- Focus Areas
From Global Trade Review (GTR) | By Finbarr BerminghamSwift is looking to bring cross-border payments times down to “instant” in a new trial that it has begun in Asia Pacific, focusing on settlements into Australia. It will pilot an improved version of its global payments innovation (gpi) service, which was launched in January 2017 to bring faster cross-border payments to its network. So far, Swift has managed to reduce payment clearing times to under 30 minutes in more than half of gpi use cases. Now the company will seek to reduce this further. Swift’s new “gpi real-time service” will be tested using Australia’s new payments platform (NPP), an instant payments platform that went live earlier this year, and which has so far been used to process domestic payments. Swift was commissioned by the Reserve Bank of Australia (RBI) to design and build this solution in 2015. This move to improve the gpi service will involve banks from Australia, China, Singapore and Thailand. These are: ANZ, Bangkok Bank, Bank of China, China Construction Bank, Commonwealth Bank of Australia (CBA), DBS, ICBC, Kasikornbank, National Australia Bank (NAB), Siam Commercial Bank, Standard Chartered and United Overseas Bank (UOB). The banks had previously been involved in workshops around instant payments with Swift. Whether or not the new gpi service replaces the existing one is undecided: Swift is waiting for the results of the trial, which it plans to announce at Sibos, its annual banking, finance and fintech conference, which takes place in Sydney this October. “The gpi real-time service is a critical step in delivering cross-border instant payments. The commitment and support we have from Asia Pacific’s leading banks is a strong indication that they understand the immediate value of partnering with Swift to realise a fast, secure and seamless cross-border real-time payment service that scales globally,” says Eddie Haddad, managing director at Swift in Asia Pacific. Already, the gpi is being used to settle US$100bn in payments every day, according to Swift. It has been gaining traction in Asia Pacific. In June, 10 Chinese banks went live with the gpi service, with 17 others in the process of implementing it. In July, Swift announced that all 10,000 banks on its global network will use gpi by 2020, after Swift was impressed by the progress made with the technology since its launch. Sun Shangbin, deputy general manager in Bank of China’s clearing department, says the instant gpi would “substantially enhance cross-border payments efficiency, providing high-quality service experience for our customers”. Silawat Santivisat, executive vice-president of Kasikornbank in Thailand adds: “The keen competition amongst payment channels, competitive transaction fees and transaction speeds offered by new entrants, mean that a faster Swift gpi service is crucial to driving international payments. While real-time payment is common for domestic transfers, it is an innovation for international payments.” He may be referring to competition from outfits like Ripple, which have been able to reduce payment times to instant – or close to it – by using blockchain technology. Swift, for its part, has trialled blockchain for nostro account reconciliation, but has not been convinced that it is a technology ready for use at the required scale. At an event in Hong Kong in June, a Ripple executive dismissed the gpi service as being only a marginal improvement on the traditional Swift offering. “Swift was built 40 or 50 years ago, before the internet was created. So their architecture is very old. They realise that this is a big problem and they consider us a big competitor. They’re also trying to make a big improvement based on the existing architecture, called Swift gpi. We consider it just a marginal improvement of their existing architecture,” said Ripple’s director of joint venture partnership, Emi Yoshikawa The market, however, will welcome another move from Swift to reduce payment times. It is used across the board by banks around the world and the likelihood is that most would prefer to use a payments service from a company they know and trust, rather than using a new player. “Swift’s new instant cross-border payments service is an important industry initiative that will complement our efforts to provide clients more control of and insight into their transactions,” says So Lay Hua, head of group transaction banking at UOB. The post Swift trials instant cross-border payments in Asia Pacific appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamAfter the US and Mexican presidents celebrated a breakthrough in the arduous renegotiation of the North American Free Trade Agreement (Nafta), analysts claim that the pressure is now on Canada to save its place in the deal. Earlier this week, US President Donald Trump announced that a deal had been struck with its neighbour to the south. The deal resolves long-standing sticking points in the automotive sector, where the US has negotiated a requirement that 75% of a vehicle be made in North America (a hike from the previous 62.5%). Of that 75%, between 40% and 45% must be made by workers earning at least US$16 an hour – placing the benefit firmly in US hands, where workers earn a higher wage. Furthermore, the US has agreed to a more relaxed 16-year lifespan, with a review every six years. Previously it had insisted on a five-year renewal clause, a scenario both Canada and Mexico have been keen to avoid, due to the uncertainty that would bring. Trump has suggested that the “US-Mexico trade agreement” replace Nafta, while his Mexican counterpart Enrique Pena Nieto has said he hopes that Canada could be included. Either way, the onus has shifted to Canada, with foreign minister Chrystia Freeland cutting her tour of Europe short for trade talks in Washington DC. “This agreement puts Canada under pressure and brings a breakdown of Nafta a step closer. Pena Nieto will gain nothing politically from the deal which, if ratified, may prevent meddling by Mexican President-elect Andres Manuel Lopez Obrador, but will also absolve him of all responsibility for any of its negative impacts for his entire six-year term, which starts in December,” says William Arthur, North America analyst at Oxford Analytica. Trump has said that talks with Canada are “going well” and expressed confidence that a Nafta deal could be concluded this week. Canadian Prime Minister Justin Trudeau, however, was less effusive about the progress, saying that his negotiating team would hold out for an agreement that suits Canada. “We’re seeing if we can get to the right place by Friday. We’re going to be thoughtful, constructive, creative around the table but we are going to ensure that whatever deal gets agreed to is the right deal for Canada and the right deal for Canadians,” he told reporters. Other analysts have downplayed the significance of the US-Mexico deal, saying that while the reaction of the financial markets has been positive, thus far, it does not alleviate wider concerns about the protectionist bent of the US government. They point to the ongoing trade war with China: on August 23, the US began implementing an additional 25% tariff on a second list of Chinese products. “At the same time as US negotiators were formalising the pact with Mexico, trade talks with China came to nothing and no dates were announced for further talks. Public hearings on proposed US tariffs on US$200bn of Chinese imports also ended yesterday. And our working assumption is still that the US will ultimately go ahead and impose these tariffs,” says Oliver Jones, markets economist at Capital Economics. He added, however, that the fact that the US administration is willing to negotiate and accept a compromise on trade will be welcomed in China. It is also likely that should this deal see the light of day, it will force auto manufacturers to rejig their supply chains if they wish to operate tariff-free in the region. The Mexican government estimates that 30% of the cars it makes and sells to the US would not contain sufficient North American content to meet the requirements. “They [manufacturers] will have to take on new costs — which cars made outside the region will not — whose only benefit is continued access to the zero tariff. And these are not the kinds of costs leading to tangible consumer gains — ie, don’t expect increased fuel efficiency, safer vehicles, or additional creature comforts,” writes Chad Bown, senior fellow at the Peterson Institute of International Economics. Bown predicts that some manufacturers in the US may benefit from less direct competition from makers in Europe and Asia. However, the downside may be passed onto the US consumer. “But these ‘gains’ are more than likely offset by their economic downside. Rising costs imply higher prices for American consumers. Equally important is North America’s deteriorating competitiveness as a global export platform for carmakers. As consumer growth in North America slows, these companies are evaluating where they can produce competitively in order to access emerging markets in Asia, South America, and elsewhere. Clunky new rules and higher costs make America, Mexico and Canada a considerably less attractive hub,” Bown says. The post US-Mexico trade deal “puts pressure on Canada” to save Nafta appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamDespite suggesting they would restrict their funding for coal projects, the project pipelines of Japan’s three major banks suggest they are still heavily involved in the sector. Mizuho, MUFG and SMBC all updated their coal-funding policies in May and June of this year. The move was welcomed by environmentalists, given that these banks are among the heaviest funders of dirty coal projects in Asia. However, new research from Market Forces, a lobby group, shows that each is set to fund large projects that would be in contravention of their updated policies. Combined, these projects will emit 1.6 billion tonnes of CO2 over their lifetimes. The study shows that if they were to follow their policies to the letter, Mizuho would be ruled out of 40% of their pipeline projects by capacity. MUFG would be ruled out of 31%, while SMBC would have to scrap 31% of these projects. Mizuho’s policy brief states that “primary considerations is whether the use of greenhouse gas-producing technology is appropriate due to economic necessity when compared to feasible alternative technologies which offer similar levels of energy efficiency”. The MUFG document reads: “MUFG Bank and Mitsubishi UFJ Trust and Banking refer to international guidelines such as OECD arrangement on officially supported export credits, when considering the provision of financing for new coal-fired power generation.” These guidelines restrict funding for the majority of coal-fired projects. Those that can be funded are those that require “ultra-supercritical technology”, which rules out most of the pipeline, according to Market Forces. SMBC’s updated policy also refers to ultra-supercritical technology, defined as power plants which “require less coal per megawatt-hour, leading to lower emissions (including carbon dioxide and mercury), higher efficiency and lower fuel costs per megawatt”. The bank’s policy reads: “Our policy for new financing will be stricter, limiting financial support to only coal-fired power plants that use ultra-supercritical or more advanced technologies which are considered highly efficient”. None of the banks were willing to comment on the report, however an MUFG representative raised the bank’s positive ranking with regard to clean energy financing, stating that while 50% of MUFG’s portfolio of power-related project finance worldwide is in the renewable sector, less than 10% goes to coal. The projects in question span five countries: Botswana, Bangladesh, Myanmar, Mongolia and Vietnam. Almost 50% of the coal-fired plants will be built in Vietnam, which has been investing heavily in power plants, the majority of which are coal-fired. SMBC was among the lenders on the S$1.87bn syndicated loan for the Nghi Son 2 coal-fired power plant in Vietnam, which reached financial close in April, despite claims that it will generate “twice as much” CO2 per every unit of power generated as the average generating plant in Vietnam. Meanwhile, Sumitomo Mitsui Trust Bank, part of the same group as SMBC, told Reuters in July that it “would stop providing project finance for new coal-fired power stations as a basic rule”. The post Do Japanese banks’ project pipelines conflict with shift in coal policy? appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamThe US-China trade war can only have negative effects in the long run, even if the short term impact have been minimal for trade finance providers in Asia. Those are the views of Standard Chartered’s global head of trade finance, who has called for common sense, as trade tensions continue to escalate. In an interview with GTR in Hong Kong, Farooq Siddiqi voiced concerns over the negative effect the US-China conflict may have on trade and investment sentiment. Citing examples of trade wars in the 1930s and 1970s, Siddiqi says: “When you look at the benefits, did it protect employment or help GDP? The answer is all negative. In the long run, if you have this mutually-assured destruction, it doesn’t help anybody. The question is: at what time does sanity prevail?” Standard Chartered is one of the leading funders of trade in emerging markets and is extremely active throughout emerging Asia, including in China. A sizeable portion of the bank’s book comes from financing trade between China and the rest of Asia. In an earnings call after the bank reported a healthy profit over the first half of 2018, chairman Jose Vinals said: “Our direct exposure to the risks of US-China trade tensions is limited. We generate far more income financing commerce between China and other markets in our footprint — meaning we stand to benefit over time if that were to increase — than we do on trade between China and the US.” This sentiment was echoed by Siddiqi, who says that the US-China trade Standard Chartered finances is “not a material number”. However, it may lead to shifts in production bases, according to research the bank has done with clients in China. “We did research with some companies in the Pearl River Delta, asking them for their your response to the trade war. Some will try to figure out a separate sourcing strategy. In the medium term, they’ll look to move their manufacturing location to another country. The big theme is companies moving south to Asean, Cambodia, Myanmar, and so on,” he says. This research surveyed more than 200 companies working in the Pearl River Delta. Of these, 70% expect a high or medium negative impact from a trade war. This in part explains the shift towards other markets in Asia, a medium-term endeavour that may take three to five years to complete. However, these shifts are likely to occur regardless of the resolution of the trade war, due to the increase in labour costs in China. “Net-net I don’t expect anybody to benefit from the trade war. In the long term it will have a negative impact. In the short term I expect companies to look for tactical places to switch sourcing. In the medium term if it really stays, they will look at rebasing manufacturing into other locations,” Siddiqi says. His views are largely shared among Asia Pacific trade financiers: the industry is yet to experience a material impact from the trade war – with the caveat that the tariffs have only recently started taking effect. “When we think about the trade wars, from my perspective I am more concerned with the trade rhetoric damaging investor sentiment, investor confidence and sending markets lower,” said HSBC’s chief executive John Flint on an earnings call earlier this month. Siddiqi, meanwhile predicts that the future growth engine of global trade will be intra-Asian trade and domestic consumption in emerging markets in the region, namely China, India and Indonesia. This reshuffling of the traditional export model may help shelter the region from future scuffles between the US and China. It may also help banks such as Standard Chartered, which have domestic footprints in these markets. “Traditional factors which drove trade growth in the past were trade between Asia and OECD countries. The EU and US would consume, Asia would produce and sell to those markets. That model is fundamentally changing. Mostly, people will produce to consume it locally: look at markets like Indonesia. Yes, today is dominated by the trade war rhetoric, but these are green shoots that banks like ours are focusing on, because that’s where the revenue growth will be,” he says. The post Standard Chartered on trade war: “At what time does sanity prevail?” appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamAmid mounting debts and fears over China’s perceived expansionary intentions, more and more countries are becoming disgruntled with the much-vaunted Belt and Road Initiative (BRI). Malaysia’s Prime Minister Mahathir Mohamad this week used a state visit to Beijing to announce he was shelving plans for two major infrastructure projects that fall under the BRI umbrella. “I believe China itself does not want to see Malaysia become a bankrupt country,” Mahathir said, referring to Malaysia’s high level of sovereign debt, upon announcing his plans to scrap the projects The previous day, standing alongside Chinese Premier Li Keqiang, the recently returned veteran leader had said: “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries.” Mahathir has cancelled the East Coast Rail Link and the Trans-Sabah Gas Pipeline projects, which were due to cost US$20bn and US$2.3bn, respectively. In doing so, he has echoed the concerns of many other politicians and analysts about the potential debt trap that the BRI could potentially create, as well as the conditionality that could come as a result of being unable to repay these debts. “I would totally agree that there’s blowback occurring on all fronts regarding China’s state-centric soft power, including BRI. I think there’s pushback on all fronts on China Inc’s ambitions to promote Chinese firms and technology,” Alex Capri, visiting senior fellow at the National University of Singapore’s business school, tells GTR. “On BRI, the debt model that Beijing has been pushing for to emerging countries, it’s increasingly seen as a honeytrap that has backfired,” he adds. The situation is laid bare in a recent study by the Centre for Global Development (CGD), a US think tank. Researchers evaluated the current and future debt levels of the 68 BRI countries, finding that 23 of those are at risk of debt distress today. The study found that for eight of those countries, future BRI-related financing will significantly add to the risk of debt distress. These countries are: Pakistan, Djibouti, Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan. The situation in Pakistan has come under intense scrutiny following the election of new Prime Minister Imran Khan. Pakistan is rated by the CGD as “by far the largest country at high risk”, with US$62bn in additional infrastructure debt, 80% of which is owed to China through big ticket BRI projects. While Khan is set to review some of China’s energy and infrastructure investments, the early signs are that he will maintain close economic ties with Beijing. In Sri Lanka, anti-China investment sentiment predates BRI itself. The country was the recipient of a series of high interest Chinese loans which helped build highways, a cricket stadium, a deep-water port and the massively under-utilised Mattala Rajapaksa International Airport, which has a capacity for one million passengers a year, but which sees only a dozen passengers every day. “Some countries are growing increasingly wary about the financing structures associated with Chinese infrastructure investments. There are worries about potentially high levels of debt. In cases of debt-for-equity deals – as with the Hambantota port in Sri Lanka, for example – critics raise concerns about political leverage and territorial integrity,” Joydeep Sen, South Asia analyst at Oxford Analytica tells GTR. Tonga’s Prime Minister Akilisi Pohiva, meanwhile, last week said that Pacific island nations should lobby China to forgive the debts owed to it for infrastructure projects. The country is reportedly US$160mn in debt to China, including a 2007 loan from China Exim to rebuild the capital city Nukualofa following a spate of rioting. “One issue for certain is that we don’t want the Chinese government to take the assets used as collateral for the loan, and when we don’t request for loans, we will not be aligned with the developments of the world it is today,” Pohiva told the Samoa Observer. Even while the pushback gathers pace, however, enthusiasm for BRI remains strong among the banking sector. In a recent glowing report on the BRI, German bank Commerzbank wrote: “Despite these challenges, Commerzbank is confident that, for BRI countries and companies – including those from Europe – as projects increase, so will the opportunities, trust, expectations and rewards.” Citi, meanwhile, has just appointed a head of banking and origination in Hong Kong, dealing exclusively with BRI-related work. The post Malaysia leads “blowback” against China’s Belt and Road Initiative appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamPeruvian miner Minsur has secured US$900mn in project financing for its Mina Justa copper mine. The lenders come from across the world, with over a dozen commercial and development banks joining a group of export credit agencies (ECAs) from countries with strong mining industries. The lenders are: BBVA Continental, BBVA, Banco de Crédito del Perú, Crédit Agricole, Export Development Canada (EDC), Export Finance and Insurance Corporation (EFIC, the Australian ECA), ING, KfW Ipex-Bank, Natixis, SG Americas Securities, Société Générale and the Export Import Bank of Korea (Kexim). Law firm Sullivan and Cromwell represented the borrower, Marcobre SAC, a subsidiary of Minsur, one of the world’s largest tin miners. Mina Justa is set to produce 100,000 tonnes of copper a year when it comes online in 2020. Total project cost is expected to run to US$1.77bn, with Minsur providing the rest of the capital. The mine will be located in the district of Marcona, which is in the Nazca province, in the Ica region of Peru. The deal represents the first greenfield mine project financing to sign in Latin America this year, according to Sullivan and Cromwell. It comes just months after Minsur sold a 40% stake in the project to Alxar Internacional, a subsidiary of Chilean company Empresas Copec, for US$200mn. Kexim, the Korean ECA, is to finance US$200mn of the debt from its own book, with Korean-Japanese consortium LS-Nikko Copper purchasing 30% of the copper output for the next 10 years. Kexim has been growing its presence in Latin America in recent years in a bid to solidify South Korea’s supply of raw minerals. In 2015, it signed onlending deals worth US$3.2bn with five banks in Brazil, Chile and Peru. This followed a state visit by former Korean president Park Geun-hye in the same year, which saw a range of investment deals signed. The most high-profile deal was a US$13bn agreement between the Peruvian energy ministry and Kexim to collaborate on a petrochemical complex. The post Lenders flock to huge Peruvian project financing appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamKfW Ipex-Bank, a German development bank, has loaned €200mn to support renewable energy production in India. The borrower is Rural Electrification Corporate (REC), a government agency that will onlend the finance in the form of low-interest loans, to investors in the solar and wind power sectors. Borrowers must contribute 30% in equity to any project supported by the REC scheme, while it is also hoped that other banks can join financings through syndication. It fits in with the Indian government’s plans to produce 175GW of renewable energy by 2022. This would represent around 50% of total energy generation. 100GW would come from photovoltaic energy under this plan, with a further 60GW coming in the form of wind energy. The rest would come from smaller sources, such as biomass and small-scale hydropower. This KfW Ipex package will see enough power generated to support 270,000 Indian homes, offsetting some 285,000 tonnes of carbon emissions each year. It marks the fourth line of credit REC has received under the Indo-Germany Development Co-operation, a bilateral initiative designed to support renewable green energy projects in India. KfW Ipex has a history of supporting rural electrification in South Asia. Since 2016, it has provided support for Myanmar’s rural electrification programme, culminating in a financing package in 2017. The post German development bank KfW supports Indian renewables appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamEngie North America has secured US$320mn for a wind project in Texas. The lender is Bank of America Merrill Lynch, with US$147mn of the funds coming in the form of construction finance, and US$155mn in project finance. Rabobank provided a letter of credit, while BofAML provided a power hedge. The funds will help build the 200MW Live Oak wind farm, part of a renewables portfolio recently purchased by Engie. The farm will come online at the end of the year. The project will use 76 Siemens-Gamesa 2,625MW turbines with 120-metre rotors, and the balance of the facility will be constructed by Blattner Energy. Engie acquired the Live Oak project from Infinity Renewables, which began developing the site in 2009. Senior vice-president and head of US wind development at Engie, Matt Riley, described it at the time as “the strongest wind portfolio in the US”, saying that “Live Oak is just the first of many successes we expect over the coming years”. Upon the announcement of the financing package, Riley said: “We’re pleased to enhance the Live Oak project’s value with a competitive financing package and long-term offtake agreement. We look forward to replicating both elements in our future projects as we grow our large-scale renewable portfolio here in the US.” The post Bank of America bankrolls Texan wind farm appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamBeibei Li is to become Citi’s head of banking and origination for China’s Belt and Road Initiative (BRI), an initiative geared towards constructing infrastructure along the old Silk Road route. She will be based in Hong Kong, reporting to Gerry Keefe, head of corporate banking for Asia Pacific. Li relocates from New York where she is currently managing the Chinese institutional client portfolio in North America. Li has worked at Citi since 1999, initially as a management associate. She has subsequently worked in a number of consumer and corporate banking roles. She begins her new role at the start of September. This will be viewed as an attempt by Citi to capitalise on the expected growth in trade spurred by the BRI. The bank is present in 60 of 70 BRI markets. To date, most of the financing has been done centrally by Chinese policy banks and government lenders. However, Keefe says that Li’s appointment will help position the bank as a funding partner for BRI projects. “The BRI is a strategic imperative for all of our major corporate, public sector, financial institution and global subsidiary clients operating along the Belt and Road – both global and local names. As such we have created a new leadership position to help align the firm’s strategic priorities, connect product and coverage partners, and drive further business opportunities across the BRI economic corridors,” he says in a bank statement. The post Citi creates banking role for Belt and Road Initiative appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamFrench bank BNP Paribas has made a series of senior appointments to its transaction banking team in Asia Pacific. Mahesh Kini (pictured) joins as head of cash management for the region. He moves from Deutsche Bank, where he was most recently head of global transaction banking for China. During his time with the German bank he also held the roles of head of corporate cash management for Greater China and head of cash management for corporates, Asia. Kini joined Deutsche Bank from HSBC in 2007 and has also worked for ABN Amro, Bank of America and HDFC Bank in India. He is based in Singapore and reports to Chye Kin Wee, head of transaction banking for Asia Pacific. Zoran Lozevski is now BNP Paribas’ head of global trade solutions, Asia Pacific, also based in Singapore. He was most recently head of transaction banking for Australia and New Zealand for the bank. He joined BNP Paribas in 2007 from George Weston Foods Group. He is replaced in Australia by Michael Reid, who joins the bank from Citi and is based in Sydney. Louise Zhang has been named head of transaction banking for China, based in Shanghai. She joins from Deutsche Bank, where she spent 11 years, most recently as deputy general manager for the Shanghai branch, and head of cash products for the Greater China region. Zhang previously worked for HSBC in Hong Kong and Shanghai. She reports to Timothy Lee, who is the new head of transaction banking for Greater China. This role is based in Hong Kong. Lee will be responsible for connecting the bank’s China business with the rest of the Asia Pacific region. He has worked for BNP Paribas for five years, and joined from JP Morgan. Lee has also worked for HSBC, Citi and Deutsche Bank. “We are pleased to welcome so many senior hires to our existing, deep pool of talent. Their extensive experience will strengthen our position as a leading transaction banking business in the Asia Pacific region,” says Chye Kin Wee. The post BNP Paribas reshuffles Asia transaction banking team appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamDanish export credit agency (ECA) EKF has frozen all new guarantees to Turkey, as concerns about the country’s economic health continue to mount. The Turkish lira has lost more than 45% of its value this year and continued its plunge this week amid a growing geopolitical storm between Turkey and the US. There are widespread fears that other emerging markets will get dragged into the crisis, including South and Southeast Asian nations and parts of Latin America. Commercial lenders across Europe are watching the situation closely, especially those with high levels of exposure to the Turkish economy. “There are some European banks that are exposed to Turkey – BBVA, UniCredit, BNP Paribas – but these are strong, very large banks that may see a negative impact on their profits from their Turkish operating areas, but won’t face fundamental problems,” IHS Markit’s principal economist Andrew Birch tells GTR. Despite this, BBVA shares plunged 5.7% last Friday, BNP Paribas fell 4.4%, with UniCredit stock losing 6.4%. Turkey accounted for 14% of BBVA’s total profit in the first half of the year, Reuters reports. Development banks such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) are also lenders who have large exposure to Turkey, and both of these could face problems with their outstanding loans in the country, Birch says. Turkey is one of EKF’s largest markets and the ECA regularly funds projects there that use Danish exports. It has financed more than 15 wind projects in Turkey over the past 10 years, including the US$100mn Balabanli windfarm last year, co-funded with UniCredit. Lynge Gørtz Smestad, senior analyst at EKF, tells GTR that the agency is “not that concerned” about that existing debt because “we mainly have bank risk on our books”. “Our assessment is that in the long run, the Turkish financial sector is pretty healthy. It’s well-capitalised and regulated. So I think our counterparties in Turkey are among the best, but of course we’re aware of the situation because it is a big market for EKF,” he says. Should there be a rate hike or other government intervention to stabilise the lira, EKF may reassess the freeze, but Smestad says that EKF and “all the banks around the world” will be watching the situation carefully. There are huge concerns about Turkey’s domestic banking sector too. The likely loss of foreign investment inflows is likely to undermine its banks’ trade, project and export finance businesses. “In the first quarter of 2018, Turkish banks had outstanding foreign liabilities equivalent to 23% of total funding, or 230% of official foreign exchange reserves,” Birch says. Turkish banks regularly tap international debt markets as a means of funding their trade lending. Indeed, annual refinancings of Turkish bank debt are viewed as calendar events and attract lenders from around the world. In March, for instance, Akbank refinanced US$1.2bn-worth of debt with 39 banks from around the world. “Despite the domestic volatility, the facilities achieved a strong global response with the participation of 38 international banks across North America, Western Europe, Asia and the Middle East which is a testament to Akbank’s strong fundamentals and successes through volatile markets, as well as the resilience of the Turkish financial sector,” reads a bank statement accompanying the refinancing announcement. In May, meanwhile, Yapi Kredi refinanced US$1.5bn-worth of debt, with 48 banks from 19 countries joining the syndicate, and eight new lenders this year. It’s been reported that some domestic banks are selling their project finance loans to lenders from the US and China in a bid to free up their balance sheet for domestic lending, on the request of the Turkish government. For now, the unrest in the Turkish economy shows no sign of abating. Today (August 15) the Turkish government announced that it was raising tariffs on US imports including cars (120%), alcohol (140%) and tobacco (60%). Turkish President Recep Tayyip Erdogan has encouraged Turkish people to boycott US electrical goods, including iPhones, and to replace them with Turkish-made products. He has accused US President Donald Trump of “economic warfare” over the US’ punitive tariffs on Turkish metals. Trump doubled tariffs on Turkish aluminium and steel last week after Turkey refused to release US citizen Andrew Brunson, a pastor who has been held in Turkey since 2016. The US has also sanctioned Turkish government officials in a bid to force the release of Brunson, who was arrested on charges of high espionage. The post Danish government freezes new guarantees to Turkey over lira crisis appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamWells Fargo has completed financing packages for two solar power generation facilities in the US. The first is a US$85mn project financing deal for a large solar project near Fresno in California. The borrower is Sempra Renewables and the funds will help build a 200MW facility in the north of the state, comprising four solar farms, with four separate offtake agreements. The Sempra Great Valley solar project, as the facility is known, will begin operating commercially in May 2019 and will produce enough electricity to power 90,000 homes. The four offtake agreements in place are with Marin Clean Energy (100MW), Sacramento Municipal Utility District (60MW), Pacific Gas & Electric (20MW) and Southern California Edison (20MW). In Florida, meanwhile, the bank has committed US$35mn to the FL Solar 5 project in Orange County. The borrower in this case is Origis Energy, a Miami-based solar energy company. The project will complete by December 2018 and will transmit electricity to Reedy Creek Improvement District of Orange, the offtaker. Both projects are in line with Wells Fargo’s commitment to invest US$200bn in sustainability by 2030, announced in April this year. The plan states that 50% will go into renewable energy, clean technologies, sustainable transport and green bonds. This follows on from a previous goal, set in 2012, of investing US$30bn in clean technologies by 2020. A host of commercial banks have made similar commitments in the wake of the Paris Agreement on Climate Change, which was signed in 2015 and which aims to keep the global temperature to below 2 degrees Celsius. Speaking upon signing the Florida deal, Wells Fargo’s head of independent power and infrastructure, Alok Garg, says Origis Energy is at “the forefront of creating a greener energy future. He adds: “Wells Fargo is proud to be a part of impactful projects like FL Solar 5 that help our communities accelerate the transition to a lower carbon economy.” The post Wells Fargo funds two US solar projects appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamAgricultural commodity giant Wilmar has renegotiated an existing revolving credit facility (RCF) with lender DBS, so that the terms may be reduced if it hits sustainability targets. Wilmar will now pay less interest on its two-year US$100mn facility if it reaches performance indicators on a range of issues, from biodiversity to greenhouse gas reduction and renewable energy. This is the latest sustainability-linked loan in Asia, following similar agreements reached this year. The market is nascent, but DBS says it has fielded enquiries on such facilities from both Asian and global commodity players. “We welcome clients to discuss the possibility with us, and we also reach out to clients committed to the sustainability agenda to consider different green financial products, such as green loans, green bonds and ESG (environmental, social, governance)-linked loans,” Yulanda Chung, DBS’ head of sustainability, tells GTR. She refused to say how much of a pipeline there is for this type of funding, but said that “it should not be used as a greenwashing attempt”. The bank will only consider working with companies that have “ambitious yet achievable targets” pertaining to ESG. Further details on the loan’s terms have not been disclosed, but the pre-set performance indicators have been established by Sustainalytics, a Dutch company which has been involved in a series of sustainability-linked loans over the past year. In November 2017, ING restructured a portion of a US$150mn loan to Wilmar. Again, this will see the company benefit from more favourable terms should it hit ESG targets. Wilmar was involved with DBS’ Singaporean rival OCBC in June this year on a US$200mn sustainability-linked RCF, also assessed annually by Sustainalytics. Asia’s first sustainability-linked club loan was closed in March, which DBS was also involved in. Olam was the borrower on this occasion, with 15 lenders contributing equal parts to a US$500mn facility. Further deals are expected before the end of 2018, although most involved in the sector are keen to impress the very early stages at which the market is currently stood. The post DBS rejigs Wilmar loan in Asia’s latest sustainability-linked loan appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamHans-Dieter Holtzmann has been named chief country officer and head of global transaction banking for Deutsche Bank, Vietnam. Holtzmann has been with Deutsche Bank for more than 20 years, most recently as head of public sector for Germany. In this role he covered federal, state and municipal-level clients. Before this, he was an economic advisor to former German chancellor Helmut Kohl. He now reports to Werner Steinemueller, Asia Pacific head of Deutsche and Kaushik Shaparia, head of global subsidiary coverage for foreign exchange and corporate cash management in Asia. The bank has been in Vietnam since 1992 and employs 70 staff. Holtzmann will be responsible for leading and growing Deutsche Bank’s business there, including “cash management, trade finance and securities services, servicing both global and local clients”, Shaparia says. Steinemueller adds that Vietnam is “one of our key markets in Southeast Asia” and that “last year we significantly increased our capital base in this market”. “Our Vietnam franchise has shown profitable growth and we are excited about the country’s outlook,” he says. The last few years have been a period of relative flux for Deutsche Bank’s Asia transaction banking business. In November 2017, the bank lost Lisa Robins as head of global transaction banking for Asia Pacific. Robins joined Standard Chartered in a similar role two months later. In July of that year, Shivkumar Seerapu left his role as regional head of transaction banking fro the region, to join Lloyds Bank. He was replaced by Atul Jain in a newly-created role, head of trade finance and trade flow, Asia Pacific, reporting to global head of trade finance, Daniel Schmand. The post Deutsche Bank appoints new Vietnam country head appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamThe insurance arm of the World Bank Group has issued guarantees for commercial loans to projects in Myanmar and Pakistan. In Myanmar, the Multilateral Investment Guarantee Agency (Miga) is to cover US$114.76mn-worth of loans from the Industrial and Commercial Bank of China (ICBC) to Myanmar Fibre Optic Communication Network. The funds will cover the installation and maintenance of 4,000km of fibre optic cable through six states and eight cities in the country. It supports a government aim of connecting 90% of Myanmar to a telecommunications network by 2020. Miga’s guarantee provides protection for 5.5 years against the risks of transfer restriction, expropriation, war and civil disturbances. The organisation previously issued a guarantee for a 4,500km cable network in January 2017. In Pakistan the agency is covering a US$66mn loan from Sojitz Corporation, a Japanese trading company, to Hyundai Nishat Motor, a joint venture between the Korean carmaker Hyundai and the Nishat Group, one of the largest conglomerates in Pakistan. The guarantee will support the construction, design and operation of a vehicle assembly plant in Lahore, which will produce three Hyundai-branded vehicles from 2020. With an annual production capacity of 30,000 vehicles, the plant will source supplies such as tyres, rubber parts and batteries from local vendors. Again, the risks covered by Miga are transfer restriction, expropriation, war and civil disturbances – this time for 15 years. The package will help diversify Pakistan’s automotive industry, which is at this point dominated by Japanese companies. Sojitz, the lender, will operate a number of dealerships in Pakistan. The flagship dealership will be in Lahore, with a number of franchises to be opened around the country. The company has committed to investing US$136.5mn in Pakistan’s automotive sector. “This project will help strengthen Pakistan’s automotive industry, reducing vehicle shortages, improving safety standards, and increasing the choices consumers will have available to them,” says Keiko Honda, CEO and executive vice-president of Miga. The post World Bank covers loans to Myanmar and Pakistan appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamFintech company TradeIX has opened a Singapore office, making two senior appointments in the city state. Leon Scott (pictured) joins as head of Asia Pacific operations, while Eugene Buckley has been named business development executive for the region. Buckley joins from Standard Chartered, where he was head of trade finance innovation and alliances. He has previously worked as an independent consultant and for PrimeRevenue, and is responsible for growing the client base. Scott joins directly from PrimeRevenue, where he was a director for global capital markets. He has also worked for HSBC and DHL. Scott will oversee the delivery of all the company’s solutions and projects and is charged with growing its trade finance relationship base. TradeIX is an open blockchain platform focusing on trade finance. It’s Singapore office is part of a global development plan, the company says in a statement. It is among the most high profile of fintech disruptors in the trade finance sector. “Asia Pacific is one of the fastest growing regions in trade finance and our presence in Singapore is crucial for our current and future bank clients. The strategy of TradeIX is to continue our focus on expanding our client relationships in Asia Pacific,” Buckley says. Scott adds: “We anticipate strong growth of our team over the coming year, allowing us to serve more clients while covering a larger part of the trade finance market.” The post TradeIX opens Singapore office appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamThe majority of Asia’s top 1,000 companies are unconvinced that digital technologies such as blockchain will improve their trade finance experience. 54% of those polled in exclusive research conducted on behalf of GTR said they were either unsure whether it would translate into a better user experience, or that it would definitely not do so. This compares with 46% of respondents who think that such technology will improve the trade finance products they use. The feedback comes as many banks in the region aggressively pursue blockchain projects. HSBC and ING recently completed their maiden trade finance deal on the ledger, out of Hong Kong. Last week, Commonwealth Bank of Australia also completed a trade deal with the help of blockchain technology. The research, which was undertaken by East & Partners, polled 1,000 companies in 10 countries across Asia, namely: China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand. Support of digital products is strongest in China, Hong Kong and Singapore. This is unsurprising given that these are among the hotbeds of fintech innovation in the region. In countries such as Indonesia, the Philippines and Thailand, appetite for such products is lower. There are many examples of innovative banks and companies in these countries. In Thailand, 14 banks are developing a trade finance platform using blockchain technology. In the Philippines, meanwhile, invoice financing platform Acudeen is working with fintech company Stellar to build a blockchain layer that will connect its marketplaces across multiple geographies. However, in general, it is perceived that the technology is being pursued more vigorously in more mature financial markets, where regulators are seen to be driving many of the initiatives. “Engagement with digitised solutions tends to be driven by multinational companies in Singapore, Hong Kong and China. It’s almost a measure of maturity and sophistication,” says Paul Dowling, principal analyst at East & Partners. Furthermore, those companies that are interested in digitising their trade finance experience are expecting to be led by their banks. “That’s the go-to place for these corporates. They’re not necessarily building their own stuff, piloting their own digitised solutions, they’re looking for their banks to deliver,” Dowling says. A director at a Singapore-based commodity producer tells GTR that the company is extremely interested in – and well-versed on – developments with blockchain technology. However it is not a strategy they are pursuing independently. “We don’t pursue digitisation on our own. We pursue it with our banking partners as well as some of our key customers, and some of the other participants within our supply chain,” says the source, who prefers to remain unnamed. Other commodity players have independently staked out blockchain. Trafigura, for example, enlisted French bank Natixis last year to test the technology for use in the oil market. Steve Ehrlich, chief operating officer at the Wall Street Blockchain Alliance, says that the needle of sentiment will move towards blockchain and other forms of disruptive technology as education as to its benefits also grows. Ehrlich claims that many corporates “cannot define a blockchain, let alone articulate how it could impact their everyday financing activities”. He says that the association with bitcoin does not do the technology any favours, given the tumultuous year the cryptocurrency has had. “With all of this in mind, it is perfectly reasonable that a significant percentage of respondents are waiting to be convinced of the technology’s utility and efficacy,” he tells GTR. He adds: “From my point of view, one that appreciates and is supportive of blockchain-based trade finance and supply chain initiatives, this is not unreasonable. Looking at the 46% who are confident about the benefits of blockchain, it is good to see this level of optimism, though I’d imagine that they are looking for some of the same progress indicators as the pessimists.” The post Most Asian companies unconvinced by blockchain’s use in trade finance appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamHSBC’s chief executive John Flint says the trade war between the US and China is yet to affect the bank’s trade business in Asia. Speaking on an earnings call after the bank announced a 4.6% rise in net profit for the first half of 2018, Flint said that the forceful rhetoric could do more harm that the trade spat itself. China and the US have been engaged in a tit-for-tat tariff battle for months. In the latest escalation on Tuesday, the US announced that it will collect tariffs on a further US$16bn of Chinese goods from August 23. This follows existing tariffs on US$34bn, introduced in July, taking the cumulative total to US$50bn-worth of Chinese goods. While US President Donald Trump says the “tariffs are working big time”, Flint shrugged off their material impact to date. “We haven’t yet seen any meaningful impact on our customer base either through activity or risk profile. It’s too early to know if that will make an impact. When we think about the trade wars, I think from my perspective I am more concerned with the trade rhetoric damaging investor sentiment, investor confidence and sending markets lower. I think that could have more impact on our wealth business,” he said. Trade finance revenues were up for the first half of the year, while the vast majority of the bank’s profitability is coming in Asia. Of the US$10.7bn total profit before tax, US$9.4bn came from Asia. Despite that, higher than expected costs meant that the profit missed consensus predictions. Chief among the expenditure hikes were technological investments, with the bank singling out its recent blockchain experiments in Hong Kong as one area of progress. Other banks in the region have voiced their concerns about the potential of the trade war to eat into profitability. Speaking this week as OCBC announced a 16% hike in net profitability for the second quarter, chief executive Samuel Tsien said that “the concern is not only trade itself, it is actually a shrinkage of the economies that we would see in the event that it is carried out to the extent of the rhetoric”. DBS CEO, Piyush Gupta, upon announcing 20% rise in profits, described the trade war as a “psychological challenge”. He told CNBC: “The fact that people are more uncertain about where this is going creates a degree of lower confidence and that results, whether it’s the credit spreads or the stock market, in animal spirits in the region coming off.” Meanwhile, China’s export data for the month of July beat analysts’ forecasts, posting 12.2% growth. “Shipments to the US did weaken slightly, which hints at some impact from the tariffs. Equally though, this may reflect a broader softening in economic momentum among developed economies given that exports to the EU edged down too,” says Julian Evans-Pritchard, China economist at Capital Economics, in a note. The post HSBC chief shrugs off trade war headwinds as half-year profits rise appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamA Singapore-based company has gone live with a solution that allows trade documents to be registered and exchanged securely on blockchain. Focusing initially on Asia, the founders are positioning the platform to play a role in China’s Belt and Road Initiative (BRI). The Open Trade Blockchain (OTB), launched by Global eTrade Services (GeTS), allows any entity in the trade cycle – be it the buyer, seller, shipper or freight forwarder – to register their documentation on the platform. Other parties involved in the trade can subsequently verify that the documentation is legitimate through an automated matching process. Powered by blockchain technology, the system is designed to deal with real-world events, such as an exporter’s email account being hacked or commercial invoices within an email being fraudulently changed. Documents being on the platform include certificates of origin, commercial invoices, shipping and freight-forwarding documents. Users can drag and drop the documents onto the OTB, where other permissioned players in the trade cycle can access them. For parties with large volumes of documentation, APIs are available so that they can automatically extract documents stored on internal systems onto the OTB. Already, around 100,000 documents have been processed on the platform, mostly using GeTS’ existing user base. The firm has also partnered with a number of organisations and agencies, whose clients are now using the platform as well. As well as referring their own clients to use the system, these organisations can also make use of the OTB’s web service APIs to develop their own interoperable blockchain solutions. GeTS’ partners host nodes on the platform, which was developed by GeTS using Multichain, a permissioned blockchain framework that the company’s CEO, Chong Kok Keong, says was chosen because of its security and “ability to manage the extraction of data points in huge volume”. The “digital silk road” The geography of partners was chosen with an eye on China’s BRI. “With OTB linking China to the rest of the region, it will provide a strategic edge to businesses wanting to participate in China’s BRI initiatives as it offers greater connectivity with the country’s digital Silk Road,” a GeTS statement reads. The platform’s current user base of more than 4,000, which includes customers of GeTS’ existing solutions (such as export and import management, trade processing, regulatory and compliance software), as well as users of its partners’ services, can use the OTB for free. The company will begin to charge for services bolted onto the top of this “early building block” further down the line. No banks have signed up as yet, but Chong says discussions are ongoing. There are ambitions to host transactional documents on the OTB in the future. GeTS launched one year ago and is a subsidiary of the more established fintech company CrimsonLogic. Singapore has been a hive of blockchain related activity in recent months, as the Monetary Authority of Singapore (MAS) continues to work towards the launch of the Global Trade Connectivity Network (GTCN – a trade finance solution built on blockchain with the Hong Kong Monetary Authority) early next year. In May, the Singapore International Chamber of Commerce announced plans to move electronic certificates of origin (eCOs) onto a blockchain-based platform in a bid to improve transparency and security. In the same month, Arkratos, a Singapore company linked to trading house Rhodium Resources, launched a commodity trading platform built with blockchain technology. Earlier in the year, Pacific International Lines (PIL), PSA International (formerly the Singapore port authority) and IBM Singapore successfully tested a blockchain platform on a supply chain network between Singapore and China. This latest effort by GeTS can be viewed in line with MAS’ top-down strategy of connecting other parts of Asia to the blockchain activity in the city state. “Partnering with GeTS from Singapore on its OTB makes good business sense,” says Xu Xucheng, general manager at Suzhou Cross e-Commerce. “We are already seeing an increase in cross-border trade volumes, and with GeTS’ blockchain solution enhancing the security of the trade documents, it will definitely help to strengthen Suzhou’s position as an e-Commerce hub for China.” The post Singapore tech firm launches blockchain service for Belt and Road appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamThe first fully-integrated petrochemical complex in Vietnam has moved one step closer to fruition after a syndicate of lenders agreed to provide US$3.2bn in funding. The borrower is Siam Cement Group (SCG), the largest building material company in Thailand and in Southeast Asia. It is also Thailand’s second-largest company. Six lenders are involved in the package: Bangkok Bank, Export-Import Bank of Thailand (Thailand Exim), Krungthai Bank, Mizuho Bank, Siam Commercial Bank and SMBC. The loan has a tenor of 14 years, with SMBC acting as the financial advisor. Long Son Petrochemicals plant will be built in Vietnam’s Vunt Tau province, about 100km from Ho Chi Minh City. Construction is due to start in the third quarter of 2018, with the plant expected to produce 2.3 million tonnes of olefin – an unsaturated hydrocarbon used in wallpaper, carpeting, ropes and vehicle interiors – each year. The project requires total investment of US$5.4bn and is described by SCG’s president, Roongrote Rangsiyopash, as the company’s “flagship investment”. He adds: “This venture will increase competitive advantages of SCG’s chemicals business in Southeast Asia. Furthermore, the project is equipped with world-class advanced technologies which allow for high flexibility to utilise raw materials resulting in increased competitive advantage. The project also leverages digital technologies to create innovations for better products, services and solutions for customers.” The project has been in the works for years and SCG became the sole owner in May when it acquired Vietnam National Oil and Gas Group (PetroVietnam)’s stake in Long Son Petrochemical. Initially it was licensed in 2008 with an estimated required investment of US$3.7bn, which has grown significantly over the past decade. Given the importance of SCG and its vast array of subsidiaries to the Thai economy, the involvement of Thailand Exim is no surprise. It comes two months after the agency announced plans to open a representative office in Vietnam, with a view to expanding Thai exports to its Asean counterpart. “Vietnam is certainly one of the promising markets in the Cambodia, Laos, Myanmar and Vietnam (CLMV) region for Thai entrepreneurs,” said Thai Exim president Pisit Serewiwattana on a recent visit to Hanoi. The post Syndicate funds landmark Vietnamese petrochemical complex appeared first on Global Trade Review (GTR).