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Frederic Neumann, HSBC’s chief Asia economist and co-head of global research for Asia, discusses the latest data out of China and the bleak outlook for the world’s second-largest economy.
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Tag: Asia Economy
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Moody's downgrading of Hong Kong's credit outlook may be a 'temporary crisis': FII Institute
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Richard Attias, CEO of FII Institute, says the city's "fundamentals are good."
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China's exports surprise with small growth — but not enough to shake off trade slump
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YANTAI, CHINA – DECEMBER 5, 2023 – A large number of Chinese-made cars are ready to be loaded for export at Yantai Port in Yantai, Shandong province, China, Dec 5, 2023. (Photo credit should read CFOTO/Future Publishing via Getty Images)
Future Publishing | Future Publishing | Getty Images
BEIJING — China’s exports unexpectedly ticked higher in November, while imports fell slightly from a year ago, according to customs agency data released Thursday.
Exports in U.S. dollar terms rose by 0.5% from a year ago, contrary to expectations for a 1.1% decline, according to analysts polled by Reuters.
Imports fell in U.S. dollar terms by 0.6%, missing the Reuters’ forecast for a 3.3% increase from a year ago.
The muted change in trade did little to offset an overall decline by about 5% to 6% for China’s exports and imports for the first 11 months of 2023.
Bruce Pang, chief economist and head of research for Greater China at JLL, attributed the uptick in exports to businesses’ strategy of cutting prices to boost volume in recent months.
“External demand is still relatively weak, and holiday orders are lower than expected,” Pang said in Chinese, translated by CNBC.
“In general, the data show there are great challenges in both domestic and overseas demand, and policy support that only focuses on the supply side will not be able to achieve lasting results,” he said.
The value of China’s exports to the U.S. rose by 7% in November from a year ago, according to CNBC calculations of official data.
In contrast, China’s exports to the European Union fell by 14.5% year-on-year in November and those to the Association of Southeast Asian Nations fell by 7%, the analysis showed.
Overall, China’s exports of toys and electronics ticked higher, while that of cars maintained recent double-digit increases in November from a year ago. Clothes, shoes and furniture saw a drop in exports from a year ago.
On imports, China bought less from the U.S. and Southeast Asia in November than a year ago, while purchases of goods from the EU rose slightly, the data showed.
Last month, China bought less crude oil, and imports dropped in both price and volume. However, China’s imports of rare earths in November roughly doubled from a year ago.
In October, China’s imports unexpectedly rose from a year ago in U.S. dollar terms, according to customs data released last week. In contrast, exports fell by a greater-than-expected 6.4% during that time, the data showed.
Demand for Chinese goods has fallen this year as global growth slows.
A monthly Caixin survey of manufacturers, known as the purchasing managers index, rose to a three-month high in November of 50.7.
However, Caixin Insight Group senior economist Wang Zhe said in a report that “overseas demand remained sluggish, with the measure for new export orders staying in contraction for the fifth straight month.”
China’s National Bureau of Statistics said its manufacturing purchasing managers’ index unexpectedly ticked lower to 49.4 in November from 49.5 in October.
— CNBC’s Clement Tan contributed to this report.
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Vietnamese companies eye the U.S. IPO market amid a lull in Chinese listings
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A VinFast EV car on display at the New York Auto Show, April 13, 2022.
Scott Mlyn | CNBC
BEIJING — A new group of Asia-based companies are contemplating initial public offerings in the U.S., where international listings were once driven mostly by Chinese startups.
Vietnam-based electric car company VinFast broke new ground with its U.S. listing in August, via its merger with the U.S.-listed special purpose acquisition company Black Spade Acquisition.
While not strictly an IPO, the listing was soon followed by Vietnamese tech unicorn VNG’s filing to list on the Nasdaq. VNG’s products include gaming, fintech and music streaming.
“Something like VinFast puts the [country] on the map,” said Johan Annell, Beijing-based partner at ARC Group.
It sends a message that “despite capital controls, which I think is the major formal barrier for companies, it is possible for them to do IPOs,” he said.
VNG noted in its prospectus that Vietnamese law prevents “foreign investors” from owning more than 49% of the capital used to establish a local company operating in gaming and certain other sectors. As a result, VNG is part of a reorganization which uses a Cayman Islands holding company to list in the U.S., the filing said.
“Our corporate structure involves unique risks, has not been tested in any court and may be disallowed by Vietnamese regulatory authorities,” the filing said.
It’s unclear when VNG will go public. But firms that scour for potential IPO clients years in advance say they are talking to more companies in Vietnam and the surrounding region.
As local companies grow, “they are outgrowing the ability of those markets to provide the capital that they need,” said Drew Bernstein, co-chairman of accounting firm MarcumAsia. “It’s still the very early stages of the game.”
Bernstein said he attended investing conferences in Malaysia and Vietnam in late October, where many of the attendees were the same people who’d he’d met over the last 10 to 15 years in the China-U.S. IPO circuit.
Since the fallout over Didi in the summer of 2021, regulation and a tepid U.S. IPO market have stalled most Chinese listing plans. Only one of the 20 China-based companies that listed in the U.S. this year raised more than $50 million, according to Renaissance Capital.
Investor relations, capital markets advisory and financial media relations firm The Blueshirt Group has also worked with many Chinese companies to list in the U.S.
But the firm’s managing director, Gary Dvorchak, said Blueshirt organized a seminar in April with 20 to 30 Vietnamese-based companies about the path to a U.S. IPO. Many of the companies were in tech, such as payments, online games and e-commerce, he said.
“Just in contrast the rest of Asia there’s nothing in Thailand, some in Indonesia,” he said. “So the fact that you see so many in Vietnam is really meaningful.”
A growing startup ecosystem
CNBC reached out to about two dozen startups with headquarters or a major office in Vietnam to ask about their U.S. IPO plans. Most of those who responded indicated any listing was still a ways off, but noted rapid growth in local startups over the last 15 years.
“Capital available to Vietnamese startups has increased tremendously compared to 10 years ago,” said Nguyen Nguyen, CEO of fintech startup Trusting Social, whose offices in the region include Singapore and Vietnam.
He added the growing startup ecosystem has attracted many people of Vietnamese heritage to return to their home country, while domestic economic growth has increased the market size for local players.
Vietnam’s gross domestic product surged 3.6 times on a per capita basis between 2002 and 2022, to nearly $3,700, according to the World Bank.
ELSA, which uses artificial intelligence to help people learn English, is based in the U.S. while co-founder and CEO Vu Van hails from Vietnam. She said given the success of Southeast Asian ride-hailing company Grab, more Vietnamese companies are starting to look beyond the domestic market to regional business.
For ELSA, “when we started the company our aspiration has always been a global business with a global footprint,” Van said, adding that a “U.S. IPO would help us with that global footprint.”
Out of 103 U.S. IPOs this year, 10 were from companies based in Southeast Asia — split between Singapore and Malaysia, according to Renaissance Capital data as of Nov. 29.
“It is unusual to see this many listings from Asian companies outside of China,” the firm said. “However, none of these are of a significant size.”
George Chan, global IPO leader at EY, expects “a lot” of companies from Southeast Asia will reach the IPO stage in the next 12 to 18 months, and might also consider the Hong Kong exchange.
The trend is not replacing Chinese IPOs in the U.S., Bernstein said, but rather creating new opportunities. MarcumAsia is expanding its offices in Beijing, Tianjin, Guangzhou and Shanghai, and opened an office in Hong Kong this fall.
MarcumAsia opened an office in Singapore in May 2022 and doesn’t have plans for other offices in Southeast Asia right now, he said. “There haven’t been enough large deals done in the markets outside of China to give people the sense of security that they can get the deal done.”
Ultimately, global IPO markets need to recover before any company can make serious plans.
“There is definitely a very robust pipeline of companies from Southeast Asia who are evaluating the U.S. markets,” Bob McCooey, a vice chairman at Nasdaq, said in a phone interview this fall. He noted that given market conditions, many companies are delaying their listing plans to the first half of next year.
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Moody's cut China's credit outlook to negative on rising debt risks
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Chinese yuan cash bills and chinese flag (money, economy, finance, inflation, crisis)
Javier Ghersi | Moment | Getty Images
Ratings agency Moody’s downgraded its outlook on China’s government credit ratings to negative from stable, expecting Beijing’s support and possible bailouts for distressed local governments and state-owned enterprises to diminish China’s fiscal, economic and institutional strength.
Moody’s though retained China’s “A1” long-term rating on the country’s sovereign bonds, while expecting China annual GDP growth to slow to 4% in 2024 and 2025 and average 3.8% from 2026 to 2030.
Structural factors including weak demographics will drive a decline to 3.5% by 2030, it said.
The move underscores concerns over rising debt levels and the impact on broader growth in the world’s second-largest economy as Beijing resorts to fiscal stimulus to support local governments and contain the spiraling debt crisis among the country’s property developers.
“The outlook change also reflects the increased risks related to structurally and persistently lower
medium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said in a statement issued Dec. 5.“These trends underscore the increasing risks related to policy effectiveness, including the challenge to design and implement policies that support economic rebalancing while preventing moral hazard and containing the impact on the sovereign’s balance sheet,” Moody’s added.
China credit default swaps (the cost of insuring against a government default) rose 4 basis points from Monday’s closing level, according to Reuters data.
Beijing disappointment
China’s Finance Ministry expressed its disappointment with Moody’s downgrade decision.
“Moody’s concerns about China’s economic growth prospects and fiscal sustainability are unnecessary,” the ministry said in a statement Tuesday.
“Since the beginning of this year, in the face of the complex and severe international situation, and against the background of unstable global economic recovery and weakening momentum, China’s macro economy has continued to recover and high-quality development has steadily advanced,” the ministry added.
The central government said Oct. 24 that it had formalized a process allowing local governments to borrow funds for the year ahead — starting in the preceding fourth quarter, according to an announcement published by state media.
Beijing also announced a rare mid-year fiscal revision, which included the issuance of 1 trillion yuan in ($137 billion) in government debt — one of the biggest changes to the national budget in years. The amount was for the reconstruction of areas hit hard by natural disasters — such as this summer’s historic floods — and for catastrophe prevention.
Moody’s also cited the 1.6 trillion yuan increase in central government transfers to regional and local governments in 2022 from 2021, which partly but only temporarily offset the 2 trillion yuan in lost land sales revenue, as a key development that factored in its thinking.
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Vietnam’s Van Thinh Phat’s property scandal is an ‘isolated case,’ says portfolio manager
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Quynh Le of Dragon Capital discusses the issues Vietnam's property sector faces and what the government needs to do.
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Indians are spending big on travel, but most of that money isn’t leaving the country
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The world famous Gateway of India monument in Mumbai, India was built during the 20th century to commemorate the visit of king George V and Queen Mary. It is located on the waterfront of the Apollo Bunder area of south Mumbai and is the city’s top tourist attraction.
Darren Robb | The Image Bank | Getty Images
India’s travel landscape is changing as the country emerges as a powerhouse in the tourism sector.
Their willingness to spend big while traveling is going, but research shows that most Indians are traveling domestically — not overseas.
Indian travelers took 1.7 billion leisure trips in 2022 but most never left the country, and only about 1% traveled abroad, according to Booking.com and McKinsey.
Indian travelers are projected to be taking 5 billion leisure trips by 2030, and 99% of those will be within the country as well, said the report published October.
The world’s most populous country is set to be the fourth-largest global travel spenders by 2030, largely due to a growing middle-income population that will see household earnings grow by $35,000 annually by that time.
In addition, the population is young, with the median age at 27.6, “more than ten years younger than that of most major economies,” McKinsey said on its website. “What’s more, consumption of goods and services, including leisure and recreation, is forecast to double by 2030.”
Spending on travel and tourism is predicted to hit $410 billion — a surge of more than 170% from $150 billion in 2019, the report showed.
Here are the top 10 spots for Indians traveling within their own country, according to Booking.com and McKinsey.
- New Delhi
- Bengaluru
- Mumbai
- Chennai
- Pune
- Hyderabad
- Gurugram
- Jaipur
- Kochi
- Kolkata
According to the “How India travels 2023” report, about 2,000 Indians and 42,000 global tourists between 18 and 54 years booked leisure travel trips in 2022 and plan to do the same this year.
New Delhi, Bengaluru, Mumbai and Chennai retained the top four spots since the previous study in 2015 — Kochi is the only new city on the list.
“India’s travel ecosystem is maturing and there are multiple government schemes that are making the country more connected and ensuring it develops into a tourist hub,” Kanika Kalra, managing partner at McKinsey Mumbai, told CNBC.
Smaller cities are gaining traction
The top 10 most visited cities are highly populated destinations, but that could soon change.
More and more Indians are now looking to discover smaller urban spots including those in Tier 2 or Tier 3 cities, Kalra said, adding that Kochi is a Tier 2 city.
Tier 2 cities in India are those with a population of between 50,000 to 100,000, while those from between 20,000 to 50,000 residents are classified as Tier 3 cities, according to India Briefing.
Tourists shopping for clothes at a local street market in Jodhpur, India, on Nov. 22 2022.
Mayur Kakade | Moment | Getty Images
In addition to cosmopolitan cities like New Delhi and Mumbai, those like Jodhpur, Dharamshala, Bodhgaya, Bilaspur, Kodagu and Raipur are also catching the attention of international hotel chains keen to carve out market share in India’s booming travel industry.
“Branded hotels are currently focusing on Tier 2 cities for expansion owing to the increasing business opportunities and travelers’ increasing willingness to pay for standard services,” Deepak Rao, director of revenue management at Hyatt Hotels in India and Southwest Asia, said in the report.
French hotel chain Novotel opened its doors to travelers in Jodhpur in May, while Radisson Hotel Group announced in June it will start welcoming visitors to Raipur in 2025.
About half (52%) the hotels in Tier 2 and Tier 3 cities will be branded hotels by the end of 2023 — up from 27% in 2015, the report showed.
Growing interest in traveling to smaller Indian cities is largely attributed to the transportation infrastructure boost that is underway, said Mckinsey’s Kalra.
At its annual budget announcement in February, India’s finance ministry said it plans to pump up capital expenditures by 33% to 10 trillion rupees ($120.96 billion), as the country is poised to become the second largest economy by 2075.
Indian airlines have ordered over 1,000 new aircraft, which will bring the total number of planes to between 1,500 to 1,700 by 2030, the report showed.
“So we will see this landscape change quite dramatically and we will see a new wave of travelers to smaller towns,” Kalra said.
Top international destinations
Of the 1% of Indian travelers going overseas, here are the top 10 places they are visiting.
- Dubai
- Bangkok
- Singapore
- London
- Paris
- Ho Chi Minh City
- Ubud
- Hanoi
- Phuket
- Kathmandu
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YG Entertainment shares climb 3% after Blackpink reportedly agrees to continue as a group
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INDIO, CALIFORNIA – APRIL 22: (L-R) Jisoo, Lisa, Jennie, and Rosé of BLACKPINK perform at the Coachella Stage during the 2023 Coachella Valley Music and Arts Festival on April 22, 2023 in Indio, California. (Photo by Emma McIntyre/Getty Images for Coachella)
Emma Mcintyre | Getty Images Entertainment | Getty Images
Shares of K-pop agency YG Entertainment climbed over 3% on Monday after South Korean media reported that girl group Blackpink has agreed to continue group activities under the label.
According to an exclusive by South Korean outlet Munhwa Ilbo, individual members will not be renewing their exclusive contracts with YG but the group agreed to continue group activities as Blackpink under the label.
Munhwa Ilbo said “exclusive contracts between each member and YG Entertainment were not signed. In the future, they plan to carry out individual activities and come together only for Blackpink activities,” according to a Google translation.
The report added that two members already signed a contract “agreeing to continue Blackpink’s activities,” without naming the members.
It’s the latest development in a long-running contract saga involving the four-member group made up of members Jisoo, Jennie, Rosé, and Lisa.
In September, YG shares plunged on two occasions by 9% and 13% when media reports said three members of the wildly popular girl group will not renew their contracts with the label.
On Tuesday last week, YG said in its quarterly report that Blackpink’s contract is being negotiated, and the company will disclose the results “later.”
Blackpink is arguably one of YG’s most successful acts, with the company claiming the group’s recent world tour attracted 2.11 million people around the world, spanning 66 performances in 34 cities.
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Ahead of Indonesia’s elections, critics slam Jokowi for nepotism and ‘dynastic politics’
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Indonesian President Joko Widodo waving to the crowd while on his journey to Presidential Palace by carriage during the ceremonial parade on October 20, 2014 in Jakarta, Indonesia when he was sworn in.
Ulet Ifansasti | Getty Images News | Getty Images
A year before stepping down as Indonesia’s president, Joko Widodo is facing serious allegations of establishing a political dynasty through nepotism.
The 61-year-old, known at home as Jokowi, is due to leave office in October 2024 after completing the maximum two terms as president.
But critics and analysts say the leader, who has enjoyed consistently high approval ratings throughout his near decade-long tenure, is attempting to retain power through members of his close family.
1. Eldest son, Gibran Rakabuming Raka
Last month, his eldest son, Gibran Rakabuming Raka, 36, was officially named the vice presidential running mate of Defence Minister Prabowo Subianto for the Feb. 14 general election race under the right-wing Gerindra Party.
That came just days before the country changed the eligibility criteria for presidential or vice-presidential candidates, allowing individuals under the age of 40 to register for either role if they previously held regional posts. Gibran is the mayor of Solo.
The constitutional court, which was helmed by the president’s brother-in-law Anwar Usman at that time, was widely criticized for changing the law, which enabled Jokowi’s son to contest the election. The court’s ethics council has since ordered Anwar to be removed from his post as chief justice after finding him guilty of ethics violations.
Most respondents see this kind of politics as tending to prioritize family interests over the interests of society.
Kompas Research and Development
According to a poll in mid-October by Kompas Research and Development, 60.7% of respondents consider the participation of Jokowi’s eldest son Gibran in the election as a form of dynastic politics.
“Most respondents see this kind of politics as tending to prioritize family interests over the interests of society,” Kompas said in a report. “It is no wonder then that more than half of respondents in this poll stated their disagreement with the practice of dynastic politics.”
2. Youngest son, Kaesang Pangarep
Separately, Jokowi’s youngest son, Kaesang Pangarep, was appointed chairman of the Indonesia Solidarity Party (PSI) in September, a few days after he officially became a party member.
PSI, which launched in 2018, focuses on young voters through issues like women’s rights, pluralism and corruption. It hopes to secure seats in the House of Representatives for the first time in the upcoming election.
3. Son-in-law, Bobby Nasution
Adding to Jokowi’s political chessboard is also his son-in-law Bobby Nasution, the current mayor of Medan.
Jokowi is “trying to retain political influence through his sons and son-in-law, Medan mayor Bobby Nasution,” said Julia Lau, senior fellow and co-coordinator of the Indonesia Studies Programme at Singapore’s ISEAS–Yusof Ishak Institute.
Back home, Jokowi’s loyalists are reportedly outraged, Reuters reported, saying that cabinet ministers within his inner circle have accused him of seeking to hang on to power through judicial interference and nepotism.
According to Reuters, Andi Widjajanto, once Jokowi’s right-hand man, resigned from his post as governor of the National Resilience Agency after the constitutional court ruling. Andi, who called the timing of his resignation deliberate, said: “As someone that worked with Jokowi for a long time I am very, very disappointed in him.”
A political dynasty?
These are “nepotistic strategies,” said Vedi Hadiz, director and professor at the Asia Institute at the University of Melbourne.
Jokowi’s sons are “part of the broader plan” to form a political dynasty before he leaves office, he continued.
“Kaesang Pangarep’s ascent into the leadership of the PSI is geared to help achieve the aim of gaining victory for the Prabowo-Gibran pairing, as the PSI has moved, also controversially, into the Prabowo orbit lately.”
Indonesia’s President Joko Widodo, second from the right, with his wife Iriana Widodo and sons Gibran Rakbuming Raka, far left, and Kaesang Pangarep, far right, taking part in the traditional wedding ceremony in preparation for the wedding of Jokowi’s daughter in Solo, Central Java on Nov. 7, 2017.
Afp Contributor | Afp | Getty Images
Lau echoed the same sentiments.
“Kaesang, 28, is a political neophyte and running on his father’s coattails,” she added, noting how the PSI has now become “a vehicle to channel the Widodo clan’s aspirations.”
CNBC reached out to Indonesia’s presidential palace for comment but did not hear back.
These developments don’t bode well for the country’s already fragile state of democracy, which only emerged 25 years ago after decades of authoritarian rule.
What is sure is that Widodo is playing a risky game in the last phase of his presidency.
Julia Lau
ISEAS–Yusof Ishak Institute
It also weighs heavily on Jokowi’s reputation. The former furniture salesman captured national hearts when he became the country’s first leader who didn’t come from a political or military background, raising hopes of a pushback against elitist-led systems.
But as his sons climb up the political ladder, critics are now drawing comparisons with existing political dynasties around Southeast Asia.
“Many liberals and intellectuals in Indonesia are now calling for a deeper look into the corruption and weakening of several democratic institutions in the country, their constitutional court, the anti-corruption commission, etcetera, that has occurred on Widodo’s watch,” said Lau from ISEAS–Yusof Ishak Institute.
Following failed attempts by his team to extend Jokowi’s tenure, she said, “this latest series of moves seems to be their way of trying to claw a permanent hold for themselves but may well backfire.”
“What is sure is that Widodo is playing a risky game in the last phase of his presidency,” Lau added.
The ‘Jokowi effect’
Analysts are now expecting what they call “a Jokowi effect” for the PSI and Gerindra parties.
Choosing Gibran, Jokowi’s eldest son, “is a clear signal by Prabowo’s camp to associate its presidential bid with the successes of Jokowi-era programmes and policies,” global research firm Asia House said in a report.
“The nomination of Gibran as his vice-presidential candidate is likely to win Prabowo votes from Central Java — where Jokowi’s family is originally from — and shift the support of Jokowi’s supporters from Ganjar and PDIP to the Prabowo camp.”
The PDIP, or Indonesian Democratic Party of Struggle, is the country’s ruling party.
The PSI is also seeking to capitalize on the popularity of Jokowi, who has unusually high approval ratings for a two-term president.
“The idea is that the popularity would rub off on Kaesang Pangarep and improve the electoral performance of the PSI,” explained Hadiz from the University of Melbourne.
“If that is accomplished convincingly, the Jokowi family can effectively take complete control of a political party. It never had such control before given the Soekarno family’s grip on the PDIP,” she said, referring to referring to Indonesia’s first president.
Meanwhile, the PDIP is increasingly distancing itself from Jokowi. His relationship with PDIP chair Megawati Sukarnoputri is now under pressure following his sons’ pivot to other parties.
“While some interpret Gibran’s candidacy as evidence of Jokowi’s involvement in dynastic politics, it’s also perceived as a snub to PDIP, the party that both supported Jokowi’s presidential bids and backed Gibran when he ran for mayor,” Asia House said.
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Mastercard says wide adoption of central bank digital currencies is ‘difficult’
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BARCELONA, SPAIN – MARCH 01: A view of the MasterCard company logo on their stand during the Mobile World Congress on March 1, 2017 in Barcelona, Spain. (Photo by Joan Cros Garcia/Corbis via Getty Images)
Joan Cros Garcia – Corbis | Corbis News | Getty Images
SINGAPORE — There isn’t enough justification for the widespread use of central bank digital currencies right now, which makes broad adoption of such assets “difficult,” Ashok Venkateswaran, Mastercard‘s blockchain and digital assets lead for Asia-Pacific, told CNBC.
“The difficult part is adoption. So if you have CBDCs in your wallet, you should have the ability for you to spend it anywhere you want – very similar to cash today,” said Venkateswaran on the sidelines of Singapore FinTech Festival on Wednesday.
A retail CBDC, which is the digital form of fiat currency issued by a central bank, caters to individuals and businesses, facilitating everyday transactions. This is different from a wholesale CBDC which is used exclusively by central banks, commercial banks and other financial institutions to settle large-value interbank transactions.
The International Monetary Fund has said that CBDCs are “a safe and low-cost alternative” to cash, with approximately 60% of countries in the world exploring CBDCs. However, only 11 countries have adopted them, with an additional 53 in advanced planning stages and 46 researching the topic as of June, according to data from the Atlantic Council.
“But [building infrastructure to facilitate that] takes a lot of time and effort on a part of the country to do that. But a lot of the central banks nowadays have gotten very innovative because they are working very closely with private companies like ours, to create that ecosystem,” said the Asia-Pacific lead.
Even then, Venkateswaran said consumers are “so comfortable using today’s type of money” such as paper money and coins, that “there isn’t enough justification to have a CBDC.”
Mastercard, the second-largest card network in the U.S., said last week it has completed testing of its solution in the Hong Kong Monetary Authority’s e-HKD pilot program to simulate the use of a retail CBDC such as electronic Hong Kong dollars.
Hong Kong’s CBDC sandbox facilitates the trial of minting, distributing and spending of e-HKD within the program.
A total of 16 companies across the financial, payments and technology sectors including Mastercard participated in the pilot. Mastercard’s rival Visa also took part in the project alongside HSBC Bank and Hang Seng Bank, testing the viability of tokenized deposits in business-to-business payments.
Venkateswaran cited Singapore as an example where the case for retail CBDC is not compelling enough as the city-state has a “very efficient” payments system.
Last year, the IMF’s deputy managing director Bo Li named Singapore and Thailand as the countries in Asia which have made “quick progress” by connecting fast payment systems, therefore lowering transaction fees for cross-border payments.
“There isn’t a reason for a retail CBDC [in Singapore] but there is a case for a wholesale CBDC for interbank settlements,” said Venkateswaran.
On Thursday, Singapore’s central bank announced it will be piloting the live issuance and use of wholesale CBDCs from 2024.
During the pilot, the Monetary Authority of Singapore will collaborate with domestic banks to test the use of wholesale CBDCs to facilitate domestic payments, said the managing director of the Monetary Authority of Singapore, Ravi Menon.
It really depends on the need of the country or what problem they are trying to solve, said Mastercard’s Venkateswaran.
It won’t work “if you’re only trying to replace your existing domestic payment network,” he said.
“But if it’s a country where the domestic payment network is not as robust, it may make sense to have a CBDC.”
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Singapore to pilot use of wholesale central bank digital currencies in 2024
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Ravi Menon, managing director of Monetary Authority of Singapore, speaks during the Singapore FinTech Festival in Singapore, on Thursday, Nov. 16, 2023. The festival runs through Nov. 17.
Lionel Ng | Bloomberg | Getty Images
SINGAPORE — Come 2024, Singapore will pilot the live issuance and use of wholesale central bank digital currencies, said Ravi Menon, managing director of the Monetary Authority of Singapore.
“We will take our experiments a step further next year,” said Menon at Singapore FinTech Festival 2023 on Thursday, without specifying more details on the timeframe.
“I’m pleased to announce that MAS will pilot the live issuance of wholesale CBDCs to instantaneously support payments across commercial banks here,” Menon said. MAS is the city-state’s central bank and financial regulator.
Wholesale CBDC is a digital currency issued by a central bank, that’s used exclusively by central banks, commercial banks or other financial institutions to settle large-value interbank transactions. It’s unlike retail CBDCs which cater to individuals and businesses, facilitating everyday transactions.
“Since 2016, the MAS has conducted many experiments with other central banks and the financial industry to explore the use of wholesale CBDCs on distributed ledgers to facilitate real time cross border payments and settlements,” said Menon, referring to the database spread across a network that is accessible from several geographical locations.
One such pilot project is Project Ubin, which was started in 2016 to explore the use of blockchain and digital ledger technology for the clearing and settlement of payments and securities.
Project Ubin was successfully completed in 2021 after five phases of experimentation. Some of the partners included Singapore’s largest bank DBS and sovereign wealth fund Temasek.
MAS announced Ubin+ in November last year to advance cross-border connectivity with wholesale CBDCs through collaborations with international partners.
During the pilot, Singapore’s central bank will partner with local banks to test the use of wholesale CBDCs to facilitate domestic payments, said Menon.
Banks will issue tokenized bank liabilities in the form of claims in balance sheets. Retail customers can then use the tokenized bank liabilities in transactions with merchants, who will then credit these bank liabilities with their respective banks. Tokenization refers to the process of issuing a digital form of an asset on a blockchain.
The CBDC will then be automatically transferred to the merchant as a form of payment during the transaction.
“So clearing and settlement occurs in a single step on the same infrastructure, unlike the current system in which clearing and settlement take place on different systems and settlement occurs with a lag,” said Menon.
On Wednesday, the International Monetary Fund’s managing director urged the public sector to keep preparing to deploy CBDCs and related payment platforms in the future.
“We have not yet reached land. There is so much more space for innovation and so much uncertainty over use-cases,” said Kristalina Georgieva.
Menon is set to retire from public service and step down as managing director of MAS on Dec. 31 since being appointed to the position in 2011. He will be succeeded by Chia Der Jiun who previously spent 18 years at MAS.
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Morgan Stanley CEO says his firm is ready for ‘Basel III endgame’ — the sweeping new global rules on banking
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James Gorman, chairman and chief executive of Morgan Stanley, speaks during the Global Financial Leader’s Investment Summit in Hong Kong, China, on Tuesday, Nov. 7, 2023. The de-facto central bank of the Chinese territory is this week holding its global finance summit for a second year in a row. Photographer: Lam Yik/Bloomberg via Getty Images
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SINGAPORE — Morgan Stanley Chairman and CEO James Gorman said his firm will be able to cope with “any form” that new banking regulations end up taking, but added he expects some watering down before the final rules are confirmed.
U.S. regulators on Tuesday defended their plans for a sweeping set of proposed changes to banks’ capital requirements, speaking in front of the U.S. Senate Banking Committee. They are aimed at tightening regulation of the industry after two of its biggest crises in recent memory — the 2008 financial crisis, and the March upheaval in regional lenders.
These proposed changes in the U.S. seek to incorporate parts of international banking regulations known as Basel III, which was agreed to after the 2008 crisis and has taken years to roll out.
Regulators say the changes in the proposals are estimated to result in an aggregate 16% increase in common equity tier 1 capital requirements — which is a measure of an institution’s presumed financial strength and is seen as a buffer against recessions or trading blowups.
“I think it will come out differently from the way it’s been proposed,” Gorman told CNBC Thursday in an exclusive interview on the sidelines of Morgan Stanley’s annual Asia-Pacific conference in Singapore.
“It’s important to point out it’s a proposal. It’s not a rule, and it’s not done.”
“I think [the U.S. banking regulators] are listening,” Gorman added. “I’ve spent many years with the Federal Reserve. I was on the Fed board in New York for six years and I just think they are trying to find the right answer.”
“I’m not sure the banks need more capital,” Morgan Stanley’s outgoing CEO said. “In fact, the Fed’s own stress test says they don’t. So there’s that … sort of purity of purpose and in pursuit of perfection that can be the enemy of good.”
Whatever the outcome though, Gorman said his New York-based bank will be able to manage.
“We have been conservative with our capital. We run a CET1 ratio, which is among the highest in the world, significantly in excess of our requirements, so we’re ready for any outcome. But I don’t think it will be as dire as most of the investment committee believes it will be,” Gorman said.
The bank said in its latest earnings report that its standardized CET1 ratio was 15.5%, approximately 260 basis points above the requirement.
Wealth management and inflation
In late October, Morgan Stanley announced that Ted Pick will succeed James Gorman as chief executive at the start of 2024, though Gorman will stay as executive chairman for an undisclosed period.
Led by Gorman since 2010, Morgan Stanley has managed to avoid the turbulence afflicting some of its competitors.
While Goldman Sachs was forced to pivot after a foray into retail banking, the main question at Morgan Stanley is about an orderly CEO succession.
There will likely be some continuity with the bank’s focus on building out its wealth management business in Asia.
“We think there’s going to be tremendous growth,” Gorman said Thursday.
“So we would like to do more. We have. If I was staying several years, we would very aggressively be pushing our wealth management in this region. And I’m sure my successor would do the same.”
On the issue of inflation, Gorman said central bankers have brought surging inflation under control.
“Give the central banks credit. They moved aggressively with rates,” Gorman said. “I think they were late —that’s my personal view — but it doesn’t matter. When they got there, they really got going. Took rates from zero to five and a half percent. The Fed did five, five and a half percent in almost record time, fastest rate increase in 40 years. And it’s had the impact.”
U.S. Federal Reserve Chairperson Jerome Powell said last Thursday that he and his fellow policymakers are encouraged by the slowing pace of inflation, but more work could be ahead in the battle against high prices as the central bank seeks to bring inflation down closer to its stated 2% target.
The U.S. consumer price index, which measures a broad basket of commonly used goods and services, increased 3.2% in October from a year ago despite being unchanged for the month, according to seasonally adjusted numbers from the Labor Department on Tuesday.
“Are we done? We’re not done,” Gorman said.
“Is 2% absolutely necessary? My personal view is no, but directionally to be heading in that to around 2, 3% — I think is a very acceptable outcome given the cards that they were dealt with.”
— CNBC’s Hugh Son and Jeff Cox contributed to this story.
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Chinese fast fashion retailer Temu overtakes Shein to dominate Japan and South Korea apps
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A package from Temu is seen in front of a screen with the Temu logo. (Photo by Nikos Pekiaridis/NurPhoto via Getty Images)
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Chinese low-cost retailer Temu is dominating app stores in Japan and South Korea in its category, dethroning rival Shein after its successful expansion in Western markets.
“Temu has rapidly expanded its footprint beyond the U.S. and into a number of international geographies and we believe is now available in 40+ countries … where we continue to see opportunities for growth in the quarters ahead,” said Goldman Sachs in an Oct. 4 report.
The investment firm estimated that Temu, which is owned by PDD Holdings, “now generates more than $1 billion of [monthly transaction value]” and expects “continued growth into second half 2023.”
Its rival Shein was estimated to be on track to hit $30 billion in transaction value in 2022, according to media reports.
Temu has overtaken Shein in Japan and South Korea by staying at the top of shopping app rankings in those locations for a longer period of time, according to data.ai analysis shared with CNBC.
Since its July launch in Japan to Nov. 2, “Temu has ranked #1 by daily iOS & Google Play shopping app downloads in Japan for 101 days out of 124 days,” said the app analytics and data company.
By comparison, Shein spent just 17 days topping the two app stores in the same period in Japan.
Temu was the fastest to reach four million downloads in Japan, taking around 121 days, compared to Shein which took 155 days, according to data.ai. Japanese marketplace Mercari took 427 days and Amazon 660 days, the data showed.
Similarly, in South Korea, Temu ranked No. 1 by daily iOS & Google Play shopping app downloads for 65 days out of 93 days from Aug. 1 to Nov. 2, overtaking Alibaba‘s AliExpress (25 days) while Shein ranks among the top 5.
Among the top shopping apps in South Korea, Temu was the fastest to reach 2 million downloads at around 88 days. Shein took 382 days while AliExpress took 366 days to hit the same milestone.
Temu and Shein’s rivalry extend outside the e-commerce space to the courtroom. Shein sued Temu in December over intellectual-property infringement while Temu accused Shein in July of threatening and forcing manufacturers into exclusivity agreements. But recent documents showed that both parties have applied to end their lawsuits against each other.
Temu’s rise
Temu is backed by Nasdaq-listed Chinese tech giant PDD Holdings, which also owns China-based e-commerce app Pinduoduo.
Launched in the U.S. in September 2022, Temu was PDD’s first major push overseas and quickly found success among budget-conscious consumers.
In just a few weeks, the Chinese ecommerce app rose to the top of app stores and subsequently expanded rapidly across countries such as Australia, New Zealand, France, Italy, Germany, the Netherlands, Spain, and the U.K.
Headquartered in Boston, Massachusetts, the Chinese online retailer focuses on selling made-in-China goods, from fashion to household products, at low prices to overseas consumers. Similarly, Shein relies on contracted manufacturers, mostly in China, to design, produce and ship its low-priced products.
Temu made its foray into Asia through Japan and South Korea in July. It then entered the Philippines on Aug. 26 before launching in Malaysia on Sept. 8.
“We believe the main reason for [PDD’s] 131% year-on-year growth in transaction service revenues and 135% year-on-year growth in cost of goods sold in second quarter 2023 was related to fast ramp of Temu performance,” Citi analysts said in a Aug. 29 report.
The platform has been expanding rapidly since its launch by leveraging its parent company’s strength in supply chain and marketing.
“Much of PDD’s incremental investment dollars have been deployed to make Temu happen,” said Bernstein analysts in a Sept. 15 report, adding that Temu’s multi-million Super Bowl advertisement “solidified Temu’s mind share for a number of its target customers.”
“We believe that Temu’s rapid rise in popularity was supported by the company’s elevated marketing investments, its low prices and focus on promotions, and to the success of its referral campaigns,” said Berstein’s analysts.
The analysts said they expect to see “an increase in the number of active users and order volume” in Temu contributing to non-U.S. transaction value and “increasingly contributing to growth from here.”
In June, the U.S. House Select Committee alleged that Shein and Temu violated import tariff law by importing goods into the U.S. without paying import duties or making shipments subject to human rights reviews.
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Higher funding costs forcing Asia’s biggest REIT to set a ‘much higher’ bar for acquisitions: CEO
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Link REIT's CEO George Hongchoy explains the company's appetite for more M&A amid capital management challenges.
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Vietnam’s BW Industrial Development discusses its expansion plans
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Fion Ng of BW Industrial Development says its growth strategy is on a "very fast track."
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China’s consumer prices swing to declines in October
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An employee works on the assembly line of LED lighting products in China.
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China’s consumer prices fell in October, as the world’s second-largest economy struggled with an uneven post-Covid recovery.
Data from China’s National Bureau of Statistics on Thursday showed October consumer price index shrank 0.2% year-on-year, more than the 0.1% decline expected by economists polled by Reuters.
This comes after China’s CPI was unexpectedly flat in September, highlighting the need for further policy support.
Producer prices declined 2.6%, slightly smaller than an expected decline of 2.7% and has been in negative territory for the 13th straight month. China’s PPI was at 2.5% in September, showing factory deflationary pressures remained.
“China is still in a deflationary environment. The domestic demand remains sluggish,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.
Beijing has provided targeted policy support even as recent data suggested growth has remained sluggish. Further hurting consumer confidence is an ongoing debt crisis in two of China’s largest real estate developers. China’s property sector makes up about 30% of its economy.
“With the budget deficit rising and the property developers potentially gaining support from the government, domestic demand will likely improve next year,” Zhang said.
Investors will now be tracking this year’s Singles Day shopping festival, which ends on Nov. 11, to gauge the strength of Chinese consumption.
But excitement about the shopping festival has waned.
“I think this year’s Singles Day sale has not been living up to expectations,” Hao Hong, partner and chief economist at Grow Investment Group told CNBC’s “Squawk Box Asia.”
“Ever since last year, people have stopped spending a lot of money on the Singles Day sale, so it is going to be a muted sales year,” Hong said.
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China is building more resilient economy: StanChart CEO
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Standard Chartered CEO Bill Winters says new technology sectors in China are “booming”, but thinks it’s too early to call the bottom for the troubled Mainland property sector.
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Singapore’s largest bank DBS beats forecast, quarterly profit jumps 17%
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DBS branch in Hong Kong.
Budrul Chukrut | SOPA Images, LightRocket | Getty Images
Southeast Asia’s largest lender DBS Group reported a 17% jump in third-quarter profit on Monday, benefiting from a high-interest rate environment.
During the quarter, net profit rose to 2.63 billion Singaporean dollars ($1.94 billion) compared to SG$2.24 billion a year ago.
It was higher that analysts’ estimates compiled by LSEG, which predicted a quarterly profit estimate of SG$2.5 billion for the July to September quarter.
The Singapore bank also declared a dividend of 48 Singapore cents for each ordinary share for the third quarter.
Shares of the company rose 0.75%.
Net interest margin, a measure of lending profitability, was at 2.19% in the third quarter, higher than 1.90% during the same period a year ago.
“We achieved record income in the third quarter as net interest margin continued to expand and growth in commercial book non-interest income was sustained,” said Piyush Gupta, chief executive officer of DBS.
“As we enter the coming year, higher-for-longer interest rates will be a net benefit to earnings, while our solid balance sheet with ample liquidity, prudent general allowance reserves and healthy capital ratios will provide us with strong buffers against macro uncertainties,” Gupta added.
DBS, Singapore’s largest bank, was second to report among the country’s top lenders.
Smaller rival United Overseas Bank posted a 1% drop in third-quarter net profit in October, missing analysts’ expectations.
Oversea-Chinese Banking Corporation is set to report quarterly results on Nov. 10.
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China’s growth will be lower but more stable if it cuts reliance on property sector: Amundi Institute
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Mahmood Pradhan of the Amundi Institute discusses the economic outlook for China.
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