Lebanon’s Dollar Peg Gives Way to Currency Chaos After Default By Bloomberg

© Reuters. Lebanon’s Dollar Peg Gives Way to Currency Chaos After Default

(Bloomberg) — Lebanon’s currency peg, an anchor of financial and social stability for more than two decades, is crumbling and attempts to stabilize the exchange rate are adding to the chaos.

Dollar shortages culminated last month in the government’s decision to default on its debt for the first time. Now, a series of new measures imposed by the central bank have made clear that authorities are slowly breaking away from the fixed exchange rate of 1,507.5 to the dollar.

Starved of hard currency, Lebanese banks have stopped dispensing dollars to clients entirely after months of setting withdrawal limits. In its latest steps, the central bank has instructed lenders to allow withdrawals from foreign-currency accounts in Lebanese pounds only but at a “market rate” determined by banks themselves. The central bank also told money transfer companies that it would buy what they receive in dollars from abroad for pounds. It’s offering them 3,625 pounds per dollar, a huge premium over what remains its own official rate.

The goal of the central bank is to absorb dollars and channel them into a currency trading platform it wants to start with lenders and licensed exchange bureaus in the coming weeks to help determine a single daily exchange rate, according to people familiar with the matter. By making it harder for businesses and ordinary people to get hold of physical dollars, however, the measures have only accelerated the pound’s depreciation and exacerbated the uncertainty.

The Lebanese pound was trading at 3,350 on the parallel market on Thursday, with some exchange houses pricing at nearer 3,700, more than 50% weaker than the official peg that is now effectively in place only for importers of essential goods; oil, wheat and medicines.

Fearing their savings will be wiped out and hit by spiraling inflation, hundreds of Lebanese braved the restrictions imposed to contain the coronavirus outbreak and resumed protests this week — burning debris in the street and blocking roads with their cars. The central bank intervened briefly in the parallel market to try to slow the depreciation but stopped after the exchange rate continued to slump, said the people, asking to remain anonymous as the information is not public.

“They might be able to temporarily hold on to a rate for a few days, but the trend is clear — there aren’t enough dollars in the system to support a peg, or a more loosely defined one for that matter,” said Nafez Zouk, an emerging-market strategist at Oxford Economics. “It’s just a shifting of losses and insolvency into local currency.”

Buoyed for years by inflows from Lebanon’s sizable diaspora, the peg became a burden as repeated failures to reform the economy and stamp out corruption shook confidence. Financial aid from oil-rich Gulf countries and Western allies, which pulled Lebanon back from the brink of financial crisis in decades past, has also dried up.

With foreign-currency reserves at critical levels and after a default on some $30 billion in Eurobonds last month, the government has approached the International Monetary Fund to discuss its draft plan to rescue the economy in the hope of getting aid. The blueprint includes a gradual change in the peg starting in 2021 — when the pound would weaken to 2,607 per dollar.

Fast Unpegging

The depreciation on the unofficial market has been anything but gradual, however, with the pound weakening some 40% in the past three months alone. Food prices have gone up by 58% since mid-October, when nationwide protests erupted and eventually forced the collapse of a government.

Consumers Lebanon, an independent group that tracks food prices, has warned that inflation is only expected to accelerate and could lead to social implosion.

With almost half of Lebanon’s bank assets parked at the Banque du Liban, or BdL, as the central bank is known, the goal has been to soak up as much foreign currency as possible, restocking holdings ravaged by outflows amid the crisis. It’s challenge now is to unify multiple rates that have sown uncertainty and generated losses for businesses and consumers alike.

“Seems like BdL is trying to reduce the FX mismatches it has by turning its dollar problem into a lira problem, given that it can print its own currency,” Zouk said.


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No global digital tax by end-2020 would mean chaos: France

RIYADH (Reuters) – Failure to reach a global deal on where and how much to tax digital giants such as Google (GOOGL.O), Amazon (AMZN.O) or Facebook (FB.O) would result in many digital tax regimes emerging all over the world, France’s Finance Minister said on Sunday.

FILE PHOTO: French Finance Minister Bruno Le Maire attends a news conference to kick off the France’s national lottery operator Francaise des Jeux (FDJ) listing with the opening of the share subscription process in Boulogne-Billancourt, near Paris, France, November 7, 2019. REUTERS/Gonzalo Fuentes/File Photo

It would also likely trigger U.S. retaliatory tariffs, U.S. Treasury Secretary Steven Mnuchin told reporters, underscoring Washington’s determination to thwart tax rules planned by France and other countries if no global deal is reached.

Speaking to Reuters on the sidelines of a meeting of world financial leaders, Bruno Le Maire said the gathering had been very useful in establishing consensus on such global tax rules.

Finance ministers and central bankers from the world’s 20 biggest economies, the G20, met in Riyadh for talks on economic issues, with digital taxation topping their two-day agenda.

Mnuchin said the issue was being addressed in negotiations with the Organization for Economic Cooperation and Development, and he hoped it could be resolved by the end of the year.

But he said Washington would strike back at the digital taxes passed by France and others if those efforts failed.

“We’ve been very consistent in saying we think the digital services tax is discriminatory in nature against digital companies, and specifically a handful of U.S. companies,” he said. “The president was clear that we were proceeding with … reciprocal tariffs.”

France and the United States have declared a truce to allow the multilateral talks to reach a conclusion by year-end.

“For the first tine there is wide consensus among the G20 members on the necessity of having a new international taxation system,” Le Maire said.

“We have to address the issue of digital companies making profits in many countries without any physical presence, which means without paying the due level of taxes,” he said.

“And we also have to address the key question of minimum taxation and the risk of having a race to the bottom on taxation,” he said.

The OECD wants to agree on technical details of such a tax by July.

“There is a consensus to build a solution by the end of 2020,” Le Maire said, noting the alternative – no agreement – would create a proliferation of different tax systems making life more difficult for companies.

“Lets be clear – either we have at the end of 2020 an international solution… clearly in the interest of all countries and digital companies, or there is no solution and … then it will be up the national taxes to enter into force,” Le Maire said.

“Instead of having one single, simple solution, we would have many different digital taxes, all over the world.”

The United States, home to most of the digital giants, has been wary of committing to a solution on taxing them before a presidential election later this year.

Reporting by Jan Strupczewski and Anrea Shalal; Editing by William Maclean and Alex Richardson

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Hong Kong Retail Sales Slump Again as Chaos Cripples Economy By Bloomberg

(Bloomberg) — Hong Kong’s retail sales suffered a record contraction in October, as the city counts the cost of almost six months of political unrest.

Retail sales by value contracted by 24.3% in the month from a year earlier, the fourth month of double-digit declines. By volume, sales contracted by 26.2%, also a record, according to a government release.

Earlier Monday, Financial Secretary Paul Chan told lawmakers he expected the first budget deficit since the early 2000s for the fiscal year, and said that the ongoing turmoil has hurt economic growth by some 2 percentage points this year.

The retail data indicate that the annual “Golden Week” holiday in mainland China failed to translate into a tourist bump that could have alleviated the domestic economic pain. Overall, visitors to Hong Kong fell almost 44% in the month.

For retail businesses, that raises the stakes for coming months. Many proprietors will have to make hard choices: whether to continue the fight into next year or give up as leases come up for renewal and employee bonuses must be paid.

Iris Pang, an economist with ING Bank NV in Hong Kong, sees a 70% chance of a wave of store closures among retailers if spending continues to be weak. The situation is especially dire for catering companies, who typically enjoy brisk business at the holidays though face the prospect of cancellations during periods of unrest.

“Make or break is the correct description for most catering businesses in Hong Kong as some of them have continued in the business just because their rental agreement has yet to be due,” Pang said. “It is very likely that many catering businesses will close their business if their revenue doesn’t make a comeback during this holiday.”

Hong Kong’s large retailers face a similar predicament.

Cosmetics retailer Sa Sa International Holdings Ltd. may close about 30 stores in the coming year depending on how the market shakes out and “the results of discussions with the owners on rent reduction,” the company said in an emailed statement. Sa Sa shares have tumbled more than 40% this year.

Chow Tai Fook Jewellery Group Ltd. will look to cut costs by seeking bigger rent discounts, reducing advertising and reviewing store networks in Hong Kong and Macau, the company said in a webcast after reporting that first-half net income sank 21%. The company has leases at more than 40 stores in Hong Kong and Macau expiring in the next fiscal year.

Watch Out

Hong Kong has been one of the world’s largest centers for sales of luxury watches, but it has taken a hammering this year. Swiss watch exports to mainland China surpassed those to Hong Kong for the first time in October.

“If the situation persists, by the end of the year many watch companies will have to shut down business,” said Alain Lam, finance director with Oriental Watch Holdings Ltd. “At the end of the year, suppliers will ask for payment and employees will demand a one-month bonus — this may cut off the cash flow of some companies.”

Oriental Watch Holdings has managed to negotiate 8% to 10% discounts in rent from some landlords and will attempt to arrange better deals as leases come up, Lam said. But there’s no guarantee the company will retain its significant presence in Hong Kong, as it has healthier operations elsewhere.

“If the numbers don’t work out, we will close stores,” he said. “We are shifting our strategic focus to mainland China, aggressively.”

(Updates with retail data from first paragraph)

London retains global finance throne amid Brexit chaos

LONDON (Reuters) – From the pinnacle of the City of London’s largest skyscraper, Stuart Lipton is wagering a $1.2 billion bet that the British capital remains a master of the international financial universe no matter what happens with Brexit.

FILE PHOTO: A general view of London is seen from the construction site of 22 Bishopsgate in London, Britain June 25, 2019. REUTERS/Hannah McKay

The 76-year-old property developer is not alone. Bankrolled by a host of global investors, including France’s Axa (AXAF.PA), his big-ticket gamble in London’s financial district is – so far – on the money.

The cataclysmic warnings during the 2016 referendum that London would lose its financial throne if it voted to leave the European Union (EU) have, so far, been proven wrong. London is still the world’s banker, only bigger by some measures.

“London is extraordinarily resilient and its future as a finance centre is secure because what we have here is unique,” Lipton told Reuters on the 61st floor of 22 Bishopsgate, set to become western Europe’s second tallest skyscraper when it opens next year.

In the year to June, London has attracted more cross border commercial real estate investment than any other city. It has overtaken New York as destination for fintech investment and it has increased its dominance of the world’s $6.6 trillion daily foreign exchange market.

Since the vote to leave the EU, Britain has leapfrogged the United States to become the largest centre for trading interest rate swaps, despite calls by ex-French President Francois Hollande to end London’s dominance in clearing euro-denominated derivatives.

That London has expanded its influence as an international finance centre is one of the biggest riddles of the United Kingdom’s tortuous three year Brexit crisis.

The city’s standing ensures the United Kingdom keeps one of its last big chips at the top table of world politics just as it splits from the EU.

It also means EU companies will still come to London to raise finance outside the bloc after Brexit, a fact not lost on Wall Street heavyweights such as Goldman Sachs (GS.N) and JP Morgan (JPM.N).

Just a mile away from 22 Bishopsgate, Goldman opened its new 1 million square foot European headquarters – complete with mothers’ rooms and wildflowers on the roof – in July, three years on from the 2016 referendum.

Largely abandoned by the British government during Brexit talks, ten senior industry officials told Reuters London’s financial services sector has grown since 2016 because there is no realistic competitor in its time zone.

And high-rolling bankers are too attached to its Anglo-Saxon, work-hard, play-hard culture.

The chief executive of the British division of one of Europe’s largest banks said although some business will move to the EU, most senior bankers will be reluctant to leave London. He would consider taking a 20% pay cut to remain in the city.

“If you are an Italian banker, who moved out to London 20 years ago, and your kids go to private school around the corner then you are not going to move to Frankfurt,” he said.


A global hub for trading, lending and investing, London is the largest net exporter of financial services in the world, with the EU accounting for a quarter of the business.

The 2016 referendum shocked many of the masters of London’s financial universe, triggering the biggest one-day fall of the pound since the era of free-floating exchange rates was introduced in the early 1970s.

But so far, most major financial institutions have opted against moving large numbers of people and activities until the loss of access to the EU’s lucrative single market is confirmed.

Banks, insurers and asset managers have shifted over a trillion euros of assets such as derivatives and bonds from London to the continent and opened new EU hubs as a hedge against London suddenly being cut off from the bloc if Britain exits the EU without a formal agreement.

The Bank of England estimates around 4,000 people may have moved by the time Britain has exited the EU. But the key decisions are still taken in London.

Reuters contacted JP Morgan and Goldman, and rivals Citi (C.N), Bank of America (BAC.N), UBS (UBSG.S), Morgan Stanley (MS.N), Credit Suisse (CSGN.S) and Deutsche Bank (DBKGn.DE), to seek details on how a ‘no deal Brexit’ might accelerate the transfer of resources and activities from London.

All banks said they were prepared for a no-deal Brexit, and had been since the first quarter.

Earlier this year, Morgan Stanley’s chief executive, James Gorman, said that he scarcely worried about Brexit.

“That’s not in my top 200 issues,” he said.

British data shows the total number of people employed in the City between 2016 and 2018 overall rose by 31,000, though the total number of people employed specifically in banking and insurance is down 3,000 over the period.

It is not clear how much of that drop is due to Brexit and how much is due to new regulations or structural changes, such as higher numbers of tech specialists at lenders while traditional banking jobs shrink.

Initial estimates of potential job losses ranged from about 30,000 roles within a year of Britain leaving the EU, estimated by the Brussels-based Bruegel research group, to up to 75,000 by 2025 by Oliver Wyman.

Oliver Wyman said they stand by their predictions because it is important to distinguish between job losses on the first day of Brexit and over the longer term. The final number will depend upon the level of market access, which is not clear yet.

Bruegel did not respond to a request for comment.


Financial capitals such as London have remarkable longevity and their rise and fall typically happens at a glacial pace, said Youssef Cassis, a professor of economic history who specialises in financial centres.

“There is no precedent for decoupling between a major economic power- in this case the European Union- and its financial centre, London,” he said.

Some key activities have moved out of London ahead of Brexit. Euro zone government bond and repurchase agreements trading worth around 230 billion euros a day, along with clearing, switched to Amsterdam, Milan and Paris earlier this year.

London-based CBOE Europe, the EU’s largest share trading venue, began trading euro shares at its new Amsterdam hub at the start of October.

Nicolas Mackel, who heads a body promoting Luxembourg’s financial centre, said it would be a shift in activities and not jobs that will affect London most.

“It’s not between now and Christmas you have to look, but on a five, 10, 15 and 20 year framework. It’s a false comfort that you are providing by only focusing on jobs,” Mackel said.

After Brexit the $15.9 trillion EU 27 economy will still be reliant on a financial capital outside its borders, which could be politically hard for Brussels to stomach indefinitely.

One European Commission official, speaking on condition of anonymity, told Reuters that the EU had no intention of smothering Britain’s financial sector to accelerate its own plans for an EU capital markets union.

But there is scepticism in the market about the longevity of such pledges.

“Why should one expect the EU to give an economic answer to what is a political challenge?” said Xavier Rolet, former head of London Stock Exchange and CEO of investment manager CQS.

Slideshow (6 Images)

“I would expect them to respond politically, even if those answers are not necessarily in the best economic interests of EU-based investors, corporates and banks.”

Rolet, who said in the aftermath of the referendum that half of all finance jobs in London may disappear if derivatives clearing left the capital, said it was too early to assess the implications of Brexit.

“I do stand by my statement,” he said of the potential job losses.

Editing by Guy Faulconbridge and Carmel Crimmins

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Motorbike ride sharing alleviates Dhaka traffic chaos

(This September 27 story corrects name of Pathao Chief Executive to Hassan M. Elius, not Hassan Melius, in paragraphs 6, 7.)

FILE PHOTO: Vehicles are seen stuck in a heavy traffic after office hours during Ramadan in Dhaka July 7, 2014. REUTERS/Andrew Biraj

By Rafiqur Rahman

DHAKA (Reuters) – Ride-sharing motorbike services are surging in popularity in the Bangladeshi capital of Dhaka, where nightmare traffic often means that walking is faster than traveling by car or bus.

Congestion in Dhaka, one of the world’s most crowded cities with a population of 20 million, eats up 3.2 million working hours per day, according to a 2017 World Bank study. Average traffic speeds have dropped to 7km per hour from 21km/h over the last decade, only slightly faster than the average walking speed.

The debut of app-based ride-sharing services in May 2015 has helped to alleviate this problem. These days, service providers like Uber Technologies Inc (UBER.N), Pathao, Shohoz and OBHAI transport hundreds of thousands of people everyday on motorcycles, navigating narrow alleys and congested traffic lanes.

“Sharing a bike ride saves me a lot of time, I can reach anywhere on time,” said Khadija Khan, a private-sector employee who often hitches a bike ride.

The ride-sharing industry in Bangladesh is worth an estimated 22 billion taka ($260 million) and accounts for about 23% of the transport sector in the country, according to a 2018 study by the Policy Research Institute of Bangladesh (PRI).

Local motorcycle ride-sharing service Pathao now has over five million users and more than 200,000 registered drivers, according to its chief executive, Hassan M. Elius.

“A trip which previously used to take two hours with uncomfortable rides on rickshaws and buses, now only takes 40 minutes,” Elius said. “That not only saves time but also increases productivity.”

The advent of motorbike sharing apps is not only providing relief to commuters used to wasting hours in gridlocked traffic, it is also creating employment opportunities for thousands.

“For a young man like me from a low-income family, it is a big source of income,” said student Lokman Hossain, who owns a motorbike.

However, unskilled bike drivers and reckless driving are often cited as one of the main reasons for a recent spike in traffic accidents in Bangladesh. More than 4,000 people die in road accidents each year, one of the world’s highest rates.

Massive student protests sparked by the death of two teenagers mowed down by a speeding bus in the capital last July led to street battles and the use of tear gas and rubber bullets by police.

The following month, the country’s cabinet approved raising the maximum jail sentence for rash driving deaths to five years from three.

Reporting by Rafiqur Rahman; Writing by Ruma Paul; Editing by Karishma Singh and Christopher Cushing

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Watchdog demands answers as power cut causes chaos across Britain By Reuters

LONDON (Reuters) – Energy regulators on Saturday demanded an urgent report from the operator of Britain’s electricity grid into what caused a power cut that led to chaos across the country, with trains brought to a standstill and traffic lights knocked out.

The hour-long outage on Friday evening left almost 1 million homes without power while two of London’s busiest train stations closed at rush-hour because of overcrowding as services were canceled or delayed.

A hospital in the eastern town of Ipswich said its back-up generator had failed while the cut also hit the airport and metro system of the city of Newcastle in northeast England.

“Ofgem has asked for an urgent detailed report from National Grid (LON:) so we can understand what went wrong and decide what further steps need to be taken,” the energy watchdog said in a statement. “This could include enforcement action.”

National Grid, which owns the electricity transmission system in England and Wales, said there had been a rare and unusual issue which had led to the almost simultaneous loss of power from two generators.

“Our normal automatic response mechanisms came into help manage the event,” Duncan Burt, National Grid’s Operations Director, told BBC radio.

“But the loss of power was so significant that it fell back to a set of secondary back-up systems which resulted in a proportion of electrical demand across the country being disconnected for a short period to help keep the rest of the system safe.”

He said that action meant power to the vast bulk of the country had been maintained but he said they appreciated the disruption the outage had caused to others.

“We will want to look at that automatic chain of events,” he said. National Grid would provide Ofgem with a detailed, technical report into the incident, but was confident it had not been not a malicious or a cyber attack, he added.

While the system returned to normal on Friday night, disruption was expected to continue into Saturday with rail operators saying trains had not ended up in their correct destination meaning services would still be affected.

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China says U.S. currency manipulator labeling could cause chaos in financial markets By Reuters

By Yawen Chen and David Stanway

BEIJING/SHANGHAI (Reuters) – China’s central bank said on Tuesday that Washington’s decision to label Beijing as a currency manipulator would “severely damage international financial order and cause chaos in financial markets”.

Washington’s decision to ratchet up currency tensions on Monday would also “prevent a global economic and trade recovery,” the People’s Bank of China (PBOC) said in the country’s first official response to the latest U.S. salvo in the two sides’ rapidly escalating trade war.

China “has not used and will not use the exchange rate as a tool to deal with trade disputes,” the PBOC said in a statement on its website.

“China advised the United States to rein in its horse before the precipice, and be aware of its errors, and turn back from the wrong path,” it said.

The U.S. currency accusation, which followed a sharp slide in the yuan on Monday, has driven an even bigger wedge between the world’s largest economies and crushed any lingering hopes for a quick resolution to their year-long trade war.

The dispute has already spread beyond tariffs to other areas such as technology, and analysts caution tit-for-tat measures could widen in scope and severity, weighing further on business confidence and global economic growth.

The U.S. Treasury Department said on Monday it had determined for the first time since 1994 that China was manipulating its currency, taking their trade dispute beyond tariffs.

The department referred to a PBOC statement on Monday as an open acknowledgement that it “has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis.”


The U.S. decision was driven purely by political motive to “vent its anger”, said Global Times, an influential Chinese tabloid published by the ruling Communist Party’s People’s Daily.

China “no longer expects goodwill from the United States”, Hu Xijin, the newspaper’s editor-in-chief, tweeted on Tuesday.

The U.S. decision to label China a manipulator came less than three weeks after the International Monetary Fund (IMF) said the yuan’s value was in line with China’s economic fundamentals, while the U.S. dollar was overvalued by 6% to 12%.

The U.S law sets out three criteria for identifying manipulation among major trading partners: a material global current account surplus, a significant trade surplus with the United States, and persistent one-way intervention in foreign exchange markets.

The PBOC said it does not fit the criteria for the label.

Zhang Anyuan, chief economist of stock brokerage China Securities, said it is “baseless for the U.S. side to determine that there was exchange rate manipulation based on the change in the exchange rate of the RMB (yuan) on a single day.”

After the labeling, it’s possible Washington “will introduce punishing measures that go beyond existing understanding of the situation,” Zhang said.


Chinese state media had warned that Beijing could use its dominant position as a rare earths exporter to the United States as leverage in the trade dispute. The materials are used in everything from military equipment to high-tech consumer electronics.

Shares in some of China’s rare earth-related firms surged on Tuesday amid speculation the sector could be the next front in the trade war.

Beijing could also step up pressure on U.S. companies operating in China, analysts say.

Beijing in June issued a travel advisory warning Chinese tourists about the risks of traveling to the United States, citing concerns about gun violence, robberies and thefts.

Air China said on Tuesday that it was suspending its flights on the Beijing-Honolulu route starting on Aug. 27, following a review of its network.

In a further sign of deteriorating ties, China’s commerce ministry announced overnight that its companies had stopped buying U.S. agricultural products in retaliation against Washington’s latest tariff threat.

“In the end, the United States will eat the fruit of its own labor,” the PBOC said.


Chinese monetary authorities let the yuan fall past the closely watched 7 level on Monday so that markets could finally factor in concerns around the trade war and weakening economic growth, three people with knowledge of the discussions told Reuters on Monday.

The yuan has tumbled as much as 2.7% against the dollar over the past three days to 11-year lows after President Donald Trump’s sudden declaration last week that he will impose 10% tariffs on $300 billion of Chinese imports from Sept. 1.

But it appeared to steady on Tuesday amid signs that China’s central bank may be looking to stem the slide, which has sparked fears of a global currency war.[CNY/]

The fell to a record low of 7.1397 per dollar on Tuesday before clawing back losses after the central bank said it was selling yuan-denominated bills in Hong Kong, a move seen as curtailing short selling of the currency.

also opened weaker before steadying, but remained below the 7 level. While the central bank set a slightly firmer-than-expected morning benchmark rate, it was still the weakest since May 2008.

The PBOC has insisted the value of its yuan is determined by the market, though it has maintained a firm grip on the currency and supported it when it neared sensitive levels over the past year.

U.S. Treasury Secretary Steven Mnuchin said the U.S. government will engage with the IMF to eliminate unfair competition from Beijing.

A IMF spokeswoman said the organization does not have any immediate comment.

After determining a country is a manipulator, the Treasury is required to demand special talks aimed at correcting an undervalued currency, with penalties such as exclusion from U.S. government procurement contracts.

“Naming China a currency manipulator could open the door for U.S. tariffs to eventually increase to more than 25% on Chinese goods,” according to a note from DBS Group Research.

Hong Kong’s Economy Starts to Feel the Hit from Protest Chaos By Bloomberg

© Reuters. Hong Kong’s Economy Starts to Feel the Hit from Protest Chaos

(Bloomberg) — Hong Kong is beginning to reckon with the economic cost of ongoing protests against the government’s extradition bill, as the disruption risks driving away local shoppers and deterring tourists from mainland China.

The Hong Kong Retail Management Association said Tuesday that “most members” reported a single-to-double-digit drop in average sales revenue between June and the first week of July, when multiple demonstrations converging on major office and retail districts took place.

The threat to Hong Kong’s vital retail sector will hit its economy at a time when it is already slowing. Retail sales data for June is due for release on August 1, with the value of goods sold having contracted every month since February.

The “industry is worried that these events will damage Hong Kong’s international image as a safe city, a culinary capital, and a shopping heaven,” the association said in a statement.

Chief Executive Carrie Lam’s bid to ease extraditions to the mainland prompted hundreds of thousands of protesters to take to the streets in a wave of historic protests that has brought parts of the city to a halt since early last month.

Hong Kong Financial Secretary Paul Chan said at a briefing July 15 that second quarter economic output is expected to be “slow,” though there haven’t been obvious capital outflows amid the demonstrations.

Sales Drop

Sa Sa International Holdings Ltd., a seller of cosmetics, reported a 15.3% drop in same store sales in Hong Kong and Macau for the three months through June. The company said the demonstrations had affected some stores, as had a high comparison from the previous year.

For the same period, Chow Tai Fook Jewellery Group Ltd. reported an 11% decline. The political backdrop and a decline in mainland visitors increases the likelihood of a two percentage-point reduction in its first-half operating margin, Catherine Lim, an analyst at Bloomberg Intelligence in Singapore, wrote in a note.

These Brands Are Caught in the Middle of Hong Kong’s Protests

The chances of a marked economic impact from the protests raises comparisons with the Occupy movement that blocked parts of central Hong Kong five years ago. Economic growth slowed in the fourth quarter of 2014 from the previous period, and the government at the time partially blamed that weaker performance on the protest, saying it “affected tourism, hotel, catering, retail and transport industries.”

Carry On

This year, the number of visitors to the city from mainland China has been increasing strongly, thanks in part to the opening of a new bridge linking Hong Kong with the city of Zhuhai, in Guangdong province. Arrivals in May surged 23.6 percent from a year earlier, with the June tally not yet available.

Images of protesters blocking major city thoroughfares — and retail outlets — is likely to pose a significant risk if the demonstrations continue. On July 1, a gathering that ultimately saw protesters break into and vandalize the city’s legislative building hampered retailers in the shopping district of Causeway Bay and elsewhere.

Hong Kong Turmoil Has Wealthy Eyeing Havens Beyond China’s Grasp

Yet most businesses are attempting to carry on.

“There were so many people, it was a mess, no one wanted to come in,” said Chen Yan, 30, who works at the counter of a pharmaceutical store in Causeway Bay. “But we haven’t changed our operations because of the protests. We expect it to be temporary.”

(Updates association comment in second paragraph.)

Making sense of chaos? Algos scour social media for clues to crypto moves By Reuters

By Tom Wilson and Simon Jessop

LONDON (Reuters) – After months of relative calm in cryptocurrency markets, bitcoin exploded back into life in April with its sharpest price jump in over a year – but few people could convincingly explain why.

The 20% leap focused investors’ attention on one of the enduring mysteries of cryptocurrencies: what moves the price of an emerging asset in an opaque, largely unregulated market?

For some, the answer lies on social media. Hedge funds and asset managers seeking an edge are training computers to scrape social media sites for triggers that could move the price of digital currencies.

Their goal: crafting algorithms capable of picking out price “signals” from the background noise of sites ranging from Reddit and WeChat to Twitter and Telegram.

Many investors already use computer models to identify, and trade, price differences across hundreds of cryptocurrency trading exchanges.

But with opportunities for arbitrage narrowing as the nascent sector develops, big players are increasingly looking to build or buy more sophisticated robots to find market-moving signals online, according to interviews with six hedge funds and asset managers and three software developers.

Yet while the use of algorithms, or algos, for parsing social media may be growing, some of those interviewed said major challenges and risks remain to their wider deployment, from cost to complexity.

“It’s an arms race for money managers,” said Bin Ren, CEO of Elwood Asset Management, which specializes in digital assets and is owned by Brevan Howard founder Alan Howard.

“Very few players are able to implement and deliver it, but I believe it is highly profitable.”

Such “sentiment analysis,” as computer-driven reading of the social media mood is known, is used as a tool in traditional markets like equities and foreign exchange to trade on consumer feelings toward a company or asset.

But it could be of greater significance in cryptocurrency markets, where there are few authoritative sources of information, such as central banks, scarcely any reliable data to gauge asset value like economic indicators and financial statements, and a high proportion of individual investors.

It is also early days for the technique in the crypto sector, with scant industry-wide data on performance and many questions over its effectiveness. None of the institutions Reuters spoke to would give details of the performance of their algorithms, citing commercial confidentiality.


To be sure, digital currencies do share some drivers with traditional markets such as comments by policymakers. Bitcoin can be sensitive to remarks by regulators in particular: It fell sharply last week after the U.S. Federal Reserve chief called for a halt to Facebook’s planned Libra cryptocurrency project.

But given cryptocurrencies have been entwined with the internet from their dawn a decade ago, when the word was spread in forums and chatrooms, it would seem to make sense to search for price triggers online.

Still, it’s far from cheap or simple to design an algorithm that can find market-moving signals in the cacophonous world of social media, analyzing huge numbers of posts in dozens of languages while sifting out unreliable information.

Andrea Leccese, president of Bluesky Capital, an investment firm in New York, said upfront costs for a robot capable of only reading Twitter in English were between $500,000 to $1 million, with most of the money spent on skilled developers. That has deterred Bluesky from using the technique, he said.

One daunting challenge is the sheer number of social media channels. Beyond Twitter, sites often used by cryptocurrency aficionados include Telegram, a messaging app with public channels and Reddit, a messaging board.

In Asia, home to many retail traders, apps like Line in Japan and Kakao in South Korea are popular.

Tens of thousands of comments on cryptocurrencies are pumped out around the clock across both national and international channels.

Reddit’s main forum, or subreddit, for bitcoin alone has 1.1 million members. Twitter also sees tens of thousands of posts mentioning bitcoin every day, with between 14,000 and 32,000 daily for the last three months, according to the BitInfoCharts website.

In an attempt to extract meaning from this mayhem, algorithms use so-called natural language processing – identifying key words and emotions that indicate changes in how social media users view certain digital currencies.

Investors using algorithms say they can also identify patterns for information that gains traction online.

    “The information propagates not randomly, but through a very well-defined structure – it’s like a tree,” said Elwood’s Ren, which has used sentiment analysis for nearly two years after developing its own software.

“It’s very similar to modeling the spreading of a virus.”


Other investors emphasized the challenges in teaching machines to spot biased or inaccurate information.

A Reuters report (https://www.reuters.com/article/us-crypto-currencies-promoters-specialre/special-report-little-known-to-many-investors-cryptocurrency-reviews-are-for-sale-idUSKCN1NW17S) last November found that many social media users take money for positive reviews of digital coins.

BitSpread, a cryptocurrency asset manager based in London and Singapore, uses its own capital to trade using an algorithm it started developing about a year ago, its CEO Cedric Jeanson told Reuters.

It is a relatively narrowly targeted software. Aggregating Twitter feeds, it looks out for posts on the liquidation, or closing, of positions at exchanges.

“It’s a matter of gathering all the info, trying to understand who is trading where, what kind of liquidation can appear,” he said. “It’s a strategy that makes sense.”

However, he acknowledged the drawbacks.

“The sentiment itself, what we see on Twitter, can be really geared toward fake news. We are always very cautious about what we’re reading in the news because, most of the time, we’ve seen that there’s a bias.”

Many algorithms use machine learning, where they are supposed to improve through experience and better understand how social media posts translate into market movements.

Developers often identify key people with outsized voices and large numbers of followers to weight more heavily in their algorithm, said Bijan Farsijani of Augmento, a Berlin-based startup that launched an algo for sentiment analysis last month.

He said a number of hedge funds had bought the software from his company since the launch.  

(Interactive graphic, Bitcoin’s wild ride – https://tmsnrt.rs/32kDEi2)


Bitcoin, the biggest cryptocurrency and a bellwether for the sector, has surged over 180% this year, driving up the interest of bigger investors from trading firms to hedge funds.

Bitcoin’s most recent rally, last month, was seen by analysts as driven by expectations for a wider adoption of cryptocurrencies driven by Facebook’s Libra.

That move was mirrored by a surge in interest online. Google searches for cryptocurrencies hit their highest level in three months on June 18, when Facebook made the announcement.

It is, however, difficult to pinpoint the chicken and the egg: online chatter or price moves.

“There may be some value in sentiment analysis in crypto, but most of the time what people tweet may be a lagging indicator of the price move,” said Leccese of Bluesky Capital.

“But there is potential,” he added. “People will start looking at this more in the next five to 10 years because there will be diminishing returns because of increased competition in traditional strategies.”

While there is a lack of data specifically for this technique, “quantitative” cryptocurrency funds – which use methods from arbitrage to sentiment analysis – significantly outperformed funds that make longer-term bets in the first quarter of this year, a PwC report shows.

Coders say they are in increasing demand.

Taiwan-based Marc Howard teamed up with over 500 machine learning experts to crowdsource sentiment analysis algorithms, bringing in data from sources including Google Trends, Reddit and development platform GitHub.

Howard said his bitcoin investments using an algorithm beat funds simply tracking the price of the cryptocurrency by 54% in the year to June 24, adding that funds in New York and Taipei had tapped him for help in developing their own analysis.

“It’s pretty hot right now,” he said. “Any fund that’s worth their salt, they are devoting some of their resources and allocation for sentiment analysis.”

Currency Chaos That Felled Sudan Leader Is Lesson for Maduro By Bloomberg

&copy Bloomberg. Omar Hassan Ahmed Al Bashir, Sudan’s president, shakes hands with Yasuo Fukuda, Japan’s prime minister, not seen, prior to their meeting at the Tokyo International Conference on African Development (TICAD) in Yokohama City, Japan, on Wednesday, May 28, 2008.

(Bloomberg) — For autocratic leaders seeking lessons from the toppling of Sudanese President Omar al-Bashir, avoiding a currency crisis may be the key to survival.

It’s the same problem that did for long-standing rulers from Angola to Zimbabwe and may yet claim Venezuela’s Nicolas Maduro.

Al-Bashir, who the military ousted on Thursday to end 30 years of rule, faced months of protests against the government’s economic mismanagement, repression and corruption. One of the root causes of the 75-year-old’s downfall was his inability to manage a shortage of foreign exchange that sent inflation soaring and hammered living standards.

Sudan’s woes can be traced back to the secession of South Sudan in 2011, which saw it lose almost all its oil fields and 60 percent of fiscal revenue, according to the Institute of International Finance. But the government’s decision to ramp up spending while pegging its currency only exacerbated the situation.

“With the loss of oil revenue, the government monetized the deficit, causing inflation to spiral and reserves to dwindle as the central bank maintained an overvalued exchange rate,” Jonah Rosenthal and Garbis Iradian, economists at the Washington-based IIF, said in a note Thursday.

The central bank devalued the pound almost 40 percent to 47.5 per dollar in October. But it was too little, too late. The currency’s black-market rate tumbled again and now stands at around 75 against the greenback. Inflation is almost 120 percent, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.

Al-Bashir is far from the only strongman to come unstuck in recent years thanks to a balance-of-payments crisis. Robert Mugabe was pushed out by Zimbabwe’s army in 2017 as a dollar squeeze and political tension caused havoc in the southern African nation, while the ruling party in Angola pressured President Jose Eduardo dos Santos to resign earlier than he wanted in the same year. Tellingly, one of the first things his successor, Joao Lourenco, did was devalue the kwanza to try and end a dire scarcity of hard currency.

And Algeria’s Abdelaziz Bouteflika, who was forced out of power this month, faced his own currency problems. The 2014 crash in oil and gas prices crimped the Arab nation’s dollar earnings. While it avoided the kind of economic pain seen in Sudan, it spent more than $100 billion of reserves to prop up the dinar and avoid tough measures such as a major devaluation or turning to the International Monetary Fund for a bailout.

In Venezuela, where inflation is more than 1 million percent, making the bolivar all but worthless, Maduro has managed to hold on thanks to continued support from the military and outside powers such as Russia. But if Sudan and Zimbabwe are a guide, he’ll also need to solve the currency chaos.

“Nobody survives hyperinflation,” Daniel Osorio, president of New York-based Andean Capital Advisors, which advises money managers on Latin America, said Thursday at a debt conference in Washington. “Sooner or later, it pushes you out.”

(Updates paragraph under chart with political tension in Zimbabwe.)

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