(Bloomberg) — Japanese lenders must brace for rising bad-loan costs and investment losses even as the financial system shows resilience to the coronavirus-fueled economic slump, according to the central bank.
If the downturn is prolonged, more companies at home at abroad could face solvency problems, raising credit costs, the Bank of Japan said Tuesday in its semiannual Financial System Report. Losses on banks’ securities investment “could deteriorate” due to financial-market moves, and foreign-currency funding may become destabilized, it said.
The central bank left unchanged its assessment that Japan’s financial system has been “maintaining stability on the whole.” Banks have “considerable resilience” in terms of capital and liquidity, and the government and central bank have implemented “swift and powerful” policy measures, it added.
Read how BOJ sees pandemic causing credit crunch at small firms
The pandemic is adding to pressures on Japanese banks that have increased risk-taking to make up for declining profitability due to ultra-low interest rates and a shrinking population. To cushion the impact of the economic slump, the central bank has expanded asset purchases while the government has announced a record stimulus package.
Lenders around the world are preparing for a wave of soured loans as businesses shut and workers lose their jobs. In Japan, banks have been increasing loans to firms that are vulnerable to economic cycles in areas such energy — a sector that’s now contending with an unprecedented oil slump.
Japanese banks, which have been investing abroad in search of returns, shifted their stance since the market turmoil intensified last month, with an increasing number taking a “more cautious” approach, the BOJ said.
Unrealized losses “deteriorated substantially” due to plunging stock prices and a spike in overseas credit spreads, the central bank said. While these were mostly offset by improvements on bond holdings thanks to falling interest rates, there may be less scope for additional gains, it added.
“Given that there is less room for further decline in overseas interest rates, the negative impact could surpass these improvements,” the BOJ said. “Should there be further adjustments in prices of stocks and credit assets overseas, sales losses and impairment losses from related investments could become large,” it said.
The BOJ said dollar funding markets, which tightened since February, have regained stability thanks to expanded swap arrangements with central banks. Japanese banks tapped the BOJ for cheap access to dollars through a facility with the U.S. Federal Reserve.
Still, the central bank said it is “too early to conclude that market functioning has fully recovered,” and developments in Japanese banks’ foreign-currency funding “warrant vigilance.”
©2020 Bloomberg L.P.
Israel to provide protection for institutional tech investment – The Guardian
JERUSALEM (Reuters) – Israel approved plans on Tuesday to provide a safety net for institutional investors taking part in late-stage funding rounds by high-tech companies, seeking to encourage them back into a sector vital to the economy.
Burned by the tech bubble that burst in 2000 and hampered by regulatory constraints, Israeli pension funds and other institutions have since shied away from high-tech, during which billions of dollars have been generated by high-profile takeovers or flotations.
An institution that is approved under the new plan will be eligible for investment protection in the event of a decline in the value of the portfolio of Israeli tech firms and would receive 40% of the nominal investment.
Should the value increase, the institution would transfer 10% of the difference between the portfolio’s return and the government’s bond yield for the comparable period to Israel’s Innovation Authority, which is part of the Economy Ministry.
The portfolio would need to be managed for 8-1/2 years and the state’s protection would be provided for investments made during the first 18 months. The Economy Ministry expects the tech sector to gain a boost of 2 billion shekels ($570 million).
In a joint statement, the ministries said the plan serves two aims – to help Israeli tech businesses survive the coronavirus crisis while boosting institutional investment in a sector that is a key economic growth driver.
“It is precisely at this time that we must focus our efforts on moves that will strengthen the high-tech engine to pull the economy out of the economic crisis,” said Aharon Aharon, head of the Innovation Authority.
($1 = 3.5092 shekels)
(Reporting by Steven Scheer; Editing by David Goodman)
Daimler to invest in Chinese EV battery maker Farasis' $480 million IPO: sources – TheChronicleHerald.ca
By Zhang Yan and Julie Zhu
BEIJING/HONG KONG (Reuters) – Daimler AG plans to invest in Farasis Energy’s planned $480 million IPO, aiming to ensure a stable supply of batteries from the Chinese firm as it ramps up electric vehicle production, three people familiar with the matter said.
The plan has yet to be finalised and is subject to change, the people said, speaking on condition of anonymity as the discussions were private. The size of the potential investment was not immediately clear, they added.
The two firms struck a deal last year for Farasis to supply Daimler with lithium-ion battery cells and Farasis is building a factory in Germany.
Daimler and Farasis declined to comment on the potential IPO investment.
Eleven-year old Farasis gained approval last week to raise about 3.44 billion yuan in an initial public offering on China’s Nasdaq-like STAR board. The float, which is slated for the current quarter, could value the company at up to 30 billion yuan ($4.2 billion), sources have previously said.
Like many other global automakers under pressure to meet tougher emission standards in Europe and China, the German maker of Mercedes-Benz vehicles plans to ramp up EV production. It currently procures batteries from China’s CATL 300750.SZ> for its China-made EQC electric car.
Automakers are keen to build deeper relationships with battery makers to manage supply, either by investing in the companies or signing long-term contracts.
Sources said in January that Volkswagen AG was looking at taking a 20% stake in Chinese battery maker Guoxuan High-tech Co Ltd 002074.SZ>.
Farasis, which is based in Ganzhou city in the eastern province of Jiangxi, will use the IPO proceeds for a lithium-ion battery project and to replenish its working capital, according to its preliminary prospectus.
The company, which has plants in Ganzhou and Zhenjiang, also counts China’s BAIC BluePark New Energy Technology Co Ltd 600733.SS> and Great Wall Motor Co Ltd 601633.SS> as major customers.
($1 = 7.1303 Chinese yuan)
(Reporting by Zhang Yan and Yilei Sun in Beijing and Julie Zhu in Hong Kong; Additional reporting by Edward Taylor in Frankfurt; Editing by Edwina Gibbs)
Billion dollar investment fund manager demands end to CERB – ThinkPol
A billion dollar investment fund manager is demanding an end to the $2,000 per month Canada Emergency Response Benefit claiming that income support to people who lost jobs due to COVID-19 pandemic is making it hard for him to hire workers.
“I’m hiring like crazy right now. Lots of great talent out there,” tweeted Canaccord Genuity Cash Management Group investment manager Andrew Johns. “Sadly, there is obviously a whole sub segment of the population that has no interest in working. Gov’t needs to end #CERB now!”
I’m hiring like crazy right now. Lots of great talent out there.
Sadly, there is obviously a whole sub segment of the population that has no interest in working.
Gov’t needs to end #CERB now!
— Andrew Johns (@AndrewNJohns) May 24, 2020
Even while calling for an end to support for unemployed workers, Johns, who founded the Bitcoin ATM network HoneyBadger Inc, is advising his investment firm’s corporate clients on how to maximize government benefits.
Thursday, May 21st
1pm PST; 2pm MST; 4pm ESThttps://t.co/xsksPzHHSG
— Andrew Johns (@AndrewNJohns) May 17, 2020
Reaction to Johns’s tweet has been swift.
“Are you willing to offer them more than they get on CERB?,” asked Tracy Assoun. “If not, why would they work for you? CERB is a bare minimum. $12.50/hr 40 hrs a week. Big deal. If you don’t pay more than that, I wouldn’t want to work for you either.”
“Classic ‘This is my reality so it must be the case for all of society!’.” said Nick Faye. “Just because your business is hiring doesn’t mean that the economy isn’t currently a fraction of what it was before with many industries (eg. tourism, performing arts, etc) still unable to safely open.”
“The CERB is literally less than minimum wage,” Jane Murdoch said. “If potential employees would rather be taking CERB than work for you, that’s a you problem. Your business practices need improving.”
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