Monthly Archives: September 2017

China Announces RRR Cut Of At Least 50 bps; First Since February 2016

In a sign that China's ongoing attempts to delever the economy may have gone a bit too far, on Saturday morning China’s central bank announced a targeted reserve requirement ratio (RRR) cut, its first since February 2016 and which will go into effect in 2018, in an attempt to boost lending to struggling smaller firms and energize China's lacklustre private sector, Xinhua reported

The People’s Bank of China said on its website that it would cut the reserve requirement ratio for some banks that meet certain requirements for lending to small business and the agricultural sector. According to the PBOC, the vast majority of China’s banks would be eligible for at least a 50 bps cut to their required reserve ratio. As a reminder, the RRR is the amount of cash as a percentage of deposits that banks must park at the central bank as reserves. The current rate for major banks was set at 17.0% after the last general RRR cut that took effect in March 2016.

The PBOC explained that the reserve requirement rate will be cut by 50 bps for banks whose loans to the targeted groups account for 1.5% of their outstanding loan balance or their newly added loans for the previous year. A much higher bar is set for a further 100 bps cut: 10% of loans must be to the designated “inclusive finance” groups, the PBOC said. Banks that meet the 10%  requirement will see their RRR cut by 150 bps.

The PBOC also said the move was made to encourage more small loans - those under 5 million yuan - to small firms, loans to individual proprietors and lending that supports agricultural production, innovation, the poor and education.

While the central bank explained that the "targeted" RRR cut is a structural adjustment that does not change the country's overall monetary policy stance, stressing that it would continue to implement "prudent and neutral" policy to guide reasonable credit and financing growth, analysts at Lianxun Securities said that "the size of the cut is big, it covers all big banks, and 90 percent of small and mid-sized banks. Conservatively we estimate 700 billion yuan in liquidity could be freed up."

Perhaps more notably, analysts observed that the cut was different from previous changes to RRR in that it was a “delayed” cut that will not go into effect until next year, which could lead to disappointment for a banking sector that has already seen significant liquidity withdrawn in recent weeks.

“Clearly, the market will be disappointed as this cut will not help ease the liquidity conditions in the onshore banking system in the short term,” Zhou Hao, a Singapore-based analyst at Commerzbank, wrote in a note after the announcement.

The RRR cut will likely not come as a surprise as China’s cabinet, gearing up for the most important Communist party Congress in 5 years starting next month, had recently flagged a possible move, saying "the government would take a number of measures, including tax exemptions and targeted reserve requirement ratio cuts to encourage banks to support small businesses."

The policy action is in line with ongoing attempts to delever the economy and encourage more targeted lending to more vulnerable sectors of the economy, even as the government tries to cut down on speculative investment in the financial sector and property and rein in a rapid buildup in overall corporate debt. However, the RRR cut is departure from the PBOC's recent approach of setting policy using new tools such as short- and medium-term lending facilities for a similar purpose....

... as well as daily changes to interbank liquidity via reverse repo open market operations.

Lianxun Securities also said the RRR cut would help to offset negative impacts to smaller firms from strict environmental protection measures and capacity cuts, while also offering some liquidity relief to small and mid-sized financial firms. Additionally, the move comes amid increasingly more aggressive attempts by China to delever its shadow banking system.

As Deutsche Bank noted several days ago, in its latest monthly credit data report, "the financial deleveraging campaign has continued to make progresses: banking assets growth softened further; loan and TSF beat estimates but the overall credit growth actually moderated; shadow banking size was shrinking while loan growth stayed resilient. As such from the financial system’s perspective we see improving transparency and lower liquidity risks. While the deleveraging has contributed to a modestly slower economy, the growth momentum is in line with our house view."

That said, DB said that "we do not foresee policies to ease and we expect the deleveraging to carry on orderly," so one wonders how today's significant easing will impact the German bank's outlook on China's economy.

Separately, to offset the shrinkage in China's shadow banking sector, in February the PBOC extended a preferential programme that allows financial institutions that support rural finance and small enterprises to apply for a lower required level of cash reserves.  But despite still-strong credit growth nationwide, many small businesses and farmers remain in desperate need of funds and do not have easy access to ample cheap credit that state-run firms enjoy.

Also on Saturday, the central bank said it will maintain prudent and neutral monetary policy and use multiple monetary policy tools to keep liquidity basically stable. The statement, which came after the third quarter meeting of the PBOC’s monetary policy committee, said "China will continue with interest rate and exchange rate reform while keeping the yuan basically stable."

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Look Who Kalanick Just Appointed To The Uber Board Without Consulting Anyone

It looks like Travis Kalanick is preparing for all-out war in the Uber boardroom.

The Uber co-founder and former chief executive officer - who retains control over three board seats, including his own - has finally filled his long-vacant seats. And guess whom he picked to fill them? Former Xerox Corp. Chairwoman and CEO Ursula Burns...and former Merrill Lynch Chairman and CEO John Thain, "ratcheting up a Machiavellian battle for control of the world’s most valuable startup" as Bloomberg put it. Uber immediately challenged the appointments, calling them "a complete surprise."

“I am appointing these seats now in light of a recent board proposal to dramatically restructure the board and significantly alter the company’s voting rights,” Kalanick said in a statement emailed to Bloomberg. “It is therefore essential that the full board be in place for proper deliberation to occur, especially with such experienced board members as Ursula and John.”

As many may remember, Thain was the last CEO and chairman of Merrill Lynch before it was absorbed by Bank of American during the financial crisis. The last leader of an independent Merrill Lynch was roundly criticized for the same venal behavior as other too-big-to-fail CEOs - BOA paid a $16.7 billion fine in 2014, at the time the largest single settlement in US history, partly for Merrill's witholding of crucial information (namely, that the products were stuffed with garbage subprime loans while being marketed as AAA) to buyers of its MBS and CDO products. There was, of course, also the whole $35,000 "commode on legs" incident as part of Thain's $1.2 million office redecoration (which also included $17,100 traveling toilet boxes and a $15,000 dog umbrella stand).

Thain was, appropriately, singled out for criticism by former President Barack Obama, who accused him of "lining his pockets" - and those of his employees - at the taxpayers' expense by handing out massive bonuses after BofA accepted $45 billion in TARP funds.

Kalanick - who resigned as CEO on June 20 after a longrunning battle between him and the company's largest shareholder, Benchmark Capital - is making the appointments without consulting the rest of the board, according to the Wall Street Journal, which broke the story. He was granted control of three board seats as part of $3.5 billion investment from a Saudi wealth fund in 2016.

The appointment is particularly controversial because Kalanick is presently being sued by Benchmark, who claim he mislead the company's investors in order to gain control over an additional board seat, and as such the appointments appear to be the latest salvo in Kalanick's war with Benchmark.

As WSJ noted, the appointments could serve to push back against Benchmark, which also holds a board seat and led other members in a coup to push Kalanick out, which has proposed a new voting structure for shareholders allowing them to vote based on the size of their stake, rather than the current system which rewards the earliest investors with greater voting power. Travis confirmed as much in a statement to WSJ, when he said he believed the "full board should be in place" before boardmembers vote on the proposal.

“I am appointing these seats now in light of a recent board proposal to dramatically restructure the board and significantly alter the company’s voting rights,” Mr. Kalanick said in the statement. “It is therefore essential that the full board be in place for proper deliberation to occur, especially with such experienced board members as Ursula and John.”

It's also notable that the appointments come just days after Softbank, which is in talks to potentially invest as much as $10 billion in the cash-burning ride-sharing company, reportedly struck a deal with Benchmark to do everything in its power to oppose Kalanick's efforts to be reinstated as CEO if it becomes an Uber shareholder and gains a board seat.

According to Bloomberg, Uber expressed concern at Kalanick’s announcement: "The appointments of Ms. Burns and Mr. Thain to Uber’s board of directors came as a complete surprise to Uber and its board," the company said. “That is precisely why we are working to put in place world-class governance to ensure that we are building a company every employee and shareholder can be proud of.”

Uber’s board had been scheduled to vote Tuesday on a plan to revamp the company’s corporate governance, a person familiar with the matter said.

 

Kalanick remains supportive of Khosrowshahi, the person said. The former CEO saw the two appointments as a way to improve the company’s board of directors ahead of the impending vote on Uber’s governance structure, the person said.

To be sure, Kalanick has reportedly told friends and family that he has no intention of returning as CEO - though he might be interested in some kind of senior-level operations position. However, his actions would suggest something entirely different. Of course, considering the astounding run of scandals that erupted under his watch - from claims of sexual harassment, a federal bribery investigation, and the revelation that Uber intentionally blocked law enforcement agents from using its app - the notion of Kalanick returning as CEO seems almost incongruous. Since leaving, his legacy has only been further tarnished by the London taxi regulator's decision to revoke the company's operating license, citing abuses that largely occurred during his tenure.

But regardless of whether Kalanick's ultimate aim is to return as CEO, there's a more pressing matter at hand: Preventing Benchmark, his primary boardroom nemisis, from asserting even more control even as skepticism continues to grow about the mega valuation of the cash-burning, regulator-flouting Silicon Valley unicorn he helped create.

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North Korea Seen Moving Missiles As US Admits For First Time It Is In “Direct Contact” With Pyongyang

North Korea has again been observed moving several missiles from a rocket facility in the capital Pyongyang, according to a report late on Friday by South Korea’s Korean Broadcasting System (KBS) rising speculation that the North is preparing to take more provocative actions. The last time a similar report emerged was at the start of September, which was followed just days later by a ballistic missile launch which flew over Japan.

Officials did not say where the missiles were being moved, nor the make: according to Reuters, the missiles could be either intermediate range Hwasong-12 or intercontinental ballistic Hwasong-14 missiles, according to the report, though the missile facility at Sanum-dong has been dedicated to the production of intercontinental ballistic missiles.

As previously reported, South Korean official have speculated that the North could launch another nuclear or missile test to coincide with the anniversary of the founding of its communist party on Oct. 10, or possibly when China holds its Communist Party Congress on Oct. 18. Meanwhile, US Pacific Command revealed on Friday that the US and South Korea had recently completed their first joint short range air defense training exercise in South Korea, though it did not say when or exactly where the exercises had taken place.

Separately, on Saturday Secretary of State Rex Tillerson acknowledged for the first time that the US is in direct communication with the government of North Korea over its missile and nuclear tests – a stunning revelation considering that administration officials have until this point insisted that there has been only limited, indirect contact between the White House and the Kim regime. According to the New York Times, Secretary of State Rex Tillerson revealed as much during a speech at the residence of the US ambassador to Beijing after a meeting with Chinese leaders. Tillerson is in China on Saturday for what the NYT described as a “brief visit.”

“We are probing, so stay tuned,” Tillerson said when pressed about how he might begin a conversation with Kim Jong-un, the North Korean leader, that could avert what many government officials fear is a significant chance of open conflict between the two countries.

Tillerson wouldn’t say if the North Koreans had responded to the US’s overtures.

After noting that this was the first time a US official had confirmed that the US was directly communicating with the North, the NYT compared the secret backchanneling to a strategy used by the Obama administration to help forge what became the Iran deal – a comparison that Tillerson swiftly pushed back against. “We are not going to put a deal together with North Korea that’s as flimsy as the one in Iran,” he said. He added that the situation is different and that the North already has nuclear weapons, while Iran was still years away from obtaining them.  

“We ask, ‘Would you like to talk?’ We have lines of communication to Pyongyang – we’re not in a dark situation, a blackout. We have a couple, three channels open to Pyongyang,” he added, speaking at the residence of the US ambassador to Beijing after a meeting with China’s top leadership. He would not say if the North Koreans had responded, beyond a heated exchange of threats in recent weeks. Trump has repeatedly threatened to “totally destroy” North Korea, while the North has threatened to conduct a nuclear test over the Pacific Ocean, and to shoot down US aircraft flying in international waters if they come uncomfortably close to North Korean territory.  

"We can talk to them," Tillerson said "We do talk to them."

When asked whether those channels ran through Chia, he shook his head. “Directly,” he said. “We have our own channels.”

Tillerson added that the most important thing was to lower the tensions between the two countries.

"I think everyone would like for it to calm down."

Reactions to the admission of bilateral contacts were mixed: that the United States would be in contact with North Korea is not surprising, said Narushige Michishita, director of the Security and International Studies Program at the National Graduate Institute for Policy Studies in Tokyo, “But it sounds a little too early.”

“The timing is unexpected,” he said. “It was perfectly clear that both North Korea and the United States, and others, are in the prenegotiation bargaining process.”

Meanwhile, in Japan, where Prime Minister Shinzo Abe recently dissolved the lower house of parliament and called a snap election, the news that the United States is already in direct contact with North Korea could give ammunition to Mr. Abe’s opponents. The Japanese leader has steadfastly maintained that it is not the time for dialogue, arguing in a recent Op-Ed article in The New York Times that “emphasizing the importance of dialogue will not work with North Korea.” “Now,” Mr. Michishita added, “the opposition party members can say ‘Look, you have been talking about pressure, but the U.S. is just leaving you behind.’ ”

 

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In Furious Tweetstorm, Trump Slams San Juan Mayor, Democrats, “Fake News” Over PR Disaster Response

In what was perhaps the harshest criticism of the Trump administration's response to Hurricane Maria, San Juan Mayor Carmen Yulin Cruz broke down last night during a press conference where she begged President Trump to more to help Puerto Rico. The disaster response has devolved into a worsening humanitarian crisis she said, and "people are starting to die." Cruz described the situation as "something akin to genocide" before accusing Trump of treating Puerto Ricans like "animals."

“So, Mr Trump, I am begging you to take charge and save lives. After all, that is one of the founding principles of the United States...If not, the world will see how we are treated not as second-class citizens but as animals that can be disposed of. Enough is enough.”

It appears that Cruz' decision to invoke "genocide" and blame Trump for what some have criticized as a sluggish response (earlier, Trump explained that the response had been stymied by the fact that Puerto Rico is surrounded by "big water") was enough to trigger another presidential rampage, because in a barrage of early morning tweets and retweets (no less then 11 as of the latest count), the president accused Cruz, the Democrats and the "fake news" media of using the disaster to score political points:

"The Mayor of San Juan, who was very complimentary only a few days ago, has now been told by the Democrats that you must be nasty to Trump"...

...Before blaming her "poor leadership ability" for the situation on the ground, adding that the disaster response should be a "community effort."

He also praised FEMA and the military for doing "an amazing job" despite the power outages, a loss of cell service and torn-up roads that have also complicated the response effort.

In a string of retweets,Trump also shared this Department of Defense video of FEMA workers and national guardsmen distributing food and water to desperate Puerto Ricans. It also showed the stockpiles of supplies that have been sent to the island by the military.

To be sure, comments about the recovery effort by Puerto Rican officials haven't been entirely negative. Earlier in the week, PR Governor Ricardo Rossello praised what he described as the administration's "swift" response to Maria. However, Democrats in the Continental US have stepped up their criticisms of the disaster response in recent days, blaming Trump for hesitating to waive the Jones Act - which allowed foreign ships to deliver emergency supplies at Puerto Rican ports - and for the fact that it took nearly a week for US ships stocked with emergency supplies to arrive in the island's ports.

Trump also accused fake news networks like CNN of unfairly criticizing first responders as a way to "get Trump."

The president also reminded his audience that he and Melania will be visiting Puerto Rico on Tuesday, and that "people were working hard" to arrange a second stop in the US Virgin Islands.

For the sake of context, the death toll from Hurricane Maria has hovered around 16 for about a week now. Power has been restored to more than half of the island's hospitals, many of which have been forced to rely on diesel-powered generators to provide dialysis and other life-saving services to patients with dangerous illness. Meanwhile, the island's battered infrastructure - power grids remain down across 80% of the island and most cell towers have also been knocked offline following Hurricane Maria - was completely devasted.

Trump previously attracted some criticism by tweeting about Puerto Rico's precarious financial situation, claiming that the island was in "deep trouble" partly because of its massive debt.

Of course, as Trump pointed out, millions of dollars' worth of supplies have already landed on the island, and thousands of relief workers are there working on the recovery effort. But even as the island slowly recovers from the storms - a process that will take months, if not years - the finger-pointing surrounding what we're certain the media will try to tag as "Trump's Katrina" is only bound to get worse.

The post In Furious Tweetstorm, Trump Slams San Juan Mayor, Democrats, “Fake News” Over PR Disaster Response appeared first on crude-oil.news.

In Furious Tweetstorm, Trump Slams San Juan Mayor, Democrats, “Fake News” Over PR Disaster Response

In what was perhaps the harshest criticism of the Trump administration's response to Hurricane Maria, San Juan Mayor Carmen Yulin Cruz broke down last night during a press conference where she begged President Trump to more to help Puerto Rico. The disaster response has devolved into a worsening humanitarian crisis she said, and "people are starting to die." Cruz described the situation as "something akin to genocide" before accusing Trump of treating Puerto Ricans like "animals."

“So, Mr Trump, I am begging you to take charge and save lives. After all, that is one of the founding principles of the United States...If not, the world will see how we are treated not as second-class citizens but as animals that can be disposed of. Enough is enough.”

It appears that Cruz' decision to invoke "genocide" and blame Trump for what some have criticized as a sluggish response (earlier, Trump explained that the response had been stymied by the fact that Puerto Rico is surrounded by "big water") was enough to trigger another presidential rampage, because in a barrage of early morning tweets and retweets (no less then 11 as of the latest count), the president accused Cruz, the Democrats and the "fake news" media of using the disaster to score political points:

"The Mayor of San Juan, who was very complimentary only a few days ago, has now been told by the Democrats that you must be nasty to Trump"...

...Before blaming her "poor leadership ability" for the situation on the ground, adding that the disaster response should be a "community effort."

He also praised FEMA and the military for doing "an amazing job" despite the power outages, a loss of cell service and torn-up roads that have also complicated the response effort.

In a string of retweets,Trump also shared this Department of Defense video of FEMA workers and national guardsmen distributing food and water to desperate Puerto Ricans. It also showed the stockpiles of supplies that have been sent to the island by the military.

To be sure, comments about the recovery effort by Puerto Rican officials haven't been entirely negative. Earlier in the week, PR Governor Ricardo Rossello praised what he described as the administration's "swift" response to Maria. However, Democrats in the Continental US have stepped up their criticisms of the disaster response in recent days, blaming Trump for hesitating to waive the Jones Act - which allowed foreign ships to deliver emergency supplies at Puerto Rican ports - and for the fact that it took nearly a week for US ships stocked with emergency supplies to arrive in the island's ports.

Trump also accused fake news networks like CNN of unfairly criticizing first responders as a way to "get Trump."

The president also reminded his audience that he and Melania will be visiting Puerto Rico on Tuesday, and that "people were working hard" to arrange a second stop in the US Virgin Islands.

For the sake of context, the death toll from Hurricane Maria has hovered around 16 for about a week now. Power has been restored to more than half of the island's hospitals, many of which have been forced to rely on diesel-powered generators to provide dialysis and other life-saving services to patients with dangerous illness. Meanwhile, the island's battered infrastructure - power grids remain down across 80% of the island and most cell towers have also been knocked offline following Hurricane Maria - was completely devasted.

Trump previously attracted some criticism by tweeting about Puerto Rico's precarious financial situation, claiming that the island was in "deep trouble" partly because of its massive debt.

Of course, as Trump pointed out, millions of dollars' worth of supplies have already landed on the island, and thousands of relief workers are there working on the recovery effort. But even as the island slowly recovers from the storms - a process that will take months, if not years - the finger-pointing surrounding what we're certain the media will try to tag as "Trump's Katrina" is only bound to get worse.

The post In Furious Tweetstorm, Trump Slams San Juan Mayor, Democrats, “Fake News” Over PR Disaster Response appeared first on crude-oil.news.