SINGAPORE (Aug 26): “This is a trade war that should have taken place a long time ago. Somebody had to do it. I am the chosen one.” — US President Donald Trump on the ongoing trade war with China.
No need for economic stimulus yet, PM Lee says
Even as Singapore teeters on the edge of a technical recession, Prime Minister Lee Hsien Loong says there is no need yet for immediate economic stimulus measures. However, the government is prepared and will “promptly respond” with appropriate interventions if the situation worsens. “We have experienced cyclical downturns like this in the past, and we are confident we can take this one in our stride,” he said at the National Day Rally on Aug 18.
The official GDP growth forecast for 2019 has been slashed again to between 0% and 1% — a steep drop from full-year GDP growth of 3.1% in 2018. Meanwhile, Singapore, which celebrates its bicentennial this year, is turning its attention to a series of mega infrastructure projects as it looks to the future. The city state might spend some $100 billion or more over the next 50 to 100 years to protect itself from rising sea levels brought about by climate change. (See “Climate change debate heats up for businesses as Singapore shores up defence against rising sea levels”) — By Stanislaus Jude Chan
US CEOs say shareholders no longer top priority
One of the US’ largest business groups has dropped the “shareholder primacy” creed that has driven US capitalism for decades. Instead, the top CEOs are now urging companies to consider the environment and workers’ well-being alongside their pursuit of profits.
See also: ECB delivers landmark rate cut but few signals top
A new “statement of purpose” from the Business Roundtable issued on Aug 19 placed shareholders as one of five stakeholders, alongside customers, workers, suppliers and communities. The BRT has close to 200 members, including the CEOs of JPMorgan Chase, Amazon.com and General Motors, generating US$7 trillion ($9.7 trillion) in annual revenue.
BRT’s revised statement is a significant shift from the bedrock belief that businesses serve the owners of their capital — a philosophy championed by the late Nobel laureate economist Milton Friedman and that has driven corporate US for decades. Companies, says BRT, should “protect the environment” and treat workers with “dignity and respect” while also delivering long-term profits for shareholders.
The change amounts to a call to reform capitalism at a time in which rising populism and concern about climate change have led politicians and shareholder activists to demand that companies consider their impact on the world beyond their balance sheets. “It’s an important shift,” says Mohamed El-Erian, chief economic adviser for Allianz, in a Financial Times report. “It reflects an emerging consensus about the importance of [a] more inclusive capitalism.”
See also: ECB holds rates and signals cuts are still some way off
Singtel and OCBC mull virtual bank JV
Oversea-Chinese Banking Corp is in talks with companies including Singapore Telecommunications to seek one of Singapore’s planned virtual bank licences, reported Bloomberg News. OCBC would take a minority stake in any virtual-banking joint venture and sees it as a way to tap new customers and markets, according to the report, citing unnamed sources.
“We are open to forging new partnerships and ventures that allow us to serve new segments and new markets,” OCBC head of digital and innovation Pranav Seth says, while declining to comment on talk of a virtual licence application. A Singtel representative declined to comment.
Singtel CEO Chua Sock Koong said earlier this month that her company was studying the prospects for a virtual licence. The Monetary Authority of Singapore said in June it planned to issue as many as five new digital bank licences to non-bank firms as part of efforts to strengthen competition in financial services. The UK and Hong Kong are among major economies that have allowed licences for virtual banks, creating a new generation of rivals for traditional lenders.
Trump cancels visit to Denmark over Greenland
US President Donald Trump has cancelled a state visit to Denmark after his offer to buy Greenland was met first with bemusement, then a flat refusal. Anger followed, and even Denmark’s Queen Margrethe II was drawn into the fray.
Trump had been due to make his first visit to Denmark, a founding member of NATO and a US ally in the Iraq war, on Sept 2. A series of reports last week indicated he wanted to purchase Greenland, the world’s biggest island and site of the US’ northernmost military base, Thule. The territory is part of the Kingdom of Denmark, though it has extensive home rule.
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Morten Ostergaard, leader of the Social Liberal Party, which forms part of the government bloc, tweeted that “reality has surpassed fantasy. It cannot be that no one in the US state department told Trump in advance that buying Greenland isn’t an option”.
Danish Prime Minister Mette Frederiksen said later that an invitation to Trump for a state visit still stands. Frederiksen had previously called the idea of buying Greenland absurd and said she hoped it was a joke. She made clear the island was not for sale, and that Copenhagen does not have the authority to sell it anyway. Their discussions were to have focused on the strategic importance of Greenland. The island’s location close to the natural resources in the Arctic has made it attractive to both Russia and China.
The cancellation of the trip is a “diplomatic crisis”, says Kristian Jensen, a leading member of the Danish opposition and a former finance minister. He hinted at the damage done to the post-World War II relationship with Denmark, which was among a handful of countries to follow the US into the Iraq war. — Bloomberg LP
Qantas to test 20-hour non-stop flights
Australian carrier Qantas Airways will run test flights between New York and London to Sydney. CEO Alan Joyce has described these routes as aviation’s final frontier. These flights will carry just a few people to see how the human body holds up on such routes, before commercial services can start. Qantas said on Aug 22 that it will simulate the world’s longest direct flights with Boeing Dreamliners as soon as October. The payload of 40 passengers and crew, mainly Qantas’ own employees, will undergo a series of medical checks and assessments. The airline wants to start direct flights connecting Sydney to New York and London as soon as 2022.
Italian government falls
Italy is in chaos again after Prime Minister Giuseppe Conte resigned. The country is now facing snap elections that could bring about Europe’s first far-right government, led by the anti-establishment Five Star Movement (M5S). A potential alliance between the nationalist League party, and the centre-left Democratic Party, could prevent that from happening, however.
Fourteen months after the general election in which no political party won an outright majority, Italy’s coalition government has crumbled amid infighting and a struggling economy. The League party had formed a coalition with the M5S, with Conte as an independent prime minister. However, earlier this month Conte said the alliance was unworkable and accused League party leader Matteo Salvini of wanting to capitalise on his popularity and bring about a vote.
However, the markets’ reaction to the collapse of the Italian government has been muted; investors are likely to be thinking that any new government would be better than the last.
