Aurelia Butler

Deutsche Post DHL is investing €500mn in its Latin American business as it seeks to capitalise on growing demand to expand supply chains beyond China.The logistics group is building out new warehouses across alternative manufacturing hubs such as Mexico, Malaysia and Vietnam as businesses try to diversify their sourcing.Oscar de Bok, head of DHL’s supply chain business, said storage facilities in these countries were filling up almost as soon as they opened. “Every time we think that we are taking a bigger risk, we fill it up right away,” he said.He added that businesses were not shutting down operations in China, but “instead of making the next investment of growth in China, [they are doing] that in alternative markets”.His comments come as multinationals race to secure their supply chains and reduce their dependence on the world’s largest exporter, following disruptions during China’s draconian Covid-19 lockdowns and rising concerns over geopolitical tensions between Beijing and the west. But De Bok echoed warnings that after decades of infrastructure investment in China, smaller manufacturing hubs have only limited supplies of land and labour to meet demand.“Will the sum of Vietnam, Mexico, Malaysia [and] India be competitive with what China can offer? . . . Will there be a challenge in some cases? Probably,” he said.He added that the Malaysian island of Penang, a hotspot for tech manufacturing, was running short of space, with new factories now spreading to the mainland.DHL was also “fast seeing a scarcity of available people” across Malaysia and Mexico, he said. The group had secured an agreement with the Malaysian government that allowed it to bring in more foreign staff,” he added, “in return for offering facilities for workers that went beyond the minimum standards required. Executives helping western multinationals to reorganise their global supply chains echo his views. One Singapore-based supply chain consultant said they had helped a number of clients move factories from China to Mexico, boost manufacturing in Malaysia and increase semiconductor production in the US. “[But some of these countries] are literally running out of talent,” the person said.Over the past year, big plans announced by DHL have included a €500mn investment in India, involving 12mn sq ft of warehouse developments between 2022 and 2026. The group will also lay out plans this week to invest the same amount across Latin America, as it foresees particularly high demand in Mexico from the automotive sector.DHL’s investment plans follow a period of record earnings as consumers splurged on online shopping deliveries during Covid-19 lockdowns. But the group also faces competition from others who cashed in on the ecommerce boom, with the likes of Danish shipping group AP Møller-Maersk similarly hoovering up warehouses across Asia. As DHL seeks to set itself apart from its rivals, De Bok said the company was investing in technology such as robots that could also help make up for labour shortages. He said he saw “lots of opportunities” in artificial intelligence, which could help the group optimise its transport routes in response to disruptions.“Supply chains are now far better understood as being essential in everyday life. That means there’s way more investments going into supply chains,” he said. “It’s now an industry where you need to move really fast [and] be innovative.” More

SINGAPORE (Reuters) – The dollar sank to a two-month low against its major peers on Wednesday in the lead-up to a key U.S. inflation reading, while sterling scaled a 15-month top on expectations the Bank of England (BoE) has further to go in raising rates.U.S. inflation data is due later on Wednesday, with expectations core consumer prices rose 5% on an annual basis in June. The figures should also provide further clarity on the Federal Reserve’s progress in its fight against inflation.Ahead of the release, the U.S. dollar fell to a two-month low of 101.45 against a basket of currencies, extending its losses from the start of the week after Fed officials said the central bank was nearing the end of its current monetary policy tightening cycle.The euro rose 0.07% to $1.1018, flirting near Tuesday’s two-month high of $1.1027.”We’re already seeing markets move in anticipation of a softer U.S. inflation report,” said Matt Simpson, senior market analyst at City Index. “That runs the risk of a ‘buy the rumour, sell the fact’ reaction if the figures come in around expectations.”Elsewhere, sterling peaked at a 15-month high of $1.2940 in early Asia trade, bolstered by bets the BoE will have to tighten monetary policy further to tame British inflation that is running at the highest rate of any major economy.Data out on Tuesday showed that a key measure of British wages rose at the joint fastest pace on record as basic earnings in the three months to May surged 7.3%, higher than expectations of a 7.1% rise.”The (BoE) will have their heads in their hands following the latest employment and wages figures, as it likely forces them to hike by another 50 basis points (bps) at their next meeting and have a terminal rate above 6%,” Simpson said.Current market pricing indicates roughly another 140 bps of rate hikes from the BoE.The Japanese yen strengthened past the 140 per dollar level on Wednesday to peak at a one-month high of 139.54 per dollar, drawing some support from expectations that the Bank of Japan (BOJ) could tweak its controversial yield curve control (YCC) policy at its upcoming meeting this month.”Although steady policy appears to be the most likely outcome for the July policy meeting, it is widely expected to bring upgraded inflation forecasts and the market will continue to hope that the BOJ may offer some signal as to when YCC could be adjusted,” said Jane Foley, head of FX strategy at Rabobank.”Speculation of a possible tweak could allow the (yen) some support ahead of the BOJ meeting this month.”In other currencies, the New Zealand dollar rose 0.34% to $0.6219 ahead of a monetary policy decision from the Reserve Bank of New Zealand (RBNZ) later on Wednesday, though expectations are for the central bank to keep rates on hold.”While we continue to see the balance of risks tilted toward the RBNZ eventually having to do more, that’s not expected to happen today,” said Susan Kilsby, an agricultural economist at ANZ.The Aussie gained 0.39% to $0.6713. More

SYDNEY (Reuters) -Australian No. 4 home lender ANZ Group broke with its rivals on Wednesday and said it supported regulator-recommended mortgage buffers to measure a customer’s borrowing capacity, citing uncertainty around the direction of interest rates.Under an Australian Prudential Regulation Authority (APRA) guideline, the country’s main lenders must test whether a borrower could make repayments if interest rates were 3% higher before selling them a loan.But the country’s central bank has raised rates 4% since May 2022 to slow inflation, leaving thousands of home owners unable to refinance their loans under the guideline. ANZ’s three larger rivals have started considering lending without applying the 3% buffer, saying it is disadvantaging some borrowers. “Of course we should build in buffers,” ANZ CEO Shayne Elliott told parliament in a regular hearing the country’s main bank bosses are required to attend.”I think 3% feels about right. We don’t know what the future holds,” he added.Few people predicted the size and speed of rate hikes so far in 2022 and 2023, and “economists think there might be another 50 basis points or more”, he said.”It’s completely unknown. We’re very comfortable with the 3%.”Elliott said that while ANZ had noticed a slowdown in discretionary spending – including for health club memberships, streaming services and dining out – its call centres had recorded only a modest increase in borrowers struggling to make repayments.Just A$6 of every A$1,000 ($670) owed to ANZ for a mortgage repayment was more than 90 days late, which was “better than it was before the pandemic”, Elliott said.”Good incomes mean that people absorb bigger expenses,” he added. Also, household savings remained higher than before COVID-19 and lending standards had improved.Even first home buyers who bought soon before the rate hikes, the category most exposed to higher repayments, “are performing remarkably well”, Elliott said.People coming off low fixed-rate mortgages, facing far higher variable rates, were “less stressed than the average customer,” he added. “They’re prepared for it. They know it’s coming, it’s not a surprise.”($1 = 1.4939 Australian dollars) More

Swing pricing involves adjusting a fund’s value in line with trading activity so that redeeming investors bear the costs of exiting a fund and do not dilute remaining investors.The U.S. Securities and Exchange Commission intends to impose other fees that will affect parts of the $5.5 trillion industry, the report said, citing person familiar with the matter.The five-member commission will vote on a 2021 proposal to boost the resiliency of money market funds, which required a taxpayer bailout at the start of the coronavirus pandemic. It had initially proposed imposing a swing pricing rule to discourage hasty withdrawals in times of stress, but the proposal drew strong industry objections.Asset managers argued it would be operationally challenging, impose excessive costs on fund sponsors, and reduce daily liquidity for investors, potentially killing off some popular products. More

(Reuters) – A U.S. judge on Tuesday dismissed a lawsuit in which the founder of WallStreetBets, which helped ignite investors’ fascination with “meme” stocks, accused Reddit of wrongly banning him from moderating the community and usurping his trademark rights.Jaime Rogozinski, who founded WallStreetBets in 2012, said Reddit ousted him in April 2020 as a pretext to keep him from controlling a “a famous brand that helped Reddit rise to a $10 billion valuation” by late 2021.Rogozinski had applied to trademark “WallStreetBets” in March 2020, when the community reached 1 million subscribers. It now has 14 million.In a 15-page decision, U.S. District Judge Maxine Chesney in San Francisco rejected Rogozinski’s claim that he owns the WallStreetBets trademark because the market associated it with him and he made the brand famous.She also dismissed Rogozinski’s state law claims related to his ouster, saying either that they were preempted by a federal law that provides “broad immunity” to websites publishing mainly outside content, or that he lacked standing to sue.Chesney said Rogozinski can try to amend his complaint.”While we are disappointed with today’s ruling, Mr. Rogozinski remains confident and committed to vindicating his rights,” his lawyer James Lawrence said in an email.Reddit declined to comment.It has called Rogozinski’s lawsuit a “transparent attempt to enrich himself,” and said it got involved to prevent consumer confusion, preserve goodwill, and let people in the r/WallStreetBets subreddit decide who should guide it.Rogozinski was seeking at least $1 million in damages.Meme stocks gain popularity through discussions, often among inexperienced investors, in online forums including Twitter.Their popularity often leads to volatile stock prices that do not reflect companies’ fundamentals or financial health.Prominent meme stocks have included AMC Entertainment (NYSE:AMC) Holdings, GameStop (NYSE:GME), Koss and the now-bankrupt Bed Bath & Beyond (OTC:BBBYQ). The case is Rogozinski v Reddit Inc, U.S. District Court, Northern District of California, No. 23-00686. More

LONDON (Reuters) – Companies around the globe took on a record $456 billion of net new debt in 2022/23, although higher interest rates should reduce appetite for new borrowing ahead, Janus Henderson said in a report published on Wednesday.The net new debt taken on in 2022/23 pushed outstanding net debt up by 6.2% on a constant-currency basis to $7.80 trillion, surpassing a previous peak in 2020/21, at the height of the COVID pandemic, Janus Henderson’s annual corporate debt index showed.The index, which monitors 933 large listed non-financial corporates globally, showed that U.S. telecoms group Verizon (NYSE:VZ) became the most indebted firm in 2022/23 for the first time, while Google owner Alphabet (NASDAQ:GOOGL) remained the most cash-rich company.One fifth of the net-debt increase reflected companies such as Alphabet and Meta, which owns Facebook (NASDAQ:META) and Instagram, spending some of their “vast cash mountains”, Janus Henderson said.This suggested the rise in debt was “not as worrying,” said James Briggs, fixed-income portfolio manager at the firm, which has $310.5 billion in assets under management.The report noted that the increase in total debt was more contained at 3% on a constant-currency basis.While corporate credit quality has held up well so far, it was likely to decline going forward, the report added. Briggs said the pace of decline would depend on strength in labour markets and the services sector.Higher interest rates were also expected to dampen appetite for further corporate borrowing and Janus Henderson said it expected net debt to decline by 1.9% in 2023/2024, falling to $7.65 trillion on a constant-currency basis.The time lag for interest rate increases to filter through also meant that companies were yet to feel a significant impact on their cost of borrowing, the report said.U.S. firms, that largely rely on fixed-rate bonds as a source of financing, have been particularly shielded so far, with the collective interest bill being flat year-on-year, it added.In Europe, where a larger part of financing comes from banks, firms have started feeling the pinch from the fastest tightening cycle in a decade and the amount spent on finance costs rose by a sixth at constant exchange rates.”The increase in interest rates will feed through into the weaker cohort of credit quality much quicker than in investment grade (bonds),” Briggs said. “We’re also expecting more distress in private markets and leveraged loans compared to high yield.” More

The writer is the publisher of Japan Economy Watch and author of the forthcoming book ‘The Contest for Japan’s Economic Future’The yen has weakened so much that, once again, Japan’s ministry of finance is threatening to intervene in currency markets to shore up its value. If it does so, it is bound to fail, just as it failed last year despite spending a stupendous ¥9.19tn, almost 2 per cent of gross domestic product.Intervention only works when a currency is out of line with economic fundamentals, but that is not the case today. The yen is so weak — worth 25 per cent less than two years ago — because Japan’s exporters have lost their past competitiveness. In fact, if current trends continue, Japan may be overtaken by Korea in the real (price-adjusted) volume of exports.A few decades back, Japan’s consumer electronics, industrial machinery and automobiles were so clearly superior that its exporters could command high prices and still enjoy a high share of global exports. Today, however, these companies have shed much of their lustre. To sell their products, they must lower their prices, which requires a weaker yen.In fact, the “real effective yen” is the weakest it has been in a half-century, according to the Bank of Japan. That measure takes into account the difference in price trends between Japan and all its trading partners. As a result, the real effective yen indicates how the prices of Japanese products in foreign markets compare with those of competitors.Over the past two years, the main factor in the yen’s value has been the gap between 10-year government bond rates in the US and Japan. When Treasuries pay much more than Japanese government bonds, investors sell the latter and therefore the yen itself, in order to buy dollars as they purchase US debt. That selling pressure lowers the value of the yen. In fact, since July 2021, there has been a stunningly high 97 per cent correlation between daily ups and downs in the rate gap and daily moves in the yen-dollar rate. The MoF intervention last autumn could not alter this linkage, nor would it today. At present, the interest rate gap is fluctuating around 3.5 per cent and a yen that recently weakened to ¥145 a dollar is in line with that gap.

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If the interest rate gap were the sole cause of the weak yen, then a rise in Japanese bond rates and a fall in US rates could cure the problem. In reality, the yen is not likely to return to levels deemed normal a decade or two ago. On the contrary, an interest rate gap that yielded a ¥100 per dollar exchange rate back in the early 2000s now translates into around ¥120 per dollar.The reason is that, even with a cheap yen, Japanese companies have trouble competing with exports. For the 30 years to 2010, whether the yen was strong or weak, Japan ran trade surpluses every year but one. Since 2011, however, the country has suffered trade deficits in nine of the past 12 years, even though the real effective yen during the last decade was 25 per cent cheaper than it was during 1980-2010. While in the short-term, income from Japan’s foreign investments acts as a counter to weakness, the longer-term direction of the yen must reflect the trade weakness. Japan’s share of price-adjusted exports by rich countries peaked at 8 per cent back in 1985. Over the succeeding decades, the share steadily dropped to just 5.8 per cent, despite the steady weakening of the yen. By contrast, both the US and Germany maintained their share.In 2000, Japan’s electronics companies enjoyed a trade surplus equal to a hefty 1.3 per cent of gross domestic product; now the sector regularly runs trade deficits. In autos, Japan will soon be overtaken by China as the world’s top exporter, partly because Japanese companies lag in battery-powered electric vehicles.The auto case brings up another reason a weak yen has not helped Japan’s exports as much as policymakers had hoped. Japan’s carmakers make more than 80 per cent of their overseas sales by producing overseas rather than exporting from Japan. The same pattern is seen in electronics, machinery and other products. The more Japanese companies move their production overseas, the smaller the boost to exports for any given drop in the value of the yen.One final point: a weak yen means Japanese households and producers have to pay more for foodstuffs and energy. And it leaves consumers with less money to buy products made in the country. As a result, real (price-adjusted) household spending in 2023 is no higher than it was way back in 2012. The weak yen doesn’t just reflect economic weakness; it also makes a weak economy even shakier. More