Economy

SINGAPORE (Reuters) – Sterling was struggling to recover from a sharp fall on Thursday following UK inflation data that undershot market expectations, while the dollar regained its footing after a steep decline last week that analysts said was overblown.In Asia, markets also had their focus on China’s loan prime rate (LPR) decision, where it is expected to keep the lending benchmarks unchanged after the central bank stood pat on a key policy rate earlier this week.The British pound was last 0.02% lower at $1.2936, after tumbling more than 0.7% on Wednesday in the wake of data that showed Britain’s high rate of inflation falling more than expected in June to its slowest in over a year at 7.9%.That pulled back market expectations of further aggressive rate hikes from the Bank of England (BoE), with the prospect of UK rates rising above 6% now likely off the table.Traders had at one point expected interest rates to rise as high as 6.5%.”The market I think is a bit more reasonable now with its expectations for rate hikes by the BoE. We always thought a 150 (basis) points of hikes was just too much,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia (OTC:CMWAY).Elsewhere, the euro rose 0.11% to $1.1213, as investors looked to next week’s European Central Bank (ECB) policy meeting for further clarity on the rate outlook.ECB policymakers have in recent days taken a more dovish tone, with Governing Council member Yannis Stournaras the latest to guide that future rate rises past July’s likely 25 bp increase remains up in the air.The U.S. dollar index steadied above 100 and last stood at 100.18, regaining some lost ground after last week’s more than 2% fall in a knee-jerk reaction to U.S. inflation data that came in cooler than expected.”We thought (the fall) was too strong, so it looks like the dollar has regained some of those losses,” said Capurso. “And with the global economic outlook deteriorating … that’s (going to be) very supportive for the safe haven U.S. dollar.”The Japanese yen rose 0.1% to 139.56 per dollar, while the Australian dollar was last 0.16% higher at $0.6782, ahead of the country’s employment data later on Thursday.The kiwi gained 0.06% to $0.6267, though retreated from the previous session’s high of $0.6315 hit after New Zealand’s consumer inflation came in slightly above expectations in the second quarter.Ahead of the LPR decision in China, the offshore yuan rose roughly 0.2% to 7.2184.Investors continue to be on the lookout for further support measures from Chinese authorities to shore up the country’s faltering post-COVID recovery, with data on Monday showing the economy grew at a feeble pace in the second quarter as demand weakened at home and abroad.”China’s growth has disappointed in the second quarter, but it’s very much on top of the agenda there (that) some stimulus will come,” said Mel Siew, a portfolio manager at Muzinich & Co.”It may not come as impactfully as people would like, but I think what will happen is you’ll see growth gradually resuming in China in the second half.” More

The Financial Supervisory Service (FSS) called on the firms, which are akin to investment banks, to swiftly write off or restructure non-performing loans to manage debt delinquency rates and accumulate enough capital for absorbing potential losses, it said in a statement.Earlier this month, a local credit union was hit by customer withdrawals after media reports about a rise in its non-performing loans related to real estate projects, sparking worries about a liquidity shortage at the union and other financial institutions.”The amount of overdue real estate project financing at securities firms is currently judged to be at a tolerable level, but I request for thorough and preemptive preparation, with the worst case scenario in mind, to prevent any trouble,” Deputy Governor Hwang Seon-oh said at the meeting.Hwang met with chief risk officers and investment banking executives from 10 securities firms, who shared the authorities’ view on real estate-related risks and agreed to implement risk management measures, according to the statement.Authorities will now step up monitoring of securities firms’ exposure to real estate projects to prevent any liquidity risks and engage intensively with those of high vulnerability, the FSS said. More

(Reuters) – The Western automakers that dominated Russia’s car market left following Moscow’s invasion of Ukraine, leaving a slumping production and sales in their wake, with domestic producers and Chinese firms picking up the pieces. Here is an overview of the fate of foreign carmakers’ assets in Russia: RENAULTOne of the first Western carmakers to exit, France’s Renault (EPA:RENA) in May 2022 sold its majority stake in carmaker Avtovaz and its Moscow factory with annual capacity of 150,000 vehicles to the Russian state, each for one rouble, sources told Reuters at the time. The deal gave Renault a six-year buyback option on its Avtovaz stake. Moscow’s mayor hailed November’s production launch of the Soviet-era Moskvich at the plant as a historic brand revival. Two sources, who asked not to be identified as they are not authorised to speak to the media, told Reuters the Moskvich 3 model is a JAC Sehol X4 assembled in Moscow using kits purchased from a Chinese partner. Moskvich told Reuters it works with a “foreign partner” but did not confirm ties to JAC. It said it would start to build more of the car locally later this year or in early 2024. Russia’s Central Automobile and Engine Research and Development Institute (NAMI) – a state entity – acquired Renault’s Avtovaz stake.Avtovaz, Russia’s leading carmaker, subsequently bought RN Bank, a joint venture between Italian lender UniCredit and the Renault-Nissan-Mitsubishi Alliance, for an undisclosed fee. NISSANNAMI purchased Nissan (OTC:NSANY)’s Russian business for one euro in October with a six-year buyback clause, which the Japanese carmaker said cost it around $687 million. That deal included Nissan’s production and research facilities in St Petersburg, with production of 100,000 units, as well as its sales and marketing centre in Moscow. The plant, now owned by Avtovaz, was renamed Lada St Petersburg and produces Lada X-Cross 5s in cooperation with what Avtovaz calls an “Eastern partner”. A source close to the company told Reuters that China’s FAW Group’s Bestune T77 compact utility vehicle is being used to produce Lada cars there. FAW did not respond to Reuters questions. Avtovaz declined to provide further details. Avtovaz has said publicly it plans to begin localising production in 2024, using parts from suppliers in St Petersburg and the Leningrad region. BMW, HYUNDAI, KIAIn Russia’s Kaliningrad exclave on the Baltic coast, Chinese Kaiyi cars are now being produced by carmaker Avtotor, which previously assembled BMW, Hyundai and Kia cars.Avtotor told Reuters it also has agreements to produce cars for China’s BAIC and Shineray Group at the plant, which currently has capacity of 80,000 units.Avtotor said it is working with “partial localisation of components” and plans to produce about 80,000 cars of the three Chinese brands this year. It is preparing for full production capacity in 2024. Kaiyi, BAIC and SWM did not respond to requests for comment.VOLKSWAGENGermany’s Volkswagen (ETR:VOWG_p) in May said it had sold its shares in Volkswagen Group Rus to Art-Finance, which is supported by autodealer group Avilon. The deal was worth 125 million euros ($140.3 million), according to a source familiar with the matter. VW’s former Kaluga factory, which has annual production capacity of 225,000 vehicles, was renamed AGR Automotive by its new owner. Avilon is in negotiations about a partnership with Chery automobile, the largest Chinese player in Russia, another source said. Chery and AGR Automotive declined to comment.Deputy Prime Minister Denis Manturov said in June that VW has no buyback option.MERCEDES-BENZMercedes-Benz sold shares in its Russian subsidiaries to car dealer chain Avtodom, including its factory with production capacity of 25,000 units in the Moscow region. It has a six-year buyback option, although the German carmaker has said it does not expect to exercise that clause. Avtodom told Reuters it is in talks with several partners about assembling premium Chinese cars there. TOYOTAJapan’s Toyota transferred its vehicle production plant in St Petersburg to NAMI in March. It is not yet clear which cars will be produced there, but a state-owned manufacturer may produce electric cars there, Russia’s Industry and Trade Ministry has said. Industry and Trade Minister Denis Manturov said in June that Toyota has no buyback option. FORDRussian automaker Sollers in November said it was producing its Atlant and Argo light commercial vehicles (LCVs) at a factory in the Tatarstan region, where Ford Transit vans were previously produced. The plant has capacity to produce 85,000 vehicles annually. China’s JAC Sunray model is being used in production, a source told Reuters. Sollers declined to comment. ($1 = 0.8911 euros) More

WASHINGTON (Reuters) – Republican and Democratic members of the U.S. House of Representatives introduced legislation on Wednesday that would authorize President Joe Biden’s administration to negotiate a tax agreement with Taiwan, seeking to foster investment as Washington works to shore up the island against a rising China.The lawmakers, including House Foreign Affairs Committee Chairman Michael McCaul and top Democrat Gregory Meeks, said the agreement, similar to a treaty, would facilitate investment, protect against tax evasion and allow businesses in both the United States and Taiwan to avoid double taxation.”In addition to the advantages we will receive from more investment from Taiwan, this is another important step in safeguarding Taiwan and maintaining peace and stability in the Indo-Pacific,” McCaul said in a statement. The bill is a companion to a measure introduced in the Senate in May by lawmakers including the chairman and ranking member of the Senate Foreign Relations Committee.Washington and Taipei do not have formal diplomatic relations, so the lack of a tax agreement means Taiwanese businesses and individuals are taxed on their income by both the U.S. and Taiwanese governments.China views democratically governed Taiwan as its own territory and has increased military, political and economic pressure to assert those claims.Taiwan is a major global supplier of the semiconductor chips essential to a wide range of consumer goods and military equipment.(This story has been refiled to correct a typo in the headline) More

(Reuters) -Tesla CEO Elon Musk signalled on Wednesday that he would cut prices again on electric vehicles in “turbulent times”, even as his all-out price war on automaker rivals squeezes the company’s own margins.The company has slashed prices several times in the United States, China and other markets since late last year, and increased discounts and other incentives to reduce inventory, as it tries to shield against competition and economic uncertainty.”One day it seems like the world economy is falling apart, next day it’s fine. I don’t know what the hell is going on,” Musk told analysts on a conference call. “We’re in, I would call it, turbulent times.”Tesla (NASDAQ:TSLA) shares, which had been largely flat after hours, fell nearly 5% after Musk’s comments.The large price cuts have pressured Tesla’s automotive gross margin, a closely watched indicator in the industry, but Musk has said Tesla would sacrifice margin to drive volume growth. He said so again on Wednesday: “I think it makes it does make sense to sacrifice margins in favor of making more vehicles,” adding that if macroeconomic conditions were not stable, Tesla would have to lower prices.As an example, Tesla this year cut U.S. prices of its Model Y long-range version by a quarter to $50,490.Tesla’s quarterly automotive gross margin, excluding regulatory credits, fell to 18.1% in the second quarter from 19% in the first quarter, according to Reuters’ calculations. That was in line with Street estimates, but a far cry from the 26% it reported a year earlier.Tesla reported overall gross margin of 18.2% for the April-June period, the lowest in 16 quarters.Earlier, Tesla said in a statement it was focusing on reducing costs and on new product development, and that the “challenges of these uncertain times are not over.””Multiple rounds of aggressive price cuts has put Tesla in a position of strength after building its EV castle and now is set to further monetize its success,” Wedbush analysts said in a note.Tesla reiterated its expectations of achieving deliveries of around 1.8 million vehicles this year, but said production in the third quarter would decrease slightly due to planned downtimes for factory upgrades.”It’s a fine line,” said Thomas Martin, a portfolio manager at Globalt Investments, which holds Tesla stock.”They are trying to get the prices right so they can generate the demand for the units, and then they like to run their factories as efficiently as they can … they don’t want to build up those inventories.”Lower pricing, along with government tax breaks for EV buyers in the United States and elsewhere, drove Tesla’s deliveries to a record 466,000 vehicles in the April-July period globally, but ate into its profitability.Still, on an adjusted basis, Tesla earned 91 cents per share, on the strength of non-core income and largely in line revenue $24.93 billion. Analysts had expected a profit of 82 cents per share, according to Refinitiv.FSD LICENSE Musk said on the call that Tesla was in talks with a major original equipment manufacturer to license its “full self driving” (FSD) software but did not name the company. He had previously said the company was open to licensing the driver-assistance system.FSD does not make the car autonomous and requires driver supervision, and Tesla is under regulatory security following a number of crashes involving its vehicles. Last year, Musk said the world’s most valuable car maker would be “worth basically zero” without achieving full self-driving capability.Tesla’s stock received a big boost this year after Ford Motor (NYSE:F), General Motors (NYSE:GM) and a raft of other automakers and EV charging firms said they would adopt Tesla’s charging technology.The company’s stock has risen 60% since the first such deal on May 25. So far this year it is up 138%, helped also by expanded federal credits for Model 3s and investor excitement over artificial intelligence.The company said on Wednesday that lower raw-material costs and government tax credits helped reduce cost-per-vehicle but that it saw an increase in operating expenses driven by Cybertruck, AI projects, and the production ramp of 4680 battery cells that are key to making cheaper and compelling EVs.Tesla benefited from $150 million to $250 million in tax credits in the second quarter, it said, while receiving similar benefits from lower raw material costs such as lithium and aluminum.Tesla said on Wednesday it had made “notable progress” on yield improvement of its 4680 cell production lines and increased production in Texas by 80% in the second quarter from the first.In 2020, Musk unveiled a plan to produce Tesla’s own EV batteries called “4680” cells. But the carmaker has struggled to meet Musk’s targets for production and performance of the cells.Tesla said production of the long-delayed electric pickup Cybertruck remained on track for initial deliveries this year. More

(Reuters) – Private equity firm Warburg Pincus on Wednesday named its Asia head of real estate Jeffrey Perlman as successor to Timothy Geithner as president. Geithner, who was U.S. Treasury Secretary in the Obama administration and had headed the Federal Reserve Bank of New York, will become the chair of the New York-based investment firm.”Now is the ideal time to put in place a plan for the next generation of leadership at the firm,” Warburg CEO Chip Kaye said.Perlman’s new role is part of the firm’s succession planning to eventually replace Kaye, said a person with direct knowledge of the matterA Warburg Pincus spokesperson said Perlman will continue with his responsibilities in Asia and remain a critical part of the firm’s real estate investment team while spending a meaningful amount of time in Asia.The appointment of 40-year-old Perlman, who has been with Warburg for the last 17 years, comes at a crucial time for private equity funds as they seek new strategies in the current interest rate cycle.Expectations that the Fed is done with the bulk of its rate hikes have led to a rebound in startup investments, but worries about a potential downturn later in the year are still weighing on sentiment.Warburg Pincus has already raised more than the targeted $16 billion in its global flagship private equity fund, said a person with knowledge of the matter.Warburg Pincus began raising 3 billion yuan ($439 million) in its maiden yuan-denominated fund, Reuters reported in February, joining a growing list of private equity investors eyeing local currency investment opportunities in China.In April, Warburg Pincus received Chinese regulatory approval to buy a 23.3% stake in Zhong Ou Asset Management Co, as the firm moved to expands its foothold in China’s $3.8 trillion mutual fund marketPerlman, who is currently the head of Southeast Asia and Asia-Pacific real estate, is also a board member of several real-estate focused companies including ESR Group Limited and BW Industrial Development JSC.Founded in 1996, Warburg has more than $83 billion in assets under management and its portfolio spans more than 250 companies. More

WASHINGTON (Reuters) – China does not want a trade or tech war but will definitely respond if the United States imposes more curbs on its chip sector, China’s ambassador to Washington said on Wednesday.Ambassador Xie Feng told the Aspen Security Forum China did not shy away from competition, but the way it was defined by the United States was not fair. He highlighted existing U.S. prohibitions on Chinese imports of equipment to make advanced chips.”This is like … restricting the other side to wear outdated swimwear in a swimming contest, while you yourself (are) wearing a Speedo,” he said.Xie referred to reports that Washington is considering an outbound investment review mechanism, and further prohibition on the export of AI chips to China.”The Chinese government cannot simply sit idly by. There’s a Chinese saying that we will not … make provocations, but we will not flinch from provocations,” he said.”China, definitely … will make our response. But definitely it’s not our hope to have a tit for tat. We don’t want … a trade war, technological war, we want to say goodbye to the Iron Curtain as well as the Silicon Curtain.”The Biden administration has been finalizing an executive order that would restrict certain investment in sectors including advanced semiconductors, quantum computing and artificial intelligence, and a senior administration official said the aim was to wrap up reviews of it by Labor Day.China targeted U.S. chip maker Micron Technology (NASDAQ:MU) after Washington imposed a series of export controls on American components and chipmaker tools to ensure that they are not used to advance China’s military capabilities.The Cybersecurity Administration of China said in May that Micron failed its security review and barred operators of key domestic infrastructure from purchasing its products.U.S. Treasury Secretary Janet Yellen said last week at the end of a four-day trip to China she had spoken with Chinese counterparts about the proposed order, and said that any investment curbs would be “highly targeted, and clearly directed, narrowly at a few sectors where we have specific national security concerns.”She said the order would enacted in a transparent way, through a rule-making process that would allow public input. More

WASHINGTON (Reuters) -U.S. government agencies are targeting buying 9,500 electric vehicles in the 2023 budget year, but face supply issues and higher costs, a federal report said on Wednesday.That’s almost three times the number acquired in the prior budget year.The Government Accountability Office said 26 agencies with approved EV acquisition plans estimated they would need over $470 million for vehicle purchases and almost $300 million in estimated costs to design and install the necessary infrastructure and for other expenses. The vehicles purchase would cost almost $200 million more than the lowest-priced comparable gasoline-powered vehicles. The agencies represent more than 99% of the federal vehicle fleet excluding the U.S. Postal Service (USPS), which is an independent federal entity.The White House did not immediately comment. Agencies face hurdles to buy as many EVs as they would like or are unsure if EVs will meet all needs. The Transportation Department told GAO it initially wanted to order 430 ZEVs for 2022 but their order was scaled back to 292 due, in part, to order cancellations from manufacturers.Customs and Border Protection (CBP) officials told GAO they do not believe that EVs “can support law enforcement equipment or perform law enforcement missions in extreme environments, such as those on the borders,” the report said.President Joe Biden in December 2021 issued an executive order directing the government to end purchases of gas-powered vehicles by 2035. Biden’s order also directs that 100% of light-duty federal acquisitions by 2027 be electric or plug-in hybrid vehicles (PHEV).Biden’s order covers 380,000 federal vehicles and covered agencies purchases about 45,000 annually. It does not apply to USPS.Federal agencies quintupled purchases of EVs and PHEVs in the 12-months ending Sept. 30, 2022 moving from 1% of vehicle acquisitions in 2021 to 12% of light-duty purchases in 2022, or 3,567 total.In May, USPS said it expected to receive next-generation delivery vehicles in June 2024, nine months behind schedule. More