Aurelia Butler

SYDNEY (Reuters) -Minimum wage increases that match inflation would be welcomed by the Australian government, the prime minister said on Friday, although the Labor government’s submission to an independent wage-setting body did not advocate as such.The government submission recommended real wages for low-paid workers “do not go backwards” but added it was not suggesting wages should “across-the-board” automatically increase with inflation.Changes to the national minimum wage are reviewed annually by the independent Fair Work Commission (FWC), which last year delivered an increase largely in line with inflation at the time. The Australian Council of Trade Unions has called for a 7% increase to match inflation again.Prime Minister Anthony Albanese said the Labor government’s submission to the FWC did not contain a specific number but he would welcome an inflation-matching increase in minimum wage.”My values haven’t changed,” Albanese told ABC Radio. “If the Fair Work Commission makes that decision then I would welcome it, but it is an independent decision of government. It’s up to them to determine the range of factors they’ll consider.” More

HONG KONG (Reuters) – Investors keen for exposure to China’s economic reopening but unwilling to wager unreservedly are turning to convertible bonds issued by Asian companies, so that they get paid an income while being positioned for some upside if stocks rally.Funds that invest in Asian convertible bonds attracted inflows of $118.1 million in January and February, data from Morningstar shows, bucking the overall outflows recorded for the more than 350 convertible bond funds it tracks globally. The flows have gone into convertible bonds of firms whose shares have been in long decline, many of them Chinese companies in the internet, technology and airline sectors listed in Hong Kong, which can push convertibles pricing into a so-called sweet spot.Convertible bonds are hybrid securities with most, like a regular bond, paying a coupon. The value of the convertible bonds is sensitive to prevailing interest rates but their price also depends on the company’s stock, as they include a conversion option, so some investors see bargains in convertibles of beaten-down firms.”Some Asian convertible bonds are attractive as they offer investors comparable or better yields for a shorter duration than straight bonds, as they come with an inexpensive equity option,” said Girish Kumarguru, portfolio manager at alterative asset manager, China Everbright (OTC:CHFFF) Assets Management. Convertibles of China app platform Meituan, smartphone maker Xiaomi (OTC:XIACF) Corp and Korean steel maker Posco Holdings are all trading at attractive levels for investors to own the convertibility option, since they are priced more or less like bonds and the option cost is minimal.This means that conversion prices are far higher than current stock prices. But it also means cheap exposure to the potential upside – something not offered by a regular bond, while it pays an income not available with a regular option.Hong Kong flagship airline Cathay Pacific’s 2.75% 2026 convertible offers an example.Compared to the 6% yield paid by its regular bond, convertible bond investors get less, with current pricing implying a yield of around 2.5%. But with the stock at HK$7.53 and rising, it is getting closer to the HK$8.57 conversion price – a level where investors have exposure to stock price gains, and protection on the downside thanks to the bond value.Fund managers say China’s reopening could drive similar dynamics in other sectors. “Measures to boost consumption in China should be favourable to Asian convertible bonds as there are numerous consumer-related issuers in this region,” said Skander Chabbi, head of global convertible team at BNP Paribas (OTC:BNPQY) Asset Management based in Paris. Recent volatility in fixed income markets has stalled some flow into convertibles, but traders expect it can pick up again.”Trading volume was massive in Jan 2023 as everyone was chasing for risk after a tough 2022,” said William Lam, head of Asia convertible bond trading at BNP Paribas in Hong Kong.”Overall, we should see more volume in 2023 than 2022 for the same period.” More

Investing.com — Alibaba (NYSE:BABA) Group Holdings has begun a whole new era – and a whole new hype cycle.The Chinese Internet giant would like you to think that reality will live up to the hype this time. It is creating a narrative of unbundling in the name of efficiency, hoping that its global investor base will look past its emasculation by the Communist Party, which has ended its dreams of dominating every sector from e-commerce to groceries and wealth management.To put it kindly, the burden of proof is firmly with Jack Ma and his anointed successor, Daniel Zhang.Alibaba had first-mover advantage in what will be the world’s largest consumer market for the next century and blew it, as its owner’s megalomania led it head on into a clash with Beijing.The regulatory crackdown that followed, augmented by the effects of the pandemic and the Federal Reserve’s abrupt tightening of monetary policy last year, wiped out all of the stock’s gains since it listed in 2014. While it has recovered in the weeks since regulators declared the regulatory campaign “basically over”, on a nine-year view, the company has failed to make the most of its initial opportunity, and is unlikely to have a better one in the foreseeable future.This is not to say that the measures announced by Zhang this week are a bad idea – quite the reverse, in fact. The company has traded at less than the sum of its parts in recent years, and the intention to create standalone operating companies with clear focuses and responsibilities is a classic business-school strategy. Alibaba has already begun to shed the dreaded “conglomerate discount”, adding over $32 billion in market value since the changes were announced.The measures are an admission of a reality that big U.S. technology companies are also facing: the slowdown in global growth has made it harder to finance big bets on the distant future. Indeed, by announcing plans to spin off its six new operating companies via public offerings, the company is going further than the likes of Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL), where loss-making ‘long-duration’ bets continue to be cross-subsidized internally – at least for now..Alibaba’s relative transparency makes clear why the steps are needed: only its China Commerce unit – which houses the Taobao marketplace powerhouse – and its cloud division are profitable. In the cloud, as in e-commerce, Alibaba led the way in China. Where it has had to follow others, it has not been successful, at least not if profit, rather than revenue, is the ultimate measure of success.According to Zhang’s new narrative, the new operating companies will be more agile and more responsible. That too is true. But they will not – as Alibaba has in the past – enjoy the privileges of being virtual monopolists. That ship has sailed. Nor will there be any more challenges to the dead hand of Communist Party bureaucracy, such as Jack Ma launched before the IPO of Ant Group, which was hastily aborted when the government took offense and decided that the country’s Internet barons had better learn their place.  The carefully-staged photo op this week that showed Ma chatting in a relaxed setting with Hangzhou academics about the future of AI sent a clear message that Beijing’s message has been internalized.Alibaba’s future is now half-General Electric and half-Lukoil.  It’s possible – probable, in fact – that the operating companies will generate better returns on their own. And those that don’t can die slow, unspectacular deaths at the hands of their competitors. But do not lose sight of the small print.As part of the peace deal under which Ant Group may now list its consumer finance unit, it has had to carve out a 10% stake for the government of Hangzhou, whose representative in the board room will most likely be – to put it mildly – first among equals. The risk is that the government’s crackdown has created or will create permanent channels for political interference in its business. Businesses run on those lines are less likely to build the next Taobao.Vladimir Putin made a similar bargain with Russia’s oligarchs 20 years ago: stay out of politics, and you can keep your fortunes, was the mantra. Twenty years on, the oligarchs have lost their export markets and their yachts to international sanctions, while the once-surefooted Putin has isolated Russia ever more dramatically from Europe.It is a precedent that none will wish to follow, but it may not be that they have the choice. China’s technology sector is far more dynamic than Russian industry, but ultimately, a knowledge economy will be hard to reconcile with the CCP’s desire for control. The worst may be over for Alibaba, but so too, very probably, is the best. More

TOKYO (Reuters) – Japanese regional lenders will be well able to weather even “large” losses on their foreign bond portfolios thanks to strong capital buffers, a senior banking regulator official said, rebuffing concerns fuelled by U.S. banking woes.Those strong capital buffers, in tandem with a deposit base that comes largely from households, mark Japan’s tens of regional lenders as different from the failed Silicon Valley Bank (SVB), said Toshinori Yashiki, deputy director-general at Japan’s Financial Services Agency. “Overseas media seem to be focusing on Japanese regional banks in association with the SVB collapse, but I’d like to emphasise that they are completely different,” he told Reuters in an interview. The SVB collapse earlier this month has put Japanese regional banks’ foreign bond portfolios under investor scrutiny, after years of ultra-low interest rates at home had driven the lenders to pile up positions in high-yielding but relatively safe assets elsewhere.Analysts at SMBC Nikko Securities calculated unrealized foreign bond losses at over 70 listed Japanese regional banks totalling 1.4 trillion yen ($10.6 billion) at the end of last year, the worst in decades for global bond markets.”It is true that unrealized losses on foreign bond holdings at some regional banks are large, but the banks have enough capital buffers even when such losses are taken into account,” Yashiki said.He also said he saw no immediate need to review Japan’s regulatory framework as Japanese banks have grown resilient with significantly improved asset quality.But the FSA “would need to step up monitoring” in the event of monetary policy changes at home, he noted, amid growing expectations the Bank of Japan could eventually change course on its ultra-loose monetary policy. SMBC Nikko’s calculation suggests if the 10-year Japanese government bond yield were to rise to 1%, unrealized losses on yen bonds would increase to around 4 trillion yen.($1 = 132.7100 yen) More

TOKYO (Reuters) -Core consumer inflation in Japan’s capital Tokyo slowed in March for a second month but remained well above the central bank’s 2% target, data showed on Friday, highlighting broadening price pressures in the world’s third-largest economy.A separate index stripping away energy prices rose at the fastest year-on-year pace since 1990, the data showed, a sign the effect of government subsidies to curb utility bills did little to stem the rising cost of living for households.The data underscores the challenge incoming Bank of Japan (BOJ) Governor Kazuo Ueda faces in assessing whether the recent cost-driven inflation will shift to one backed by solid demand and wage growth.Core consumer prices in Tokyo, a leading indicator of nationwide trends, rose 3.2% in March from a year earlier, compared with a median market forecast for a 3.1% gain.The pace of increase slowed from a 3.3% gain in February and a nearly 42-year high of 4.3% hit in January, due largely to the effect of government subsidies to curb utility bills.An index for Tokyo stripping away fresh food and energy prices, which is closely watched by the BOJ as a gauge of demand-side price pressures, was 3.4% higher in March than a year earlier and faster than a 3.1% rise in February.Japan’s economy is finally recovering from the scars of the COVID-19 pandemic after a delay, though risks of a global slowdown and rising food prices have clouded the outlook for exports and consumption.In a glimmer of hope, factory output rose 4.5% in February from the previous month, government data showed on Friday, more than a median market forecast for a 2.7% gain.Manufacturers surveyed by the government expect to increase output by 2.3% in March and by 4.4% in April, the output data showed.With inflation already exceeding its target, markets are rife with speculation the BOJ could tweak or end yield curve control (YCC) when Ueda succeeds incumbent Haruhiko Kuroda whose second, five-year term ends in April.YCC aims to control the shape of the yield curve to suppress short- to medium-term rates without depressing super-long yields too much.BOJ officials have repeatedly said the central bank will not roll back its massive stimulus until recent cost-push inflation turns into one driven by strong demand, and ensures Japan achieves 2% inflation in a sustainable manner. More

The UK on Friday unveiled an agreement to join an 11-member Asia-Pacific trade bloc, with British prime minister Rishi Sunak claiming it proved his government was seizing “post-Brexit freedoms”.Talks on Britain becoming a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership were finally wrapped up after two years of haggling over quotas and tariffs.The UK will be the first country to join the CPTPP since the group was established in 2018, and Sunak said the trade deal will bring economic benefits and also boost his “Asia-Pacific” tilt to Britain’s foreign policy.The current members of the CPTPP are Australia, Canada, Japan, Mexico, New Zealand, Singapore, Brunei, Chile, Malaysia, Peru and Vietnam.Sunak said: “We are at our heart an open and free-trading nation, and this deal demonstrates the real economic benefits of our post-Brexit freedoms. “Joining the CPTPP trade bloc puts the UK at the centre of a dynamic and growing group of Pacific economies, as the first new nation and first European country to join.”Downing Street said more than 99 per cent of UK goods exports to CPTPP countries will now be eligible for zero tariffs, including products such as cheese, cars, chocolate, machinery, gin and whisky.But the economic gains for Britain are minimal, according to the government’s own projections, and will do little to offset the EU trade losses incurred as a result of Brexit.The government estimates the CPTPP deal will increase UK gross domestic product in the long term by just 0.08 per cent, although it said that could rise if Thailand and South Korea later joined the group.However, Britain’s decision to join the CPTPP gives it a strengthened economic presence in a region which is preoccupied with how to respond to the rise of China, which has applied to join the trade bloc.Kemi Badenoch, trade secretary, argues the deal is the most significant commercial agreement signed by the UK since Brexit, with a potential to grow in importance as the rise of Pacific Rim countries continues.She says the agreement protects the UK’s vital interests, including agriculture and the NHS, and upholds high animal welfare and food safety standards.But the CPTPP deal is controversial, with special criticism levelled at the decision to cut UK tariffs on imports of Malaysian palm oil, production of which has been linked to the destruction of rainforest.

Daniela Montalto, head of forests at Greenpeace UK, described the deal as “outrageous”, adding that cutting palm oil tariffs would only incentivise further destruction.Another contentious issue raised by the deal was access to the UK for beef from Canada.Canadian beef is not currently on sale in the UK because the country’s cattle are treated with hormones that are banned in Britain.Under the CPTPP deal, the UK will set an annual quota of 13,000 tonnes for imports of Canadian beef. But the meat will have to meet UK food standards, meaning little is actually likely to be permitted for sale in Britain. More

BENGALURU (Reuters) – Australia’s central bank is expected to go for a final 25 basis point interest rate hike to 3.85% on Tuesday, although forecasts from economists polled by Reuters suggest the decision on whether to hike or hold rates is on a knife edge.While inflation in Australia rose to a more than three-decade high of 7.8% last quarter, well above the central bank’s target of 2%-3%, the bank signalled again this month a possible end to its current tightening cycle, as it did in December.A new monthly measure of Australian consumer prices on Wednesday showed inflation slowed to an eight-month low of 6.8% in February from 7.4% the previous month, bolstering the case for a pause in rate hikes.While the Reserve Bank of Australia (RBA) focuses on the more detailed quarterly inflation data, due on April 26, the slowing monthly inflation numbers suggest the peak may already be in the rear-view mirror.The latest poll of 27 economists taken March 27-30 showed the RBA would increase its official cash rate by 25 basis points to 3.85% at its April 4 meeting. But the market is pricing in no further hikes from the current rate.While just over half, 14 of 27, predicted the cash rate to rise, the remaining 13 saw a pause at 3.60%. Some regular contributors could not be reached after the inflation data to confirm their views and so were not included in the poll.However, eight of the 13 economists expecting a pause pencilled in a rate hike sometime in the second quarter. “The softer headline inflation print for the month of February will not be sufficient for the RBA to abandon their tightening bias as labour market indicators, forward indicators and the still comparatively high level of inflation all point to the need for further tightening,” wrote Benjamin Picton, senior macro strategist at Rabobank. Reuters Poll: RBA monetary policy and economy outlook, https://fingfx.thomsonreuters.com/gfx/polling/lbpggjelkpq/Reuters%20Poll%20RBA%20monetary%20policy%20and%20economy%20outlook.png Among major local banks, ANZ and NAB forecast a hike at the April meeting, with ANZ predicting a higher terminal rate of 4.10%. Although CBA and Westpac forecast a pause in April, they expect one more rate hike in the second quarter.Forecasters are divided in part because of mixed messages from the central bank, which was late joining the current global tightening cycle, only starting in May 2022, and has been keen since December to end it. “The RBA’s communication since the beginning of the year has been somewhat erratic,” said Gareth Aird, head of Australian economics at CBA.”In a short period of time the RBA has both dialled up and subsequently dialled down their rhetoric on just how much more tightening they think they are likely to deliver.”The RBA has raised rates by 350 basis points, less than some of its peers such as the U.S. Federal Reserve, the Bank of England and its neighbour the Reserve Bank of New Zealand.Minutes from the March meeting showed RBA board members reconsidered the case for a pause at the following meeting, noting monetary policy was already in restrictive territory and the economic outlook was uncertain.Although the median forecast showed the cash rate would remain at 3.85% until the end of 2023, five economists predicted it to peak at 4.10%. Two did not expect any change from the current 3.60%, while five expected at least one rate cut by year-end.Nearly two-thirds, seven of 11, who answered an additional question said the bigger risk to their terminal rate forecast was it would be lower than they predicted, while the remaining four said it would be higher.Money market traders are pricing in no move through the end of this year.Inflation was not expected to fall to within the target range until the third quarter of 2024, averaging 5.4% this year and 3.1% in 2024, up from 5.2% and 2.9%, respectively, in a January poll.(For other stories from the Reuters global long-term economic outlook polls package:) More