Bloomberg Article Pick & Summary (200525~200531)
● What we learned from China's annual economic policy meeting?
On this annual policy meeting, the Chinese Administration decided to put employment above growth. It excluded growth target which was presented in every meeting and decided to make more jobs and lower unemployment rate. Also stimulus package which amounts to 10% of GDP is ready to be executed, while monetary policy such as lowering base rate or 'relending' monetary tool will be used as well to complement the fisical policy. Moreover, investment on technology will be funded such as 5G network, new-energy automobile, smart-manufacturing, and industrial upgrading.
▶ Related Articles: China will maintain stimulus even as economy improves
PBOC plans to use five tools to complement the fisical policy: delay repayment of loans and interest, increase collateral-free credit to SMEs, improve the government's associated credit guarantees, support corporate bond sales, and develop supply-chain finance. PBOC has been trying to ensure sufficient liquidity, lower borrowing costs, and provide cheap credit and further targets to execute its policy in more precise and targeted way
▶ Related Articles: China Markets Show anxiety over looming $380 Billion Funding Gap
As large amount of cash is due to mature by May and June, Chinese government is facing dilemma between lowering interest rates so that more cash can be supplied and expanding government debt irreversably.
● U.S. Nationalism Pits the Financial World Against China
Free movement of capital was once a popular agenda over the world. Governments of developing countries tried to attract global firms in order to build factories in their country and global financial institution invested in various countries worldwide. However this came to end in recent days, as governments are blocking foreign capital coming in and delisting foreign companies. In short, financial nationalism is on the rise. This causes cheap Chinese goods and services not to be supplied, factories not being able to built in lower-labor-cost-countries, and global economies not be able to enjoy the highest level of global economic growth.
● Latest India Rate Cut is Adding to Record Company Bond Sales
Companies in India is raising funds from corporate bond market which amounts to 36 billion rupees following 1.4 trillion rupees already raised by April 1st. Due to this excess supply and central bank trying to lower interest rate, yields on top-rated three year rupee bonds slides lower while demand side of Indian bond is showing weaker signs because of worries delinquencies might spike due to worst economic condition.
▶ Related Articles: Wary India Funds Still Refuse to Buy All but the Safest Debt
Investors in Indian corporate bonds are reducing their exposure on them due to concerns that Indian companies may fail to recover from this pandemic situation. Even though Indian government is trying to compensate investor's concerns by giving credit line to companies, still investors are hoarding cash or invests only in government bond or top-rated corporate bonds.
● Pet Clinic Ruipeng Seeks New Funds at $3 Billion Valuation
New Ruipeng Pet Healthcare Group Co. is seeking to raise funds at a valuation of about $3 billion ahead of its planned public offering. The Hillhouse Capital which backed pet clinic operater is working with an adviser to raise about $300 million in the pre-IPO round. Ruipeng Co. operates more than 1,300 pet clinics across China and also opeartes animal salons and online diganosis assessment platforms. Since wealthy Chinese consumers are raising pet ever more than before, pet market in China is expected to grow by 472 billion yuan size market.
● ByteDance Hit $3 Billion in Net Profit Last Year
● Japan moves to Limit Foreign Investment in Half of Listed Firms
The Foreign Exchange and Foreign Trade Act requires some foreign investors to report in advance when they plan to buy a more than 1% stake in the designated firms, versus a previous threshold of 10%. The steps add restrictions to investments in more than half the listed companies in the country, though a series of blanket exemptions apply for registered investors, including most financial and asset management firms.
● UBS to Start Own Venture Capital Fund in Effort to Digitize Bank
UBS is incorporating fintech firms through venture capital fund in order to offer digital services on wealth management which the company specializes in.