Aurelia Butler

COLOMBO (Reuters) – Sri Lanka’s central bank is widely expected to loosen monetary policy further on Thursday, following a massive 250-basis-point interest rate cut in June, as it looks to revive growth amid a rapid fall in inflation.Sri Lanka’s economy nosedived last year after its foreign exchange reserves fell to record lows, pushing the island into its worst financial crisis in more than seven decades.However, since it secured a $2.9 billion bailout from the International Monetary Fund (IMF) in March, the island has been steadily rebuilding its reserves, strengthening the currency. Its once soaring inflation dipped to 12% year on year in June.The median estimate in a Reuters poll is for a 200-basis-point rate cut. Seven economists called for a 200 bps reduction, three expect a 100 bps cut while one said the central bank (CBSL) could cut by 300 bps.The decision will be announced via a statement at 7:30 a.m. (0200 GMT).At its last meeting in June, the CBSL reduced its standing deposit facility rate and standing lending facility rate (SLFR) in a surprise move to 13% and 14%, respectively.”Economic contraction, lower than expected inflation is giving the central bank space to cut rates. It’s the right thing to do for growth,” said Murtaza Jafferjee CEO of J.B. Securities. The central bank expects Sri Lanka’s economy to shrink by 2% this year following a 7.8% contraction in 2022.Sri Lanka’s domestic debt restructuring plan, which received parliamentary approval on Saturday, has pushed down domestic bond market interest rates to 12%-13% levels from 22% earlier, analysts said.”We are waiting to see how the foreign creditors respond to debt restructuring in the next two months. That will be critical to how interest rates will play out,” said Visaahan Arumainayagam, analyst for Colombo-based broking firm Asha Securities.The median estimate is for the SLFR to end the year at 10%, around 300 bps lower from current levels.The island aims to complete restructuring debt talks by September in time for the first review of the IMF program. The central bank raised rates by a record 950 basis points last year to tame inflation and by 100 bps on March 3.For the detailed list of responses, please see below:Organisation SDFR on July 06 SLFR on July 06 SLFR at end-2023 Acuity 12.00% 13% 10% Advocata Institute 11.00% 12% 9% CAL Group 11.00% 12% 10% HSBC 13.00% 14% First Capital 11.00% 12% 11% Asha Securites 11.00% 12% 10% Capital Economics 13.00% 14% Lanka Securities 11.00% 12% 10% University of 10.00% 11% 8% Colombo JB Securities 11.00% 12% 9% Frontier Research 12.00% 13% 10% CSE 12.00% 13% Asia Securities 11.00% 12% 9% Median 11.00% 12% 10% More

SYDNEY (Reuters) – PwC Australia provided Google (NASDAQ:GOOGL) confidential information about the start date of a new tax law leaked from Australian government tax briefings, according to two sources familiar with the matter.This is the first time a company has been directly linked to the national scandal involving the “big four” accounting firm that was first revealed in January.PwC is under fire because several years ago a former partner, Peter Collins, who advised the Australian government on anti-tax avoidance laws shared confidential drafts with colleagues about the government’s plans that were then used to drum up business with multinational companies. In one instance, one of these colleagues emailed a Google employee in August 2015 to confirm the likely start date for the government’s Multinational Anti-Avoidance Law (MAAL), according to one of the sources.While the Jan. 1, 2016 start date for the law had been announced in the government’s budget papers in May 2015, the confirmation that the government would go ahead with that date came from confidential government briefings, the source said.At the time, a number of organisations had called for the government to delay the planned January 2016 start date.The former partner did not tell Google the information was confidential, the source said.The sources asked not to be named as the information has not been authorised for public release.PwC has not publicly identified any client in relation to the scandal, which was sparked by Collins breaching confidentiality agreements signed with the government between 2013 and 2018.Reuters could not establish if Google was a client of PwC Australia at the time, and if it used the information in any way.Google did not respond to questions about its relationship with PwC Australia.PwC Australia responded to a request for comment on this story and several questions about its relationship to Google by saying its clients “were not involved in any wrongdoing and no confidential information was used to enable clients to pay less tax”.Collins could not be reached for comment.First revealed by tax authorities in January, the scandal has forced out PwC Australia’s chief executive Tom Seymour, cost it at least five high-profile clients and triggered the sale of its lucrative government consulting wing for A$1 ($0.66).After receiving a 144-page cache of PwC emails released by the Tax Practitioners Board, lawmakers investigating the scandal asked PwC to list companies given confidential Australian Taxation Office information about the anti-avoidance law.PwC sent a written response in June. What sources told Reuters matches information in the letter, which was publicly released with the name of the company that received the confidential information redacted.Tax officials told parliament in May they foiled several attempts by unnamed multinational firms to subvert the multinational anti-avoidance law in early 2016, months after confidential information had leaked.($1 = 1.5051 Australian dollars) More

The EU wants the textile industry to pay for the processing of discarded clothing and footwear under new rules aimed at cutting the environmental footprint of fast-fashion brands.The proposal, presented by the European Commission on Wednesday, would push clothing companies to improve the recyclability of their products and catalyse a growing second market, it said. “You can’t ban people from buying new things if they can afford it and they feel like it,” said Virginijus Sinkevičius, the EU’s environment commissioner. “What I need to ensure is that even if they do, at the end of life of those goods can find a better way than being . . . incinerated or dumped in Africa.” Fast-fashion brands such as the online retailers Shein and Boohoo and high street clothing giants H&M and Inditex, which owns Zara, have come under increasing pressure to move away from low-cost business models that have resulted in millions of tonnes of clothes being trashed.The equivalent of 12kg of clothes and footwear per EU citizen is discarded each year of which more than three-quarters is incinerated or goes to landfill, according to commission data. The consumption of clothing and footwear is expected to increase by 63 per cent from 62mn tonnes in 2019 to 102mn tonnes in 2030, European Environment Agency data suggests.According to the proposal, companies that sell to consumers in the EU would be responsible for paying for the treatment of any waste textiles with the amount charged dependent on the amount of processing required.Similar measures are already in place in EU countries such as France and Spain, and member states are already obliged to put in place systems for collecting textile waste by 2025 under separate rules.An EU official said that by the commission’s estimates the cost of making companies pay for clothing waste would amount to the equivalent of around €0.12 per T-shirt but it would vary according to the product and what treatment was needed. Fees could be reduced if a garment was made more sustainably, the official said. “Fast fashion is a problem,” the person said, adding that modulating the charges would encourage retailers to think harder about the potential for reusing or recycling their products.EuroCommerce, the retail industry body, said it backed the idea but wanted the rules to be harmonised across all of the EU’s 27 member states when they were implemented.Companies wanted to sell more sustainable products, it said, but were hampered by the lack of recycling infrastructure. “Finance and investment are needed to achieve this high level of textile waste collection,” the trade body said.H&M also said it backed the measures and aimed for 30 per cent of its clothes to be made from recycled fibres by 2025. Euratex, the textile industry body, said that it was working on pilot projects with small fabric manufacturers in 11 textile producing regions to create a closed loop system with clothes better designed for recycling.But the proposed measures are likely to disappoint lawmakers in the European parliament who have called for an “end to fast fashion” and the setting of specific targets for textile waste collection, prevention and recycling.

The proposal was issued at the same time as a revision of food waste rules and new legislation governing the health of the bloc’s soils and use of new techniques for genetically modifying crops.It will have to be agreed in negotiations between EU member states — which last month backed a ban on the destruction of unsold clothing — and the European parliament before it becomes law.A report published this week by the European Court of Auditors suggested there was little appetite among EU countries to increase the proportion of recycled material that was circulating in their economies. The authors said that levels of circularity in seven countries, including Sweden and Denmark, had gone backwards.“EU action has been so far powerless, meaning the circular transition is unfortunately almost at a standstill in European countries,” said Annemie Turtelboom, a member of the ECA. More

A key measure of eurozone inflation has fallen into negative territory for the first time in two and a half years, in a further sign that the surge in prices that has plagued businesses and households is now in retreat. The EU’s statistics office, Eurostat, said factory gate prices in the region fell 1.5 per cent in the year to May, the first outright decline since December 2020. The measure has fallen significantly since the summer, when annual price rises hit a peak of 43.3 per cent in August after energy costs surged in the wake of Russia’s full-scale invasion of Ukraine. The decline will raise hopes that a series of rate rises by the European Central Bank is finally beginning to pay off. Central bank figures out on Wednesday showed households increasingly expect inflation to fall sharply over the coming year, a trend that Andrzej Szczepaniak, an economist at Nomura, described as “exactly what the ECB will have been looking for”. However, consumer price inflation remains well above the ECB’s 2 per cent target at 5.5 per cent in the year to June. At 5.4 per cent, the core consumer prices are close to record highs. Higher borrowing costs are also weighing on activity in the region’s housing market. Separate data published by Eurostat on Wednesday showed house prices fell for the second quarter in a row — though by a smaller amount in the three months to March than in the final quarter of 2022. Average mortgage rates across the eurozone now stand at 3.58 per cent, up from 1.78 per cent a year ago, according to ECB figures. The central bank has raised its benchmark deposit rate by 4 percentage points to 3.5 per cent over the past year. A breakdown of producer prices showed energy costs were down 13.3 per cent compared with May last year. Factory gate prices charged on intermediate goods, such as parts of machinery, also contracted. Producer prices were down 1.9 per cent between April and May, with all EU countries except Malta reporting a contraction.Eurozone house prices fell 0.9 per cent in the first quarter compared with the previous three months, following a 1.7 per cent contraction in the previous quarter. That marked the first two consecutive contractions in almost a decade.Households’ expectations for inflation over the next 12 months decreased to 3.9 per cent in May, from 4.1 per cent in April, according to the ECB’s quarterly poll. The fall in inflation expectations to the lowest level since last March “nicely illustrate that the disinflationary process in the eurozone is gaining momentum”, said Carsten Brzeski, an economist at Dutch bank ING. He added that it confirmed his view “that both headline and core inflation could fall faster towards the end of the year than the ECB currently thinks”.Markets expect rate-setters to raise borrowing costs by a quarter point at the next two policy meetings in July and September. In Germany, the region’s largest economy, prices have fallen 6.8 per cent. Sven Jari Stehn, economist at Goldman Sachs, said: “The drag from policy tightening via the housing market is likely to build.” More

Dear reader, Investors are putting big bets on who the immediate winner will be in geopolitical backbiting between China and the US. China has hit back at mooted US-led restrictions on chip sales by limiting its own exports of two metals used in chipmaking. A rally in related stocks overlooks the likely long-term effects. The US dented China’s plans to make advanced artificial intelligence chips. By subjecting gallium and germanium to export restrictions, Beijing has set up roadblocks in the world’s chip manufacturing supply chain. The two materials are used in chip production and can serve as alternatives to some traditional silicon wafers. They are also needed in a wide range of products in the defence and renewable energy industries, including solar cells, night-vision devices and satellites.China accounts for about two-thirds of the world’s germanium production and about 80 per cent of global gallium output. Shares of Chinese metals producers surged following the export controls. Yunnan Lincang Xinyuan Germanium Industrial rose by its 10 per cent daily limit for the second straight day on Wednesday, bringing gains for the year to more than 50 per cent. Expectations are running high that prices and demand for the materials will surge as controls limit supply.Most germanium is a byproduct of zinc production. Gallium is found in small amounts in zinc ores. That has boosted related stocks such as Aluminum Corp of China, which also produces gallium, and Zhuzhou Smelter Group. The timing of the export controls suggests Beijing will no longer sit back as it loses access to advanced chips. The move comes just days after the Netherlands announced its latest set of export controls on high-end chipmaking equipment made primarily by Dutch group ASM. China is sending a signal to the US. Treasury secretary Janet Yellen is scheduled to visit Beijing this week.Chinese curbs on metals exports are not an insuperable problem for chipmakers elsewhere. The US, Canada and Belgium can make germanium while South Korea and Japan produce gallium.

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Production capacity is limited at present. Setting up new processing plants is time-consuming and costly. Yields are low.The move comes at a high cost to Chinese producers. These are mostly relatively small companies. One of the main groups, Yunnan Lincang Xinyuan Germanium, for example, has a market valuation of just $1bn. Operating margins are negative. That makes it difficult for the companies to weather an extended period of declining export volumes. Chipmakers in South Korea, one of the world’s largest importers of the two materials, can fall back on large stockpiles in the government’s inventory. That could mean a slower rise in material prices than Chinese suppliers hope. But a dent to local companies’ earnings may be a price Beijing is willing to pay. Like Washington, it is prioritising political objectives over the health of its businesses and international trade.Rising tensions with the US are far from over. The Biden administration is reportedly preparing to restrict the access of Chinese companies to US cloud-computing services that use advanced AI chips.Beijing may well add more materials to its export control list in retaliation for this and other side swipes from the US. China accounts for about two-thirds of the world’s rare earth mining and most of the world’s processing capacity. Some of these metals — including dysprosium, cerium and neodymium — are critical for the supply chains of electric cars, missiles, magnets and renewable energy production.The effects could be far-reaching. The world is attempting to switch to a net zero economy. The move is dogged with uncertainty, inertia and feeble policymaking. A trade war that impedes a full switchover from combustion vehicles to the electric kind may be an added problem.Meanwhile, the battle over high technology will surely retard innovation in both the west and east. In the geopolitical contest to cut off noses to spite faces, Washington and Beijing are both making steady progress.Enjoy the rest of your week,June YoonLex Asia [email protected] More