More US firms favour India over China for supply chains, survey reveals
US firms increasingly regard China as a risky location for their supply chains are turning to India when setting up overseas operations.
In a survey by UK market research firm OnePoll, 61% of the 500 executive-level US managers polled said they would pick India over China if both countries could manufacture the same materials, while 56% preferred India to serve their supply chain needs within the next five years over China.
The survey showed that 59% of the respondents found it “somewhat risky” or “very risky” to source materials from China, compared with 39% for India.
At least one in four of the executives who participated in the independent, third-party survey, commissioned by marketplace India Index in December, do not currently import from either China or India.
“Companies are seeing India as a long-term investment strategy as opposed to a short-term pivot to avoid tariffs,” said Samir Kapadia, CEO of India Index and managing principal at Vongel Group, in an exclusive with CNBC.
Recent diplomacy between the US and India, spearheaded by President Joe Biden and Prime Minister Narendra Modi, with the former’s “friendshoring” policy aimed at encouraging US companies to diversify away from China have also made India an attractive alternative.
The relationship between the two countries entered a new chapter last June with Modi’s state visit to the White House in June where deals on major collaborations in defence, technology and supply chain diversification were signed.
Yet against the optimism, US firms remain wary of India’s supply chain capabilities. The survey showed that 55% of the respondents found quality assurance was a “medium risk” they might face if they have factories in India.
Moreover, Investments into China are still robust and it remains the “second choice” for investments after the US, said Raymund Chao, Asia-Pacific and China chairman at PwC.
Similar to India, Vietnam has also been an option on investors’ minds when adopting a “China plus one” strategy. The optimism in the Vietnamese market led to a more than 14% surge in foreign direct investments (FDI) last year compared with 2022.
According to London Stock Exchange Group (LSEG) data, US$29 billion in foreign direct investments were pledged to Vietnam from January to November 2023. One major disadvantage is that Vietnam’s population is significantly lower than that of India, which is the world’s most populous country and offers access to a massive customer base.
Turkey in “final” hike to 45% on interest rate decision day
Turkey’s central bank has, as expected, announced a further interest rate hike in what could mark an end to its aggressive tightening cycle, according to surveys.
Before today's increase in the benchmark one-week repo rate from 42.5% to 45%, the Central Bank of the Republic of Türkiye (CBRT) had already lifted its key rate by 3,400 basis points (bps) since June, including a hike of 250bps to 42.5% last month. The hikes came after the CBRT reversed a prolonged easing policy and embraced a sharp tightening after President Recep Tayyip Erdoğan won re-election in May.
The policy shift aims to arrest inflation increased to 64.8% year-on-year in December, up from 62% in November which increased to 64.8% year-on-year in December from 62% in November - reduce trade deficits, boost foreign investment, rebuild foreign exchange reserves and stabilise the Turkish lira.
In Europe, the European Central Bank’s (ECB) President Christine Lagarde is likely to resist calls for an interest rate cut back toady even as Europe’s economy sputters and financial markets look for signs of cheaper credit that would boost business activity and stock prices.
She will likely underline that the bank needs to see more proof that the recent resurgence of inflation – which has made everything from groceries to energy more expensive — has been beaten down, analysts say.
Lagarde has indicated that the ECB’s next move would likely be a cut to borrowing costs this summer but said its benchmark rate will need to stay at a record high for “as long as necessary” to unequivocally subdue inflation.
Elsewhere, the Bank of Canada has held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank said that it is continuing its policy of quantitative tightening and commented:
“In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024. Consumers have pulled back their spending in response to higher prices and interest rates, and business investment has contracted. With weak growth, supply has caught up with demand and the economy now looks to be operating in modest excess supply.”
German business morale starts year in doldrums
German business morale has sunk further at the start of 2024, as the slump in Europe's largest economy showed few signs of being swiftly resolved.
The Ifo institute’s closely watched confidence barometer, based on a survey of around 9,000 companies, dropped to 85.2 points in January 2024, after falling to 86.3 points in December.
The further drop disappointed analysts surveyed by financial data firm FactSet, who had expected a modest improvement in the indicator.
“The German economy is stuck in recession,” said Ifo president Clemens Fuest, with companies assessing the current situation and the outlook as worse than the previous month.
Germany has yet to record two consecutive quarters of negative growth -- the measure for a technical recession -- but the economy has been moribund in the past 12 months.
End-of-year figures for 2023 showed the German economy had shrunk by 0.3% over the course of the year amid high inflation, rising interest rates and a global slowdown.
“The economic start to the new year was a disappointment,” said Fritzi Koehler-Geib, chief economist at public lender KfW.
Mastercard offers €500,000 Strive EU Innovation Fund grants to SME applicants
Mastercard is inviting applicants from small and medium-sized enterprises (SMEs) for the ‘Strive EU Innovation Fund’, its new initiative aiming to accelerate the development of solutions to support small businesses across Europe.
The new Fund will provide equity-free grants of up to €500,000 (US$545,000) alongside technical assistance and mentoring to as many as 20 projects from EU member states. Ultimately, Mastercard hopes to accelerate the development of these new solutions and get them to market faster.
Applications are open to entities of all sizes, from startups to those that are more established – provided they are soliciting innovation that helps Europe’s small business community to:
- Unlock working capital and credit through embedded finance
- Go digital safely by bolstering cybersecurity
- Navigate consumer preferences and regulatory expectations around environmental sustainability
- Harness artificial intelligence (AI) to improve efficiency and income.
“Small businesses are the backbone of the European economy and, now more than ever, it is critical that they receive the support they need to join the digital economy,” commented Mark Barnett, president of Mastercard Europe.“We are excited to open the application window for the Strive EU Innovation Fund and to hear about some of the best projects coming from Europe’s most innovative minds over the coming months.”
Mastercard also plans to establish a ‘Strive EU Small Business Council’ to convene the European entrepreneurial ecosystem and encourage collaboration. The Council will play a key role in selecting the final recipients of the Innovation Fund and supporting winners with financial resources and mentorship throughout the initiative.
BNP Paribas launches UK fintech incubator
BNP Paribas Personal Finance has joined forces with UK cross-sector partnership SuperTech to launch a UK innovation lab aimed at addressing data-led challenges in the financial services sector.
The lab is inviting applications from SMEs - rather than traditional fintechs - for an incubator programme focused on harnessing external data and insights to boost engagement with financial services customers.
Participants will be able to collaborate with BNP Paribas Personal Finance and business support services, including a flexible co-working space from Birmingham-based STEAMhouse, mentorship from senior financial services experts, investment pitch opportunities, and personalised one-on-one support.
The programme will culminate in the chance to showcase products and services to executives within the organisation as part of BNP Paribas' “Innovation Week in May 2024”.
Stephen Hunt, CEO, BNP Paribas Personal Finance UK, said: “For us to remain a leader in personal finance, it’s important we open our minds and embrace new ideas to help us deliver better products, services and solutions for our customers and partners which is what this partnership is all about.”
According to a separate report BNP Paribas aims for 50% of new hires within its UK investment bank to be female. The French bank has set a target of half of new hires in its UK global banking operation to be women, say insiders quoted in the report. It has already set a similar goal for those joining its ranks at the entry level.
UK’s progress on open banking has stalled, says watchdog
The UK risks squandering its early lead on opening up banking data, its most senior financial regulator has warned.
“If we do not find a way of making data sets more readily available to smaller players, then growth, innovation, competition and our international competitiveness could stall,” said Financial Conduct Authority (FCA) Chief Executive Officer Nikhil Rathi.
With millions of British customers using the changes to access services, regulators in countries such as Brazil and India have raced to catch up with the UK and Europe. “We were early adopters of open banking,” said the FCA's Rathi. “That progress has slowed.
Rathi also warned that the UK’s financial services may need to prepare for a “techlash” as big tech threatens to damage financial inclusion and security of data and services.
He said that “new forms of fraud and harms” created by technologies like quantum computing and artificial intelligence (AI) could jeopardise the security of digital identities and overall trust in tech.
Envisaging this potential scenario, he said tech and banking heavyweights could “gobble up the competition”. The lines between gaming, gambling, entertainment, trading and investing could “become so blurred as to endanger people’s long term financial wellbeing,” he added.
It comes as cyber fraud, cyber attacks and identity fraud are accelerating rapidly in scale and sophistication, with a rally in the cybersecurity market expected as a result.
Rathi said big tech’s foray into financial services could benefit many in the short term. “But in the longer term, there was a risk that the competition benefits could be eroded if the firms exploited their entrenched market power,” he explained.
Santander Mexico nearer launch of digital bank
Santander’s Mexico unit will launch its digital bank service in the months ahead according to an executive, who said the bank’s planned roll-out was in the final stages.
The Spanish group’s digital product, known as Openbank, received its licence to operate in Mexico last July.
Openbank’s launch “will be this year, soon,” said Matias Nunez, Santander Mexico’s head of digital and innovation, at an event with startup adviser Endeavor. “I hope in just a few months we'll be back here to talk about the launch.”
Mexico’s traditional banks have struggled to catch up as digital banks have grown rapidly. Competitor Banorte is set to launch its digital bank service, called Banco Bineo, next week. Meanwhile, Brazilian fintech Nubank claimed more than four million clients in Mexico by the end of September.
Santander has also launched a handful of other digitally focused services in Mexico recently, Nunez added, explaining the bank was the first to roll out a customer-service bot on its social media using artificial intelligence application ChatGPT.
Transfers through the Santander application also grew more than 40% in December from the year-ago period, Nunez said, topping 40 million transactions.
Santander Mexico incorporated DiMo, an electronic transfer platform from Mexico’s central bank to its application last year. More than 700,000 clients have used the service so far, Nunez said.
Endowus offers flexible short-term cash management for HK investors
Endowus, a Singapore-based pan Asia digital wealth management platform, has launched the Endowus CashUp Portfolios, offering institutional-grade, flexible short-term cash management services for Hong Kong investors.
The Endowus CashUp Portfolios offer investors a single investment product that provides exposure to multiple funds, constructed by the Endowus Investment Office, curating money market and ultra-short duration fixed income funds from global managers, including Amundi, HSBC Asset Management, and Ping An of China Asset Management (Hong Kong).
Steffanie Yuen, head of Hong Kong, Endowus, said “In the current high interest rate environment, with cash and money market instruments yielding at 5% levels, there is no better time to look at comparatively safer, secure ways to optimise one’s savings without sacrificing liquidity. For money market funds that are characterised by a relatively lower level of returns, the compounded impact of fees on your returns is critical to investment success.
The portfolios come in two options: CashUp Simple and CashUp Plus. CashUp Simple is a lower risk portfolio, constructed with high-quality money market funds with a focus on capital preservation. Its underlying funds have smaller subscription amounts, and lower risk.
CashUp Plus is a portfolio for investors willing to take slightly higher risk for potentially better returns, designed with money market and ultra-short duration bond funds, including US Treasury bills, with liquidity and a weighted average maturity of less than 60 days.
The cash management portfolios have an investment minimum of US$100 (HK$800), no lock-up periods, no subscription or withdrawal fees, and no maximum caps.
Iliad Solutions launches new testing standards for SEPA real-time payments
UK software firm Iliad Solutions, a specialist in payments testing, is offering support to financial institutions integrating the next SEPA Instant Credit Transfer (SCT Inst) rulebook version scheduled to go live in March 2024.
To help organisations make this SCT Inst transition smoothly and keep up-to-date with the latest changes, Iliad Solutions has developed the SCT Inst Testing Solution, an orchestrated version of its acclaimed t3 payment testing platform. The Solution empowers financial institutions to securely simulate all types of instant payment journeys included in the new 2023 rulebook – across both internal and external ecosystems.
Iliad’s SCT Inst Testing Solution allows financial institutions to:
- create bespoke tests tailored to their unique environment
- run automation using Iliad’s test studio and palettes with a blend of test data
- quickly see where errors are occurring with user-friendly test results
- manage all data centrally to ensure full sight of all results at all times
- thoroughly test downstream applications affected by real-time payments
- comprehensively test regression and allow for test automation with data tagging
- devise condition-based test scenarios with matching response rules (PACS.002 etc)
Egypt's aiBANK and Valu join Visa in co-branded credit card
Egypt’s aiBANK and fintech Valu announced their partnership in issuing a new co-branded credit card in association with Visa, that is exclusive to Valu customers. This collaboration aims to provide “exceptional financial solutions to Valu’s customers while enhancing the overall customer experience for users.” Eligible Valu customers will be able to apply for the card through the Valu app starting from 28 January.
The newly launched credit card issued by aiBANK will provide Valu’s customers with several benefits, including a daily earnings boost with a 1% cashback on food and beverage as well as fuel purchases. Flash cashbacks will allow users to enjoy cashback rewards at unexpected moments, adding an additional dimension to their financial interactions.
The Buy-Now, Pay-Later (BNPL) option also empowers customers to manage purchases through flexible instalments, while the fee-free Valu dues settlement ensures a seamless payment process without any additional charges. The new card will introduce a unique balance transfer program, allowing customers to transfer their balances from any other credit cards. This programme “offers exclusive benefits in terms of process and pricing, extending over a duration of three months.”
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