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20 major companies to open or expand in Hong Kong this week: finance chief

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20 major companies to open or expand in Hong Kong this week: finance chief

“These key companies will help attract upstream, midstream and downstream companies in related sectors to cluster in Hong Kong, promoting the vibrant development of the entire innovation and technology ecosystem,” Chan said.

Paul Chan, the financial secretary, has heralded the creation of 13,000 new jobs and HK$40 billion in investment from firms that have moved or plan to expand operations in the city. Photo: Edmond So

The news came as Chan promised Hong Kong would continue to develop as an international innovation and technology centre, on top of being a multinational supply chain management giant and trade finance hub.

“While traditional markets in Europe and the United States remain important for Hong Kong’s exports of goods, their share has significantly decreased,” he wrote.

Chan said the proportion of exports to the United States fell from 18.6 per cent of the total in 2003 to 6.5 per cent last year and exports to the European Union went down to 6.6 per cent from 10.5 per cent over the same period.

But exports to Asean countries over the time frame went up from 6.1 per cent to 7.9 per cent, which made the bloc Hong Kong’s second-largest export market after mainland China. The proportion of exports destined for the Middle East went up to 3.3 per cent.

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Chan said geopolitical developments, global manufacturing adjustments, supply chain restructurings, and the emergence of nearby ports with excellent facilities had reshaped production and export patterns of businesses and affected Hong Kong’s export performance.

Hong Kong plans e-commerce festival ‘to boost city’s brands in mainland’

He explained that large manufacturers had adjusted their supply chains, but many medium-sized ones had yet to do so.

Chan added environmental, social and corporate governance, as well as high interest rates, had led to difficulties in trade finance, which had affected some businesses.

“Hong Kong has a solid foundation in trade and various related professional services, providing favourable conditions to capture the opportunities arising from these changes,” he said.

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“The key lies in assisting companies in strengthening supply chain and value chain management, and creating higher value for their cross-border businesses through a focus on more efficient commercial and professional services.”

He said the city’s goal, laid out in February’s budget, was to establish itself as a one-stop shop able to offer services that included supply chain management, trade financing, consulting, talent development, and corporate training.

Chan added the city wanted to tap into the estimated 50,000-plus medium-sized manufacturers in the Greater Bay Area and the Yangtze River Delta, many of which would need to engage with overseas businesses as they expanded internationally.

Hong Kong finance chief says Beijing’s growth target ‘not easy, but achievable’

The Greater Bay Area is Beijing’s plan to link Hong Kong, Macau and nine mainland cities to create an economic and business powerhouse.

Chan said Hong Kong’s advanced financial infrastructure could provide companies with a variety of funding options and highlighted that more than 70 of the world’s top 100 banks had operations in the city.

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“Mainland enterprises settling in Hong Kong will have access to more efficient and lower-cost trade financing services,” he added.

Chan said the city would launch the first phase of the mBridge this year, which will allow cross-border transactions using central bank digital currencies and boost payment speed as well as reduce costs.

The multi-central bank digital currency platform is a cross-border payment and foreign exchange transaction scheme being developed by the Hong Kong Monetary Authority in collaboration with the central banks of the mainland, Thailand and the United Arab Emirates.

Gary Ng Cheuk-yan, a senior economist at corporate and investment bank Natixis, agreed Hong Kong had to adapt to new demands because of a “global supply chain reshuffle”.

“The city will not only need to connect mainland and Hong Kong firms to new markets, but will also have to attract trade and capital flows that could have bypassed the city,” he said.

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“The core advantages of Hong Kong remain in free capital flows and low taxes, meaning it is easy for firms to manage trade and investment here.”

But Ng added the city should be prepared for geopolitical problems and stiff competition from other jurisdictions such as Singapore, which held a natural advantage in the Asean bloc of countries as a fellow member.

“Hong Kong will have a role to play, but it will not be as easy as in the past,” he said.

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EU finance ministers deadlocked on RRF extension and EIB defence spending

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EU finance ministers deadlocked on RRF extension and EIB defence spending

European finance ministers fell short of achieving any breakthroughs at their meeting in Luxembourg on Friday (12 April) as divisions persisted on whether to prolong the bloc’s multibillion pandemic recovery fund and how the European Investment Bank’s (EIB) lending criteria could be widened to include defence-related assets.

Belgian finance minister Vincent Van Peteghem told reporters following the meeting that there were “different views” among ministers about whether the EU’s €723.8 billion Recovery and Resilience Facility (RRF) should be extended, adding that “some member states… emphasised the one-off nature of the facility.”

Commission executive vice-president Valdis Dombrovskis, however, defended the “ground-breaking” nature of the fund, whose “design and flexibility have helped us to tackle new challenges, such as high inflation [and] energy security issues.”

“The RRF re-assured financial markets on the EU’s resolve to tackle the Covid-19 challenges, ensured a rapid flow of funds to member states in a time of great difficulty, played a key rule in preserving public investments and sustained a solid recovery, returning the EU economy to pre-pandemic levels sooner than expected,” Dombrovskis said.

Meanwhile, Van Peteghem noted that “on specific issues, further discussion is needed” on how the EIB could potentially step up support for Europe’s security and defence industry.

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However, he said there was still “large support amongst ministers to move forward” with an “action plan” — the outline of which was presented to ministers on Friday by EIB president Nadia Calviño.

Before the meeting, Calviño informed reporters that her plan would include the results of a two-month investigation into the “definition” of so-called dual-use technologies, as called for by EU finance ministers in February.

The EIB’s current mandate limits the range of permissible defence-related investments to dual-use items that should be used mostly for civilian and military purposes.

Most of the technology’s expected future revenue must also derive from its civilian use.

The bank is explicitly prohibited from investing directly in weapons, ammunition, and “core” military infrastructure.

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Panaceas for Europe’s investment and security needs?

The RRF and the EIB have been objects of growing attention by European policymakers in recent months.

The RRF is viewed by many as a source of much-needed financing for member states still reeling from the twin shocks of the COVID-19 pandemic and subsequent energy crisis.

However, several of the so-called ‘frugal’ EU countries — including Germany, the bloc’s largest economy — are resistant to extending the facility beyond its scheduled expiry in 2026.

Meanwhile, the EIB — the world’s largest multilateral lender by assets — is seen by many member states as a potential tool to boost European defence expenditure, as Russia’s war in Ukraine continues to rage into its third year and member states assess ways to step up their defence capacity.

Last month, the European Council “invited” the EIB “to adapt its policy for lending to the defence industry and its current definition of dual-use goods, while safeguarding its financing capacity.”

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In February the European Parliament called on the bank to “enhance its support… to the European defence industry,” urging it to overhaul its investment eligibility criteria “so that ammunition and military equipment that go beyond dual-use application are no longer excluded from EIB financing.”

However, several stakeholders have expressed deep concern about the EIB’s possible move into defence-related spending, citing the possibility of the bank losing its high ESG and triple-A credit ratings.

‘No discussion of scandal’

Van Peteghem, whose country currently holds the rotating presidency of the Council of the EU, told reporters that there had been “no discussion” among ministers about the recent scandals involving RRF financing.

Last week, the European Public Prosecutor’s Office (EPPO) announced that 22 individuals had been arrested in Italy, Austria, Romania and Slovakia for embezzling €600 million in RRF funds.

In an interview with Euractiv on Tuesday (9 April), European Court of Auditors president Tony Murphy said that the facility’s scheduled expiry by the end of 2026 is “contributing to the risk” of the funds’ misappropriation by amplifying “pressure on member states to spend this money quickly.”

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“That in itself inherently raises the risk of people being opportunistic and taking advantage of shortcuts or whatever might be there,” he said.

Murphy stressed that a lack of central oversight was “amplifying” the likelihood of the funds’ misuse.

His comments came on the same day that European Commissioner for Economy Paolo Gentiloni called for the RRF to be used as a “blueprint” for future EU funding programmes — arguing that the bloc would “benefit hugely from a permanent, safe asset commensurate with the size of its economy, and this will be a big issue to discuss for the next Commission.”

Agreed at the height of the COVID-19 pandemic in December 2020, the RRF comprises €385.8 billion worth of loans and €338 billion in grants, financed through debt jointly underwritten by EU member states.

The funds, the flagship component of the bloc’s NextGenerationEU (NextGenEU) initiative, are intended to boost Europe’s post-pandemic recovery by financing green, digital, and other critical investments in exchange for targeted reforms.

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[Edited by Anna Brunetti/Rajnish Singh]

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Japan finance chief excludes no options to counter volatile yen moves

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Japan finance chief excludes no options to counter volatile yen moves

Japan is keeping tabs on factors driving the yen’s fall relative to the U.S. dollar and will respond as appropriate to excessive volatility without ruling out any options, Finance Minister Shunichi Suzuki said Friday.

Suzuki told reporters that the government will also take steps to minimize the negative impact of the weaker yen on people’s livelihoods and the broader economy after the Japanese currency fell to a new 34-year low of 153.32 in New York overnight.

Financial markets remain vigilant about the possibility of market intervention by Japanese authorities to arrest the yen’s rapid depreciation.

A weak yen was once welcomed as a boon to exporters, particularly automakers that form the backbone of the economy, as it boosts their overseas profits in yen terms. In recent years, however, the negative side has become increasingly clear amid higher import costs for energy and raw materials, in a blow to businesses and households.

“Currency movements should be stable, reflecting fundamentals. Excessive fluctuations are not desirable,” Suzuki said, adding that he is in “constant contact” with Masato Kanda, the country’s top currency diplomat, over market developments.

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“It’s not just the (foreign exchange) rates we are looking at with a heightened sense of urgency but also the background moves,” he said. “We will act appropriately to excessive volatility without ruling out any options.”

The yen is on a downtrend as financial markets expect the wide interest rate differential between Japan and the United States to remain.

Its fall beyond 153 against the dollar came after the Bank of Japan’s first interest rate hike in 17 years, while the Federal Reserve is now widely expected to take more time before cutting interest rates due to sticky inflation.

Repeated verbal warnings are viewed as preceding actual intervention by Japanese authorities. Japan previously stepped into the market by buying the yen for the U.S. currency in October 2022 after it fell to 151.94, higher than its level of around 153 on Friday in Tokyo.

Suzuki declined to reveal the government’s assessment of the factors behind the yen’s recent depreciation and whether preparations are being made with Kanda for a fresh yen-buying, dollar-selling operation.

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Related coverage:

Japan warns “all options” on table to counter excessive yen moves

Yen sinks to 153 range vs. dollar, 1st time in 34 years


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Finance watchdogs press Morgan Stanley on work with wealthy clients who have been flagged about money laundering

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Finance watchdogs press Morgan Stanley on work with wealthy clients who have been flagged about money laundering

Morgan Stanley shares fell the most in five months after a report that a cadre of U.S. regulators are scrutinizing the firm’s efforts to prevent potential money laundering by wealthy clients.

The Securities and Exchange Commission, the Office of the Comptroller of the Currency and other Treasury Department offices are digging into whether the New York-based bank has done enough to investigate the identities of risky clients, the Wall Street Journal wrote, citing unidentified people familiar with the matter. The Federal Reserve was already known to be looking into those controls last year.

The stock fell 5.3% to $86.84 during regular trading in New York on Thursday, its biggest drop since mid-October. A Morgan Stanley spokesperson declined to comment.

The SEC and the Treasury’s Financial Crimes Enforcement Network have sought information on certain clients outside the U.S. who’ve raised red flags and the bank’s policies to address it, the Journal said. Specifically, the SEC pressed Morgan Stanley about why it did business with some who had been cut off by E*Trade, the digital-trading platform the company acquired.

The inquiries, which haven’t been publicly disclosed by the bank, focus on a wealth management arm that has swelled into Morgan Stanley’s biggest business, generating almost half of the company’s revenue last year. The U.S. government has been ramping up pressure on the industry to tighten money-laundering controls as authorities make greater use of sanctions.

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The bank has told regulators it’s improving controls and procedures and met with Federal Reserve officials to allay concerns last year.

The OCC also sent the firm a formal warning last year, known as a matter requiring attention, demanding executives address its concerns, according to the Journal. That followed an annual exam of the bank’s anti-money-laundering programs, and a document shows the bank sent the regulator detailed plans for action, the publication said.

Regulators have issued MRAs with greater frequency in recent years. When concerns are deemed more urgent, they also issue matters requiring immediate attention. Such notices are typically flagged to the board and generate a reply including a time line for corrective action. Deeper investigation or enforcement action may follow if officials are dissatisfied.

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