Economy

KUALA LUMPUR (Reuters) – Malaysian former Prime Minister Najib Razak starts his final attempt on Monday to set aside his conviction in a corruption case linked to the multi-billion dollar 1MDB financial scandal.The country’s highest court has scheduled hearings through Aug. 26 to hear Najib’s appeal of his convictions for criminal breach of trust, abuse of power and money laundering over the alleged theft of $4.5 billion from 1Malaysia Development Berhad (1MDB), a state fund he co-founded as premier in 2009.At least six countries have launched investigations into 1MDB, a global scandal that has implicated high-level officials and major financial institutions.Prosecutors say more than $1 billion in 1MDB funds made its way into Najib’s personal accounts. Najib, 69, who has pleaded not guilty to dozens of charges, was sentenced in July 2020 in the first of several trials to 12 years in jail and a $50 million fine for illegally receiving about $10 million from SRC International, a former 1MDB unit. The conviction was upheld by an appeals court last year.In addition to appealing that verdict, Najib is asking the Federal Court to introduce fresh evidence to nullify the trial, accusing the trial judge of a conflict of interest, documents filed ahead of Monday’s hearing showed. Najib, who was voted out in 2018, has been free on bail pending the appeal. If the verdict is upheld, he would likely begin his sentence immediately, according to a prosecutor. Malaysian law allows for a review of Federal Court decisions, but such applications are rarely successful. The appeal comes ahead of national elections that are expected to be called before a September 2023 deadline. An acquittal could spark a political comeback for Najib, who told Reuters last year he had not ruled out seeking re-election to parliament.While he remains a popular figure and active lawmaker, Najib is barred from contesting elections unless his conviction is overturned or he receives a royal pardon. More

TOKYO (Reuters) -SoftBank Group Corp’s decision to sell down its Alibaba (NYSE:BABA) Group Holding stake for a $34 billion gain may be aimed at bolstering its finances, but it also underlines how CEO Masayoshi Son has cooled on China tech.Son was formerly one of the sector’s biggest cheerleaders and Alibaba is his most famous bet, immensely profitable and for his fans, symbolic of his foresight and investing acumen. Amid a sharp market downturn, however, Son will reduce his conglomerate’s stake in Alibaba to 14.6% from 23.7% by settling prepaid forward contracts, although the Chinese firm remains SoftBank’s largest asset.”It seems like they’re saying ‘we think the outlook for China tech is pretty poor so we’re going to get in front of that’,” said Redex Research analyst Kirk Boodry. A rough ride for Chinese tech companies after a regulatory crackdown that started in late 2020 has been exacerbated by tensions between Washington and Beijing. Alibaba has been added to the U.S. Securities and Exchange Commission’s delisting watchlist as a result of a dispute over auditing compliance issues for U.S.-listed Chinese firms. Murky prospects for the Chinese economy as Beijing pursues a zero-COVID policy that has led to stringent lockdowns have also not helped. Since the regulatory crackdown, Alibaba’s shares have fallen by more than two thirds to value the company at $250 billion.”We have to watch (Chinese) government policy with caution and not be reckless,” Son told shareholders in June. Son’s pullback contrasts with earlier optimism towards China tech that saw him pour $12 billion into ride-hailer Didi through the first $100 billion Vision Fund, which also made outsized investments in Uber (NYSE:UBER) and office space firm WeWork.Didi angered Chinese regulators by pushing ahead with a New York initial public offering and is now traded over-the-counter after delisting. SoftBank was forced to cut the valuation and, after a series of high profile reversals, Son reduced the size of individual investments made through a smaller second fund.As of end-June, SoftBank had booked a $9.3 billion gross investment loss on Didi. SoftBank’s other Chinese bets include Full Truck Alliance and JD (NASDAQ:JD) Logistics. The conglomerate is also the top shareholder in AI firm SenseTime, which has been blacklisted by Washington over human rights concerns. Sensetime shares fell by almost half at the expiry of a lock-up period in late June.This week, SoftBank announced it had exited KE Holdings, which operates Chinese property platform Beike, at an average price per share of $23.89 compared to a cost price of $12.91.The conglomerate has pledged to preserve cash and cut costs as it booked a $50 billion loss at its Vision Fund investment arm in the six months to end-June.TikTok operator ByteDance is also an investment and has been highlighted as one of eight assets in the first Vision fund with potential upside. The Beijing-headquartered company, which has received scrutiny in the West over its management of user data, does not currently have a timeline for its much-anticipated IPO, Reuters reported previously.Alibaba “is the only ‘representative mega-win’ investment in the portfolio for now,” Quiddity Advisors analyst Travis Lundy wrote in a note on Smartkarma. Without it SoftBank is “less interesting because very little of the portfolio now reflects any sort of “special sauce” of forward-thinking investment,” he wrote. For now, however, using capital to buy SoftBank’s own shares is a priority for Son. The company has announced a 400 billion yen ($3 billion) share buyback in addition to the current 1 trillion yen programme which is due to expire in November. SoftBank shares closed up 5.6% on Friday, the first trading day after the Alibaba deal was announced late on Wednesday. The conglomerate’s shares have gained 3.2% year to date. ($1 = 133.2000 yen) More

LONDON (Reuters) – The Bank of England will deliver another bumper 50 basis points (bps) increase to borrowing costs next month but then slow the pace to a more regular 25 basis point rise in November before pausing, a Reuters poll forecast.Earlier this month the Bank, the first amongst its major peers to start unwinding ultra-loose COVID-19 policy, raised interest rates by 50 basis points – the most in 27 years – in its attempt to contain inflation likely to climb into double digits.More than half of the economists polled by Reuters Aug. 9-12 – 30 of 51 – said the BoE would take Bank Rate to 2.25% on Sept. 15 by adding 50 basis points. The other 21 suggested a more modest 25 basis point lift to 2.00%. The expected hefty increase comes despite official data showing the economy contracted 0.1% last quarter and the central bank saying the country was likely to enter a recession later this year and not emerge from it until early 2024.”With growth slowing, it is tempting to assume the BoE will be thinking of hitting the brakes – and could even be cutting rates within the next year. But for now at least, the UK’s problems are supply and inflation driven: allowing inflation to rise even further risks only making the situation worse,” said Elizabeth Martins at HSBC.A large majority of those polled said the Bank would slow the pace in November to 25 basis points. For the December meeting, 18 economists said the Bank would add another 25 basis points while 25 said it would pause.The median forecast suggested borrowing costs would end the year at 2.50%, where they would stay until a cut in 2024.That is despite the threat of recession, with the median forecast of one within a year at 60% and within two years at 75%. However, quarterly median forecasts only depicted very weak or no growth as economists picked different timings for when it would happen.”We expect a recession in 2022/23 to be driven by high inflation, with a contraction in real consumer spending at its epicentre,” said Ruth Gregory at Capital Economics. “But with household and corporate balance sheets still relatively healthy, we suspect the recession will be mild by historical standards.”Growth was pegged to average 3.5% this year and 0.2% next.The Bank’s mandate is to have inflation at 2% and according to the poll it will reach 11.4% in the fourth quarter, higher than the 10.2% predicted last month, before slowing although it wasn’t expected to be at target across the forecast horizon.The BoE has said it would peak at 13.3% in October, the highest since 1980.Soaring inflation largely driven by rising energy costs, alongside issues surrounding Britain’s departure from the European Union and disrupted supply chains exacerbated by Russia’s invasion of Ukraine, has led to a cost-of-living crisis.Frontrunner to be the next prime minister, Liz Truss, has said she favours tax cuts over direct handouts to help households while her rival, Rishi Sunak, said on Friday every household would get savings of around 200 pounds ($242) on their energy bills with a tax reduction.Yet analysts at a consultancy firm forecast the energy price cap could hit a whopping 5,038 pounds a year in April 2023 due to soaring energy prices across Europe, up 150% from already elevated current levels.When asked what would best help households, 14 of 16 economists who answered an extra question said subsidised fuel bills, while only two said tax cuts. “Well-targeted subsidies provide a better answer to help those who need them most. The problem with a wholesale approach to tax cuts is that they are often regressive and not paid by the most vulnerable such as pensioners,” said Michal Stelmach at KPMG.(For other stories from the Reuters global economic poll:)($1 = 0.8248 pounds) More

SYDNEY (Reuters) – Asian shares inched higher on Monday with investors anxious to see if Wall Street can sustain its rally as hopes U.S. inflation has peaked will be tested by likely hawkish commentary from the Federal Reserve this week.”The FOMC Minutes on Wednesday should reinforce the hawkish tones from recent Fed speakers of being nowhere near being done on rates and inflation,” warned Tapas Strickland, a director of economics at NAB.Markets are still implying around a 50% chance the Fed will hike by 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year.Hopes for a soft economic landing will also get a health check from U.S. retail sales data that is expected to show a sharp slowdown in spending in July.There is also a risk earnings from major retailers, including Walmart (NYSE:WMT) and Target (NYSE:TGT), could be laced with warnings about a downturn in demand.Asian markets have to navigate data on China’s retail sales and industrial output for July due later on Monday, which should show some pick up as coronavirus rules were relaxed.However, figures already out showed new bank lending in China tumbled more than expected in July.Geopolitical risks also remain high with a delegation of U.S. lawmakers in Taiwan for a two-day trip.Early Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.1%, having bounced 0.9% last week.Japan’s Nikkei edged up 0.5% as data showed the economy grew an annualised 2.2% in the second quarter, a touch under estimates.S&P 500 futures and Nasdaq futures were both down around 0.2%. The S&P index is almost 17% above its mid-June lows and only 11% from all-time highs amid bets the worst of inflation is past, at least in the United States.PEAK INFLATION”The leading indicators we observe provide support for moderation with easing supply pressures, weakening demand, collapsing money supply, declining prices and falling expectations,” said analysts at BofA.”Key components of headline inflation, including food and energy are also at an inflection point. Both Wall Street and Main Street now expect inflation to moderate.”The bond market still seems to doubt the Fed can manufacture a soft landing, with the yield curve still deeply inverted. Two-year yields at 3.26% are 42 basis points above those for 10-year notes.Those yields have underpinned the U.S. dollar, though it did slip 0.8% against a basket of currencies last week as risk sentiment improved.The euro was holding at $1.0259, having bounced 0.8% last week, though it shied away from resistance around $1.0368. Against the yen, the dollar steadied at 133.36 after losing 1% last week. [USD/]”Our sense remains that the dollar rally will resume before too long,” argued Jonas Goltermann, a senior economist at Capital Economics.”It will take a lot more good news on inflation before the Fed changes tack. The minutes from the last FOMC meeting and the Jackson Hole conference may well push back further against the notion that the Fed is ‘pivoting’.”The pullback in the dollar provided something of a reprieve for gold which was up at $1,799 an ounce, having gained 1% last week. [GOL/]Oil prices eased early on Monday with traders cautious in case progress was made on a possible European-brokered nuclear deal with Iran. [O/R]Brent slipped 43 cents to $97.72, while U.S. crude fell 36 cents to $91.73 per barrel. More

A public weary of virus precautions pushed up consumption of goods and services, but the longer-term picture is uncertain as the global economy weakens.TOKYO — Restaurants are full. Malls are teeming. People are traveling. And Japan’s economy has begun to grow again as consumers, fatigued from more than two years of the pandemic, moved away from precautions that have kept coronavirus infections at among the lowest levels of any wealthy country.Lockdowns in China, soaring inflation and brutally high energy prices could not suppress Japan’s economic expansion as domestic consumption of goods and services shot up in the second three months of the year. The country’s economy, the third largest after the United States and China, grew at an annualized rate of 2.2 percent during that period, government data showed on Monday.The second-quarter result followed growth of 0 percent — revised from an initial reading of a 1 percent decline — during the first three months of the year, when consumers retreated to their homes in the face of the rapid spread of the Omicron variant.After that initial Omicron wave burned out, shoppers and domestic travelers poured back onto the streets. Case numbers then quickly galloped back to record highs for Japan, but this time the public — highly vaccinated and tired of self-restraint — has reacted less fearfully, said Izumi Devalier, head of Japan economics at Bank of America.“After the Omicron wave ended, we had a very nice jump in mobility, lots of catch-up spending in categories like restaurant and travel,” she said.The new growth report indicates that Japan’s economy may finally be back on track after more than two years of yo-yoing between growth and contraction. Still, the country remains an economic “laggard” compared with other wealthy nations, Ms. Devalier said, adding that consumers, especially older people, “are still sensitive to Covid risks.”As that sensitivity has slowly declined over time, she said, “we have had this very gradual recovery and normalization from Covid.”The second-quarter growth came despite stiff headwinds, particularly for Japan’s small- and medium-size enterprises. China’s Covid lockdowns have made it hard for retailers to stock in-demand products like air-conditioners, and for manufacturers to procure some critical components for their goods.A weak yen and higher inflation have also weighed on companies. Over the last year, the Japanese currency has lost more than 20 percent of its value against the dollar. While that has been good for exporters — whose products have grown cheaper for foreign customers — it has driven up prices of imports, which have already become more expensive because of shortages and supply chain disruptions caused by the pandemic and Russia’s war in Ukraine.While inflation in Japan — at around 2 percent in June — is still much lower than in many other countries, it has forced some companies to substantially raise prices for the first time in years, potentially dampening demand from consumers accustomed to paying the same amounts year after year.Japan faces other challenges both at home and abroad. Small- and medium-size enterprises in particular are likely to struggle as pandemic subsidies come to an end and foot traffic to their businesses remains below prepandemic levels.Additionally, geopolitical tensions are creating greater uncertainty for Japan’s key industries. Frictions between the United States and China over Speaker Nancy Pelosi’s visit to Taiwan this month have raised concerns among Japanese policymakers about possible disruptions to trade. Taiwan is Japan’s fourth-largest trade partner and a critical producer of semiconductors — essential components for Japan’s large automobile and electronics industries.As for Japan’s overall economic outlook, “short term, momentum is pretty good, but beyond that, we are actually quite cautious,” Ms. Devalier said.At home, she expects consumption to slow as people adjust to the new normal of living with the pandemic and their enthusiasm for spending dims. Wage growth, which has been stagnant for years, is falling behind inflation, which is likely to affect spending. And, she said, “for manufacturing and exports we expect a slowdown in momentum reflecting the fact that we expect global growth to be weaker.”Even under ideal conditions, Japan’s domestic consumption is at least a year away from returning to prepandemic levels, said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting.“Next year, we should be in a situation where it’s not necessary to worry about Covid infections and there are no restrictions whatsoever on economic activity,” he said.By then, he said, Japan will have most likely relaxed restrictions on tourism and business travel from abroad, which have been an additional drag on its economic performance.But with Omicron cases still climbing, fully returning to normal life this year is “impossible,” he said. More

BEIJING (Reuters) -New bank lending in China tumbled more than expected in July while broad credit growth slowed, as fresh COVID flare-ups, worries about jobs and a deepening property crisis made companies and consumers wary of taking on more debt.Chinese banks extended 679 billion yuan ($101 billion) in new yuan loans in July, less than a quarter of June’s amount and falling short of analysts’ expectations, data released by the People’s Bank of China (PBOC) on Friday showed.”Credit growth dropped back last month, with property market jitters weighing on bank lending,” Capital Economics said in a note. “It may continue to disappoint in the near-term given that sentiment among homebuyers is likely to stay weak and government borrowing is on course to slow.”Analysts polled by Reuters had predicted new yuan loans would fall to 1.10 trillion yuan in July, versus 2.81 trillion the previous month and 1.08 trillion a year earlier.Household loans, including mortgages, fell to 121.7 billion yuan in July from 848.2 billion in June, while corporate loans slid to 287.7 billion yuan from 2.21 trillion.China’s economy slowed sharply in the second quarter as widespread lockdowns hammered demand and business activity, while the property market has lurched from crisis to crisis.China’s top leaders recently signalled they were prepared to miss the government growth target of around 5.5% for 2022, which analysts said had been looking increasingly unattainable. The PBOC reiterated it would step up implementation of its prudent monetary policy and keep liquidity reasonably ample, while closely monitoring domestic and external inflation changes, it said in its policy report.But few China watchers now expect cuts in benchmark lending rates, which could raise the risk of capital flight as other major central banks sharply raise rates to battle surging inflation.STALLED PROJECTS In the real estate market, a growing number of homebuyers have threatened to stop repaying mortgages on hundreds of stalled projects. While regulators have urged banks to help provide funds to fill developers’ funding gap, confidence in the sector remains fragile.Data firm China Beige Book International, which conducts monthly surveys of more than 1,000 firms, said there was a clear drop in credit demand in July from manufacturing and services firms, with a slight increase in retail, which it attributed largely to fears of more lockdowns.Some analysts point to a recent glut of liquidity in interbank money markets as a further sign of weaker credit demand.Broad M2 money supply grew 12% in July from a year earlier, the central bank data showed, above estimates of 11.4% in the Reuters poll. Outstanding yuan loans grew 11% compared with 11.2% growth in June. Analysts had expected growth unchanged from June.Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.7% in July from 10.8% in June. TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.In July, TSF dipped to 756.1 billion yuan from 5.17 trillion in June. Analysts polled by Reuters had expected July TSF of 1.30 trillion yuan.Local governments issued a net 3.41 trillion yuan in special bonds in the first six months – part of the 2022 special bond quota of 3.65 trillion, finance ministry data showed, as authorities sought to quicken infrastructure spending.Sources have told Reuters that China plans to bring forward some 2023 local special bond quotas to the fourth quarter. More

Since May, the Reserve Bank of Australia (RBA) has increased its key cash rate by 175 basis points which the country’s “Big Four” lenders have passed on to their customers in full.Australia’s third largest lender said CET1 capital ratio, a measure of spare cash, fell to 10.75% at the end of June from 11.3% at end of March.Westpac said its total assets with exposure of default at the end of the quarter were A$1.213 trillion, compared to A$1.184 trillion at the end of March. The lender did not disclose a profit figure for the quarter, but said that cash earnings were partly offset by higher deductions for capitalized software and other regulatory deductions.Last week, larger rival Commonwealth Bank of Australia (OTC:CMWAY) warned that spiralling cost-of-living pressures had begun to hit consumer confidence, while National Australia Bank (OTC:NABZY) issued yet another warning on increasing costs. More

The Conservative leadership candidates came under growing pressure on Sunday to detail plans to tackle soaring energy bills, with increasing calls to find a way to freeze the amount households pay. Sir Keir Starmer, leader of the opposition Labour party, and some of the UK’s largest energy providers have put forward separate plans to cap the typical household bill below £2,000, as concerns grow that runaway gas and electricity prices could plunge millions of families into poverty and trigger a deep recession. The energy crisis is now a “national emergency”, said the Labour leader, adding that the Conservative leadership had “failed to prepare and refused to invest” in the sector. Starmer said his party’s plan would save the typical family £1,000, bring energy costs under control and help tackle inflation. It would be funded through initiatives including increased taxes on oil and gas company revenues. Ofgem, the energy regulator, has set the current annual cap, which limits the rates energy suppliers can charge customers for their default tariffs, at £1,971 for the typical home. But it is due to announce a new cap for the autumn later this month, with the price expected to rise to more than £4,400 by next April and some consultancies forecasting it could climb to about £5,000 as wholesale gas prices continue to rise. Starmer’s intervention echoed calls from the opposition Liberal Democrats to scrap the incoming energy price rise in October. Over the weekend, 70 charities across the UK including the Joseph Rowntree Foundation described rising energy prices as a “national emergency” and urged Tory leadership candidates Liz Truss and Rishi Sunak to “demonstrate the compassion and leadership needed” to tackle the cost of living crisis.Truss has rejected imposing another windfall tax, arguing that tax cuts and other measures, such as a temporary moratorium on green energy levies, would ease the cost of fuel bills for families.Meanwhile, Sunak has pledged that if elected he would “lead a national effort” to increase domestic energy supply and cut energy waste, and establish a new energy security task force.Some of the UK’s largest gas and electricity providers have also suggested more government help will be needed for households. Last week, prime minister Boris Johnson conceded that the government’s existing £37bn cost of living package might not be enough to support struggling households this autumn but Downing Street said the government had no plans to make significant fiscal interventions until a successor to Johnson is announced on September 5.

Scottish Power has revived a proposal to cap typical household bills under £2,000, with the rest being paid for through a combination of government backstopped lending. It would eventually be repaid over the next decade either by being added to customer bills or absorbed into general taxation. The Financial Times reported on Saturday that energy suppliers including Centrica — owner of the UK’s largest household supplier, British Gas — Octopus Energy and Eon have proposed moving a swath of charges on bills into general taxation. These include charges related to support for poorer households, VAT and environmental levies, which could knock at least £420 off bills from October, according to calculations by Eon. Electricity generators — which include some of the largest household suppliers that own various stakes in renewable projects, nuclear plants or gasfields — are worried they too could be targeted with a windfall tax beyond oil and gas. Some renewable and nuclear projects have reaped much higher revenues without seeing their costs rise significantly. “We know that rising prices caused by global challenges are affecting how far people’s incomes go, which is why we have continually taken action to help households by phasing in £37bn worth of support throughout the year,” said the Treasury. More