<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1307" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-scaled.jpg" alt="" class="wp-image-505609" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-300x191.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-820x523.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-141x90.jpg 141w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-768x490.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/G5RU4II5WFP75F4POZ2VUFIWME-1536x980.jpg 1536w" sizes="auto, (max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">FILE PHOTO: A general view shows the central business district in downtown Nairobi, Kenya February 18, 2022. REUTERS/Thomas Mukoya</figcaption></figure>



NAIROBI, Aug 12 (Reuters)&nbsp;&#8211;&nbsp;Kenya&#8217;s new Finance Minister John Mbadi said on Monday he would clean up the bloated government payroll and carry out tax reforms to cut spending and bolster the government&#8217;s finances.



The East African nation, which has been rocked by deadly protests over the last two months, faces gaping budget deficits and needs to boost revenue collection to meet conditions set by the International Monetary Fund for a lending programme.



&#8220;Anyone who is standing in the way of that reform, please give way,&#8221; Mbadi said, referring to a long-delayed project to link government payrolls with technology systems to weed out ghost workers and pensioners. &#8220;Payroll reforms must be done.&#8221;



Mbadi said he would also speed up reforms at the Kenya Revenue Authority, which collects taxes.



&#8220;If we could increase our revenue collection to GDP by just about 3%, I am sure that would give us almost 400 billion shillings additionally,&#8221; he said, pledging to continue with his predecessor&#8217;s tax amnesty programme.



The amnesty, which allows those who pay overdue taxes to gain exemption from penalties, has so far netted about 43 billion shillings ($334.63 million), Mbadi said.



($1 = 128.5000 Kenyan shillings)



(Reporting by Duncan Miriri; editing by Mark Heinrich)

General view of the central business district in Nairobi

Kenya’s finance minister eyes tax, payroll changes to cut deficits

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-820x462.jpeg" alt="" class="wp-image-518027" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107430312-1718715743467-gettyimages-539259934-img_1239_40_fused.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The London skyline. Andrea Pucci | Moment Open | Getty Images</figcaption></figure>



LONDON — European stocks kicked off the new trading week higher, with U.S. and U.K. inflation data set to dominate focus this week.



The pan-European Stoxx 600 index nudged 0.3% higher at Monday’s open as investors hunt for signs that last week’s market rout is finished. Financial services and insurance led gains, both up by around 0.6%.



European stocks followed their counterparts in Asia-Pacific higher, continuing to shake off recent volatility. Global stock markets see-sawed last week with steep sell-offs followed by a sharp rebound.



The Stoxx 600 index ended up with a weekly gain of 0.27%, according to LSEG data, rebounding from a 2.9% decline the week before.



U.S. stock futures were little-changed Monday as investors await key inflation data, with the core producer price index Tuesday followed by July’s consumer price index Wednesday.



Major Wall Street averages rose Friday, with the indexes making a sharp recovery from a downturn.



Investors this week are hoping to get a better sense of the state of the U.S. economy after recent fears of a job market slowdown spooked traders and rocked the market.



U.K. inflation data is due on Wednesday, the first print since the Bank of England cut interest rates by 25 basis points.

107430312-1718715743467-gettyimages-539259934-img_1239_40_fused

European markets open higher as rebound continues; U.S., UK inflation in focus this week

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1261" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-scaled.jpg" alt="" class="wp-image-425668" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-300x185.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-820x505.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-146x90.jpg 146w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-768x473.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/06/OZ4B5K4TQZJQ3DGFJGTGZNTIYQ-1536x946.jpg 1536w" sizes="auto, (max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">FILE PHOTO: A man walks beneath electricity pylons during frequent power outages from South African utility Eskom, caused by its ageing coal-fired plants, in Orlando, Soweto, South Africa, January 16, 2023. REUTERS/Siphiwe Sibeko//File Photo</figcaption></figure>



PRETORIA, Aug 12 (Reuters)&nbsp;&#8211;&nbsp;South Africa&#8217;s plan to expand its power grid, now the biggest bottleneck to replacing coal with renewables, has hit a snag: finding investors to lend the necessary $21 billion to a near-bankrupt state monopoly.



Since May&#8217;s election brought a coalition government to power, there has been a policy shift favouring renewables, after years of bureaucratic delays and contradictory messages about South Africa&#8217;s willingness to give up coal, which provides 80% of its power.



But as private providers &#8211; including Mainstream Renewable (owned by Aker Horizons&nbsp;AKH.OL), EDF Renewables&nbsp;EDF.PA&nbsp;and Acciona SA&nbsp;ANE.MC&nbsp;&#8211; prepare to transform the sector, many face another problem: how to get power from sunny and windy outposts to energy-hungry urban centres.



Six officials told Reuters over the past month they were considering options for financing some 14,000 kilometers (8,700 miles) of power lines and pylons, but hadn&#8217;t yet found a solution.



&#8220;Our quest to decarbonise &#8230; relies heavily on our ability to expand the grid,&#8221; new Energy Minister Kgosientso Ramokgopa told Reuters at his office in Pretoria late last month.



&#8220;But raising 390 billion rand ($21.30 billion), the state doesn&#8217;t have the balance sheet to roll out that size of capital investment.&#8221;



Meanwhile, donors offering a total of $11.6 billion mostly in loans to fund climate-related projects are reluctant to lend the needed cash to state power firm Eskom without sovereign guarantees, which the government cannot currently provide, two donor country sources and a South African source involved in the programme, told Reuters.



That is because of its high debt levels &#8211; Eskom owes over 400 billion rand, even after receiving billions in government debt relief. Broke municipalities also owe the utility 78 billion rand, which Ramokgopa calls an &#8220;existential threat&#8221;.



Representatives of the German and French partners in the donor-funded program did not respond to emailed questions, while British partners declined to officially comment.



<h2 class="wp-block-heading" id="h-simply-no-way">&#8220;SIMPLY NO WAY&#8221;</h2>



Burning coal has rendered South Africa among the world&#8217;s top 15 greenhouse gas emitters &#8211; above Italy, France and Britain. It is seen as a test case for aid to developing countries to switch to green energy, alongside Vietnam and Indonesia.



But years of blackouts from aging power stations have also ravaged Africa&#8217;s most industrialised economy, and Eskom only ended them earlier this year by firing up its coal burners to full capacity, most likely increasing emissions.



A bidding process to bring in independent producers to generate power and sell it to Eskom last year failed owing to insufficient grid capacity, Rudi Dicks, head of project management at President Cyril Ramaphosa&#8217;s office, said.



The core issue is that the grid stems from the northeastern coal belt, but the sun beats down hardest on the semi-desert Northern Cape, while coastal Eastern Cape gets the best winds.



&#8220;You really need to reconfigure the entire grid &#8230; (but) they are chugging along building at less than 10% the pace that&#8217;s needed,&#8221; Crispian Oliver, head of the Presidential Climate Commission, told Reuters.



Eskom&#8217;s plan involves building 1,400 kilometres of transmission lines every year for at least 10 years. Last year, it managed 74 km (45 miles).



&#8220;There&#8217;s simply no way Treasury can put out (sufficient) &#8230; guarantees,&#8221; Oliver told Reuters, remarks echoed by Ramokgopa.



&#8220;The alternative is to &#8230; get the private sector to take on large portions of the risk,&#8221; Oliver said, via mezzanine finance.



<h2 class="wp-block-heading" id="h-we-need-to-build-now">&#8220;WE NEED TO BUILD NOW&#8221;</h2>



A Treasury spokesperson did not respond to a request for comment, but the two donor sources said options included escrow accounts &#8211; in which a neutral third party holds the funds and releases them when both sides have met their obligations &#8211; and offtake agreements with private firms that would fund construction in exchange for future earnings.



The latter could unlock cash from the United States, which currently doesn&#8217;t fund transmission as it will not work with public institutions.



&#8220;Should a framework involving private entities be established, we would be open to exploring partnerships,&#8221; Emilia Adams, a U.S. embassy spokesperson, said.



Eskom CEO Dan Marokane told Reuters that to attract private companies into transmission, the regulator still needed to overhaul tariffs &#8220;because investors want to know with certainty what their return expectations can be&#8221;.



He hoped this would happen by year-end.



Dicks, meanwhile, said the Treasury had agreed in principle to fund some grid buildout on a case-by-case basis, and that work was underway to get private firms involved.



&#8220;But that&#8217;s 18 months away,&#8221; he said. &#8220;And we need to build right now&#8221;.



Officials had agreed to adopt engineering procurement and construction financing (EPC) and independent power transmission funding (IPT) methods, Dicks said, with the latter opening up the possibility of getting China, which last year signed a raft of energy deals with South Africa, involved.



A spokesperson for The State Grid Corporation of China could not be reached for comment.



($1 = 18.4847 rand)



(Reporting by Tim CocksAdditional reporting by Collen Howe in Beijing and Kopano Gumbi in Johannesburg; Editing by Sharon Singleton)

FILE PHOTO: South Africa’s Eskom to reduce power cuts but long-term outlook bleak

South Africa battles to fund vital grid upgrade for green energy

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="546" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-820x546.jpg" alt="" class="wp-image-517945" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-820x546.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-768x511.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-1536x1022.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/AMFIPVFR25OWJEGKNAXCTAXDRQ-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Students attend a class at Super Climax Academy, a coaching institute training students to prepare for competitive examinations to secure government jobs, in Prayagraj, India, June 21, 2024. REUTERS/Sahiba Chawdhary</figcaption></figure>



ZURICH, Aug 12 (Reuters)&nbsp;&#8211;&nbsp;Youth unemployment worldwide last year dipped to a 15-year-low and is likely to continue falling through 2025, although weaker growth means Asia has lagged this trend, the International Labour Organization said in a report published on Monday.



The ILO said 64.9 million people aged between 15 and 24 worldwide were unemployed last year, good for a rate of 13%, and it forecast that proportion would decrease further over the following two years to sit at 12.8% in 2024 and 2025.



The improvement in the market was driven by robust economic growth rates following the COVID-19 pandemic which has spurred demand for youth labour, the ILO said.



Youth unemployment rates in 2023 returned to their pre-pandemic rates or lower in most, but not all subregions.



For young people in the Arab States, East Asia, and South-East Asia and the Pacific, youth unemployment rates were higher last year than in 2019, the ILO said.



For the Arab States, this was a continuation of the pre-COVID-19 trend. But for the Asian subregions, it marked a change of direction from the stronger growth of the pre-COVID years.



The ILO also noted that the far lower average age of the population in Africa than in more developed nations has raised questions about economic sustainability there.



The imminent &#8220;youthquake&#8221; in Africa means job creation is becoming a critical issue for social justice and the future of the global economy, the organization said.



(Reporting by Dave Graham, Editing by Rachel More)

India’s youth flock to cram schools in search of security of government jobs

Global youth unemployment in decline and seen falling further, report finds

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="429" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4-820x429.jpg" alt="" class="wp-image-516568" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4-820x429.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4-300x157.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4-160x84.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4-768x402.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4-1536x804.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4.jpg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via Reuters</figcaption></figure>



NAIROBI, Aug 8 (Reuters)&nbsp;&#8211;&nbsp;Police fired tear gas to clear pockets of anti-government demonstrators from the centre of Kenya&#8217;s capital Nairobi on Thursday, as their protest movement sought to capitalise on earlier concessions and compel President William Ruto to resign.



The &#8220;Nane Nane&#8221; march, meaning &#8220;eight eight&#8221; in reference to the date, follows weeks of similar pro-reform protests that saw Ruto scrap planned tax hikes and overhaul his cabinet.



The youth-led nationwide protests began peacefully in June before turning violent, and more than 50 people have been killed.



Shops were shut and streets left deserted after riot police set up road blocks and threw tear gas canisters to disperse handfuls of protesters across Nairobi&#8217;s financial district. Police fired tear gas at one group of a dozen protesters chanting &#8220;Ruto must go&#8221;, a Reuters journalist reported.



A lone rag-picker was seen gathering up some of the canisters, occasionally wincing as some still appeared to be hot.



At least three journalists were wounded when police fired tear gas canisters close to them, the International Press Association of East Africa, which represents hundreds of journalists in the region, said on X.



In what has been the biggest crisis of his two years in office, Ruto bowed to pressure and shelved the new taxes in June after some demonstrators briefly stormed parliament.



Ruto fired his entire cabinet apart from the foreign minister last month, a victory for activists and protesters who had demanded sweeping changes.



Ruto then named opposition members to his cabinet, but activists criticised the move as a corrupt deal and reiterated demands that he resign. They called for far-reaching reforms to tackle corruption and for regional county and national governments to improve service delivery.



Ruto has said the new cabinet reflects national unity and will address the demands of the protest movement. He has promised to investigate alleged abuses by the police during demonstrations but has broadly defended their conduct.



Ruto&#8217;s reconstituted cabinet was sworn in on Thursday.



&#8220;Where Kenya is today, while competition is healthy and good, there is a moment where the interest of a nation is greater than the interest of a political formation,&#8221; he said in a speech after the ministers were sworn in.



The protests have no official leaders and have been mostly organised online.



Ruto has stepped up criticism of them after initially praising demonstrators for being peaceful.



&#8220;We are a proudly democratic country, based on the firm foundation of the rule of law. There is no room for anarchy, chaos and violence,&#8221; Ruto said in Embu County on Wednesday.



The Kenyan police asked people to avoid crowded areas ahead of Thursday&#8217;s protests and said it was deploying adequate personnel across the country.



(Reporting by Bhargav Acharya, Humphrey Malalo, Nelson Aruya and Jeff Kahinju, Editing by Hereward Holland, William Maclean)

https___cloudfront-us-east-2.images.arcpublishing.com_reuters_APRKGTRBQVIBVAXDNA2LHTJGC4

Kenya police use tear gas to clear pockets of protesters in Nairobi

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="573" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-820x573.jpg" alt="" class="wp-image-516475" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-820x573.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-300x209.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-129x90.jpg 129w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-768x536.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-1536x1072.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6C4MZYOVDRPGPIB65MJOQGNVLA-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: Ethiopian Prime Minister Abiy Ahmed speaks in parliament during a session to approve the country&#8217;s 2024/25 budget, in Addis Ababa, Ethiopia, July 4, 2024. REUTERS/Tiksa Negeri/File Photo</figcaption></figure>



ADDIS ABABA, Aug 8 (Reuters)&nbsp;&#8211;&nbsp;Ethiopia&#8217;s securities exchange is expected to start operations in October, its chief executive was quoted as saying by state-affiliated media on Thursday.



The establishment of a bourse is part of Prime Minister Abiy Ahmed&#8217;s push to open up the country &#8211; which is heavily controlled by the state &#8211; to greater private investment.



All human resource and technological requirements for the bourse will be in place by October, the bourse&#8217;s CEO Tilahun Esmael Kassahun was quoted as saying by Fana Broadcasting.



Abiy said in February that the government was discussing the&nbsp;sale of 10% of state-owned&nbsp;telecoms company Ethio Telecom via the stock exchange.



Ethio Telecom held a monopoly before a consortium led by Kenya&#8217;s Safaricom won the country&#8217;s first private telecoms licence and started commercial operations in 2022.



Ethiopia&#8217;s economy is still grappling with the legacy of being a command economy for decades, but Abiy&#8217;s push since 2018 towards more private sector involvement has been notable for being more ambitious than previous attempts at opening up.



In late July,&nbsp;Ethiopia floated its currency&nbsp;ahead of securing International Monetary Fund support, a step that needed to happen before a long-delayed debt restructuring could begin.



(Writing by George Obulutsa; Editing by Edwina Gibbs)

FILE PHOTO: Ethiopia’s Parliament approves 2024/25 fiscal year budget

Ethiopia’s securities exchange to start operations in October – media

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-820x461.jpeg" alt="" class="wp-image-516437" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A bank employee count China’s renminbi (RMB) or yuan notes next to U.S. dollar notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023. Athit Perawongmetha | Reuters</figcaption></figure>



BEIJING — Chinese companies seeking growth from exports face a new challenge: a strengthening yuan.



The “offshore” yuan traded in Hong Kong surged Monday against the U.S. dollar to its strongest level for 2024 — below 7.1 — before weakening slightly to around 7.18 as of Wednesday afternoon, according to Wind Information.



The sharp moves came amid a global stock market sell-off as investors reassessed their outlook for the U.S. economy and potential interest rate cuts. High rates have bolstered the U.S. dollar and related assets.



A strong greenback has also helped keep the Chinese yuan weak, which in turn kept Chinese exports competitively priced abroad. After steadily weakening in the first half of the year, the offshore yuan has strengthened against the U.S. dollar over the last month.



Many trade companies, especially smaller ones, have “currently adopted a strategy of ‘preferring not to take orders rather than take loss-making orders,’” Winnie Wang, president of the Shenzhen Cross-Border E-Commerce Association, said Tuesday in Chinese, according to a CNBC translation.



She noted the case of one such company, which made 20 million yuan ($2.8 million) in revenue during the yuan’s weakening during the first half of the year, allowing it to raise employee salaries. But she said the company did not win a single order in July because the stronger yuan forced it to repeatedly raise its prices.



Ryan Zhao, director at an export-focused company called Jiangsu Green Willow Textile, said Tuesday that recent fluctuations in foreign exchange will cut into about 2% of profits on accounts receivable this month.



“We are concerned that a prolonged appreciation of the yuan will lead to price increases by Chinese suppliers, which will affect the export businesses,” he said in Chinese, according to a CNBC translation. He said the company’s way of dealing with exchange rate fluctuations is to negotiate a middle exchange rate with the customer.



China reported slower-than-expected growth in U.S. dollar-denominated exports for July on Wednesday, while imports surprised with a better-than-expected increase.



Exports have stood out as a bright spot as China’s economic growth slows. Many local companies from automakers to e-commerce players have accelerated overseas expansion plans to capture opportunities for faster growth abroad.



That also means Chinese companies are now more exposed to currency fluctuation risks. China’s foreign exchange regulator has in the last two years published guides on how businesses can mitigate such risks.



“Apart from geopolitical reasons, Chinese companies are increasingly focused on hedging currency risk because they are localizing operations globally – which makes their operations more complex than they used to be,” said Chris Pereira, president and CEO of consulting firm iMpact.



“In addition to hedging against traditional USD/RMB fluctuations, Chinese cross-border e-commerce companies are increasingly also hedging against the Euro, British Pound, and Japanese Yen,” he said Tuesday. Cross-border e-commerce refers to online shopping platforms selling products between different countries.



Pereira said many of his clients work with fintech companies such as Airwallex and LianLian Pay. “Larger Chinese cross-border e-commerce companies generally work with banks to secure forward contracts or options, allowing them to lock in exchange rates for future transactions,” he said.



<h2 class="wp-block-heading" id="h-changing-expectations"><a></a>Changing expectations</h2>



Global businesses and investors have increased their focus on currency risk in recent days. Many institutional investors on Monday started to unwind a popular ”carry trade” in the Japanese yen, which had played an attractive role in global asset allocation until the Bank of Japan raised interest rates last month to their highest since 2008.



The Chinese yuan has held a similarly attractive role due to low interest rates in China. But several analysts expected that could change.



“A large amount of foreign currency is awaiting settlement” against the yuan, Zhou Ji, macro FX analyst at Nanhua Futures, said in Chinese translated by CNBC.



Zhou noted lack of willingness to settle earlier in the year due to widespread expectations that the yuan would weaken against the U.S. dollar, a view partly supported by the People’s Bank of China’s latest interest rate cuts.



Fast-fashion giant Shein and PDD Holdings’ Temu are two of the most well-known examples of Chinese cross-border e-commerce companies. Many small businesses — which may have their own factories in China — have entered the industry to sell on TikTok, Amazon.com or platforms run by Alibaba.



Chinese policymakers have also encouraged the development of cross-border e-commerce by supporting special economic zones and overseas warehouse construction.



Official data claim explosive growth in the industry, with more than 120,000 cross-border e-commerce entities in China as of June.



Such online international commerce grew by 10.5% year-on-year in the first half of the year to account for nearly 5.8% of total trade, according to CNBC calculations of official data. That’s up slightly from a share of about 5.7% in the first quarter. A breakdown by exports and imports for the first half of the year was not immediately available.



Wang from the Shenzhen Cross-Border E-Commerce Association pointed out that large Chinese companies have tended to negotiate deals with business partners to mitigate currency risks.



For many smaller businesses, their expansion overseas has been part of an effort to move capital outside China, making them less affected by the latest currency moves, said Chris Sun, founder and CEO of BrandPal, an AI-based marketing company focused on short video monetization. The company claims its backers include Plug and Play Tech Center.



He said the companies, many newly registered in the last year or two, have focused on spending yuan within China while making U.S. dollars via overseas sales.

107184396-16747379042023-01-26t120649z_723665645_rc27yy9kye44_rtrmadp_0_thailand-economy

China’s exporters enjoyed the benefits of a weak yuan. Now that’s changing and cutting into profits

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-820x547.jpg" alt="" class="wp-image-422955" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/GettyImages-924883576-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Uganda shillings. Uganda. (Photo by: Godong/Universal Images Group via Getty Images)</figcaption></figure>



KAMPALA, Aug 7 (Reuters) &#8211; Uganda&#8217;s central bank reduced its key lending rate by 25 basis points to 10.00% on Wednesday, saying a recovery in the shilling currency had led to an improvement in the inflation outlook.



The shilling hit a record low in late February, but has risen by more than 6% against the U.S. dollar since then, meaning there is less risk that a recent rise in inflation will prove to be persistent.



Inflation rose to 4.0% year-on-year in July, still below the central bank&#8217;s 5% medium-term target but up from 2.8% in January.



&#8220;The MPC (Monetary Policy Committee) noted that &#8230; the adverse impact of the past external shocks has abated and there has been some progress in moderating risks of inflation persistence,&#8221; Central Bank Deputy Governor Michael Atingi-Ego told a news conference.



&#8220;The inflation projection has been revised slightly downwards relative to the June 2024 forecast &#8230; largely due to a lesser depreciated shilling exchange rate.&#8221;



Atingi-Ego attributed the recent uptick in inflation to sectors such as passenger transport, accommodation, sports and recreation.



He said the Bank of Uganda expected inflation to continue rising moderately in the next four months due to seasonal factors, but to stabilise around the target of 5% by the first quarter of 2025.



At the bank&#8217;s last monetary policy meeting in June it expected inflation to only stabilise around 5% in the second half of next year.



Atingi-Ego noted there had been a pickup in Uganda&#8217;s economic growth, which averaged 6.7% in annual terms in the last two quarters of fiscal year 2023/24 compared with 5.3% growth in the previous two quarters.



The bank&#8217;s growth forecast for the 2024/25 fiscal year that started in July remains unchanged, at between 6.0% and 6.5%.



&#8220;It was appropriate to reduce slightly the degree of monetary policy restrictiveness,&#8221; Atingi-Ego said.



(Writing by Bhargav Acharya; Editing by Aexander Winning and David Holmes)

GettyImages-924883576-1

Uganda cuts key rate as shilling recovery helps inflation outlook

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1365" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-scaled.jpg" alt="" class="wp-image-516139" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/43YFXIZ3X5PSHBQY3FVDOZWFFI-1536x1024.jpg 1536w" sizes="auto, (max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">FILE PHOTO: A truck exits the mine after collecting ore from 516 metres below the surface at the Chibuluma copper mine in the Zambian copperbelt region, January 17, 2015. REUTERS/Rogan Ward/File Photo</figcaption></figure>



LUSAKA, Aug 7 (Reuters)&nbsp;&#8211;&nbsp;Zambia&#8217;s proposed minerals regulation law could deter investment and deliver a &#8220;fatal blow&#8221; to plans to raise annual copper output to 3 million tons, two mining bodies said on Wednesday.



Zambia&#8217;s government has proposed a new Minerals Regulation Commission Bill, which seeks to &#8220;regulate and monitor the development and management of mineral resources&#8221; in Africa&#8217;s second-biggest copper producer.



But Zambia&#8217;s Chamber of Mines (ZCM), the main mining industry body, and the Association of Zambian Mineral Exploration Companies (AZMEC) said in a joint statement some parts of the proposed law &#8220;will drive up the perception of investment risk in Zambia&#8221;.



&#8220;Unfortunately, due to&#8230;the prospect of forced &#8216;free carry&#8217; acquisitions by the state of stakes in new ventures, this Bill will seriously undermine property rights,&#8221; the mining industry bodies said.



&#8220;The Bill also grants unaccountable and arbitrary discretionary decision making powers to individual regulators, which present obvious future corruption risks,&#8221; they added.



Zambia&#8217;s mines ministry was not immediately available to comment.



President Hakainde Hichilema&#8217;s government, elected in 2021, has sought to repair the country&#8217;s investment reputation and ramp up copper production, which was impacted by the seizure of Konkola Copper Mines from Vedanta by the previous administration in 2019.



The new government has handed the company back to Vedanta as it pushes to raise copper output to 3 million tons per year within the next decade to take advantage of growing demand for the metal, which is key to the global shift to cleaner sources of energy.



Copper output slumped to 698,000 tons in 2023 from 763,000 tons the previous year, data from the Zambia Chamber of Mines showed.



Mining majors such as Barrick Gold and First Quantum Minerals are investing billions of dollars into their Zambian copper assets.



The United Arab Emirates&#8217; International Resources Holding (IRH) has pledged to invest $1.1 billion to expand output at Mopani Copper Mines after buying a 51% stake in the company previously owned by Glencore.



(Reporting by Chris Mfula; Writing by Nelson Banya; Editing by Angus MacSwan)

A truck exits the mine after collecting ore underground at the Chibuluma copper mine

Zambia’s proposed mining law bad for investment, miners say

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="720" height="425" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/ANCK25OQIFMHTJYACOM5XU5T24.jpg" alt="" class="wp-image-498541" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/ANCK25OQIFMHTJYACOM5XU5T24.jpg 720w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/ANCK25OQIFMHTJYACOM5XU5T24-300x177.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/ANCK25OQIFMHTJYACOM5XU5T24-152x90.jpg 152w" sizes="auto, (max-width: 720px) 100vw, 720px" /><figcaption class="wp-element-caption">Kenya shilling coins and notes are pictured inside a cashier&#8217;s booth at a forex exchange bureau in Kenya&#8217;s capital Nairobi, April 20, 2016. REUTERS/Thomas Mukoya/File Photo</figcaption></figure>



NAIROBI, Aug 7 (Reuters)&nbsp;&#8211;&nbsp;Kenya&#8217;s central bank governor said on Wednesday that the country&#8217;s shilling currency had remained stable in the face of protests sparked by a plan to hike taxes and should shrug off recent credit rating downgrades.



Governor Kamau Thugge was speaking a day after the Central Bank of Kenya cut its benchmark lending rate by 25 basis points, the first cut in more than four years.



It was the first interest rate decision since President William Ruto bowed to pressure from protesters, scrapping the tax hikes and overhauling his cabinet amid calls for him to resign.



Rating agencies Moody&#8217;s and Fitch downgraded Kenya&#8217;s sovereign ratings following the withdrawal of the tax measures, saying the move could complicate the East African country&#8217;s fiscal consolidation efforts.



&#8220;We don&#8217;t expect that there&#8217;ll be much impact (on the shilling) &#8230; because of these downgrades,&#8221; Thugge said, adding that the central bank was seeing more foreign exchange coming into the economy than going out.



The shilling is up more than 20% against the dollar this year, after a rally that started in February when the government issued a new $1.5 billion Eurobond to buy back most of a $2 billion bond whose maturity in June had unnerved investors.



The country currently has no plans for another $1 billion bond buyback before the end of the year, the governor said, despite the World Bank saying in June this was possible.



&#8220;What we are trying as much as possible is trying to talk to our development partners, both bilaterals as well as multilaterals, to get additional external financing,&#8221; Thugge said.



Kenya has not made a decision on its future engagements with the International Monetary Fund after the current lending programme agreed in 2021 expires next year, the governor added.



The Central Bank Rate was reduced to 12.75% on Tuesday after inflation fell to 4.3% year on year in July, below the midpoint of the government&#8217;s preferred range of 2.5%-7.5%.



Kenya&#8217;s economy is projected to grow 5.5% in 2025, at a similar rate to this year&#8217;s 5.4% growth, Thugge said.



(Reporting by Bhargav Acharya and George Obulutsa; Editing by Alexander Winning, William Maclean)

ANCK25OQIFMHTJYACOM5XU5T24

Kenya currency should shrug off rating downgrades, cenbank governor says

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1374" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-scaled.jpg" alt="" class="wp-image-516063" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-300x201.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-820x550.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-134x90.jpg 134w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-768x515.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/H7HVUG7OLJM7TMXBKROUDBYZ3E-1536x1031.jpg 1536w" sizes="auto, (max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">FILE PHOTO: South Africa&#8217;s President Cyril Ramaphosa gestures after signing into law a national health bill that aims to provide universal coverage to South Africans, at the Union Building in Pretoria, South Africa, May 15, 2024. REUTERS/Siphiwe Sibeko/File Photo</figcaption></figure>



JOHANNESBURG, Aug 7 (Reuters)&nbsp;&#8211;&nbsp;South Africa is moving ahead with implementation of the National Health Insurance (NHI) bill, President Cyril Ramaphosa said, despite strong opposition from within and outside government.



The NHI aims to provide universal coverage through a major overhaul of South Africa&#8217;s two-tier system. Ramaphosa signed the bill right before the May election in which his African National Congress lost its parliamentary majority.



&#8220;We have highlighted the social and economic value of affordable, accessible, quality health care that is available equally to all South Africans,&#8221; Ramaphosa said in a speech on Tuesday evening, at the closing of an ANC policy meeting.



&#8220;We will therefore proceed with the implementation of the National Health Insurance.&#8221;



Speaking earlier on Tuesday, Health Minister Aaron Motsoaledi said that the section of the bill which outlines transitional mechanisms would be implemented &#8220;immediately&#8221;.



This includes setting up advisory committees and amending other health-related laws to be in line with the NHI.



The legislation will gradually limit the role of private insurance in South Africa, create a new public fund to provide free access for citizens, and set the fees and prices that private healthcare suppliers can charge for NHI-funded benefits.



Supporters call it a generational change to reverse inequality dating to the apartheid era. But opponents, including big local health insurers, say the proposed funding model won&#8217;t work.



Motsoaledi said he would listen to concerns from stakeholders and help people understand the NHI.



&#8220;The real poor people who are (set to be) beneficiaries haven&#8217;t spoken,&#8221; he said. &#8220;Nobody&#8217;s carrying their voice.&#8221;



One opponent of the bill is the pro-business Democratic Alliance (DA) party, which formerly led the opposition and has now joined the ANC in government.



DA leader John Steenhuisen said last month that the NHI continued to be a sticking point for the coalition government and that discussions on it would continue.



Motsoaledi said the bill would be implemented in phases over years and acknowledged that legal challenges could delay its roll-out.



(Reporting by Nellie Peyton; Editing by Kim Coghill)

South Africa’s Ramaphosa to signs health insurance bill into law

South Africa moves to implement national health bill despite resistance

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="929" height="523" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV.jpeg" alt="" class="wp-image-516045" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV.jpeg 929w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107193967-1676336822877-gettyimages-1240268939-AFP_32927KV-768x432.jpeg 768w" sizes="auto, (max-width: 929px) 100vw, 929px" /><figcaption class="wp-element-caption">The Japanese flag flutters over the Bank of Japan (BoJ) head office building (bottom) in Tokyo on April 27, 2022. Kazuhiro Nogi | Afp | Getty Images</figcaption></figure>



Bank of Japan Deputy&nbsp;Governor&nbsp;Shinichi Uchida said on Wednesday the central bank&nbsp;won’t&nbsp;raise&nbsp;interest&nbsp;rates&nbsp;when&nbsp;financial&nbsp;markets&nbsp;are&nbsp;unstable.



The recent strengthening of the yen would affect the&nbsp;BOJ’s policy decision because it reduces upward pressure on import prices, and therefore overall inflation, Uchida said.



Stock market volatility would also influence the central bank’s decision by affecting corporate activity and consumption, he said.



“As we’re seeing sharp volatility in domestic and overseas financial&nbsp;markets, it’s necessary to maintain current levels of monetary easing for the time being,” Uchida said in a speech to business leaders in the northern Japan city of Hakodate.



The&nbsp;BOJ’s interest rate path will “obviously” change if market volatility affects its economic and price outlook, its view on risks, and the likelihood of durably achieving its 2% inflation target, he said.



“We&nbsp;won’t&nbsp;raise&nbsp;interest&nbsp;rates&nbsp;when&nbsp;financial&nbsp;markets&nbsp;are&nbsp;unstable,” Uchida said.

107193967-1676336822877-gettyimages-1240268939-AFP_32927KV

Bank of Japan won’t raise rates when markets unstable, deputy governor says

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1600" height="900" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3.jpeg" alt="" class="wp-image-515777" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3.jpeg 1600w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3-1536x864.jpeg 1536w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Pedestrians walk past a currency exchange shop in central Tokyo on April 17, 2024. Richard A. Brooks | Afp | Getty Images</figcaption></figure>



Rapid interest rate cuts from the Federal Reserve could make matters worse for the global “carry trade” unwind, according to economists at TS Lombard.



The warning comes as market participants seek to aggressively roll back on carry trades following a dramatic global sell-off in risk assets.



Carry trades refer to operations wherein an investor borrows in a currency with low interest rates, such as the Japanese yen, and reinvests the proceeds in higher-yielding assets elsewhere. The trading strategy has been hugely popular in recent years.



Stock markets in Europe were unsettled on Tuesday, paring earlier gains amid a faltering sense of relief.



An August stocks slump has been partly driven by weaker-than-expected U.S. economic data at the end of last week. The readings led investors to worry that the Federal Reserve may be behind the curve in cutting interest rates to fend off a recession.



“The natural reaction from the Fed to soft labour market data and fresh recession risks would be to cut rates and to do so relatively rapidly. But this would exacerbate any carry trade unwind,” economists at TS Lombard said in a research note published Monday.



“The US economy should trump all else, but it would make sense for central bankers to be cautious,” they added.



<h2 class="wp-block-heading" id="h-triple-whammy"><a></a>‘Triple whammy’</h2>



Led by Freya Beamish, economists at the investment strategy research firm said they hoped to see a coordinated message from the Bank of Japan and Fed to soothe market nerves.



“Then if the carry trade unwind really is a problem, we’d hope these central banks would take steps to introduce some form of quantity measures that would help prevent Japanese and other investors that have run on yen carry trades from having to sell assets, and facilitate the Fed cutting rates in due course without exacerbating financial fragilities,” economists at TS Lombard said.



A spokesperson for the Federal Reserve declined to comment when contacted by CNBC on Tuesday.



Traditional safe haven assets, such as the yen and Swiss franc, surged on Monday, fueling speculation that investors were seeking to quickly unload profitable carry trades to cover their losses elsewhere.



The Japanese currency has risen sharply against the U.S. dollar in recent weeks, trading at 145.07 per dollar at 1:10 p.m. London time on Tuesday. It marks a stark contrast from the run-up to the July 4th U.S. holiday, when the yen fell to 161.96 per dollar for the first time since December 1986.



Strategists at HSBC said there had essentially been a “triple whammy” of concerns in recent days, citing the unwind of carry trades, the monetization of artificial intelligence and the prospect of an imminent U.S. recession.



“We think it’s too early to buy just yet, but fundamentals are still broadly supportive,” HSBC strategists said in a research note published Tuesday.



“We think the biggest risk now is a self-feeding sell-off that would eventually prompt a recession, given negative wealth effects and tighter credit conditions,” they added.



<h2 class="wp-block-heading"><a></a>‘Reawakened with a vengeance’</h2>



Kit Juckes, chief foreign exchange strategist at Societe Generale, said in a recent research note that “the big carry unwind is underway.”



“You can’t unwind the biggest carry trade the world has ever seen without breaking a few heads. That is the impression markets give us this morning,” Juckes said on Monday.



Juckes flagged that the biggest foreign exchange market reaction was still one of “position reduction.” He said long positions against the Japanese yen for the Australian dollar, British pound, Norwegian krone and U.S. dollar were all being taken off.



A push below 140 a dollar for the Japanese yen in the near term “would be unsustainable given the impact on equities and inflation,” he added.



Economists at TS Lombard said Monday that global assets — from the U.S. to China — “look exposed.”



“Maturity mismatch in the external balance sheet, built up over years of BoJ excess accommodation, drove Japanese investors out of foreign assets as the curve flattened though the early part of the pandemic,” they continued.



“But monetary divergence since the Fed started raising rates then presented a new opportunity – the old carry trade reawakened with a vengeance.”



— CNBC’s Michael Bloom contributed to this report.

108015521-1722602037773-gettyimages-2147872842-AFP_34PM2M3

The popular ‘carry trade’ is unwinding — and economists fear Fed rate cuts could make matters worse

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="612" height="350" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/istockphoto-1040865674-612x612-1.jpg" alt="" class="wp-image-400879" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/istockphoto-1040865674-612x612-1.jpg 612w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/istockphoto-1040865674-612x612-1-300x172.jpg 300w" sizes="auto, (max-width: 612px) 100vw, 612px" /><figcaption class="wp-element-caption">Stock market report. 3d illustration</figcaption></figure>



Aug 6 (Reuters)&nbsp;&#8211;&nbsp;Emerging market assets recouped some losses on Tuesday after a torrent of selling in the prior session, though a stronger dollar and continued concerns over global economic growth kept gains in check.



MSCI&#8217;s index of emerging market stocks rose 1.2% after its worst day in over two years on Monday, when a combination of concerns about a U.S. economic recession, disappointing tech earnings and geopolitical worries saw investors flee risk assets.



Emerging market stocks in Asia outside Japan rose 1%, helped by a sharp recovery in the Nikkei.



Still, some caution remained, with investors pricing in an 80% chance of a 50 basis point interest rate cut from the Federal Reserve in September, down from 86% on Monday. Policy easing in the U.S. typically benefits emerging market stocks and currencies.



&#8220;Large stock market movements often mean that investors are looking for answers to one or more questions, so even if the day looks like the situation is improving, it is best to assume that it will continue to be nervous for some time to come,&#8221; Marcus Widén, economist at SEB said.



The Japanese yen was a key beneficiary of risk aversion on Monday, which saw an unwinding of carry trades that hit many high-yielding emerging market currencies. The yen slipped on Tuesday, though a rebound in the U.S. dollar continued to weigh on EM currencies.



&#8220;Higher interest rates in Japan and expectations of greater and faster expectations of interest rate cuts in the U.S. changed the conditions for carry trades,&#8221; Widen added.



Turkey&#8217;s lira touched a fresh record low of 33.47 to the dollar, while the South African rand slipped 0.2%.



Malaysia&#8217;s ringgit lost over 1% against the dollar after surging over 2% on Monday. The Mexican peso was also down on the day after the carry trade favourite fell to a two-year low.



Among equities, Turkey&#8217;s Bist 100 rose 1.4% and the Prague bourse rose after falling over 4% the session prior.



Saudia Arabia&#8217;s benchmark index gained 1.8%, with Saudi Aramco rising 2.2% after reporting a second-quarter net profit of 109.01 billion riyals.



Central European currencies weakened against the euro, with the Czech crown, Polish zloty and Hungarian forint slipping between 0.1% and 0.3%.



Meanwhile the International Monetary Fund said it was &#8220;fully committed to Bangladesh&#8221; after Prime Minister Sheikh Hasina resigned and fled the country following student-led protests.



Kenya&#8217;s shilling edged down 0.2% against the dollar ahead of a monetary policy announcement.



(Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Christina Fincher)

Stock market report. 3d illustration

EM stocks recover after bruising selloff, dollar recovery weighs on currencies

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1394" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-scaled.jpg" alt="" class="wp-image-515686" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-300x204.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-820x558.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-132x90.jpg 132w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-768x523.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/6RYF2UQ3FZLS7NXFVWZYO5NC3Q-1536x1046.jpg 1536w" sizes="auto, (max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">FILE PHOTO: Customers perform transactions on Nedbank automated teller machine (ATM) at the Trade Route Mall, in Lenasia outside Johannesburg, South Africa, February 8, 2023. REUTERS/Siphiwe Sibeko</figcaption></figure>



JOHANNESBURG, Aug 6 (Reuters) &#8211; South Africa&#8217;s Nedbank Group reported an 8% rise in half-year profit on Tuesday, supported by lower impairment charges and solid growth in non-interest revenue (NIR).



Nedbank upwardly revised its full-year forecast for NIR and new Chief Executive Jason Quinn told Reuters the bank should benefit as South Africa&#8217;s new national unity government has spurred cautious optimism in financial markets and could see companies spending meaningfully again.



&#8220;The national agenda on infrastructure is clear and we are an infrastructure player,&#8221; Quinn, who became CEO in May, said in an interview. &#8220;Companies are geared to take on some projects and taking on some debt.&#8221;



Nedbank, South Africa&#8217;s fourth biggest bank by assets, said headline earnings rose to 7.9 billion rand ($427.2 million) in the six months ended June 30.



NIR increased by 7% to 14.4 billion rand, slightly ahead of the group&#8217;s full-year guidance of above mid-single-digit growth. This was thanks to good growth in commission and fees, a strong trading performance and higher equity investment income, the bank said.



Nedbank now expects NIR growth for 2024 to be in the upper-single digits, buoyed by ongoing corporate deals and the acquisition of fleet management business Eqstra.



CEO Quinn is betting on an improving South African economy as inflationary pressures ease and the central bank is expected to start cutting interest rates in September for the first time since July 2020.



In the first half of the year, Nedbank&#8217;s net interest income (NII) &#8211; the amount banks earn from loans minus what they pay on deposits &#8211; grew marginally by 2% to 20.8 billion rand, below initial management expectations of above mid-single digit growth.



For 2024, NII growth is now guided to be below mid-single digits.



Nedbank&#8217;s loan growth increased by 4% to 913 billion rand, with stronger growth expected in the second half &#8220;as lower interest rates and inflation start benefiting retail credit growth and as wholesale clients start drawing down on renewable energy deals,&#8221; the bank said.



&#8220;Our best case says credit extension could grow by 6%,&#8221; Quinn told Reuters.



The group&#8217;s credit impairment charge decreased by 12% to 4.7 billion rand. Its credit loss ratio &#8211; a measure of bad loans as a percentage of total loans &#8211; of 104 basis points remained elevated as household finances remained under pressure.



But it improved from the 121 basis points reported in the same first half of 2023.



($1 = 18.4912 rand)



(Reporting by Nqobile Dludla; Editing by Jacqueline Wong, Janane Venkatraman and Susan Fenton)

Customers perform transactions on Nedbank automated teller machine

Nedbank raises non-interest revenue growth guidance after sold first half

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-820x462.jpeg" alt="" class="wp-image-515647" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/08/107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A view of storage tanks and pipelines at the Shell Carson Distribution Complex, a distribution hub for petroleum products, in Carson, California, on March 11, 2022. Bing Guan | Reuters</figcaption></figure>



U.S. crude oil futures fell to a six-month low on Monday as equity markets sold off on fears the economy might be teetering on the brink of a recession.



West Texas Intermediate is now up roughly 2% for the year while Brent is now down marginally for 2024, after trading higher for months on geopolitical risk in the Middle East and forecasts that the oil market would tighten in the third quarter.



U.S. crude oil closed below $73 per barrel, the lowest settlement since Feb. 5.



“In times of crises all assets correlate,” Matt Smith, lead oil analyst for the Americas at Kpler, said of oil following equity markets lower. But geopolitical tensions in the Middle East and OPEC’s ongoing production cuts are providing a floor for crude prices, Smith said.



Here are Monday’s closing energy prices:



<ul class="wp-block-list">
<li>West Texas Intermediate&nbsp;September contract: $72.94 per barrel, down 58 cents, or 0.79%. Year to date, U.S. crude oil is up 1.8%.</li>



<li>Brent&nbsp;October contract: $76.30 per barrel, down 51 cents, or 0.66%. Year to date, the global benchmark has fallen about 1%.</li>



<li>RBOB Gasoline&nbsp;September contract:&nbsp;$2.33 per gallon, up more than 1 cent, or 0.69%. Year to date, gasoline is up 10.99%.</li>



<li>Natural Gas&nbsp;September contract: $1.94 per thousand cubic feet, down more than 2 cents, or 1.27%. Year to date, gas is down 22.75%.</li>
</ul>



The sell-off comes after U.S. job growth disappointed in July, with the unemployment rate rising to 4.3%, the highest level since October 2021. The U.S. manufacturing sector also contracted in July for the fourth consecutive month.



The weak economic data in the U.S. comes as lackluster demand in China had already been spooking traders.



“Already before we had the jobs report, already before the manufacturing data, we were concerned about weaker imports into China, weaker refinery utilization rates in China,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said on CNBC’s “Squawk Box” on Monday.



<h2 class="wp-block-heading" id="h-opec-plans-face-challenges">OPEC plans face challenges</h2>



OPEC+ is also expected to start increasing production in October, though the group indicated last week that this decision “could be paused or reversed, depending on prevailing market conditions.” Croft said OPEC+ is now unlikely to start ramping up production.



“If the trend continues, I just can’t imagine OPEC would go forward with increasing output into this market. The question is, would they go the opposite way given the conditions we’re seeing,” Croft said, suggesting the oil producers could cut production again.



Bob Yawger, executive director of energy futures at Mizuho Securities, said OPEC+ seems interested in moving forward with the production increase based on last week’s statement, but they may not be able to afford to do so at this point. Rolling oil bank onto the market at current prices would “tank” the market, Yawger said.



<h2 class="wp-block-heading" id="h-geopolitical-risk"><a></a>Geopolitical risk</h2>



Geopolitical risk remains present with Israel preparing for an attack from Iran after the assassination of Hamas leader Ismail Haniyeh in Tehran last week.



“That exchange of fire in April between Iran and Israel was relatively contained, did not lead to any market disruptions,” Croft said. “But the question is now are we looking at something more coordinated with Hezbollah, Iran, Hamas.”



Bob McNally, president of Rapidan Energy, warned that tensions in the Middle East are “climbing the escalation ladder.” If Iran strikes Israel and kills civilians, the Netanyahu government will hit back much harder, he said.



“Israel is in a not in an eye for an eye mode,” McNally said. “They’re in three eyes for one eye mode.

107387062-17103533112022-03-12t000514z_565864485_rc2c0t9vvjxf_rtrmadp_0_ukraine-crisis-usa-gasoline

U.S. crude oil falls to six-month low as market sells off on recession fears

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1152" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-2-scaled.jpg" alt="" class="wp-image-400641" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-2-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-2-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-2-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-2-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/1x-1-2-1536x864.jpg 1536w" sizes="auto, (max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">A collection of mixed denomination South African rand coins sit in an arranged photo in Johannesburg, South Africa, on Thursday, June 22, 2017. South Africas inflation rate rose for the first time this year in May after food-price growth quickened from the slowest pace since December 2015. Photographer: Waldo Swiegers/Bloomberg via Getty Images</figcaption></figure>



JOHANNESBURG, Aug 5 (Reuters)&nbsp;&#8211;&nbsp;South African stocks and the rand tanked on Monday as global investor sentiment soured towards riskier assets due to growing fears over a possible recession in the United States.



At 1206 GMT, the rand traded at 18.5825 against the dollar, about 1.7% weaker than its previous close and near a two-month low. The rand had lost more than 2% against the greenback in earlier trade.



On Johannesburg Stock Exchange, the Top-40 index was down about 2.3%, mirroring a sell-off on global stock markets.



Markets have been hit by Friday&#8217;s weak U.S. July payrolls report, which showed the unemployment rate had risen to 4.3%, stoking concerns the world&#8217;s biggest economy may be heading for a recession.



&#8220;The ongoing equity market correction provides a glimpse of the kind of volatility that can be expected through the months ahead &#8230; (but) it will eventually trigger more aggressive rate cuts in the world&#8217;s top economies,&#8221; said Danny Greeff, co-head of Africa at ETM Analytics.



Traders are pricing in a near 100% chance that the Federal Reserve will cut interest rates by a full 50 basis points in September to rescue growth, compared with an 11.5% chance a week earlier, according to the CME FedWatch tool.



Rate cuts in the world&#8217;s biggest economies should lead to corrections in overvalued major currencies, Greeff added.



&#8220;The rand is thus still expected to strengthen through the coming quarters, but it will be far from smooth sailing,&#8221; he said.



Like other risk-sensitive currencies, the rand often takes cues from global drivers such as U.S. economic data and monetary policy in addition to local factors.



South Africa&#8217;s benchmark 2030 government bond was also weaker, as the yield gained 9.5 basis points to 9.345%.



(Reporting by Tannur Anders;Editing by Bhargav Acharya and Helen Popper)

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featured

Kenya’s finance minister eyes tax, payroll changes to cut deficits

European markets open higher as rebound continues; U.S., UK inflation in focus this week

South Africa battles to fund vital grid upgrade for green energy

Global youth unemployment in decline and seen falling further, report finds

Kenya police use tear gas to clear pockets of protesters in Nairobi

Ethiopia’s securities exchange to start operations in October – media

China’s exporters enjoyed the benefits of a weak yuan. Now that’s changing and cutting into profits

Uganda cuts key rate as shilling recovery helps inflation outlook

Zambia’s proposed mining law bad for investment, miners say

Kenya currency should shrug off rating downgrades, cenbank governor says

South Africa moves to implement national health bill despite resistance

Bank of Japan won’t raise rates when markets unstable, deputy governor says

The popular ‘carry trade’ is unwinding — and economists fear Fed rate cuts could make matters worse

EM stocks recover after bruising selloff, dollar recovery weighs on currencies

Nedbank raises non-interest revenue growth guidance after sold first half

U.S. crude oil falls to six-month low as market sells off on recession fears

South African rand, stocks sink as US recession fears hit riskier assets

News Tips

Advertise With Us

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