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China reports mixed start to 2024 for the economy – Industry roundup: 16 April

China’s economy grows by 5.3% in first quarter

China’s economy grew by more than expected in the first three months of 2024, despite a deepening crisis in its property sector.

According to official data, gross domestic product (GDP) in the world’s second-biggest economy grew by 5.3% in Q1, compared to a year earlier, surpassing estimates that growth would slow to 4.6% over the period.

Last month, Beijing set an ambitious annual target for economic growth of ”around 5%”.

However, data from the National Bureau of Statistics (NBS) also showed first quarter retail sales growth, a key gauge of China's consumer confidence, fell to 3.1%. In the same period property investment fell 9.5%, highlighting the challenges faced by China's real estate firms.

The NBS said in a statement that the economy had made a “good start” to the year under “the strong leadership” of the Central Committee of the Communist Party of China and President Xi Jinping.

“As a result, the policies continued to take effect, production and demands maintained stable and witnessed an increase, employment and prices were generally stable, market confidence continued to boost, and high-quality development made new progress,” the statistics agency said.

The stronger-than-expected figures came days after China reported that exports and imports in March declined 7.5% and 1.9% respectively, missing expectations.

Last week Fitch Ratings downgraded China’s sovereign credit outlook to negative, citing “increasing risks to China’s public finance outlook” as Beijing attempts to move away from real estate-led growth.


Bank of Israel’s governor outlines economic recovery prospects

The Bank of Israel’s governor, Amir Yaron said he believes that the Israeli economy will recover from the war relatively quickly but stressed the need for investments in infrastructure and human capital and does not rule out raising taxes to strengthen the economy.

In a lengthy interview with Israeli tech news site Calcalist, Professor Yaron said: “It is clear to us that some of the sentiment in the world towards Israel is currently much more challenging. Israel is still seen as a productive, entrepreneurial economy, with good academia, and that is the good part. But as the sentiment erodes, then this intangible capital may be damaged, and if it is damaged, it could potentially hurt how investors see us and our capabilities.

”And the more there is such an erosion, the better we will have to be, and work harder to compensate for it,"

Asked how he regarded Israel’s economic prospects after the war, he commented: ”There are ebb and flow cycles in the economy, and I hope it will be the same the day after. There will be a restoration of the towns, villages and kibbutzim and the businesses that were damaged and even a jump in investments in the region, around a regional security arrangement that will be the final chord of the state of war. In the past we have seen that our economy demonstrates an impressive ability to recover from crises.

”Unexpected rapid growth, as in the exit from the coronavirus crisis, was accompanied by high global growth, but I believe that we will see a gradual return to Israel's long-term growth rate. Our forecast for growth in 2025, assuming that there will be no additional direct effects of the war, is 5%.”


IMF objects to Ghana’s proposed deal with bondholders

Ghana’s attempts to restructure its US$13 billion debt with a group of international bondholders have hit a snag, the government announced, dealing a setback to its efforts to overcome default and economic challenges.

The International Monetary Fund (IMF) objected to the terms of the proposed deal, citing concerns about its incompatibility with a debt sustainability analysis that sets parameters for how much debt a country can afford.

Additionally, the bondholder group rejected part of the proposed restructuring, including a “par option” aimed at preserving the bond’s original value with an extended maturity and reduced coupon.

Ghana defaulted on the majority of its US$30 billion external debt in December 2022, following a surge in debt costs and inflation after being shut out of global markets.

The government is seeking solutions aligned with IMF parameters, aiming for a mutual agreement. Moreover, two groups of bondholders are involved, one international and the other regional African.

Finance Minister Mohammed Amin Adam expressed confidence in reaching a deal without specifying a timeline. The IMF emphasised the need for progress in bondholder talks during its second review of the US$3 billion loan program with Ghana.

The proposed bondholder deal included discounted options with varying coupons and maturities. Some bondholders preferred state-contingent debt instruments to align economic outlooks.


PwC forecasts three-in four European funds will be ESG by 2027

The level of assets allocated to environmental, social and governance (ESG) strategies in Europe will rise to €9.7 trillion over the next four years, according to PwC Luxembourg.

The global consultancy group made the forecast based on trends it analysed around launches, flows and investor appetite over the course of 2023. The upsurge will mean that three-quarters of all funds will either be Article 8 or 9 by 2027.

In its report Article 8 as a Middle Ground the firm said current figures indicated assets under management (AUM) in the European Union (EU)  as a whole reached €10.1 trillion in 2023. Of this, €6.2 trillion (61.5%) was in ESG-oriented assets – the great majority (€5.9 trillion) in Article 8 funds.

PwC Luxembourg also noted the number of funds at the end of last year across the continent totalled 24,010. Of these, 10,481 were Article 8 funds, with a further 963 being classified Article 9.

Split by asset class, the majority at the end of 2023 were equity funds (5,740 Article 8 and Article 9, compared with 4,415 ‘other’ funds), followed by bond (3,353 Article 8 and 9 versus 3,669 ‘other’), and mixed assets (2,120 versus 4,215 ‘other’). The report also found around 97% of ESG funds were actively managed.

“Since the implementation of the SFDR in 2021, there has been an undeniable surge in ESG investments,” wrote the report’s authors. “By the end of 2023, the AUM of funds disclosing under Article 8 and Article 9 of the regulation reached an impressive €6.2tn, marking a substantial increase of over €1tn compared to 2022, when the AUM of Article 8 and Article 9 totalled €5.1tn.”

“Our projections indicate that, by 2027, these figures will soar to €9.4tn, demonstrating a CAGR [compound annual growth rate] of 10.9% and representing approximately 75% of the total EU ESG UCITS AUM (up from 61.5% in 2023).”


KPMG: Global supply chains are still fragile

Supply chain stability saw “tremendous improvement” in 2023, but several variables are “still driving continued fragility”, with little or no prospect of nearing a return to pre-pandemic normality over the next 12 months, reports KPMG.

The annual KPMG Supply Chain Stability Index (SCSI) is produced by the Big Four accountancy firm in collaboration with the Chicago-based Association for Supply Chain Management (ASCM).It aims to help supply chain professionals understand the stability of US operations.

Authors of the SCSI report that 2023 saw ”tremendous improvement and increased supply chain stability overall”, but adds that several variables are “still driving continued fragility”.

A return to pre-pandemic normality over the next 12 months is seen as unlikely, with factors such as cross-border patrol closures between US and Mexico trade corridors – as well as conflict in the Middle East leading to attacks on commercial ships in the Red Sea – highlighted as adding to recent instability.

However, there remain reasons to be positive, such as greater nearshoring efforts in Mexico and Canada, reducing reliance on other regions.

”While supply chain challenges do persist, the overall return to increased levels of stability is a testament to the incredible efforts of countless supply chain professionals,” comments Abe Eshkenazi, CEO at ASCM. “The index continues to confirm that people make all the difference. We must continue cultivating supply chain talent to mitigate disruptions, build resiliency and drive growth.”


Société Générale sells Morocco banking and insurance units for €745 million

Société Générale has agreed the sale of its group's shares (57.67%) in Société Générale Marocaine de Banques including its subsidiaries and the total divestment of Sogecap’s stakes in the insurance company La Marocaine Vie.

The French bank said private investor Saham Group would take over all the banking and insurance activities operated by these companies, as well as all client portfolios and employees.

This divestment project was “part of the execution of Société Générale’s strategic roadmap presented in September 2023, targeting a streamlined, more synergetic and efficient business model, while strengthening the Group’s capital base".

The transaction would be done at a price of €745 million (US$791 million) and will have an estimated positive effect of around 15 basis points on the Group’s CET1 ratio upon the completion of the transaction, which could take place by the end of 2024.

The announcement of this agreement is expected to have a negative accounting impact of approximately €75 million on the Group's Q1 2024 results.

Société Générale and Saham also outlined the framework for a long-term business partnership that would allow Société Générale’s corporate clients operating in Morocco to engage with a local banking partner. For Saham Group this partnership would offer its future large clients the support and financing solutions provided by Société Générale Group experts.

Slawomir Krupa, chief executive officer of Société Générale Group, said: "Société Générale is pursuing the implementation of its strategic roadmap through this divestment project. Over the last decades, Société Générale has built a solid and recognised bank in Morocco serving more than one million clients.

"We are convinced the quality of Saham Group's proposed project will offer new development prospects for these activities and will create value for customers and employees. Société Générale is fully committed to support the transition and is pleased to enter into a long-term partnership with Saham Group.”


Hectare offers last mile trade finance for farmers

UK “smarter agriculture” fintech Hectare, a provider of agricultural technology supply chain solutions, has announced the launch of Advance Pay, a new embedded finance product that, according to a release, “gives arable farmers access to instant cash flow from their grain contracts at a fair market interest rate”.

Advance Pay aims to solve the challenges of financing last mile grain supply chains. Hectare claims to be the first to market to offer an independent solution without the heavy costs or administration headaches of traditional finance, lock-in contracts for grain pools, or input financing. On grain trades, farmers receive instant payment for up to 80% of the contract’s value.

Hectare sees the embedded finance offering as “the sweet spot where digital workflows and digital finance go hand in hand.” Farmers can receive an advance payment on a grain contract while closing a deal with a buyer, all in one transaction using its digital trading tools.

There are no costs associated with using Hectare's crop trading tools, and farmers pay what is labelled as “fair market interest” when choosing Advance Pay against a grain contract.

Vanessa Lenssen, Chief Product and Growth Officer at Hectare, says: “Hectare was created by farmers, for farmers. We wanted to solve the complex puzzle of last mile trade finance for our farming community.”

“We faced sceptics, but we felt that just maybe we could do something special and today, we're proud to break new ground and support our customers in building sustainable financial success for their farming businesses every day.”

In February 2023, Hectare raised US$20 million in Series A funding in a round led by existing and private investors.  The investment is being used to support Hectare’s Software-as-a-Service (SaaS) inventory, trading, logistics and market insights product development, and expansion beyond the UK into new international markets.


Afreximbank and Sterling Bank team on supply chain finance in Nigeria

African Export-Import Bank (Afreximbank) has partnered with Nigeria’s-Sterling Bank to launch its supply chain finance product ‘Payables Finance’ across Nigeria. Under the arrangement, Afreximbank will provide financing to corporates and banks in US dollars and euros, while Sterling Bank will manage financing in Nigeria.

Payables finance enables suppliers to access financing from the banking system by obtaining early payment for invoices which have been approved for payment by their corporate buyers.

The supply chain finance product, branded ‘Afreximbank Tradelink’, is one of the bank’s digital offerings under the umbrella of the Africa Trade Gateway (ATG). ATG provides African corporates and commercial banks with relevant digital tools to access market information, connect with buyers and sellers across the continent for efficient marketing and procurement, facilitate Know Your Customer (KYC) processes, and promote trade payments between African countries in local currencies.

Chukwuka Onuaguluchi, ecosystem banking head at Sterling Bank, said: “Sterling Bank is committed to meeting the trade finance needs of Nigerian corporates and their suppliers and we are proud to introduce this much-needed product in partnership with Afreximbank for the benefit of Nigerian businesses.”


Capital Bank updates cash management portal and adds trade services

Capital Bank of Jordan has introduced an updated business online banking platform for cash management with a new user interface and user experience. The bank also enriched the portal to add trade services in its offering.

The Amman-based bank, which also operates in Iraq, said the platform ”is crafted to simplify, secure, enhance the efficiency and the customer experience related to cash management and trade services transactions for institutional banking customers.”

The updates platform offes user-friendly navigation and robust security measures. It empowers clients to seamlessly manage and execute their daily financial transactions. These include internal, domestic, and international transfers, processing company payrolls, all done securely and conveniently. 

The trade services platform provides users with an efficient way of initiating and tracking of trade transactions pertaining to letters of credit, bills of collections, letters of guarantees, and shipping guarantee. 

The new platform also gives clients unrestricted access, enabling them to conduct their financial transactions anytime, anywhere, ensuring the smooth continuation of their tasks, everything based on the customer authority matrix in compliance with the certificate of registration.


Satago partners with mmob to simplify its SME embedded finance offering

Satago, a London-based fintech that provides working capital solutions, and mmob the universal API adaptor, announced a partnership that enables lenders and corporates to embed Satago’s invoice finance and cash flow solutions using mmob’s integration capabilities.

Lenders and corporates will now integrate Satago’s 3-in-1 Working Capital solution for small and medium enterprises (SMEs) into their digital platforms through a single snippet of code. This approach reduces the initial integration time required to embed Satago to mere hours, minimising the burden on development teams.

The cloud-based infrastructure means that the integration features automatic, periodic updates, making it a solution that scales and optimises with the business leveraging it. Once embedded, any invoice-issuing SME can easily access Satago’s flexible invoice financing, risk insights and credit control solutions through lenders’ and corporates’ digital channels.

CEO of Satago, Sinead McHale, said, “This partnership allows us to drive the reach of our platform, allowing lenders and corporates to embed Satago’s transformative working capital solutions into their platforms in as little as two hours of integration time. This ultimately benefits end-users the most, enabling us to place the increased visibility, control, flexibility and intelligence that Satago provides into the hands of more global partners – and their thousands of small business customers – with ease.”

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