BlackRock and Goldman Sachs holding on to Russian investments, expecting diplomatic solution to crisis
The latest hysteria around the uneasy relationship between Russia and Ukraine has reportedly failed to scare global investors away from Russia’s debt. International investment majors like Goldman Sachs, BlackRock, Fidelity and Pimco are betting a diplomatic solution could boost interest earnings.
Yields on Russian government and corporate bonds have reportedly surged since the beginning of the year, with the spread between Treasuries and 10-year local-currency sovereign debt rising to 7.8 percentage points at the peak.
The total return on a local-currency 10-year sovereign bond was 6.3% in 2020 and 6% in 2021, versus 1.92% and 0.9% for the equivalent US Treasury note.
Meanwhile, the Russian ruble has depreciated 3.5% against the greenback so far this year and was trading at its weakest level in more than a year last week, before recovering moderately. The Central Bank of Russia suspended its planned foreign-exchange purchases on Monday in an attempt to support the domestic currency. The regulator has hiked interest rates seven times since March 2021, to tame the surging inflation due to the pandemic.
Russian bonds reportedly make up 7% of a popular emerging-market debt index run by JPMorgan Chase & Co. that is used as a benchmark by many fund managers.
“Russian assets could have a big rally back,” Abrdn PLC’s Viktor Szabo, who continues to hold some ruble-denominated Russian sovereign bonds, said, as quoted by WSJ. “It’s not so easy for investors to fully walk away.”
Russia’s current-account surplus increased by 3.5 times in 2021 through November, boosted by rallying crude prices. In January, the country’s international reserves rose to an all-time high of nearly $640 billion. Russia also enjoys a relatively small debt load, at 17% debt-to-GDP. Those factors keep luring investors, who see the underlying financial strength as very promising.
Some of the world’s biggest investors are still sticking to positions in Russian debt.
“My base case is that there likely won’t be a full invasion. We’re in a situation where you still have this frozen conflict, since 2014,” Uday Patnaik, head of emerging-market debt at Legal & General Investment Management, who bought Russian sovereign bonds maturing in 2042 last week, told media.
A complete ban on trading Russia’s government debt was included in the debated list of potential sanctions that Washington and its allies have pledged to introduce against Moscow in case of a military assault in Ukraine. Russian authorities have rejected the idea of war with Ukraine, accusing Western officials of provocative rhetoric that just ramps up tensions.
Digital currency project Diem raised security and reliability concerns
After months of speculation and regulatory opposition, Meta, formerly known as Facebook, said this week it was shutting down its digital currency project, Diem. The company said the underlying technology had been bought by a crypto-focused bank for $182 million.
“Over the coming weeks, the Diem Association and its subsidiaries expect to begin the process of winding down,” Meta said.
The initiative made progress, but “it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead,” Diem Networks’ US CEO Stuart Levey explained.
Silvergate bought development, deployment and operations infrastructure, as well as tools for running a blockchain-based payment network for payments and cross-border wire transfers.
The Diem Association (initially known as Libra) was launched by Facebook in 2019 with the support of a number of partners including Visa and Mastercard, as well as tech companies Lyft and Spotify. The social media giant had been hoping that getting into crypto payments would provide it with a fresh income stream, but questions about its involvement led to several of the founding partners pulling out.
The organization was renamed as Diem at the end of 2020 in a bid to show the currency would be independent from Facebook. However, those measures did not convince regulators, with some arguing that the network effects available to Meta through its social network could increase its circulation and undermine the fiat currencies of weak economies.
“The combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power,” US regulators said in a 2021 report.
Daimler restores corporate name Mercedes-Benz for the first time in nearly 25 years
From February 1, German car manufacturer Daimler AG is formally changing its name to Mercedes-Benz Group AG. The rebranding, announced last week, is the latest in a string of structural changes for the automaker.
Last year, the company announced that its truck and bus business would be spun off as Daimler Truck AG. The new company is now listed separately on the Frankfurt Stock Exchange. The move, approved by Daimler AG stockholders in October, resulted in creating two independent companies, each with their own management and chairman.
The step is expected to help the company to unlock shareholder value for both divisions and tap into the full potential of its business in a zero-emissions, software-driven future.
“We have a real chance to raise the multiple,” Daimler CEO Ola Kaellenius said last week, providing no details on a specific target valuation for the company, which is currently worth just under €77 billion ($87 billion).
Last year, the company reportedly sold over 2.4 million cars, CUVs, SUVs, and vans despite the supply crunch that led to major chip shortages across the industry. Moreover, Daimler reportedly set sales records for HEVs, PHEVS, and EVs, as well as high-end Maybach, AMG, and G-Class vehicles.
The automaker is now seeking to change its car line-up to one powered entirely by electric motors by 2030, and gradually shift toward a direct sales model to better control pricing, and increase net revenue per vehicle as well as from digital services. It is also planning to spend some $68 billion on its transformation between 2022 and 2026.
As part of the new strategy, the producer will keep developing electric vehicles, vans, SUVs, luxury cars, and self-driving cars. Meanwhile, Daimler is expected to focus on zero-emission drivelines for trucks and buses, and integration of autonomous driving technology into its heavy-duty vehicles.
The Daimler-Benz alliance traces its origins to Carl Benz, who founded Benz & Cie in 1883, and to Gottlieb Daimler and Wilhelm Maybach, who launched Daimler Motoren Gesellschaft in 1890. Daimler first used the Mercedes name in 1902, and is named for the daughter of Daimler dealer Emil Jellinek. The first Mercedes-Benz branded vehicles were produced in 1926, shortly after the merger of the two companies into Daimler-Benz.
In 1998, Daimler-Benz AG merged with the Chrysler Corporation to become DaimlerChrysler. When Daimler sold Chrysler to Cerberus in 2007, the corporation changed its name to Daimler AG.
India will also launch its own digital currency in April
The Reserve Bank of India will launch its digital currency on April 1, Finance Minister Nirmala Sitharaman said on Tuesday. The country also plans to tax the income from the transfer of virtual assets at a rate of 30%, she added.
To capture details of all such crypto transactions, the minister also proposed a 1% tax deduction at source on payments made related to the purchase of virtual assets.
“No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income,” she said, adding “Gift of virtual digital asset is also proposed to be taxed at the hand of the recipient.”
Purchases of cryptocurrencies and NFTs in India have been on the rise despite regulatory pressure. Binance-owned WazirX said last month that the yearly trading volume on its platform exceeded $43 billion in 2021, at a “1,735%” growth from 2020.
“There’s been a phenomenal increase in transaction in virtual digital assets,” Sitharaman said. “The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”
India’s central bank has long been working on a phased implementation strategy, which could reduce the nation’s high dependency on cash. According to the finance minister, the launch of a digital rupee “will give a big boost to digital economy” and lead to a “more efficient and cheaper currency management system.”
About half of the mining giant’s employees who responded to an external review say they have been bullied
Anglo-Australian mining multinational Rio Tinto released a shocking report on Tuesday, revealing that racism, sexism, harassment and sexual assault are rife among its global workforce of 47,500.
The report came as a result of an external review that the mining giant commissioned in 2021 after a string of complaints and scandals, including the blowing-up of an ancient Aboriginal site in Western Australia to expand an iron ore mine.
According to the report, nearly half of the company’s employees said they had been bullied, while racism was found to be common across a number of areas. The survey also revealed that “people working in a country different to their birth experienced high rates of racism, and that 39.8% of men and 31.8% of women who identify as Aboriginal or Torres Strait Islander in Australia experienced racism.”
The results were “disturbing,” according to Rio Tinto Chief Executive Jakob Stausholm, who said the company would implement all 26 recommendations from the report that was overseen by Australia’s former sex discrimination commissioner Elizabeth Broderick.
“The eye-opener for me was twofold,” Stausholm said, as quoted by Reuters. “I hadn’t realised how much bullying exists in the company and secondly that it’s quite systemic – the three issues of bullying, sexual harassment and racism… that’s extremely disturbing.”
Headquartered in London, Rio Tinto employs people in 35 countries. Its workplace review reportedly involved more than 10,000 respondents to an online survey, interactive group and individual sessions, and a call for written entries.
The findings are the latest blow to the corporation that has been trying to repair its image after it demolished a 46,000-year-old sacred Indigenous site in Australia to expand an iron ore mine. In 2020, the backlash over the destruction forced out former CEO Jean-Sebastien Jacques.
