yesterday’s closing level but failed to break above and closed -0.5pt (flat)@ 1,014
TAIWAN 
Opened lower but worked higher through the day and closed at the day high +210pts (+1.3%) @ 17,077
CHINA 
CSI300 opened lower and sold down to 4,900 through the morning. PM rebounded but closed -32pts (-0.6%) @ 4,949 ahead of key data tomorrow on the open (GDP data, House Price Index, Industrial Production & Capacity Utilisation, Retail Sales and Unemployment)
HONG KONG 
Pre mareket opened @ 28,873 -28pts vs -31pts ADR’s Sold down to 28,530 in the morning before a small bounce into lunch. PM working higher currently -141pts (-0.5%)@ 28,760
EUROPE Market opened slightly higher with caution ahead of earnings ( L’Oreal, Deliveroo, Unicredit AGM and Shell ito publish its annual environmental, social and governance update) and US initial claims.  German and French inflation numbers in line with estimates.  
Most sectors in the green with basic resources leading.
Data
Germany
Inflation Rate Final Mar +1.7% YoY vs +1.3% Feb (F/Cast was +1.7%)
Inflation Rate Final Mar +0.5% MoM vs +0.7% Feb (F/Cast was +0.5%)
France
Inflation Rate Final Mar +1.1% vs +0.6% Feb (F/Cast was +1.1%)
Inflation Rate Final Mar +0.6% vs 0% Feb (F/Cast was +0.6%)
Due later
UK BoE Credit Conditions
US Futures Opened in Asian time slightly higher Dow +50pts, S&P and NDX +0.2% but rose to Dow +100pts S&P and NDX slightly +VE
Data due:Retail Sales, NY Empire State Manufacturing Index, Philiadelphia Fed Manufacturing Index, Initial Claims, 4 week average Initial Claims, Continuing Claims, Industrial Production, Capacity Utilisation, Manufacturing Production, NAHB Housing Market Index, Business Inventories, EIA Natural Gas Report, Foreign Bond Investment, Net Long Term TIC Flows, Overall Net Capital Flows.
Earnings: Bank of America, Citigroup, UnitedHealth, PepsiCo, BlackRock, Alcoa, PPG Industries, U.S. Bancorp, Charles Schwab, Delta Air Lines, Rite Aid, Wipro, Taiwan Semiconductor, Truist Financial, SunTrust

FT PrintFront Page
Egypt seizes Suez ship
As canal operators demand $900m in compensation.
'The SCA made a claim for $916m on April 7, according to the UK P&I Club, an insurer that covers the owner, Japan-based Shoei Kisen Kaisha, against third-party liabilities. UK P&I said a counteroffer had been made and that it was disappointed by the decision to arrest the 220,000-ton vessel.’
I suspect that there will be a lot of claims and counter claims from this incident. -VE for insurers and re-insurers.
I would love the know the conversation between the Suez Canal ‘guide’ an the Captain as the incident unfolded.The canal authorities are placing the blame on the Captain saying that the guides only advises. But a ship has to carry two guides.
I guess its rather like when I was a pilot; all air traffic control instructions are mandatory…. unless it’s going to cause a crash… then they are advisory!
See also Page 4 Ever Given held as Egypt seeks $900m payment for Suez blockage
Looks into some more of the detail. Notes that 'Evergreen Marine, the Taiwanese operator of the 220,000-tonne vessel, said yesterday the SCA’s claims were “largely unsupported and lack any detailed justification”.“Evergreen is urging all concerned parties to facilitate a settlement agreement,” it said, adding it was also “investigating the scope” of the court order.'

Coinbase’s $76bn debut puts seal on cryptocurrencies asset class
• Digital exchange lists on Nasdaq • Market cap exceeds ICE • Powell voices reservations
“What we hope is it just brings a lot more transparency to this industry, and a lot more focus,” said Alesia Haas, chief financial officer of Coinbase. “We’ve seen that with the attention that Coinbase has received during the past few months.”
It went public via a direct listing rather than IPO or Spac
.“There’s no question that millennials and [younger people] really gravitate toward crypto,” Schuler (a partner at DFJ Growth,) said. “They look at the traditional financial infrastructure and they see it as rigged, and they’re right.”
It notes 'Bitcoin’s supporters have touted it as a technology for transforming the world’s financial system, though Jay Powell, chair of the Federal Reserve, was pouring cold water on that idea just as Coin-base began trading. Calling cryptocurrencies “vehicles for speculation”, the central bank boss said: “No one is using them for payments, for example, like the dollar. It’s a little bit like gold.”
I can understand Powell’s stance and a lot of other establishment voices but many of them are set in their ways. The US has only recently started to really look into digital currencies. Being in charge of the worlds reserve currency it is easy to see why they would be complacent; thinking ‘what could replace the USD’. As is quickly becoming apparent, and accelerated by covid and peoples reluctance to use cash, digital and I would think crypto too.
The Fed will be forced to explore and come up with its own because China and many other nations have too. It should have been something that the Fed was at the forefront of but as with 5G and IoT China is leading and directing the narrative. The question is whether the PBOC’s and China's State Administration for Market Regulation (SAMR) crackdown on its Ecommerce companies is doing to stymie the development of digital and FinTech in China?
Worth noting that currently popular tech guru Cathie Wood told CNBC on Monday that digital wallets and genomics would be the two biggest disruptive trends following Tesla and electric cars.
See also China envisions rise of digital rival to dollar below and 
LEX Coinbase: hodling up  Says its a bet on two entwined factors ‘the price of bitcoin and regulators’ tolerance of cryptocurrencies. Neither is certain.’  
It asserts that Coinbase investors must be crypto believers — or speculators cynically hitching a ride. (I would expect an element of both but many are retail and it is only when larger established funds get involved with its mainstream acceptance really be achieved). It suggest the valuation @ 79x trailing earnings is questionable, and whilst I agree to a degree it is an incredibly difficult entity to value because it wears so many hats, which could be a good thing or bad!
It concludes 'Coinbase’s listing tests mainstream acceptance of crypto. Reservations were already abating. Companies such as Square and Tesla have purchased bitcoin. PayPal allows users to pay with cryptos. Bank of New York Mellon is giving customers access to cryptocurrencies alongside other assets. Coinbase counts 7,000 institutions as customers.That bodes well for bitcoin, for now. If prices drop, so will trading volumes. Coinbase’s newfound profitability would evaporate. But steep prices are dangerous, too. They reduce the incentive for owners to spend bitcoin on daily payments. Without these transactions, the practical case for cryptocurrencies — and crypto exchanges — falls apart.’
Worth a read. The key now is who else will list, I was on Forkast yesterday and I think S Korea will be watching with interest, having so many crypto fans and investors and having has so many run in’s with the regulators. What Coinbase I think shows is that firms that are prepared to work with regulators will succeed.
Link to yesterdays show:
https://www.youtube.com/results?sp=mAEA&search_query=The+daily+forkast

Brussels banks on BioNTech as Danes drop AstraZeneca jabs over clot fears
The EU plans to massively increase its supply of the BioNTech/Pfizer corona-virus vaccine, as Denmark became the first European country to end use of the Oxford/AstraZeneca jab.Ironic that the EU battled so bitterly with AstraZeneca and is now scaling back because of the clotting issues.
As I have said before there is a lot we still don’t understand about the virus and for that matter the vaccines.

Page 2
IMF urges eurozone to boost spending
Increase would fuel bloc’s recovery and cut loss of jobs and output, says fund

Political polarisation hampers Spain’s pandemic response
Starts 'The candidate issued a heartfelt plea. “Please stop using this for political ends,” Edmundo Bal said as he denounced left and right alike for sowing “chaos and confusion” over Spain’s coronavirus strategy.’

OECD talks. Multinational levy. Devil is in the detail on US global tax plan
Europeans welcome Biden’s proposals but battle looms over setting a minimum rate. Especially from Ireland, the Netherlands, Luxembourg, Malta and Cyprus all of whom have low tax rates and are home to many of the world’s large companies. Everyone likes the idea until it hurts them. Key for the low tax companies will be at what level they set the global minimum rate.

Madoff, mastermind of ‘extraordinarily evil’ fraud, diesHe passed away at a federal prison in North Carolina, where he was serving a 150-year sentence after pleading guilty in 2009.

Page 3
Scientists step up efforts to test risks and rewards of mixing Covid shots
Oxford group hopes study means people will not be hostage to fortune if there are supply shortfalls. As mentioned above there is a lot we still don’t understand about the virus and for that matter the vaccines. But initial tests on animals has given encouragement.
AstraZeneca vaccine more effective in elderly than Pfizer jabThe Oxford/AstraZeneca vaccine induced a stronger cellular immune response in elderly adults than the BioNTech/Pfizer shot, potentially providing more protection against severe Covid-19 and new virus variants.
German police had close ties with Wirecard, inquiry shows
Germany’s top police agency co-operated closely over several years with Wirecard until late 2020, showing the extent to which the disgraced payments provider was intertwined with the country’s law enforcement establishment. Wirecard provided credit cards to the police unit for use during criminal investigations, no doubt giving it good insight into who was being investigated and where.
Not only the police but the secret services of Austria and Russia too.
Interesting quote '“In hindsight, the BKA units — surely unwittingly — put the fox in charge of the henhouse,” the special investigator’s report concluded. Wieland noted that the BKA was in charge of fighting money laundering and organised crime and should have scrutinised “its partners more critically”.’
Tanzania’s president draws line under Magufuli era
Hassan signals end of Covid denial and hostility towards large foreign investorsAn interesting read and would suggest good for Barrick Gold and other investors in the Country that suffered from Magufuli’s attitude to foreign investors.

Page 4
Brazil asks west for $1bn to protect Amazon
Cash upfront wanted but foreign diplomats keen to see deforestation cut firstThe issue could complicate Biden’s climate summit next week and illustrates the complicated nature of protection and enforcement.Brazil is strapped for cash and says it needs the money to implement enforcement. It also says its past actions deserve reward.
But critics ‘accuse Salles of wanting to tear down the rainforest to make way for commercial activity, but he pointed to Brazil’s historical preservation of the forest as grounds to receive cash now.’'
'The minister is viewed with suspicion by other nations and environmentalists following leaked comments last year in which he said the government should take advantage of the public’s distraction by the pandemic to push through laws to deregulate the environment.’
Also worth noting that 'Since the inauguration of Jair Bolsonaro’s administration in 2019, deforestation in the Amazon has risen to its highest level in more than a decade,’
Worth a read, it underlines that protection the environment is costly and that paying up doesn’t actually guarantee you success. The people who make money from the illegal and semi legal operations are often more will to pay!

Afghanistan. Battle against Taliban
Biden declares end to ‘America’s longest war’
President orders withdrawal of troops 20 years after 9/11 attacks that provoked conflict
An interesting read and I have to say I agree with his thought process. 'Biden has characterised efforts to create the perfect conditions for US withdrawal as futile.“We cannot continue the cycle of extending or expanding our military presence in Afghanistan hoping to create the ideal conditions for our withdrawal, expecting a different result,” he was expected to say.’
It will be interesting to see how the human rights lobby reacts, it is expected that human rights and especially women’s rights will be curtail after the US withdrawal. Interesting to note that Afghanistan borders Xinjiang.

US calls on Japan to support Taiwan at White House summit
Washington wants leaders to issue joint statement of support as it courts allies to counter China. An interesting read which sets out the pros and cons on what is a very tricky issues, especially with China seeking to confront Japan on the disputed Senkaku islands

Ecuador’s leader faces struggle against social and economic ills
Self-made millionaire Guillermo Lasso may have pulled off a big surprise by winning Ecuador’s presidential election but he faces huge challenges. Worth a read if only because Ecuador’s previous president was close to China.

Companies & Markets
Soaring Wall Street fees power US bank profits
• JPMorgan and Goldman to the fore
• Robust capital markets provide lift
Earlier in the week the FT outlined 5 things to watch
1. Bad loan provisions
2. Outlook for loan growth in the 2H, as existing loan balances have shrunk.
3. Deposit levels 'In the absence of loan growth, deposits are costly and require banks to hold more capital.’ So without good loan growth prospects or regulatory change (seems currently unlikely) the banks, especially Citi and JP Morgan face challenges.
4. M&A activity and Spac’s
5. Fees, especially from Trading and whether clients are still looking to Capital markets for funding.
JP Morgans results were boosted by writing back loan provisions and it warned that loan demand was weak; it also gave a flat outlook.
The article notes that 'But the traditional banking business of taking deposits and making loans continued to grow less profitable and executives warned that the boost to earnings from those activities would likely fade.'
'The search for more stable returns is behind Goldman’s push into the consumer business with Marcus. But the pandemic and lower interest rates forced it to push out the timeline for when it expects its fledgling consumer unit to be profitable by a year to 2022.’

Eastern promise HSBC relocates top leadership from London to Hong Kong
HSBC confirmed earlier indications but also added Nicolas Moreau, head of asset management, whose departure from London had not previously been reported.The result is that 'almost all of HSBC’s global revenue will be run out of Hong Kong. The decision also has symbolic importance considering the bank’s delicate geopolitical position, caught amid escalating tensions between the west and China as they face off over the future of Hong Kong.“These moves underscore the importance of the Asia-Pacific region . . . [which is] central to our future growth,” Quinn said in the email, which was seen by the Financial Times.
“An important part of our global strategy is to base more of our leadership population in Asia.”’
It will be interesting to see if HSBC commitment to Asia is welcomed by the potential clients in Asia and most importantly by China. In the past HSBC has tried to gain favour with China in some of its strategy but has never achieved the success that one might have expected. Investors will be watching to see if this time is different.

Glencore raises investor hackles with CEO pay plan
Glencore is facing the threat of investor dissent after an influential proxy adviser urged shareholders to reject new chief executive Gary Nagle’s incentive scheme and abstain from a key climate change resolution.
Energy groups are now a more complex foe for environmentalists
An interesting read is it better to try and effect change from outside or from within?
General Atlantic to repay Greensill debt
Private equity firm takes pricey €300m Goldman loan to protect reputation.An interesting move; worth a read if you are following the saga.

Toshiba chief ’s abrupt exit stirs doubts on CVC buyout
The departure of Nobuaki Kurumatani followed a shareholder rebellion, management’s defeat in a clash with activist funds, and signs of a split on the Toshiba board over the approach made by CVC and other private equity funds.Basically everything is in the air. It would appear that there are divisions within the board. As I wrote yesterday I think reveals that the old guard of Japanese management is still ingrained. They will tolerate a lot as long as they feel it is in the best interest of the company but bringing a company’s reputation into question is still taboo.
Now they have appointed Kurumatani predecessor as replacement CEO; which will raise some concerns; it was his decision in 2018 to issue $5.4bn worth of shares that resulted in the addition of some activist shareholders to the company register. Those shareholders are now likely to put more pressure on the board to solicit more bids for the company now that the company is seen to be ‘in play’. Whilst that is probably not the desire of the majority of the board, presuming that it was opposition to the privatisation that lost Kurumatani his job, they will at least have to go through the motions. The next few weeks are likely to be crucial for investors and for M&A arb players. Stock was trading higher again today +1.1% at a five year high.

Technology. Crackdown. Beijing dictates terms of Ma ‘rectification’
Demands prove more onerous than expected for Ant while Alibaba escapes the worst.
The key I think is that the PBOC is looking to access Ant’s data on the people that use its services. The article notes 'The PBoC and Ant have fought a multiyear, unresolved battle over the latter’s data, which the fintech has said it cannot share with other parties without customer consent. But that line of argument may not satisfy Beijing.’
Now it may not have an option because it will need to apply for a licence for its personal credit rating operations; that and the systems it has developed to interpret that data is the jewel of its business. That is more advanced than anything the PBOC or any of the SOE banks have and I think that is what they want most.
Unfortunately the PBOC’s actions are likely to prove Jack Ma’s speech right that the existing banking structure will hold back the advance of FinTech in China. It was leading, it is likely to now regress and allow the rest of the world to catch up and maybe even overtake.

Silver Lake acquires stake in UAE group G42Silver Lake has paid about $800m for a stake in G42, an artificial intelligence and cloud-computing group with links to Abu Dhabi’s ruling family, in a move that strengthens the US private equity firm’s ties with the wealthy emirate.
Restaurant-bill app receives seed funding
A hospitality-payment app called Sunday, created by the founders of Big Mamma restaurants has raised Europe’s largest seed-funding round in a sign of confidence in the sector as lockdowns begin to ease.Interesting quote about changing patterns; the key is it uses a QR code on the table to pay the bill via the app; which has promised to cut the commission that restaurateurs pay on customer bills by at least half. It should save time and hence allow quicker turnaround. Although I would imagine restaurants are going to need to know which tables have paid via the app to avoid people leaving without paying.
But a key quote from a manager “Before Covid I would never have put a QR code on my table. It seemed gross and then suddenly it became normal,” It concludes 'the QR code system was “not the endgame” and that he planned to develop Sunday to work off near-field communications, a contact-less technology that links two devices.The company plans to open four offices in London, Paris, Madrid and Atlanta and double its headcount to about 90 staff over the next six weeks.’

US warned it must become more self-sufficient in PPE production
Manufacturers that battled shortages fear supply chains rely too much on China imports.An interesting read not least because PPE exports are a significant part of the exports that have driven China’s recovery. With foreign countries building up their domestic capacity that element to the Chinese export numbers will disappear.
The question is then will the demand for China’s more normal exports have recovered. The amount is quite significant 'PPE imports are still almost three times above pre-Covid rates, according to Panjiva, the trade data company.’
It will take time for the US companies that have now tooled up for PPE production to win contracts and there is still going to be an element of pricing although it quotes Sara Greenstein, chief executive of Lydall, a specialist manufacturer, who says '“I absolutely believe that supply chains will no longer be [just] about lowest cost; they’ll be about reliability and quality, efficacy and cost,” she said. “It’s important that we know not just how to consume but how to produce.”’
Currently China is doing well because PPE has been exempted from section 301 import tariffs but that will change. For investors it will be a matter of watching how China deals with the reversion to more normal exports and whether they are recovering at the same pace that demand for Chinese PPE declines.
Univision agrees $4.8bn content tie-up with Mexican broadcaster
Mexico’s top broadcaster Televisa and Univision of the US have agreed a $4.8bn content merger backed by Japan’s SoftBank aimed at launching a Spanish-language streaming service to take on the likes of Netflix.
Virgin Media’s £31bn combination with O2 receives initial watchdog clearance
The UK competition watchdog has provisionally cleared Virgin Media’s £31bn tie-up with mobile operator O2 after finding it was unlikely to lead to reduced competition or higher prices for wholesale mobile services. That could signal a fresh wave of European telecoms consolidation +VE for the sector that is struggling to find critical mass.
Corporate America joins law firms in fighting moves to restrict voting rights
Hundreds of the biggest US companies, top executives and leading law firms have pledged to fight efforts to restrict voting rights in states across the country, in an escalation of corporate America’s battle with the Republican party over the issue.

Equities. Rotation. Investors braced for rare shift as momentum and value collide
Unusual melding of strategies may add more fuel to gains for energy and financial stocks.Many expect a major rebalancing from tech and healthcare into financials, energy, materials and industrials.
It also says that 'Although equities have historically been divided into distinct, static sectors — such as utilities or technology — investors are increasingly sorting the stock market by more dynamic financial characteristics known as factors. Unlike sectors, factors can and often do overlap, and companies can drop in and out of different baskets.
However, momentum and value are often seen as nemeses, with one usually doing badly if the other is on the upswing. After all, if a value stock climbs for long enough, it is no longer cheap enough to qualify as one.
Yet the superlative performance of many long-shunned areas that dominate the value stock universe has fed expectations that they will also be categorised as momentum stocks when weightings get periodically reshuffled.
A value-momentum convergence is the “holy grail” of quantitative investing, according to Bernstein strategist Inigo Fraser-Jenkins — something so rare that it is intriguing many investors in the field.’
A very interest read because the expectation is the convergence will last for longer than before and the fact that a number of value funds withdrew from the market last year, although I am sure they are already reforming and dusting of their tried and tested formula’s.
'Sydney-based Platinum Asset Management, Lee Ainslie’s Maverick Capital and London-based Lansdowne Partners are among funds already benefiting from the market rotation from once-hot “growth stocks” to value stocks. Some believe that the duration and depth of value stocks’ wretched run means there is left plenty of room for the recent rally to continue.“We’re at one of the most extreme positionings in markets in terms of value versus growth,” said Platinum co-founder Andrew Clifford, who believes such stocks could do well over the coming years. The recent rally, “while impressive, is quite small in the context of previous underperformance”.’
Mentions 'Currently, tech high-flyers like Tesla, Microsoft and Apple dominate momentum strategies such as the one followed by BlackRock momentum ETF.
Less glamorous technology names like Intel, IBM and Cisco sit atop the asset manager’s value factor fund with financial and energy companies also taking on a bigger weighting.’
Another interesting aspect is the re-ordering of momentum ETF’s which will/is; add to the volatility.

IEA raises oil demand forecast but stays cautious
The International Energy Agency revised higher its oil demand forecast for this year but warned of “lingering concerns” over the strength of the recovery in consumption.The report coupled with the fall in US inventories prompted a rally in oil prices last night.'“Reductions in surplus inventories as well as an expected pick-up in product demand will pave the way for a cautious recovery of oil market balance in the summer months,” the cartel said in its monthly report.'

Gold stages tentative recovery after central bank and consumer buying
Gold buying by central banks and consumers in India and China is stirring hopes for a recovery in the market, which has been hit by a wave of selling this year driven by large exchange traded fund outflows. Notes two key factors gold prices in China are rising and ‘the amount of gold withdrawn from the Shanghai Gold Exchange doubled in March from a year earlier to 168 tonnes, according to exchange data.’In India demand for gold jewellery has also rebounded with imports of gold hitting a two year high in March.
An interesting read but I think gold as an inflation hedge has lost some lustre to Bitcoin and other crypto currencies especially with millennials and Gen X, which is going to undermine some of its performance.
Vaccine boost for pound wears off with gains against dollar and euro eroded
The pound is paring gains against the euro and dollar while the optimism-fuelled drop in UK government bonds is easing as the effect of the country’s head start in vaccines starts to wear off.
China envisions rise of digital rival to dollar By Michael Hasenstab chief investment officer for Templeton Global Macro
Follows on from my comments about how the Feb has been slow.
Says the recent interest in Bitcoin is just the warn up for the digitalisation of the RMB and that could accelerate the decline in the USD’s dominance as the worlds reserve currency and the acceptance of the RMB internationally.Notes the advantages of a central bank digital currency (CBDC): 'greater fraud prevention, enable instantaneous international transactions, reduce transaction costs, permit greater financial inclusion and aid the provision of direct fiscal stimulus to individual citizens.’
The PBOC has been trialling the CBDC in 28 major cities since August 2020 and will include more this year like Beijing and Shanghai.
He notes that 'Some users outside China, particularly in the US, might be reluctant to use a digital currency controlled by China, given geopolitical tension. However, early adoption in parts of Asia, Latin America and Africa is likely to proceed significantly faster.’
Key is 'Global reserve currencies’ relative importance historically is explained by the macroeconomist Barry Eichengreen. Currencies are more prized as reserve assets when they satisfy two conditions: first, when they are stable, liquid and widely used in international transactions; and second, when they are backed by a country to which another state has important security links.’
He sets out how China satisfies a number of the requirements and also how a 'Lack of renminbi-denominated assets for foreigners to own has inhibited the rise of the renminbi as a reserve currency. But now the renminbi will be supported by the Chinese authorities opening their $15tn domestic bond market to foreign participants. Greater demand for these bonds will push down yields, lowering borrowing costs.’
Which, not mentioned, maybe one of the reasons the PBOC is reigning in debt in order to try an avoid significant bond defaults which would scare investors.
He notes the significance of the first mover advantage and the use of the BRI to enhance the RMB’s status.
He concludes 'Covid-19 might also be a catalyst for the greater acceptance of the renminbi as a global reserve currency. The economic carnage of the pandemic has sent already large fiscal deficits ballooning and driven even more accommodative monetary policy in the US.This historically unique combination of impending massive fiscal and vaccine-led growth, where short-term interest rates are anchored at zero, will expand an already large current account deficit, putting further pressure on the value of the dollar. The digitalisation of the renminbi will add to these economic and geopolitical factors. This will have a durable, transformative impact on the international economy.’
I think he is right in many aspects but the lack of convertibility at present is an issue and China’s tight control is going to be an issue. The clamp down on external investment is a indication of the concern, I think that given the chance a lot of money wants to leave China. That may be paranoid but it is a concern. It is interesting to wonder how the government’s direct knowledge of peoples finances will impact acceptance. China has been at the forefront with firms like Ant and the PBOC’s access to Ants data and systems could be important but the other key element is when only the consumer and Ant had the data, citizens were happy. If the PBOC/Govt has the data too, then there are increased concerns; not least in China regarding non declared income.
A good and well thought out piece, well worth a read.

For interest
FT BIG READ. INTERNATIONAL POLITICS. Quitting QAnon
Although its prophecies have proven false, the pro-Trump movement remains popular globally. Experts say that in the era of social media, it is even harder to persuade people to abandon a conspiracy theory.

Opinion
Grab is lunging for the top of the Spac market By Brooke Masters
Starts'The world’s largest Spac deal has lift-off: Singapore’s superapp Grab announced on Tuesday that it will use a special purpose acquisition company to float on Nasdaq at a value of close to $40bn.But the rest of the Spac market is deflating rapidly, with potentially dire consequences for investors and entrepreneurs who hope to tap a relatively quick method of joining a stock market.’
Concludes 'It is too hard right now for investors to tell these motives apart. The watchdogs should step in. The SEC has already warned de-Spacs about selling themselves with misleading predictions and taken a closer look at their accounting. Tough punishment should follow for those that misbehave.US regulators — and others seeking to lure Spacs — must do more. Tougher disclosure rules should set standards for projections and make it easier for investors to see who is profiting and how. Spacs aren’t for everyone but, done right, they have a place in the market.’Worth a read
Johnson plan to save the Union is muddle through by Robert Shrimsley
After a good start, the Iran nuclear talks still have far to go By Ali Vaez directs the Iran project at the International Crisis Group

Do China’s ‘wolf warrior’ diplomats have any bite?  By Lindsay Gorman a fellow for emerging technologies at the Alliance for Securing Democracy at the German Marshall Fund
Focuses on the fact that recently their attacks have misfired or backfired; 'exposing a more shadowy side of Beijing’s foreign policy to public scrutiny.’
Interesting to note 'Chinese officials have increasingly taken to Twitter over the past year in the face of mounting global concern about Xinjiang. That has now gone into overdrive. In just the last week of March, China’s diplomatic and state media accounts tweeted about the province more than 2,000 times — an eightfold spike in frequency, according to research complied by the Alliance for Securing Democracy, where we track authoritarian social media accounts.’
But quantity is not quality and is often far more damaging. 'As the French foreign trade minister wrote, “It is not by trying to intimidate our parliamentarians, researchers & academics that [China] will respond to legitimate concerns about the treatment of Uyghurs in #Xinjiang”. Beijing’s message rings similarly hollow in other key democracies. Last week, Japan called out China in an uncharacteristically strong statement. And at a bizarre media event in Canberra, the Chinese embassy gauchely paraded Uyghurs in an ill-received video presentation to journalists.’
'Beijing’s mixed messaging was neatly captured, mid-tweet, recently when the Chinese Embassy in Ireland mangled an Aesop’s fable. In its version of “the Wolf and the Lamb”, China accused the west of wolf-like attacks but then asserted: “The wolf is the wolf, not the lamb. BTW, China is not a lamb.” The real audience is likely to be party politicians back home, who want to see an emboldened China going punch for punch with the west.’
But 'China’s coercion has succeeded far better when it has been covert. A 2020 PEN America study on the Beijing government’s influence on Hollywood, for example, found that studios and filmmakers change “casting, plot, dialogue and settings . . . to avoid antagonising Chinese officials” who control whether their films gain access to the booming Chinese market.’
She concludes
'For democracies, activists, researchers and those concerned about the fate of the more than 1m imprisoned Uyghur Muslims, all this means meeting Beijing’s bluster with a continued spotlight and an open megaphone. As the 2022 Beijing Winter Olympics draw closer, and debates grow louder over whether and how democracies should participate, there may be just such an opportunity.’
A good read. As I have said before so many of these issues if China allowed foreign observers from the UN or other recognised international organisations free access they could quickly show how the west is wrong. The fact that they don’t I think reveals there is something to hide, as she says the 'Wolf Warriors' are for the benefit of the home market not real global diplomacy.

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