Malaysia optimistic of winning investor, ratings agencies’ confidence in budget plans

KUALA LUMPUR (Reuters) – Malaysia is “cautiously optimistic” it would win the confidence of investors and ratings agencies for its 2020 budget, its finance minister said on Saturday, as the government prioritized boosting growth over reducing the deficit in the short term.

Lim Guan Eng told reporters that given the global economic uncertainties, the country needed to “not only convince but reassure investors” that the Southeast Asian nation will be back on track for fiscal consolidation in 2021.

Malaysia’s government unveiled on Friday a smaller budget than expected for next year but flagged a wider budget deficit than earlier estimated, and said it would step in with stimulus measures should global demand worsen.

The government projected a fiscal deficit of 3.2% of gross domestic product (GDP), larger than an initial target of 3% but lower than this year’s 3.4%.

“So far the response by both the World Bank and even Moody’s have been positive so we are cautiously optimistic that we will be able to convince not just foreign investors and fund managers but also ratings agencies that this is necessary in order to ensure sustainable economic growth,” Lim said.

World Bank lead economist for Malaysia, Richard Record said in a note overnight that the budget was “a prudent balance between the competing needs for Malaysia to preserve fiscal sustainability, while also responding to the realities of a slowing economic environment”.

Record also said proposals to reform the country’s investment incentives framework was a step in the right direction.

Sovereign risk senior analyst at Moody’s Investors Service, Anushka Shah said in a note late Friday that Malaysia’s fiscal strength will continue to constrain its credit profile but the budget’s emphasis on backing higher-value added industries and on infrastructure development will support growth against a challenging global environment.

Esther Lai, head of sovereign ratings at RAM Ratings, a Malaysian ratings agency said the 3.2% deficit target was within expectations. “It is a pragmatic target as the government is striking a balance between supporting growth and keeping its promise for fiscal consolidation.”

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China Plans $90 Billion Cut in VAT for Manufacturers

(Bloomberg) — China is planning to cut the value-added tax rate that covers the manufacturing sector by 3 percentage points as part of measures to support the slowing economy, a person familiar with the matter said.

The reduction in the highest of the nation’s three VAT brackets could be announced as soon as this week, when political leaders are gathering in Beijing for the annual National People’s Congress, the person said, who declined to be named as the matter isn’t public.

Premier Li Keqiang is due to deliver his annual report on economic policy on Tuesday, a detailed document that sets targets for gross domestic product expansion as well as objectives for fiscal and monetary policy. A 3 percentage-point cut to VAT could deliver a boost worth up to 600 billion yuan ($ 90 billion) or 0.6 percent of GDP, according to estimates by Morgan Stanley.

The move helps corporate profits at a time when the economy is facing pressure from the U.S. trade standoff and the impact of a domestic debt cleanup. Officials have increasingly turned to tax policy in their efforts to support growth, as debt-fueled spending and monetary policy become increasingly constrained.

The tax cut is also part of broader, more “proactive” fiscal support. The budget deficit target is said to be widened to 2.8 percent of GDP from 2.6 percent in 2018, and the quota for special bonds is said to be set to 2.15 trillion yuan, a significant rise from 1.35 trillion yuan in 2018.

The Finance Ministry didn’t respond to faxed request for comment on the VAT reduction plans.

To contact Bloomberg News staff for this story: John Liu in Beijing at jliu42@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Sharon Chen

©2019 Bloomberg L.P.

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U.S. Treasury says no plans to block Chinese listings ‘at this time’: Bloomberg

(Reuters) – The United States does not currently plan to stop Chinese companies from listing on U.S. exchanges, Bloomberg reported on Saturday, citing a U.S. Treasury official.

“The administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time,” Bloomberg quoted https://bloom.bg/2obHkDb Treasury spokeswoman Monica Crowley as saying.

Reuters reported on Friday that President Donald Trump’s administration is considering delisting Chinese companies from U.S. stock exchanges in a move that would be part of a broader effort to limit U.S. investment in Chinese companies.

The Treasury did not immediately respond to a Reuters request for comment.

(This story has been refiled to add dropped ‘not’ in first paragraph)

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India says no plans to revise fiscal deficit target or cut spending now

By Manoj Kumar

NEW DELHI (Reuters) – India will not revise its fiscal deficit target immediately and is not planning any spending cuts at this stage, the country’s finance minister said on Sunday, after slashing corporate tax rates to boost a flagging economy.

India cut corporate tax rates on Friday in a surprise move designed to woo manufacturers, revive private investment and lift growth from a six-year low that has led to major job losses and fueled discontent in the countryside.

Though equity markets welcomed the move, bond yields spiked to a near three-month high on speculation the government may have to borrow more to meet its spending needs.

The measures will cut revenue by 1.45 trillion rupees ($ 20.4 billion) in the current fiscal year, according to government estimates.

But Finance Minister Nirmala Sitharaman said the government would only review the fiscal deficit target closer to the 2020/21 budget.

“At this point of time we are not revising any target. The decision will be taken later,” she told reporters at her residence in New Delhi on Sunday, adding that there was no plan to cut spending currently.

Sitharaman also said the government would decide on additional market borrowings for the second half of 2019/20 later.

Ratings firm S&P Global said on Friday India’s move to cut corporate tax rates was a “credit negative development” despite potentially boosting the economy as it will widen its fiscal deficit.

Government sources told Reuters this month that India is likely to miss its fiscal deficit target for the current financial year and, toward the end of 2019, be forced to raise it to 3.5% of GDP from 3.3% after economic growth fell to a six-year low of 5% in the April-June quarter.

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Trump plans to revoke California fuel economy standards

The Trump administration plans to set a nationwide standard for automotive emissions and fuel economy, depriving California of the waiver that allows it to set its own standards, according to an administration official. The proposal is expected some time this month from the Environmental Protection Agency.

California has had stricter fuel economy and auto emissions standards for decades. The state’s laws were enacted before the passage of the Clean Air Act to curb the automobile air pollution in the Los Angeles metropolitan area. Congress granted California a waiver to make stricter standards law in the state for public health reasons. 

Twelve states and the District of Columbia chose to adopt the California standards, too. The different standards have meant that automakers who want to sell cars in these states either must manufacture two sets of cars — those that meet the California standards and those that meet the looser national standards — or they could follow the California standards for all their cars. Some have already decided to side with California.

Trending News

In July, four automakers — Ford, BMW, Honda and Volkswagen — signed a deal with California to meet more stringent pollution and mileage standards than the Trump administration is proposing. 

President Trump has pushed for months to weaken Obama-era mileage standards nationwide. Any administration moves to rescind authority that Congress granted probably would end up in court. When President George W. Bush challenged California’s greenhouse gas emissions and mileage-setting ability, California fought it. The Obama administration subsequently dropped the Bush effort.

The Trump plan would have to be posted in the Federal Register and would be subject to public comment. His administration has tried to ease or remove scores of environmental regulations that it regards as unnecessary and burdensome. The tougher mileage standards were a key part of the Obama administration’s efforts to reduce climate-changing fossil fuel emissions.

The administration has sought to freeze Obama-era standards, keeping fleetwide new-vehicle mileage at 2021 levels of about 30 mpg. The administration argues that the extra expense to comply with the requirements will raise the price of new cars, making them unaffordable and depriving buyers of new safety technology. Many experts, including former EPA engineers, have challenged the administration’s safety assertion.

Arden Farhi contributed to this report.

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Czech PM says government plans digital tax on multinationals: Lidove Noviny

© Reuters. Extraordinary European Union leaders summit in Brussels © Reuters. Extraordinary European Union leaders summit in Brussels

PRAGUE (Reuters) – The Czech government is planning to prop up state budget revenues by introducing a special tax on multinationals, Prime Minister Andrej Babis was quoted by a daily newspaper as saying on Saturday.

Its central budget plans for this year and next show expected deficits of 40 billion crowns ($ 1.76 billion), or 0.8 percent of gross domestic product (GDP), a year, versus a broadly even balance or surpluses in recent years.

Weaker growth is forcing the center-left government to cut spending and find new income to reach that goal.

“We will implement a digital tax for multinational firms which do business in the Czech Republic but don’t reside here,” Babis said in an interview published by the daily Lidove Noviny.

Babis did not name any company that would be affected by the tax or say at what level it should be set, as this was still being negotiated with Finance Minister Alena Schillerova.

The government is also looking for savings after the Finance Ministry cut the GDP outlook for the coming years.

It even signaled that the country may see its public finances – which include the central and regional budgets, plus other funds – plunge into deficit for the first time since 2015.

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UK PM May plans watered-down Brexit vote to secure departure delay

© Reuters. British PM May speaks at the House of Commons in London © Reuters. British PM May speaks at the House of Commons in London

By William James and Alistair Smout

LONDON (Reuters) – British Prime Minister Theresa May scrambled on Thursday for a way to secure a new delay to Brexit in the face of parliamentary deadlock by setting out plans for a watered-down vote on her EU divorce deal to be held on Friday.

Lawmakers will vote on May’s withdrawal agreement at a special sitting but not on the framework for future relations with the EU she negotiated at the same time, a maneuver which sparked confusion among lawmakers.

Britain agreed with the EU last week to delay Brexit from the originally planned March 29 until April 12, with a further delay until May 22 on offer if May could get her divorce package ratified by lawmakers this week after two failed attempts.

"The European Union will only agree an extension until May 22 if the withdrawal agreement is approved this week," House of Commons leader Andrea Leadsom told lawmakers. "Tomorrow’s motion gives parliament the opportunity to secure that extension."

May’s Brexit package, comprising the legally binding withdrawal agreement and a more general political declaration on the future relationship with the EU, has been overwhelmingly rejected by lawmakers on two previous occasions.

It remains uncertain how, when or even whether the United Kingdom, the world’s fifth-biggest economy, will leave the EU. The risks that it could crash out as early as April 12 without a transition deal to soften the shock to its economy, or be forced into a long delay to the departure date to hold a general election, have increased as other options have faded.

May’s struggles to pass her deal have thrown the process into chaos, resulting in Brexit being put off and even a pledge from the premier to quit if that is what it takes to win over eurosceptic opponents in her Conservative party to the plan.

Although it cannot clinch approval of May’s deal in legal terms, Friday’s vote now dares Conservative eurosceptics to vote against the government on the very day that Britain was due to leave the bloc, a goal they have cherished for decades.

Parliament’s speaker said he would allow the vote to go ahead as it would be on the withdrawal deal only and so did not break rules against bringing the same package back more than once in the same session of parliament.

CONFUSION AT MAY’S NEW GAMBIT

But angry and confused lawmakers from the opposition Labour Party demanded to know whether the government’s motion was legal. Lawmaker Stephen Doughty said: "This just looks to me like trickery of the highest order."

On Wednesday, May offered to resign if her Brexit package was passed, securing support from some high-profile critics in her party. But the Democratic Unionist Party (DUP), which props up her minority government, said it still opposed the deal, denying her votes she desperately needs to pass it.

"Things change by the hour here but I’m not expecting any last minute rabbits out of the hat," DUP deputy leader Nigel Dodds told the BBC on Thursday.

May’s deal means Britain would leave the EU single market and customs union as well as EU political bodies. But it requires some EU rules to apply unless ways can be found in the future to ensure no border posts need to be rebuilt between British-ruled Northern Ireland and EU member Ireland.

Many Conservative rebels and the DUP object to this "Irish backstop", saying it risks binding Britain to the EU for years.

A bid on Wednesday by lawmakers to seize control of the Brexit process in the face of government disarray with a series of "indicative votes" on alternatives to May’s deal yielded no majority for any of them.

However the option calling for a referendum on any departure deal, and another suggesting a UK-wide customs union with the EU, won more votes than May’s deal did two weeks ago. Lawmakers will have another go at the more popular options on Monday.

Labour Brexit spokesman Keir Starmer said that May’s vow to resign if her deal was passed meant Britain was headed to a "blindfold Brexit", which would be exacerbated by a vote which did not encompass the political declaration on future relations.

"We would be leaving the EU, but with absolutely no idea where we are heading," Starmer said. "That cannot be acceptable and Labour will not vote for it."

With May floundering in her effort to get her Brexit package approved, EU officials and diplomats said on Friday Britain was more likely than ever to tumble chaotically out of the EU.

They said the bloc would push ahead with contingency preparations next week and was gearing up for an emergency Brexit summit the week after, probably on April 10.

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Forex News

Sears plans to unload pensions, close more stores

Eddie Lampert’s $ 5.2 billion offer to buy what’s left of Sears is drawing fire from the bankrupt retailer’s creditors as well as current and former employees.

The judge who will determine whether to approve Lampert’s bid for the retailer, which the billionaire investor still chairs, is hearing from creditors who oppose the deal. That includes the government entity that guarantees pensions when an insured plan closes without enough money to cover benefits.  

The Pension Benefit Guaranty Corp., or PBGC, filed a lawsuit Friday seeking to take over the retailer’s two pension plans, which cover 90,000 people. The plans are underfunded by an estimated $ 1.4 billion, according to the agency.

Lampert and his hedge fund, ESL Investment, seem willing to relinquish the liability, as they made clear in a court filing on Friday. ESL’s business plan would have Sears emerging from bankruptcy in better fiscal shape because it will no longer be shouldering about $ 4 billion in debt and pension obligations, the hedge fund stated.

The PBGC represents a potential hurdle to Lampert’s proposal because under his watch Sears entered arrangements that gave the agency liens on assets that ESL wants to void. 

Former Sears exec says retailer has been on “death spiral” for decade

More store closures

ESL’s future business plan “essentially allows for them to terminate three stores per month, and based on the court testimony, it’s unclear what will happen to those employees,” said Alex Brozman, a legal analyst at Reorg, a provider of financial and legal information. “The judge is very focused on what happens to the remaining employees at the company, and the public is as well,” said the analyst. 

“Eddie Lampert pitched his bid as him being a savior stepping in and saving 45,000 jobs, but as things become more clear, that is not entirely accurate.”

ESL reiterated that its offer is the sole “long-term opportunity to save and create jobs,” a spokesperson emailed. “We intend for the new company to operate as many Sears and Kmart stores as reasonably possible, including new smaller stores that emphasize our stronger capabilities. Continuing to operate a meaningful network of stores is essential to achieving our goal of returning Sears to profitability.”

On Thursday, the bankruptcy court is expected to hear additional testimony about the business plan. “There are so many outcomes that could happen, bankruptcy is such an ongoing state of negotiation,” said Brozman.

How Sears went from innovation to bankruptcy

A push for severance

The judge is also being asked to meet with a group of current and former Sears and Kmart workers who hope to push for concessions from the retailer. Organized through the labor group Rise Up Retail, workers in a letter called on the judge to protect their interests with steps including severance for those who’ve been laid off.

Sears could have regained its feet up until 2005, after five years of being poorly run by Alan Lacy, whose crowning act was turning it over to Lampert, said Mark Cohen, the former CEO and chairman of Sears Canada and current director of retail studies at Columbia University’s business school.

In Cohen’s view, Lacy is the real villain in the once mighty retailer’s demise, while Lampert is “just a financial pirate.”

As things stand, the judge will determine whether Sears liquidates its remaining 425 stores immediately or the process is drawn out another year or so as Lampert continues a 13-year reign of stripping Sears of its assets, said Cohen. 

Creditors have so far refused to agree to Lampert’s demand that he and ESL be held harmless from future litigation, another potential stumbling block in the process. 

“He’s as guilty as you can get,” said Cohen, “but maybe not in a court of law, and that’s the difference.”

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Facebook CEO plans public debates about tech for 2019 personal challenge

© Reuters. FILE PHOTO:  Facebook's founder and CEO Mark Zuckerberg speaks at the Viva Tech start-up and technology summit in Paris © Reuters. FILE PHOTO: Facebook’s founder and CEO Mark Zuckerberg speaks at the Viva Tech start-up and technology summit in Paris

(Reuters) – Facebook Inc (NASDAQ:) Chief Executive Officer Mark Zuckerberg said on Tuesday he will host a series of public discussions about the future of technology in society as part of his personal challenge this year.

Zuckerberg sounded his plan in a Facebook post, which has been a regular feature when he airs his New Year’s resolutions that in the past have included personal goals such as learning Mandarin to reading two books a month.

"Every few weeks I’ll talk with leaders, experts, and people in our community from different fields and I’ll try different formats to keep it interesting. These will all be public, either on my Facebook or Instagram pages or on other media", Zuckerberg said in a Facebook post https://www.facebook.com/zuck/posts/10106021347128881.

Facebook’s reputation suffered last year from a data scandal involving a British political consulting firm that involved personal information of millions of users, putting the social network under tight scrutiny across the globe.

Last year Zuckerberg said he would fix many of Facebook’s issues such as the use of the platform for hate speech, spreading misinformation and political meddling.

As part of those efforts, Facebook stepped up its fact-checking efforts, took down suspicious pages and accounts, improved its systems for identifying fake accounts. However, it still faces criticism from regulators and lawmakers for not doing enough.

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Zimbabwe plans new currency as dollar shortage bites: Finance Minister

© Reuters. People queue to withdraw US dollars from a money transfer shop in Harare © Reuters. People queue to withdraw US dollars from a money transfer shop in Harare

By MacDonald Dzirutwe

HARARE (Reuters) – Zimbabwe will introduce a new currency in the next 12 months, the country’s Finance Minister said, as a shortage of U.S. dollars plunges the financial system into disarray, forcing businesses to close and threatening unrest.

The southern African nation abandoned its own hyperinflation-wrecked currency in 2009 at the height of an economic recession, adopting the greenback and other currencies including sterling and the South African rand.

But without enough hard currency to back up the $ 10 billion of electronic funds trapped in local bank accounts, businesses and civil servants are demanding payment in cash which can be deposited and used to make payments both inside and outside the country.

Mthuli Ncube told a townhall meeting late on Friday that a new local currency would be introduced in less than twelve months.

"On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years," he said.

Zimbabwe currently has less than two weeks import cover, according to central bank data, and the government has previously said it would only consider launching a new currency if it had at least six months of reserves.

Locals are haunted by memories of the Zimbabwean dollar, which became worthless as hyperinflation spiraled to reach 500 billion percent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.

A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.

President Emmerson Mnangagwa is under pressure to revive the economy but, in something of a vicious circle, the dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.

With less than $ 400 million in actual cash in Zimbabwe according to central bank figures, there are fuel shortages and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370 percent.

The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month due to the dollar crunch.

Zimbabwe’s iconic manufacturer of cooking oil and soap, Olivine Industries said on Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $ 11 million.

A local associate of global brewing giant Anheuser-Busch Inbev (BR:) said this week it would invest more than $ 120 million of dividends and fees trapped in Zimbabwe into the central bank’s savings bonds.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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