Finance

A cryptocurrency whale took a high-stakes bet on Bitcoin and Ethereum just before Trump announced the creation of a strategic crypto reserve.

Finnish companies could receive loans totalling up to €437m to boost green energy initiatives and support for digitalisation under an agreement where the European Investment Fund (EIF) will provide guarantees to back lending by Helsinki-based financial services provider Nordea.

The loans to Finnish small and medium-sized enterprises (SMEs) and small mid-caps would support green and sustainable investments, including solar panels, electric cars, energy efficiency, and the adoption of digital technologies. These loans could range anywhere from €100,000 to €7.5m, depending on the types of investment involved, a Nordea spokesperson told Impact Investor.

Cross posted from: https://beehaw.org/post/17809174

Archived version

One of China’s leading developers is now on the authorities’ radar for default risk. A major Hong Kong builder is asking lenders to extend loans. Another industry peer is selling an iconic but largely empty mall in Beijing.

As China’s property debt crisis enters its fifth year, there is little indication that distressed developers are finding it easier to repay debt as a slump in home sales continues. Their dollar bonds are still trading at deeply distressed levels, their debt issuance has nearly dried up, and the sector is a notable laggard in stock markets.

Alarm bells went off again in recent weeks, when the banking regulator told top insurers to report their financial exposure to China Vanke to assess how much support the country’s fourth-largest developer by sales needs to avoid default.

[...]

"While recent government policies have helped to arrest the speed of decline, it could take another one or two years for the sector to bottom,” said senior credit analyst Leonard Law at Lucror Analytics.

“Against this backdrop, we can’t rule out the possibility of some more defaults next year, albeit the overall default rate should be much lower than before.”

[...]

The [Chinese government's] rescue measures adopted so far have focused on preventing a collapse in property prices, protecting owners of unfinished apartments and using state funds to help absorb excess supply.

At the same time, policymakers chose to look on as former industry behemoths China Evergrande Group and Country Garden Holdings became defaulters.

This is why the banking regulator’s queries over insurance firms’ exposure to Vanke’s bonds and private debt have drawn much attention. The insurers conducted similar checks in March as fears grew over the builder’s repayment risks.

Separately, Vanke executives have visited several insurers in the past few weeks, urging them not to exercise put options on some private debt that will soon become open to them.

“If there is no turnaround in property sales, asset disposals remain slow in a weak property market, and financial institutions become more cautious and require additional collateral, we believe Vanke could see a liquidity shortage sooner than expected,” Jefferies Financial Group analysts, including Ms Shujin Chen, wrote in a note.

[...]

Vanke’s dollar bond due May 2025 dropped about 10 US cents in the past week to around 80 US cents on the dollar, the biggest weekly decline in more than a year. Its 2027 note also slumped to 49 US cents, signalling investor doubts about full redemption.

Vanke’s woes come at a time when capital markets continue to show weak investor confidence in the sector: mainland Chinese and Hong Kong developers have issued US$67.3 billion (S$91.3 billion) of bonds in 2024, putting the market on track for its smallest annual issuance in at least in a decade.

[...]

In another worrying development, distressed Hong Kong builder New World Development is asking banks to postpone the due dates of some bilateral loans, a move that deepens concerns over its ability to service one of the heaviest debt loads of its kind.

Controlled by the family empire of tycoon Henry Cheng, the developer had total liabilities of HK$220 billion (S$38.4 billion) at the end of June and recorded its first annual loss in two decades.

[...]

"Hong Kong developers are facing a double-whammy in the current down cycle,” said Mr Daniel Fan, credit analyst at Bloomberg Intelligence.

“China’s property market, where many of them are involved, shows no sign of a strong recovery, while Hong Kong’s market correction is still ongoing.”

The Central Bank of Russia (CBR) held its key interest rate unchanged at the record high of 21% in its December meeting, surprising markets that expected a 200bps rate hike to 23%.

The decision took place following reports that CBR Governor Nabiullina recently talked with President Putin, who called for a 'balanced' decision, and Russian business leaders, who have been vocal against high interest rates despite soaring inflation.

The central bank is independent by law, but analysts said the pressure from business had become too strong to ignore. "The pressure ... worked, and the central bank decided to stop," said economist Evgeny Kogan according to Reuters. The current rate is still the highest since the early years of Putin's rule, when Russia was recovering from the economic chaos of the 1990s.

The central bank cited low credit activity as the warrant for the pause in rate hikes, but reiterated that underlying inflation continued to rise amid higher expectations from households and business, driving the bank’s inflation forecast to rise for 2025 and 2026.

The central bank also noted that the significant weakening of the ruble, unbalanced budget spending, and the ongoing labor force crisis contributed to soaring inflation. November data showed that annual headline inflation was at 8.9%, but early forecasts from the CBR have December's print near 9.5%, translating to the highest since February 2023.

Tragic story by Krebs. It's a long read, but likely worth your time especially if you are using crypto and you self-custody.

TLDR: Two persons lost a fortune due to very basic mistakes: one uploaded a picture of his cryptocurrency seed phrase to Google, another one entered his seed phrase into a pishing website.

Archived version

The decision, announced late on Tuesday, comes after the fund's ethics watchdog, the Council on Ethics, adopted a new, tougher interpretation of ethics standards for businesses that aid Israel's operations in the occupied Palestinian territories.

The $1.8-trillion fund has been an international leader in the environmental, social and governance (ESG) investment field. It owns 1.5% of the world's listed shares across 8,700 companies, and its size gives it influence.

It is the latest decision by a European financial entity to cut back links to Israeli companies or those with ties to the country, as pressure mounts from foreign governments to end the war in Gaza.

[...]

"The company, through its physical presence and provision of telecom services to Israeli settlements in the West Bank, is helping to facilitate the maintenance and expansion of these settlements, which are illegal under international law," the sovereign wealth fund's watchdog said in its recommendation to divest.

"By doing so the company is itself contributing to the violation of international law."

[...]

The rouble is down by 8% against the dollar over the past month. This is not a one-off event; it is part of a developing crisis that is affecting Russia’s economy.

Russia’s currency has been highly volatile since its troops invaded Ukraine in February 2022. The initial collapse, which saw the rouble lose one-third of its value by March compared with the start of the year, was due to the exodus of capital from the country following the introduction of western sanctions. Capital flowing out of Russia made the rouble more readily available on the foreign exchange market, hence causing its value to depreciate.

[...]

A volatile and weaker rouble will discourage domestic and foreign investment, as investors prefer to transact with a strong and predictable currency. It will also encourage people to move their capital out of the country, as it has since the war began, so the central bank will be forced to use its reserves to defend the rouble. But Russia is already constrained by limited foreign currency inflows and high spending demands – a vicious cycle that will further weaken its currency.

A weak rouble also raises the cost of importing goods or materials. The profit margins of import-dependent businesses will be reduced unless they pass the increased costs onto consumers – something that is relatively easy to do in Russia where there is minimal market competition.

This drives inflation for imported items like food, medical supplies, machinery and energy.

[...]

There is plenty for Putin to be concerned about. Falling export revenues, inflation and strained reserves all weaken Russia’s fiscal stability. And it looks as if western economic sanctions are now having a significant effect on Russia’s ability to counter its economic difficulties.

The administrators of Putin’s regime will argue that a weaker rouble is more favourable to them during the war. Converting stronger foreign currencies from energy exports will give the Kremlin more domestic currency to plug the government’s widening deficit.

Despite this, Russia’s currency crisis has exposed deep problems in the economy. It relies heavily on energy exports, has limited economic diversification and has a weak financial sector. Over the longer term, sanctions will also isolate Russia further and limit its economic autonomy because Putin will have no choice but to rely on doing business with a few trading partners, such as China and India.

The Russian ruble plunged nearly 7% to trade at more than 110 per USD, the lowest on record excluding the short-lived selling immediately after Russia launched its invasion of Ukraine, as more sanctions against Russia dampened the outlook for inflows of foreign capital. The US sanctioned Gazprombank, the last major financial institution without penalties, to halt the transfer of payments from foreign markets to pay for Russian gas.

The ruble remained under pressure from Moscow relaxing capital controls as a weaker currency aids the Kremlin’s ability to finance its budget. Mandatory forex conversion for export revenues fell 25% from earlier in the year, significantly reducing demand for rubles.

Russian central bank intervenes to stop currency free fall

Russia's central bank said on Wednesday [27 November] it would stop foreign currency purchases in order to ease pressure on the financial markets after the rouble weakened beyond 110 to the U.S. dollar, 119 to the euro, down by one-third since early August.

The central bank said it had decided not to buy foreign currency on the domestic market from Nov. 28 until the end of the year, but to defer these purchases until 2025.

"The decision was made to reduce the volatility of financial markets," the regulator said in a statement. Since Russia was blocked from using the dollar and euro, it has made foreign exchange interventions using Chinese yuan.

Russia published new economic data on Wednesday highlighting the latest signs of overheating in an economy retooled for the purpose of fighting the war in Ukraine, which has sucked workers out of the labour force.

[Edit typo.]

• IPO freeze, economic issues lead to rise in redemption requests
• Founders responsible for redemption; startups risk failure
• 14,000 startups at risk of refund requests, law firm estimates
• Startups' predicament challenges China's self-sufficiency drive
• Redemption rights offer protection, investor says

Chinese startups are increasingly struggling with demands from early-stage venture capitalists to return their investment or face lawsuits, after failing to provide an exit via a market listing within an agreed time frame, industry executives said.

Startups worldwide often agree redemption rights allowing private equity and venture capital investors to ask for their money back along with a premium if targets such as an initial public offering are not met.

In China, however, a near freezing of the IPO market this year and declining sources of capital in an economy hobbled by a property crisis and struggling for growth has given rise to reimbursement requests, threatening many startups' existence, executives said.

The situation conflicts with the government's resolve to foster innovation and achieve technological self-reliance in systemically important industries to insulate the country from the impact of geopolitics.

One in three people would rather deep clean their bathroom – deep clean with rubber gloves and everything – rather than check their savings,” according to AJ Coyne, chief marketing officer at online bank Monzo. While this might sound like marketing hyperbole, it reflects a profound truth about our relationship with financial information: many of us actively avoid looking at our bank balances when we fear bad news.

This trait is so common that behavioural economists have given it a name: the “ostrich effect”. Like the myth of ostriches burying their heads in the sand, we often prefer uncertainty to confronting potentially negative financial information.

Research examining millions of banking logins reveals clear patterns in how people interact with their financial information. A 2009 study found that people systematically avoid checking their financial information when they suspect bad news.

This avoidance has real consequences for how people manage their money. In our ongoing research, we found clear evidence that people who don’t regularly check their accounts show much more volatile spending patterns, particularly around payday. When people receive their salary, those who infrequently check their accounts tend to spend significantly more on discretionary purchases compared to regular account checkers.

Russia's central bank on Thursday said it planned to set a surcharge for banks when issuing new loans to large firms with a high debt burden, as the regulator looks to limit credit risks for Russian companies contending with interest rates at 21%.

[...]

Russian Railways, a key cog in Russia's industrial machine, is one of several firms planning to reduce investments next year. The state-owned monopoly expects its interest payment costs to hit $7 billion next year, suggesting a rise of around $4 billion, a company document seen by Reuters showed last week.

The central bank said the measures would apply to companies with debt over 100 billion roubles ($987 million), an interest coverage ratio of less than 3% and whose consolidated debt exceeds 2% of the Russian banking sector's capital.

It did not specify how much the surcharge would be.

[At the time of the publication of this article on 21 November, $1 stood at 101.2955 roubles.]

If former president and Republican nominee Donald Trump is elected next week, economists are betting that inflation will go up. Research firm Capital Economics plans to actually raise its interest-rate forecast in such a scenario because its economist Thomas Ryan suspects the Federal Reserve’s reaction will be to pull back on slashing rates.

[...]

We’re a little less than a week away from the presidential election, and the housing world is still at a standstill. The two candidates have plans, or concepts of plans, for housing. But inflation plays a key role: It can push prices higher even while real estate serves as a hedge against it. The Consumer Price Index rose just 2.4% in September from a year earlier, and that’s very close to the Fed’s target. Not to mention, the central bank entered into a cutting cycle that same month, slashing its key interest rate by 50 basis points. So you might think the worst is behind us, but it might not be.

In June, 16 Nobel Prize–winning economists signed a letter expressing their concern that Trump’s proposals could reignite inflation. Earlier this month, 68% of economists surveyed [...] said inflation would likely be higher under a Trump presidency. On the other hand, 12% said the same for a Kamala Harris presidency.

[....]

That isn’t to say everything would be perfect if Harris were president—it won’t be, and housing will still be pretty stuck; maybe there’ll be a small recovery. Mortgage rates might come down a bit too. However, the expectation of another Trump presidency is already taking effect, and may only worsen if he is elected.

[...]

cross-posted from: https://feddit.org/post/4321125

Russian Central Bank Governor Elvira Nabiullinawarned comments, made to a group of State Duma lawmakers, come a week after the Central Bank hiked its key rate to a record-high 21%, taking it even further than the emergency rate of 20% initially introduced after the February 2022 invasion of Ukraine.

“With high inflation, economic growth cannot be sustainable,” the Central Bank head told Russian lawmakers. “It’s a dangerous illusion to think that increased inflation can be reliably kept within a certain zone.”

“That’s why we’re not planning to take any shortcuts as we move toward our 4% target,” she added, defending the regulator’s tight monetary policy as an “inevitable reaction to what’s happening in the economy.”

[...]

Seasonally adjusted price growth in September rose to 9.8% year-on-year from 7.5% in August. Core inflation, meanwhile, increased to 9.1% from 7.7% over the same period.

[...]

Russia has faced volatile prices since President Vladimir Putin sent troops into Ukraine in February 2022, triggering a barrage of Western sanctions and strict countermeasures in a bid to stabilize the economy. So, too, has defense spending soared as Moscow ramps up arms production for the war in Ukraine.

Russia’s draft budget for 2025, passed by lawmakers in its first reading last week, allocates around one-third of total state spending — or 6.3% of GDP — to the military, a figure unprecedented since the days of the Cold War.

Given that so much of the current spending is driven by the state, which is less responsive to higher borrowing costs, analysts fear that raising interest rates may not be an effective measure against inflation.

[...]

Analysts have cautioned that Russia may be entering a period of “inflation without growth,” while also warning the economy is inching closer toward stagflation — when the economy grows slowly and prices shoot up.

cross-posted from: https://feddit.org/post/4262252

A combination of good high-speed internet coverage, high digital literacy rates, large rural populations and fast-growing fintech industries had put the Nordic neighbours on a fast track to a future without cash.

[...]

But Russia’s invasion of Ukraine in 2022 and a subsequent rise in cross-border hybrid warfare and cyber-attacks blamed on pro-Russia groups have prompted a rethink.

[...]

The Swedish government has since completely overhauled its defence and preparedness strategy, joining Nato, starting a new form of national service and reactivating its psychological defence agency to combat disinformation from Russia and other adversaries. Norway has tightened controls on its previously porous border with Russia.

[...]

[Norway's] justice and public security ministry said it “recommends everyone keep some cash on hand due to the vulnerabilities of digital payment solutions to cyber-attacks”. It said the government took preparedness seriously “given the increasing global instability with war, digital threats, and climate change. As a result, they’ve ensured that the right to pay with cash is strengthened”.

[...]

Biased media coverage imposes on African nations a significant cost burden, particularly during electoral periods, ultimately deterring foreign direct investment (FDI) in a continent known for its low default rates and high returns in strategic sectors, research by the 'Africa No Filter' and 'Africa Practice' finds.

The study used academic estimates indicating that media sentiment can influence borrowing interest rates by up to 10%, with a 10% improvement leading to a 1% decrease in rates.

• Negative narratives dominate the discourse around African elections compared to non-African countries with similar risk profiles. Fir example, 88% of media articles about Kenya during its election period were reported as negative, compared to only 48% for Malaysia, which affects Kenya's ability to attract foreign investments​.
• African countries consistently face higher bond yields, with Egypt having an average bond yield of 15%, compared to Thailand’s 2.5%
• Improved media sentiment could reduce borrowing interest rates by up to 1%, translating to potential savings of $4.2 billion annually across the continent. This amount could fund the education of over 12 million children, provide immunizations for more than 73 million children, or ensure clean drinking water for two-thirds of Nigeria’s population.

The report emphasises that while Eurobond debt servicing constitutes only 6% of Africa’s financing portfolio, further exploration into other financial inflows is essential to fully understand the extent of the ‘prejudice premium’ affecting African nations.

The findings underline the need for a recalibration of global media representations of Africa, urging for more accurate portrayals that reflect the continent’s diverse realities. The study serves as a clarion call for stakeholders in both media and finance to work collaboratively towards fostering a more equitable representation of Africa. By addressing these biases, substantial investment can be unlocked.

Here are detailed numbers by the International Monetary Fund (IMF)

Public debt levels have ticked up again in the United States, the EU and China in 2024, according to estimates by the International Monetary Fund (IMF). This year, U.S. government debt is expected to reach 121 percent of GDP, compared to 90.1 percent of GDP in China and 82.7 percent of GDP in the EU.

Looking back over recent years, public debt rose to around 132 percent of GDP in the first year of the coronavirus pandemic in the U.S., marking an increase of almost 24 percentage points from 2019. The increase in debt in the European Union and China was significantly lower during this period.

However, the debt ratio in the U.S. also fell again relatively sharply in 2021, down 7.3 percentage points compared to 2020. By contrast, the Chinese government's debt has continued to rise steadily between 2020 and 2024. While China has fueled growth with significant, credit-financed investments, this economic policy is also reflected in the country’s rising national deficit.

National debt is expressed in absolute terms in the national currency. The debt ratio/government debt ratio is the ratio of government debt to gross domestic product (GDP). If government expenditure exceeds government revenue, this is referred to as a budget deficit (as opposed to budget surplus).

cross-posted from: https://feddit.org/post/4036901

Russia expects the local subsidiaries of European banks Raiffeisen Bank International (RBI) and UniCredit to participate in the mass launch of the digital rouble in July 2025 or face potential fines.

Austria's Raiffeisen Bank International (RBI) and Italy's UniCredit are two of Russia's 13 systemically important banks but they are also under pressure from the European Central Bank to cut their exposure to Russia.

Russia has been piloting a digital rouble and plans to begin mass implementation on July 1, 2025. Under the pilot scheme, a select group of individuals and companies has been allowed to open digital wallets and make purchases and transfers with digital roubles. Bank of Russia Governor Elvira Nabiullina said the full rollout next year would be voluntary for individuals, but not for systemically important lenders.

[...]

Meanwhile, the Russian government is signaling that it will block any attempt by lenders including Raiffeisen Bank International AG and UniCredit SpA to sell local units to any buyer that risks being sanctioned, according to people familiar with the matter.

That effectively rules out a Russian buyer, and given the opposition by Western governments to any outside bidder stepping in, makes a sale next to impossible. Abu Dhabi’s Mubadala Investment Co. abandoned a potential purchase of UniCredit’s Russian operations last year on the basis that the US government would oppose it, people familiar with the matter said.

Raiffeisen and UniCredit have been seeking a way out of their entanglement in the country since the invasion of Ukraine over two years ago. The Western banks, two of the largest left with operations in Russia, are seen by the government of President Vladimir Putin as vital conduits for foreign payments, one of the people said.

Archived version

Human rights concerns continue to dog China's fast fashion retailer Shein‘s initial public offering (IPO) in the UK

If Liam Byrne—a British Labour Party politician who leads parliament’s business and trade committee—gets his way, Shein might need to redirect its planned IPO float to Hong Kong or its home base in Singapore. He is calling for the U.K. government to ban imports made in the Xinjiang region in China, according to the Financial Times. That kind of legislative change will result in greater intensive scrutiny in the supply chain, and ultimately on producers such as Shein over alleged use of forced labor.

Xinjiang is the Chinese region with links to the exploitation of Uyghurs and other Muslim ethnic groups via forced labor. The evidence of crimes against humanity are widely documented.

[...]

Even those connected to the fast-fashion firm end up getting pulled into Shein controversies.

Last month, Italy launched a greenwashing probe into Shein. The Italian antitrust watchdog is probing Infinite Styles Services Co., a Dublin-based operation that manages Shein’s online presence. The probe’s focus is over the possibility of misleading sustainability claims connected with Shein’s clothing.

Last month, Italy launched a greenwashing probe into Shein. The Italian antitrust watchdog is probing Infinite Styles Services Co., a Dublin-based operation that manages Shein’s online presence. The probe’s focus is over the possibility of misleading sustainability claims connected with Shein’s clothing.

And in August, David Schwimmer, the leader of the London Stock Exchange Group, found himself pushing back on allegations that the Exchange had lowered its standards to court Shein so it could switch course from the U.S. to the U.K. for its flotation.

[...]

Shein initially planned to file its IPO in the U.S., but drew scrutiny from Washington lawmakers, who urged the Securities and Exchange Commission to block the firm due to concerns over ties to the Chinese government and alleged use of forced labor in its supply chain.

[...]

[Given the scrutiny in the UK], the most likely scenario could be a listing on the Hong Kong Stock Exchange.

[...]

But how a Hong Kong listing would fare also remains a big question mark. Hong Kong isn’t exactly the go-to choice for companies aiming to go public. Exchanges elsewhere, such as the U.S. or London, are seen as more active, and therefore get to attract more investors.

Archived link

On Sept. 13, the Central Bank of Russia raised its key interest rate to 19% and warned of further hikes to come. The Central Bank claims the move was necessary to combat inflation, which it attributes to an alleged excessive rise in domestic demand.

However, there is an alternative viewpoint. According to economist Valery Kizilov, it was the Central Bank itself that fueled inflation by unjustifiably expanding the monetary base for years while simultaneously encouraging a credit boom. Russia has grown accustomed to living with an inflation rate of close to 10%, negligible real growth, and interest rates on loans exceeding 25% per year.

Breaking away from this course is difficult, writes Kizilov, and those caught up in the euphoria tend to ignore the risks and disregard the future.

The People's Bank of China (PBoC) lowered the reserve requirement ratio (RRR) for banks by 50bps, the second reduction this year aimed at bolstering a stuttering economy. The change, which takes effect today, Sept. 27, was signaled earlier in the week by Governor Pan Gongsheng, bringing the weighted average RRR to 6.6%.

This move will free up about CNY 1 trillion in new lending, with the central bank leaving room for another cut this year.

Additionally, the PBoC trimmed the 7-day reverse repo rate by 20bps to 1.5%. This rate is used to determine the nation's key lending rates. It also stated interest rates for 14-day reverse repos, as well as temporary repos and reverse repos, will continue to be adjusted in line with changes to the 7-day reverse repo rate. China has ramped up the rollout of policy initiatives this week, with its top decision-making body, the Politburo, pledging to introduce further fiscal and monetary support measures to prevent further deterioration of the econom

cross-posted from: https://feddit.org/post/3202701

China’s problem is essentially that it has too much debt.

The main role of debt is to bring forward demand from the future. [...] China’s stimulus has kept on increasing since 2008, until it peaked with the end of the pandemic.

Now China risks entering a classic ‘debt trap’ where new loans are taken out to repay existing debt – not to create new demand. In other words, the debt is no longer being used to generate growth. In turn, this risks generating a downward spiral.

[...]

The underlying problem, of course, is China’s massive housing bubble. It was probably the largest ever seen. And it has been bursting for some time, with home sales slumping, as the Bloomberg chart shows.

[...]

China needs to urgently boost [domestic] consumption and downsize manufacturing.

[...]

• Housing is currently unaffordable for most people
• The real estate market is an outsize risk for the economy – it is 29% of GDP, and 70% of China’s urban wealth
• Given China’s ageing population, it seems likely [that housing sales] volume could drop at least another 20% before the market bottoms
• That will mean China will need to import a lot less oil, metals, plastics and everything else connected to the bubble.