Aurelia Butler

China has cut a benchmark lending rate but defied market expectations by leaving another unchanged, as policymakers sought to shield banking sector profits while grappling with slowing economic momentum, a property sector cash crunch and a weakening currency.The decision to cut just one loan prime rate (LPR) prompted economists at Citigroup to downgrade their annual growth forecast to 4.7 per cent, joining the growing ranks of Wall Street investment banks that project China’s full-year economic growth will fail to hit Beijing’s official target of “about 5 per cent”.The one-year loan prime rate, a reference for bank lending, was cut 0.10 percentage points to 3.45 per cent, the People’s Bank of China announced on Monday. The equivalent five-year rate, which is closely watched because of its relationship to mortgage lending, was kept steady at 4.2 per cent. Economists polled by Bloomberg had unanimously projected 0.15 percentage point cuts to both the one-year and five-year rates. The outcome was “quite surprising and frankly it’s a bit puzzling,” said Hui Shan, chief China economist at Goldman Sachs. Five international investment banks, including Morgan Stanley and JPMorgan, have lowered their China growth forecasts in recent weeks in response to signs of slowing economic momentum in China. Despite Beijing lifting pandemic restrictions this year, growth has been hampered by a property cash crunch, declining exports and soaring youth unemployment. Last week the government announced it would stop publishing reports about the unemployment figures.On Wall Street, only Bank of America and Goldman Sachs project growth of more than 5 per cent for 2023.

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The increasingly pessimistic outlook on China’s economy reflects a widening gap between expectations of more forceful policy support and the government’s reluctance to deliver stimulus at a scale needed to reinvigorate growth. Citi analysts in a note attributed their forecast downgrade to “policy disappointment”.Beijing has come under pressure to reduce interest rates and spur consumer demand. The PBoC last week unexpectedly cut the one-year medium-term lending facility, which affects loans to financial institutions, by 0.15 percentage points. But Monday’s policy decision showed Beijing remained intent on insulating bank earnings, analysts said. The one-year LPR is partly set by China’s biggest banks, which are set to release second-quarter results this month.“This looks like policymakers are putting a lot of weight on the banking system’s ability to run smoothly. They may want to protect banks’ net interest margins, which cutting the LPR can pull down,” said Shan at Goldman Sachs. “At the end of the day, you need a healthy banking system to help absorb economic shocks and continue to deleverage [the property sector]”, which has been paralysed for two years by a liquidity crisis.

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Monday’s decision also weighed on Chinese equities, with the Hang Seng China Enterprises index dropping almost 2 per cent despite a host of reforms announced on Friday intended to bolster investor confidence. The benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 1.4 per cent, while the renminbi fell as much as 0.4 per cent to Rmb7.3155 against the dollar.Julian Evans-Pritchard, chief China economist at Capital Economics, suggested the “underwhelming” response meant the PBoC was “unlikely to embrace the much larger rate cuts that would be required to revive credit demand”.

“Hopes for a stimulus-led turnaround in economic activity largely depend on the prospect of greater fiscal support,” he added.Goldman remains the most optimistic among big Wall Street investment banks on China’s 2023 growth prospects, holding its forecast at 5.4 per cent. But Shan acknowledged that the bank may have to reconsider if Beijing’s policy response continues to underwhelm.“Our current assumption is that [policymakers] will ease real estate restrictions in first-tier cities and put more measures in place to support the property market in the coming weeks,” she said. “But if that fails to materialise we will have to rethink things.” More

The upward revision to the rate, which is used to calculate debt interest payments for the annual state budget, is based on rising Japanese government bond yields after the Bank of Japan last month tweaked its ultra-easy monetary policy, Kyodo said.While the assumed rate tends to be estimated conservatively and is subject to change depending on actual long-term rate moves, any increase adds to strain on the country’s budget which is set to exceed a record 114 trillion yen ($782.64 billion) with planned rises in defence and social security spending. Japan carries the industrial world’s heaviest debt burden, at more than twice the size of GDP. The higher assumed rate would be used to calculate debt-servicing costs when compiling the fiscal 2024/25 budget draft in late December, after sticking to a rate of 1.1% since fiscal 2017.The BOJ guides short-term interest rates at -0.1%, buying huge amounts of government bonds to cap the 10-year yield around 0% as part of efforts to fire up inflation to its 2% target.It said last month it would allow the 10-year bond yield to move up to 1%, having previously raised the cap to 0.5% last December from 0.25%.The higher assumed rate would be the first increase since fiscal 2007 when the rate rose to 2.3% from 2.0% after the BOJ scrapped its previous zero interest rate policy. ($1 = 145.6600 yen) More

WASHINGTON (Reuters) – After puzzling for years over the sluggish U.S. rebound from the 2007-2009 recession, the Federal Reserve had a reckoning at its policy meeting in September of 2016.Because of poor productivity and population aging, typical U.S. economic growth of 2.5% or more annually was “not possible anymore” on a sustained basis, said John Williams, the current New York Fed president who at the time was head of the San Francisco Fed, according to transcripts of a session where policymakers cut their median long-term GDP growth outlook to 1.8%, continuing a roughly decade-long slide.For the next three years and continuing on the other side of a world-altering pandemic, the U.S. has left that seeming constraint in the dust, with growth exceeding 1.8% in 21 of the 28 quarters since, including a period of 2.5% annual growth in the years between that 2016 Fed meeting and the onset of the coronavirus pandemic, and averaging 3% so far under President Joe Biden. The pandemic, with its massive hit to growth in two of those quarters in 2020 and the multi-trillion-dollar government response that followed, clouds an understanding of emerging trends.But when policymakers gather later this week for an annual Fed research symposium in Jackson Hole, Wyoming that will be focused on “structural shifts,” they will have to grapple with an economy in deep flux – from U.S. labor force growth that has been better than anticipated, a manufacturing construction surge, changing global supply chains, continued high inflation, and, now, hints of improving productivity. It’s unlikely they’ll abandon their muted view of U.S. economic potential. Slower population growth is wired into the U.S. outlook at this point, immigration remains a politically-charged issue, and better productivity, the other key driver of growth, is hard to anticipate. Economists at investment firm BlackRock (NYSE:BLK) in essays this month pivoted towards an even harsher view of what they deemed “full-employment stagnation,” with potential U.S. growth as low as 1% as the baby boom generation retires, inflation remains volatile, and worker shortages persist. But policymakers have been surprised enough in recent years that a larger conversation is beginning – some of it couched in technical analysis of whether, for example, underlying interest rates have moved higher, some in the blunt observation that people keep behaving differently than the experts expect.From September 2016 through 2019, for example, the U.S. labor force grew about twice as fast as the moribund 0.5% a year Fed staff saw as the likely trend, a pace sustained once the number of available workers recovered in 2022 from a pandemic-driven downturn to its prior high. “The ability to pull people into the labor force … was much higher than even advocates thought,” said Adam Posen, a former Bank of England policymaker who is now president of the Peterson Institute for International Economics in Washington. He called the U.S. central bank’s misreading of the issue “a major failure” that can mar analysis of where the economy stands.IS IT MOSTLY FISCAL? For available workers to add to economic output, however, they have to have something to do. Since 2016, policies from the vastly different Trump and Biden administrations have combined in a sort of accidental complementarity to keep both job and economic growth above the Fed’s estimate of potential.Under former President Donald Trump, corporate tax cuts and other changes pushed growth higher in ways that surprised the central bank, while under his successor, President Joe Biden, an array of energy- and technology-related industrial policies, with infrastructure spending also in the pipeline, has triggered a boom in manufacturing construction. Both presidents added to pandemic recovery programs that may still be boosting consumer and local government spending.Trump’s pre-COVID years ended with the unemployment rate at 3.5% in February 2020; it has been essentially at that level since March of 2022 under Biden, with the economy still adding roughly 200,000 jobs per month. It isn’t sustainable, said Dana Peterson, chief economist at the Conference Board think tank. Driven by government tax and spending policies, the run of above-potential growth doesn’t reflect any underlying shift in economic performance – at least not yet – and now faces two obstacles, she said.One is rising public debt. While some of the money borrowed in recent years could lift economic performance over time with improved infrastructure or other projects, Peterson said the net outcome is likely a drag on growth and private investment.The other is the Fed. The central bank is fighting an outbreak of high inflation, largely linked to the pandemic and the response to it, with high interest rates designed precisely to force economic growth below trend. Fed Chair Jerome Powell is scheduled to speak at the Jackson Hole conference on Friday. The Fed has raised interest rates by 5.25 percentage points since March 2022 in its bid to tame the surge in inflation, but so far it has not seen as much response from the economy as expected. U.S. output grew at a 2.4% annual pace in the second quarter, and may be poised for a strong third quarter as well. While many economists feel a slowdown is coming, the longer growth remains robust the more the Fed may feel it needs to lean on the economy.Median Fed policymaker projections of potential U.S. economic growth have slid from a level around 2.5% a decade ago to 1.8% as of June 2023, when the last projections were issued. “In the next six to 12 months you probably have a recession and that is a function of the Fed,” the Conference Board’s Peterson said. “After that is done we will shift to a phase of slower growth.”NEW PRODUCTIVITY REGIME?An alternative view harkens to former Fed Chair Alan Greenspan’s hunch in the mid-1990s that quickening economic growth stemmed from technological improvements that paved the way for workers to produce more per hour, allowing the economy to grow faster without raising inflation. Under pressure from colleagues to raise interest rates as the economy accelerated, Greenspan resisted and accommodated the expansion instead of fighting it.At the onset of the pandemic some economists suggested that changes in the application of technology or the shift to remote work might boost worker output.As of last year’s Jackson Hole conference, San Francisco Fed economist and productivity expert John Fernald and his colleague Huiyu Li said in a paper that while the pandemic had rearranged some industry trends, it had not changed the underlying “slow-growth regime” of productivity increasing about 1.1% a year. By contrast, productivity rose about 2.5% a year from 1995 to 2005, they noted.Yet productivity jumped by a 3.7% annualized rate in the second quarter of this year, and expectations for a strong boost in the current three-month period “offer glimmers of hope that trend productivity is picking up,” Michael Feroli, chief U.S. economist at JPMorgan (NYSE:JPM), wrote this month. He concluded the change “could have some legs,” with rising investment in software and information processing possibly pointing to the diffusion of artificial intelligence applications.It may not matter much to the Fed with inflation still running high. But it could help economic growth continue even as prices cool, another prop for the “soft landing” the Fed hopes to engineer and possible evidence of rising potential. “It is very hard to extrapolate recent years into any reassessment of longer-term conditions,” said Antulio Bomfim, head of global macro for the global fixed income group at Northern Trust (NASDAQ:NTRS) Asset Management and a former senior adviser to Powell. But “having said that … I would see the balance of risks as being to the upside.” More

We begin today with Donald Trump’s announcement that he will not be participating in the upcoming Republican presidential debates. The announcement comes just days before the other candidates are set to square off on Wednesday night in Milwaukee, Wisconsin.“The public knows who I am and what a successful presidency I had, with energy independence, strong borders and military, biggest ever tax and regulation cuts, no inflation, strongest economy in history and much more,” Trump confirmed in a social media post on Sunday. “I WILL THEREFORE NOT BE DOING THE DEBATES”, he added. Trump holds a commanding lead in the party’s polls. A CBS survey released on Sunday, cited by Trump, showed that 62 per cent of likely Republican primary voters now say they would back the beleaguered former president. This gave him his largest lead to date, even though his campaign has been overshadowed by criminal charges brought against him at a federal and state level. Trump’s closest contender is Florida governor Ron DeSantis, who trails him by a wide margin, garnering the support of only 16 per cent of those polled. The seven remaining presidential hopefuls have only single-digit support.The New York Times on Friday reported that instead of participating in the first debate, Trump was planning to sit for an interview with Tucker Carlson, the firebrand conservative television host formerly at Fox News. Trump has not confirmed that plan, but such a decision would be particularly painful for Fox because it is hosting the debate on Wednesday.Former vice-president Mike Pence criticised Trump for not appearing, telling ABC News on Sunday, “every one of us that has qualified for that debate stage ought to be on the stage, be willing to square off, answer the tough questions and also draw a bright-line contrast [on various issues]”. Go deeper: Why is DeSantis’s primary bid fading and what does it mean for the other candidates? Here’s what else I’m keeping tabs on today:China: The country’s central bank has cut a benchmark lending rate but defied market expectations by leaving another unchanged as policymakers grapple with their response to slowing economic momentum. Results: Zoom reports second-quarter results after calling for staff to return to the office this month. Demand for the video conferencing platform’s services has dropped as more companies adopt hybrid work. Self Storage Group also has earnings.Five more top stories1. Exclusive: Citigroup’s chief is considering a plan to disband the bank’s biggest division in what would be the most significant structural shake-up in nearly 15 years. The plan would affect the Institutional Clients Group, which generated nearly three-quarters of the bank’s net profits last year. Here’s why Jane Fraser wants to split it into three units.2. Saudi border guards have killed hundreds of Ethiopian migrants attempting to cross into the kingdom from Yemen over the past 18 months, a rights group has said, alleging security forces “fired explosive weapons” and in some cases asked migrants which of their limbs they would prefer to be shot. Here are more details from the 73-page report by Human Rights Watch.3. Australian prime minister Anthony Albanese arranged a two-week internship at PwC in 2021. This is the latest sign of the close ties between the country’s government and the consultancy industry. The internship took place two years before it was revealed that a senior partner in PwC’s tax practice had leaked confidential government information to colleagues both in Australia and overseas about plans to crack down on tax avoidance by multinational companies. 4. Ukraine nears deal with global insurers to cover grain ships. The scheme, which could be put in place as early as next month, is a vital step in the country’s attempts to create a safe corridor for exports after Russia withdrew from a UN-brokered deal last month. If successful it could see as many as five to 30 ships covered to travel to and from Ukraine’s Black Sea ports.5. The $25tn global private funds industry is braced for one of the most sweeping regulatory reforms in its history as the US Securities and Exchange Commission prepares to impose tough requirements on private equity, real estate and hedge funds when it meets on Wednesday. Here’s more on the far-reaching rules.The Big Read

© FT montage

Welcome to the à la carte world. As the post-cold war age of America as a sole superpower fades, the old era when countries had to choose from a prix fixe menu of alliances is shifting into a more fluid order. The stand-off between Washington and Beijing is presenting an opportunity for much of the world: not just to be wooed but also to play one off against the other — and many are doing this with alacrity and increasing skill.We’re also reading . . . Public health: Countries need to start working together on the most dangerous pathogens to avoid repeating the mistakes of Covid-19, the World Health Organization’s chief scientist said in an interview with the FT.Credit Suisse: What started as Switzerland’s public embarrassment is now a source of increasing political pressure, writes Jonathan Guthrie, as voters watch UBS closely ahead of October elections. Strength in solidarity: As autocrats around the world strengthen ties, human rights activists are calling for greater global co-operation, writes author and journalist Kim Ghattas.Graphic of the dayCar manufacturers, mining companies and battery developers are all trying to carve out a space in the world of next-generation batteries, forming a series of alliances while placing technological bets. But whatever technology becomes dominant, batteries powering tomorrow’s electric vehicles will require vast amounts of mining and processing.Take a break from the newsWith the Church of Scotland poised to make some deep cuts, the FT Weekend Essay examines the social consequences of religious retreat and how Scotland lost the faith.

St Monans Church © Photographed for the FT by Antony Sojka

Additional contributions from Benjamin Wilhelm. More

WASHINGTON (Reuters) – A feud over spending cuts between hardline and centrist Republicans in the U.S. House of Representatives raises the risk that the federal government will suffer its fourth shutdown in a decade this fall.Members of the hardline House Freedom Caucus are pushing to cut spending to a fiscal 2022 level of $1.47 trillion, $120 billion less than President Joe Biden and House Speaker Kevin McCarthy agreed to in their May debt ceiling compromise.With Republicans also seeking higher spending on defense, veterans benefits and border security, analysts say the hardline target would mean cuts of up to 25% in areas such as agriculture, infrastructure, science, commerce, water and energy, and healthcare.Centrists, who call themselves “governing” Republicans, say their hardline colleagues are ignoring the fact that their priorities are rejected by Democrats who control the Senate and White House, and that spending will wind up near the level agreed by McCarthy and Biden anyway. The result is a major headache for centrist Republicans from swing districts that Biden won in 2020 and others with constituents in the firing line of hardline spending targets.”The reductions are so deep,” said Representative Don Bacon, a centrist Republican from Nebraska. “They want to make everything a root canal.”Hardliners view the 2024 fiscal year that begins on Oct. 1 as a test of Republican resolve to reduce the federal debt and move on to reform social programs including Medicare and Social Security.”I don’t fault any individual member for raising concerns and wanting to make sure that the bill is right for them and for their district,” said Representative Ben Cline, who belongs to the Freedom Caucus, the conservative Republican Study Committee and the bipartisan Problem Solvers Caucus.”What there has to be is an understanding that for there to be 218 Republican votes, the spending needs to be in line with pre-COVID levels rather than the debt-limit agreement.”One significant source of frustration is hardline demands for cuts to bills that have already been vetted by the 61-member House Appropriations Committee.”We’re not, willy-nilly, just trying to give money away. We’re trying to focus and prioritize,” said Representative David Joyce, a member of the appropriations committee who heads the 42-member centrist Republican Governance Group. With Democrats opposed to hardline proposals, McCarthy can afford to lose no more than four Republican votes if he hopes to pass all 12 appropriations bills before funding expires on Sept. 30. “I do not know how they get themselves out of this jam,” said William Hoagland, a former Senate Republican budget director now at the Bipartisan Policy Center think tank.TRICKY PATHWhen the House returns from summer recess on Sept. 12, lawmakers will have 12 days to complete their bills and hammer out compromise legislation with the Senate or risk a partial government shutdown.McCarthy acknowledged last week they may have to resort to a stopgap funding bill, known as a “continuing resolution,” or CR, to keep federal agencies open.That option could be complicated by hardline demands that it include some of former President Donald Trump’s border policies, which Democrats reject.Some House Republicans say the challenges are similar to disagreements McCarthy has overcome on other major legislation, including an April Republican debt ceiling bill that cemented his negotiating position in talks with Biden. “The more appropriations bills we can get across the finish line, the more we’ll have the leverage we need to negotiate a good deal with the Senate,” said Representative Dusty Johnson, who chairs the Main Street Caucus, whose members describe themselves as “pragmatic conservatives”.Failure would mean another costly government shutdown starting in October, which would be the fourth in a decade.SHUTDOWN RISKHouse Freedom Caucus members say a shutdown could be necessary to achieve their objectives. “It’s not something that the members of the Freedom Caucus generally wish for,” said Representative Scott Perry, who chairs the group of roughly three dozen conservatives.”But we also understand that very little happens in Washington that’s difficult, without someone or something forcing it to happen,” he told Reuters.Senate Majority Leader Chuck Schumer, the top Democrat in Congress, said last week that Republicans will be to blame for any new shutdown “if the House decides to go in a partisan direction.” Disputes over funding and policy have shut down the federal government three times in the past decade: once in 2013 over healthcare spending and twice in 2018 over immigration. A 35-day shutdown that began in December 2018 and ran into January 2019 cost the economy 0.02% of GDP, according to the nonpartisan Congressional Budget Office. This time, the slim 222-212 House Republican majority could pay a political price. A shutdown would disrupt the lives of Americans barely a year before the 2024 election, when Republicans must defend 18 House seats in districts that Biden won in 2020.McCarthy could face the prospect of having to resort to a CR that requires bipartisan support to pass, neutralizing the hardliners, analysts said. That could endanger McCarthy’s speakership under a deal he struck allowing a single lawmaker to move for his dismissal. Would the House Freedom Caucus end McCarthy’s reign over a CR? “I wouldn’t go that far,” Perry said. “That’s a final option. We want to work with the leadership. We want to work with Kevin, and we think that we can.” More

1. Futures point higherU.S. stock futures edged up on Monday, with the major indices on Wall Street coming off a losing week that featured surging bond yields and deepening worries over China’s post-pandemic recovery.At 05:15 ET (09:15 GMT), the Dow futures contract had moved higher by 102 points or 0.3%, the S&P 500 futures contract gained 19 points or 0.4%, and the Nasdaq 100 futures rose by 94 points or 0.6%.Following a mixed session on Friday, the benchmark S&P 500, tech-heavy Nasdaq Composite, and the 30-stock Dow Jones Industrial Average all posted weekly declines. Equities came under pressure from a jump in bond yields that partly stemmed from waning hopes that the Federal Reserve will soon begin to back away from its long-standing monetary tightening campaign. Prices typically dip as yields rise.As the new trading week begins in the U.S., investors will be looking ahead to comments on Friday from Fed Chair Jerome Powell at an annual symposium in Jackson Hole, Wyoming.Meanwhile, weak economic releases have added fuel to concerns over how long it will take China to fully rebound from draconian COVID-19 rules. Calls for Beijing to roll out more stimulus to help spur demand in the world’s second-largest economy have been intensifying, yet officials remain wary about causing further weakening in the yuan (see below).2. Zoom to report with AI plans in focusVideo conferencing service Zoom (NASDAQ:ZM) is set to deliver its latest quarterly results after the bell on Monday, kicking off a fresh week of corporate returns.Once a pandemic-era powerhouse driven by remote working, Zoom has been hit by more workers coming back to physical offices, along with rising competition from similar offerings backed by big-name players like Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL). Revenue growth has slowed, while the company has slashed about a sixth of its headcount.Zoom’s leadership has outlined plans to use artificial intelligence to spruce up the business. Chief Executive Officer Eric Yuan recently said that the San Jose, California-based group is aiming to fold AI into almost all its features, arguing that the nascent technology has “a lot of monetization opportunities.”Traders seem unconvinced so far: Zoom shares have shed more than 8% of their value over the past six months.The hype around AI will likely continue to take center stage this week, powered in particular by results from chipmaker Nvidia (NASDAQ:NVDA) and Chinese tech behemoth Baidu (NASDAQ:BIDU).3. Strong cybersecurity demand boosts Palo Alto NetworksShares in Palo Alto Networks (NASDAQ:PANW) climbed by over 12% in premarket U.S. trading on Monday after the cybersecurity group unveiled a better-than-expected estimate for annual billings.The firm said it now anticipates that it will report billings of between $10.9 billion to $11 billion in its 2024 fiscal period, topping Bloomberg consensus estimates of $10.77B.Billings in Palo Alto’s fourth quarter came in slightly underestimated, although Chief Financial Officer Dipak Golechha noted that the figure did not capture the company’s top-line strength.The rosy outlook was enough to also lift shares in Palo Alto peers Zscaler (NASDAQ:ZS) and Fortinet (NASDAQ:FTNT).These one-stop shops for cybersecurity solutions have seen a spike in demand from both businesses and governments following a spate of hacks and other digital crimes over the past year. According to Check Point Research, a cyber threat intelligence provider, average weekly global cyberattacks touched a two-year high in the second quarter of 2023.4. China unveils unexpectedly modest lending rate cutChina slashed a benchmark lending rate on Monday, but kept another steady, in a move that widely surprised expectations that Beijing would announce deeper policy cuts.The People’s Bank of China lowered its one-year loan prime rate, a key reference for bank lending, to 3.45% from 3.55%. The five-year rate, used to determine mortgage rates, was left unchanged at 4.20%. Analysts had seen a 15-basis-point cut for each rate.Officials in the country are under increasing pressure to introduce new stimulus measures to reignite flagging post-pandemic growth and support an ailing property sector. But worries over a weakening in the local currency and potential capital flight have placed limitations on the depth of the changes policymakers can make.The renminbi dropped following the PBOC’s announcement.5. Crude moves higherOil prices rose Monday, rebounding after selling last week, boosted in part by the Chinese rate cut and also by expectations for lower output from a group of top producers in August.The crude market was lower to the end the prior week, ending a seven-week long winning streak, on concerns that higher U.S. interest rates and China’s slowing economic recovery will hit oil demand.However, the prospect of tighter supplies after deep output cuts this year from Saudi Arabia and Russia — the two leading producers in the group known as OPEC+ — have helped support prices.By 05:19 ET, the U.S. crude futures traded 0.5% higher at $81.06 a barrel, while the Brent contract climbed 0.5% to $85.22. More

President Cyril Ramaphosa said South Africa would “not be drawn into a contest between global powers”, ahead of this week’s Brics summit in Johannesburg that will consider the biggest expansion of the emerging-market bloc in more than a decade.Africa’s most industrialised nation supports the expansion as a non-aligned country that wants to avoid a world that is “increasingly polarised into competing camps”, Ramaphosa said in a televised address as South Africa prepared to welcome the leaders of Brazil, Russia, India and China, as well as those from other developing-world nations.China is pushing for the Brics to become a stronger political rival to the G7 bloc of advanced economies through an expanded membership that could include Argentina, Iran, Indonesia and 20 other governments that have formally applied, according to people briefed on Beijing’s position.But in the run-up to the summit that begins on Tuesday, India and Brazil have been more sceptical about adding new members, representing tensions over whether the Brics should mostly stay as an economic forum for diverse developing nations. India is currently the only strongly performing Brics economy as China confronts a slowdown and the three other members have had lacklustre growth in the past decade.South Africa, which was the first country to be added to the original Brics grouping in 2010, has signalled that it does not see further expansion in anti-western terms.“An expanded Brics will represent a diverse group of nations with different political systems that share a common desire to have a more balanced global order,” said Ramaphosa, who hosts Xi Jinping for a state visit ahead of the summit, only the Chinese leader’s second trip abroad this year.

India’s Narendra Modi and Brazil’s Luiz Inácio Lula da Silva are also set to travel to the gathering in Johannesburg, but Russia’s Vladimir Putin will stay behind. The Russian leader will not attend after South Africa faced an obligation to arrest him over his indictment by the International Criminal Court for war crimes in the invasion of Ukraine.South Africa has been trying to balance closer ties with Russia and China with mollifying the US and preserving threatened trade links over what has been seen in Washington DC as its equivocation in condemning the war.“While some of our detractors prefer overt support for their political and ideological choices, we will not be drawn into a contest between global powers,” Ramaphosa said. “Multilateralism is being replaced by the actions of different power blocs, all of which we trade with, invest with, and whose technology we use.” More

SYDNEY (Reuters) – Australia’s A$2.4 trillion ($1.54 trillion) pension sector grew its investments in local and foreign debt by more than A$20 billion over the past year as higher yields burnished an asset class overlooked in a country where equities traditionally rule.The two largest pension funds grew fixed income investments in their primary vehicles, holding bulk of the pensions, in the last financial year. For the A$300 billion AustralianSuper, the country’s largest fund, its fixed income allocation hit the highest level since at least 2013.AustralianSuper told Reuters it had doubled debt assets to A$40 billion over the past year and added at least three new fixed income portfolio managers to its London office.”We had a very low allocation to fixed interest for much of the last two or three years and are now building that back up again as rates start to normalise,” said Katie Dean, head of fixed income, currency and cash at AustralianSuper.Australian Retirement Trust, which manages A$240 billion, Sio lifted its fixed income allocation to 13.7% from 12.5%, according to filings. The rotation into bonds is a step change for a sector long underweight the asset class by global standards. Norway’s $1.4 trillion sovereign wealth fund and the $450 billion California public employees pension fund CalPERS hold about a quarter of assets in fixed income, for instance.Australian investors have historically preferred stocks to bonds, in part due to dividend friendly tax laws since the 1980s that enhance income from stocks.The decline in global yields after the 2008 financial crisis also sapped appetite for debt. Australian government 10-year bond yields had dropped to around 1% in 2020 before the pandemic, from 6% in 2007. They are now above 4%. “There’s a huge market bias in Australia… it’s ridiculous for an OECD country,” said Amy Xie Patrick, head of income strategies at Pendal Group, which manages pension money. Jay Sivapalan, head of Australian Fixed Interest at Janus Henderson, which manages money for local pension funds, said their past investments were mostly in private debt markets where yields come with a liquidity premium.But the spectacular rise in benchmark sovereign yields since late 2020 is luring funds back to public markets, said Sivapalan.Even funds reluctant to permanently change allocations to debt are trading bonds. Fixed income has been Aware Super’s most actively traded asset class over the past few years, says its Head of Investment Strategy Michael Winchester.The A$160 billion fund has roughly a tenth of its primary vehicle invested in fixed interest, according to its website.In another sign of the sector’s tentative embrace of fixed income, the country’s fifth largest fund, the A$100 billion Hostplus, added debt in fiscal 2022 to its primary vehicle for the first time in five years, but the allocation was only 3%.”Within the last year to 18 months, they’ve [the sector] been trying to get to some sort of neutral,” said Patrick. “They’re not necessarily going over their skis on fixed income.”($1 = 1.5584 Australian dollars) More