Hong Kong court orders China property group Evergrande to liquidate

A Hong Kong court has ordered the liquidation of stricken Chinese property giant Evergrande after lawyers failed to convince a judge it had a working restructuring plan.

Once China's biggest developer, Evergrande has reported more than US$300 billion in liabilities and its financial problems have become a symbol of a years-long property crisis that has dealt a massive blow to the country's economy.

In 2022 a creditor filed a winding-up petition in Hong Kong against China Evergrande Group and began the process of liquidation, but the case has dragged on while parties attempted to broker a deal.

High Court judge Linda Chan on Monday called for the liquidation of the firm given “the obvious lack of the progress on the part of the company in putting forward a viable restructuring proposal and the insolvency of the company.

“I consider that it is appropriate for the court to make a winding-up order against the company and I so order," Chan said. She added that the court at the previous hearing in December “made it very clear it expected to see a fully formulated and viable proposal”.

Speaking after the morning session of the court adjourned, a lawyer representing an ad-hoc group of creditors told reporters that Evergrande had “failed to engage with us”.

“There has been a history of last-minute engagement which has gone nowhere,” said lawyer Fergus Saurin. “The company has itself to blame for being wound up.”

The demise of Evergrande, which first defaulted on a debt payment in 2021 and declared bankruptcy in the United States last August, has been closely watched as it was once a pillar of China’s economy, with the construction and property sector once accounting for around a quarter of the country’s GDP.

But Chinese President Xi Jinping deemed the debt accrued by Evergrande and other property firms an unacceptable risk for China's financial system and overall economic health. Authorities have gradually tightened developers' access to credit since 2020, and a wave of defaults has followed.

By the end of June 2023, Evergrande estimated it had accumulated debts of US$328 billion.

Steve Clayton, head of equity funds at financial services group Hargreaves Lansdown:commented: “The fallout from the woes of China Evergrande and other over-leveraged Chinese property developers is spreading to Asian money markets more widely.

"Overnight, Chinese bond yields fell further, reaching a 20-year low of 2.5%. Investors are betting that China will need to flood markets with liquidity as their banking sector tries to find ways of absorbing the huge losses that look likely to emerge from their property sector exposures."

 

Singapore's MIA leaves policy unchanged in first meeting of 2024

Singapore’s central bank left its policy unchanged as forecast in its first quarterly monetary policy decision of 2024.

The Monetary Authority of Singapore (MAS) will also maintain its exchange rate policy band, known as the Singapore dollar nominal effective exchange rate (S$NEER).

“MAS will closely monitor global and domestic economic developments, and remain vigilant to risks to inflation and growth,” the central bank said in a policy statement.

The MAS differs from other central banks that adjust their domestic lending rates, opting instead to tweak the exchange rates of its currency. The central bank strengthens or weakens its currency against those of its main trading partners, thus effectively setting the S$NEER. The exact exchange rate is not set, rather the S$NEER can move within the set policy band, the precise levels of which are not disclosed.

Until this year, MAS reviewed its monetary policy only twice-yearly but has shifted to a quarterly issue of statements in January, April, July, and October.

The central bank also said it expects Singapore’s gross domestic product (GDP) to improve in 2024, estimating growth between 1% and 3%. Preliminary data in early January showed the economy growing by 1.2% in 2023, but the fourth quarter showed an increase of 2.8% year-on-year basis , its fastest pace for the year.

“Barring any further global shocks, the Singapore economy is expected to strengthen in 2024, with growth becoming more broad-based. Core Inflation is likely to remain elevated in the earlier part of the year, but should decline gradually and step down by Q4, before falling further next year,” the MAS said.

The MAS said core inflation is expected to rise in the current quarter “due in part to the one-off impact of the 1%-point hike in the goods and services tax (GST) from January this year.” Singapore raised GST on 1 January.

The central bank estimates core inflation to average between 2.5% and 3.5% in 2024, unchanged from its October forecast. Excluding the impact of the GST hike, core inflation is projected to average between 1.5% and 2.5%.

Singapore will announce its budget for 2024 on 16 February, when economists will look for indications of any shift in government priorities.

 

Bank of Japan holds first digital yen CBDC meeting

The Bank of Japan (BOJ) and the Ministry of Finance held their first meeting to discuss a potential central bank digital currency (CBDC).

The central bank is currently conducting a digital yen pilot, but no decision has been made regarding the launch. Last year, the central bank set up a separate CBDC Forum consisting of private sector representatives.

According to reports, last Friday’s meeting involved representatives from the Cabinet Office and National Police Agency. Observers from the Fair Trade Commission and the Personal Information Protection Commission also attended.

The Ministry outlined the need to ensure a CBDC can coexist with existing private sector digital payment firms, according to NHK news. Any CBDC needs to enhance payment convenience and protect privacy and several legal issues are still to be resolved.

A decision to launch will only be made after public discussion and may require a referendum. The next meeting will explore specific challenges and how to address them.

The BOJ was one of the first central banks to explore CBDC, and previously collaborated with the European Central Bank (ECB) and others on research. The progress of the ECB with the digital euro and the advanced stage of China’s digital yuan (eCNY) pilots may exert some pressure on Japan to progress with a CBDC, despite a continued heavy reliance on cash.

Since 2020 a digital currency forum involving over 100 Japanese institutions and enterprises has been exploring digital currency. It plans to launch a yen-backed digital currency (DCJPY) solution this year. Separately, the MUFG-backed Progmat DLT platform has a Progmat Coin solution for stablecoins.

 

Vietnam’s corporate bond market waits for action

Vietnam’s corporate bond market is sluggish and expected to remain relatively inactive until the end of the first quarter of 2024, as conditions for issuing and trading corporate bonds tighten.

No corporate bond issuances had been reported as of 24 January, according to data from the Hà Nội Stock Exchange (HNX) and the State Securities Commission (SSC). However, there has been consistent activity in the repurchase of bonds before maturity, with companies buying back nearly dong (VNĐ) 4.3 trillion (US$17.5 million) worth of bonds.

Currently, few companies are disclosing their plans to issue corporate bonds in 2024, except for some banks such as Vietcombank and VietCapital Bank.

Experts predict that Vietnam’s corporate bond market this year will follow a similar pattern to 2023, characterised by a slow start in the first half and stronger growth in the second half. 

Vietnamese business operations continue to face challenges, the country’s real estate market remains subdued and investor confidence has yet to fully recover, each contributing to the trend of the corporate bond market.

Furthermore, the recent reintroduction of Decree 65/2022/NĐ-CP, which tightens the rules for bond issuance, after a period of suspension and postponement under Decree 08/2023/NĐ-CP, is also an obstacle for the market.

In the long term, the implementation of Decree 65 will contribute to a more transparent and professional corporate bond market, according to Cấn Văn Lực, a member of the National Financial and Monetary Policy Advisory Council. However, in the short term it creates certain pressures for issuing companies.

Currently, bank savings interest rates are very low, and many retail investors are interested in returning to the corporate bond investment channel but facing difficulties in meeting the requirements of Decree 65.

According to the decree, retail investors who want to participate in the corporate bond market must hold a securities portfolio with a minimum market value of VNĐ2 billion, determined based on the average market value of the portfolio over the previous 180 consecutive days before being recognised as a professional securities investor.

 

Amazon abandons US$1.4 billion iRobot bid over EU regulatory issues

Amazon has scrapped its planned US$1.4 billion acquisition of US tech group iRobot, producer of the Roomba robot vacuum cleaner, in the face of the European Union’s (EU) opposition to the deal.

The e-commerce group will pay a US$94 million break fee to iRobot, which announced that it will now reduce its workforce by 31% – or 350 employees – and that chief executive Colin Angle would step down but continue to serve on the board until his term expires in May.

Glen Weinstein, iRobot’s executive vice president and chief legal officer, has been appointed Interim CEO, and Andrew Miller, lead independent director of the board is named Chairman of the Board.

The Wall Street Journal had reported on 18 January that the EU’s executive arm was preparing to block the deal and had informed Amazon of its proposed view. UK regulators had previously approved the deal last June, but it also faced scrutiny in the US from the Federal Trade Commission (FTC).

Amazon originally agreed the terms for an acquisition of the robot firm in August 2022. However, last November the European Commission said its preliminary view of the deal had triggered concerns that it could harm competition for iRobot’s rivals on Amazon’s online marketplace, particularly in France, Germany, Italy and Spain.

Amazon and iRobot said in a joint statement the takeover had “no path to regulatory approval in the European Union, preventing the two companies from moving forward together”.

Handelsbanken and ex-senior manager dispute her departure

Sweden’s Handelsbanken is in a PR dispute with its Chief Communications Officer Louise Sander, over her recent departure from the bank.

A release issued by Handelsbanken at the end of last week stated: “Handelsbanken’s former Chief Communications Officer, Louise Sander, will now also be relinquishing her membership of Handelsbanken Liv’s and EFN’s boards of directors.

“She was relieved of her role as Chief Communications Officer on 9 January, with immediate effect, and thus also ceased to be a part of the Bank’s executive management. The action was taken on the Bank’s initiative.

The recruitment process for a successor has been initiated, and until such time as an appointment is made, Pernilla Eldestrand, currently Head of Communications for Sweden, will serve as Acting Chief Communications Officer for the Group.”

Sander responded by rejecting the statement as inaccurate, “I left the bank on my own initiative, something I communicated with the former CEO already in November, but I was asked to stay until the turn of the year,” she said in an email to Bloomberg. “I would think that the bank has more urgent things to focus on than press releasing false statements on why I left the bank.”

The conflicting statements have triggered a public relations storm for the bank’s new chief executive Michael Green, who was named CEO in November and took over at the start of this year. He succeeded Carina Akerstrom who last summer announced her retirement.

Green has been with the bank for 30 years and “noted when meeting the press on 4 January, communications is an area where the Bank sees significant potential for improvement”, according to Eldestrand. Sander joined Handelsbanken in 2013 and before becoming Chief Communications Officer in 2021 served as CEO of Handelsbanken Liv, the company's life insurance subsidiary.

 

Village Capital and Standard Chartered Bank invest in women-led startups

Start-ups supporter Village Capital & Investment has partnered with Standard Chartered Bank to pilot a financing facility to invest in the Bank’s Women in Tech programme alumni.

“With a primary focus on early-stage, impact-focused start-ups led by women founders, the initiative seeks to address the gender financing gap that persists in the entrepreneurial ecosystem,” a release stated.

“The financing facility’s key objective is to provide much-needed catalytic capital, empowering women entrepreneurs to overcome the challenges they face in accessing investment and financing opportunities compared to their male counterparts.

“Extensive research has consistently highlighted the critical need for gender-focused investment initiatives. The partnership is set to create dedicated support for impact-focused, women-led ventures developing solutions to address local and global challenges.”

“We’re extremely excited to partner with Standard Chartered Bank to support their vision to lift participation of women globally by driving more investment capital to impact-driven women founders,” said Heather Matranga, Vice President, Impact Investments, Village Capital.

“For over a decade, Village Capital has been developing systems and processes to improve equity in investment decision-making and ultimately unlock more opportunity and capital for women-founded and led ventures. Through this pilot facility, we intend to provide innovative and catalytic financing that truly meets the needs of women entrepreneurs across a range of business models and markets,” she continued.

 

BNY Mellon assesses T+1 environment as US deadline approaches

With the pivot towards T+1 securities settlement in the United States now four months away, BNY Mellon analysed its US custody base and reports that about a third of trades settled by the Depository Trust & Clearing Corporation (DTCC) may face issues preparing for the settlement cycle reduction in their current workflow format.

The data collected by BNY Mellon in November found that 25% of client transactions need to adjust their workflows to meet the new settlement cut-offs. Meanwhile, another 9% would need “significant operating model changes” to meet the new deadlines which come into force on 28 May in the US.

Only two-thirds of client trades BNY Mellon tracked currently meet the future deadlines.

Adam Watson, head of commercial product, custody services at BNY Mellon, told Global Custodian: “This is a look at the efficiency of us and our clients’ operating models. We’ve got all these analytics and we look at key performance indicators (KPIs) whether it be affirmation rates, settlement rates, failure rates, straight through processing, manual touch points, it’s a wealth the data.” 

Watson added that the data also shows the US to have a high success rate as expected, however while the consensus within the industry is that Asia is probably the furthest behind in being ready to move to T+1 – and even T+0 – Europe actually emerged as lagging the further behind out of the three regions.

 

World Bank issues US$100 million bond to reduce plastic waste

The World Bank has priced a seven-year US$100 million, principal-protected Plastic Waste Reduction-Linked Bond. The “innovative” bond provides investors with a financial return linked to Plastic Waste Collection Credits, Plastic Waste Recycling Credits (collectively, plastic credits), and Voluntary Carbon Units (carbon credits) expected to be generated by two projects.

The selected projects in Ghana and Indonesia aim to reduce and recycle plastic waste in vulnerable communities, cutting plastics leaking into nature and oceans. Citi acted as Lead Manager for the transaction.

“This ground-breaking outcome bond mobilises private capital to support the financing of projects with positive climate and development impacts – with outcomes measured by the generation of plastic and carbon credits issued on the Verra Registry,” a release stated.

“Through the transaction, investors are providing approximately $14 million in up-front financing required by the projects to increase capacity at existing facilities, expand to new collection and recycling sites, and install food-grade recycling equipment.

“In addition to reducing plastic pollution, the projects create improvements in local pollution and air quality, reduce associated health impacts, and create jobs in often overlooked and marginalised communities.”

Token.io joins SEPA Payment Account Access scheme

UK open banking payments platform and account-to-account (A2A) payment infrastructure provider Token.io has become an official participant in the SEPA Payment Account Access (SPAA) scheme: a commercial application programming interface (API) initiative that will enable greater innovation and unlock wider adoption of A2A payments in Europe.

An announcement stated that “through leveraging open banking and instant payments, the SPAA scheme will directly support the establishment of “a competitive pan-European payment solution, which is a key pillar of the retail payment strategies of both the European Commission (EC) and European Central Bank (ECB).”

As a SPAA participant, Token.io will contribute “to the development of the richer payment functionality outlined in the scheme’s rulebook and Minimum Viable Product for banks and service[providers (TPPs).”

Examples include Dynamic Recurring Payments (analogous to the UK’s Variable Recurring Payments capabilities) and Payment Certainty Mechanisms, which will “expand the use cases for instant bank payments to include one-click checkout and point of sale (PoS) payments.”

These new payment capabilities “will deliver benefits to payment service users throughout the EU, while creating robust competition with established payment methods, enabling banks to create new revenue opportunities, and positioning Europe as a global leader in digital payments.”

The SPAA scheme was developed collaboratively “by the European Payments Council (EPC), the retail payment industry (as represented by the Euro Retail Payments Board) and is supported by relevant EU institutions, including the European Central Bank (ECB) and the European Commission.”

Token.io will be officially listed as “a scheme participant in the EPC register as of 9 February.