Understanding the British pound's sudden crash - CNA

WHAT'S THE GOVERNMENT'S PLAN? 

The aim is that the tax cuts will create a more dynamic economy, which should eventually generate higher tax revenue and keep borrowing in check.

The new Conservative government's plans have drawn comparisons, even among its supporters, with the ill-fated 1972 budget drawn up by Kwarteng’s Tory predecessor Anthony Barber, who also delivered a massive package of unfunded tax cuts. In his case, inflation soared and the economy overheated before collapsing into recession. Barber’s boss, Edward Heath, was defeated by the Labour opposition two years later, and the UK had to seek a bailout from the International Monetary Fund in 1976.

There are also parallels with policies followed in the 1980s by another of Kwarteng’s predecessors, Nigel Lawson, under then Prime Minister Margaret Thatcher. 

WHERE DOES THIS LEAVE THE UK'S PROSPECTS?  

An export powerhouse like Japan is better able to manage a bout of currency weakness thanks to its huge current-account surplus.

The UK is in a similar position to some emerging markets, with one of the largest current-account deficits in the world and an already sizable budget deficit - set to get larger after Kwarteng’s announcement. Inward investment into UK property and other assets tend to prop up the pound in normal years.

But with growth weak and the economy increasingly volatile, there are mounting reasons not to invest in the UK. Lawmakers from Truss’s party have said the Bank of England may need to step in with an emergency rate rise to calm market nerves. 

WHY DOES IT MATTER?

Truss' Conservative Party, which has held power under four prime ministers since 2010, will face a general election by January 2025 at the latest. That gives her little more than two years to convince voters that her policies will work and the country’s cost-of-living crisis will abate.

While she retains a comfortable majority in the House of Commons for now, the party is trailing the opposition Labour Party in opinion polls. A continued decline in the pound would pile further pressure on the government.

Option-market pricing in late September suggested a real chance that the currency will hit parity with the dollar before the end of 2022. 

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2022-09-26 13:51:18Z
1578005664

Wall Street Banks Reassess China Over Taiwan After Russia Losses - Bloomberg

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1. Wall Street Banks Reassess China Over Taiwan After Russia Losses  Bloomberg
2. Wall Street Banks Prep For Grim China Scenarios Over Taiwan  NDTV Profit
3. View Full coverage on Google News

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2022-09-26 09:37:56Z
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In China, homebuyers occupy their 'rotting', unfinished properties - CNA

But in June 2020, Jiadengbao Real Estate hit the headlines after a court accused its parent company of illegal fund-raising and seized 340 million yuan worth of its properties, including a number of flats in Xiulan County Mansion.

Construction stopped in mid-2020, which Xu found out months later, describing her feelings at the time as "crashing from paradise".

Jiadengbao Real Estate did not respond to a request for comment from Reuters.

Since the debt crisis erupted in 2021, thousands more home buyers have been caught in similar predicaments as cash-strapped developers went into bankruptcy or abandoned struggling projects.

FENCING AND UNDERGROWTH

On a recent day, the main block of buildings at Xiulan County Mansion was surrounded by a tall blue fence while the clubhouse, touted in promotional materials, was covered in dense undergrowth. Cement mixers, iron poles, and piles of debris lay strewn around.

Xu, who is unemployed, said she bought the apartment for her only son, with the hope that he would be able to raise a family there. She said her son and her husband, who live far away in the northern province of Hebei, blame her for their financial predicament and no longer speak to her.

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2022-09-26 05:51:35Z
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Pound plunges to all-time low as UK economic plan spurs investor exodus - The Straits Times

TOKYO - The British pound tumbled to a record low on Monday, prompting speculation of an emergency response from the Bank of England (BOE), as confidence evaporated in Britain’s plan to borrow its way out of trouble, with spooked investors piling into US dollars.

The pound dived as much as 4.9 per cent to an all-time nadir of US$1.0327 before stabilising at around US$1.05405, 2.9 per cent below the previous session’s close.

It dropped 3.6 per cent on Friday, when new finance minister Kwasi Kwarteng unveiled historic tax cuts funded by the biggest increase in borrowing since 1972.

Against the Singapore dollar, the pound sank 2.89 per cent to $1.5079 as at 11.55am, and is now down about 17 per cent this year.

“Sterling is getting absolutely hammered,” said Mr Chris Weston, head of research at Pepperstone.

“Investors are searching out a response from the Bank of England. They are saying this is not sustainable, when you have got deteriorating growth and a twin deficit.”

The pound’s searing drop helped boost the safe-haven US dollar to a new two-decade peak against a basket of major peers. The dollar index - whose basket includes sterling, the euro and the yen - reached 114.58 for the first time since May 2002 before easing to 113.73, 0.52 per cent higher than the end of last week.

The euro also touched a fresh 20-year trough to the dollar on simmering recession fears, as an energy crisis extends towards winter amid an escalation in the Russia-Ukraine war. A weekend election in Italy was also set to propel a right-wing alliance to a clear majority in Parliament.

The dollar built on its recovery against the yen following the shock of last week’s currency intervention by the Japanese authorities, as investors returned their focus to the contrast between a hawkish United States Federal Reserve and the Bank of Japan’s insistence on sticking to massive stimulus.

Mr Kwarteng scrapped the top level of income tax and cut the basic rate by a percentage point, while also reversing a rise in the National Insurance payroll tax brought in earlier this year. On Sunday, he appeared unperturbed by the ferocious response that sent British assets tumbling, telling BBC television that he would not comment on market movements, but when it comes to tax cuts, "there is more to come".

"We have only been here 19 days," Mr Kwarteng said. "I want to see, over the next year, people retain more of their income, because I believe that it is the British people that are going to drive this economy."

On Friday, yields on British government bonds soared, by a record amount on some maturities, as investors punished the minister for his unapologetic dash for growth.

If maintained, the move in yields will dramatically inflate the cost of the extra £400 billion (S$616 billion) of borrowing that the Resolution Foundation think-tank estimates is needed over the next five years to fund the plan, adding to an interest bill already bulging thanks to sky-high inflation and BOE rate increases.

"With broad unfunded spending on the fiscal side unmatched by monetary policy to offset the inflationary impulse, the currency is likely to weaken further," Goldman Sachs analysts wrote in a note to clients on Friday.

The market moves this week could have huge implications. The opposition Labour Party - already enjoying a comfortable lead in the polls - is seeking to capitalise on the policy gulf that has opened up with the Tories at its annual conference, which began in Liverpool on Sunday. Leader Keir Starmer on Sunday told the BBC he would reverse Mr Kwarteng's most eye-catching measure - the scrapping of the top 45 per cent rate of income tax levied on earnings over £150,000.

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2022-09-26 00:17:14Z
1578005664

Live news updates: China sets out measures to prop up renminbi - Financial Times

On Monday we will be picking over the fallout from Italy’s lurch to the right after the completion of a bad-tempered election campaign. The Financial Times got in early with a Big Read on what a far right administration means for the rest of Europe.

We also have elections in Latvia, Bulgaria, Kuwait and Bosnia and Herzegovina this week. But the big one will be on Sunday with the first round of the Brazilian presidential election. The race frontrunner is left-wing former president Luiz Inácio Lula da Silva, but incumbent Jair Bolsonaro is far from out of the race. Tensions are running high.

A smaller but nonetheless significant ballot takes place on Thursday, when the alderman of the City of London will decide the next lord mayor. This largely ceremonial role will be key to promoting the UK’s financial centre, so it’s important. Hopefully the ballot will not prove as contentious as last year’s.

Aside from elections, it is a strong week for space travel. On Monday, Nasa will be crashing a spacecraft into an asteroid at 23,000kph in order to divert its path. The $300mn Dart mission, short for Double Asteroid Redirection Test, has picked as its target an asteroid called Dimorphos because it orbits another asteroid rather than the sun.

The US space agency will be busy again the next day with the launch of Artemis I, the first in a series of increasingly complex missions to establish a permanent human base on the moon.

If that were not uplifting enough the week will end with the return of the London Marathon, albeit six months later than its usual April slot to enable it to take place at all after the disruption the pandemic brought.

Companies

Continuing the theme of play, Lego (the name is derived from the Danish phrase leg godt, or “play well”) reports half-yearly results on Wednesday. The toymaker has guided analysts to expect a normalising of sales after its pandemic boom but expectations are high that sales will continue to outpace rivals in the sector.

For petrol heads, Thursday is an exciting day because shares in Porsche will begin trading on the Frankfurt stock exchange after the long-awaited flotation of the luxury car brand.

It is a more sombre week for lovers of the silver screen. Ailing movie house chain Cineworld will report its half-year results on Friday. Although the group is expected to post a profit, contrasting with last year’s loss, focus will turn to its latest cash position and net debt level after the company filed for bankruptcy protection in the US earlier this month.

Economic data

This will be a week of finding out how economies are performing and how the public expect them to perform with gross domestic product figures from the US, Canada and the UK as well as several consumer confidence surveys.

We will also get further insights into the battle in Europe to calm inflation with the release of consumer price index and producer price index readings from Germany, France and Italy.

Read the full week ahead calendar here.

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2022-09-26 07:40:40Z
1579222651

Wall Street Banks Reassess China Over Taiwan After Russia Losses - Bloomberg

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Wall Street Banks Reassess China Over Taiwan After Russia Losses  BloombergView Full coverage on Google News
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2022-09-26 00:00:00Z
CAIiEJreDES02L695vLxVxNcXQ4qGQgEKhAIACoHCAow4uzwCjCF3bsCMIrOrwM

Chinese anthem booed as football returns to Hong Kong - CNA

HONG KONG: Hong Kong football fans were heard booing China's national anthem on Saturday (Sep 24) at the first match open to spectators in the city since legislation outlawing the practice was passed more than two years ago.

Supporters in Hong Kong have been barred from games for almost three years due to the COVID-19 pandemic, but boos at the anthem were previously heard in the stands as huge, sometimes violent pro-democracy protests swept the city in 2019.

Police equipped with video cameras looked on as fans booed "March of the Volunteers" for about 10 seconds on Saturday before the Hong Kong team took on Myanmar in front of more than 12,000 spectators, according to local media and an AFP reporter on the scene.

China imposed a sweeping national security law on Hong Kong in 2020 that outlaws acts of secession, subversion, terrorism or collusion with foreign forces.

Hong Kong's legislature also passed a bill specifically criminalising disrespectful acts towards the anthem, with a maximum penalty of three years in jail.

Long queues were seen snaking outside Hong Kong Stadium on Saturday night as fans queued for tickets for the highly anticipated return to action.

When China's national anthem was played, loud booing was clearly audible, though not at levels heard before the security law was passed, according to the AFP reporter.

When the song was over, fans loudly chanted "We are Hong Kong".

In November 2019, long and loud booing at the anthem was heard at two Asian qualifiers for the World Cup when Hong Kong played Bahrain and Cambodia at the same stadium.

The Hong Kong Football Association was fined 30,000 Swiss francs (US$30,500) by FIFA as a consequence.

In July last year, a man was charged with insulting the anthem for booing the song when watching a screening at a local mall of Hong Kong fencer Edgar Cheung receiving a gold medal at the Tokyo Olympics.

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2022-09-24 15:36:00Z
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