German business confidence soars as Brexit fears ‘disappear’

German Chancellor Angela Merkel speaks at the annual Summit of the Federal Association of the German Tourism Industry in Berlin. (AFP)
Updated 26 September 2016

German business confidence soars as Brexit fears ‘disappear’

FRANKFURT: German business confidence soared to its highest level in more than two years in September, the Ifo economic institute said, recovering from a post-Brexit slump and signalling a rosier outlook for Europe’s largest economy.

The closely-watched index unexpectedly jumped to 109.5 points from 106.3 points in August to reach its highest reading since May 2014, the Munich-based Ifo said.
“The German economy is expecting a golden autumn,” Ifo president Clemens Fuest said in a statement.
Analysts surveyed by Factset had predicted the mood to stay unchanged.
The figure is all the more surprising after the index suffered a steep fall in August, when Ifo said the German economy had fallen into “a summer slump” as companies worried about the fallout from Britain’s decision to leave the European Union.
“The prominent Ifo index suggests that Brexit fears have disappeared as quickly as they had emerged,” said Carsten Brzeski, chief economist at ING Diba.
Ifo said morale had improved across the board, from manufacturing and retailing to the services sector, with confidence in the construction industry reaching a new high.
“Companies are clearly more optimistic about the months ahead. They are also more satisfied with their current business situation,” said Fuest.
But analysts cautioned against reading too much into the survey, after a recent string of disappointing data out of Germany pointed to a gloomier picture.
German exports plummeted in July as demand weakened from outside the euro area, while industrial production shrank and demand for industrial orders showed only a slight increase.
Nordea Markets’ Holger Sandte said the September optimism should be taken “with a pinch of salt.” “We find the improvement a bit too strong to really reflect what is going on in the economy,” he said.
Capital Economics analyst Jennifer McKeown agreed.
“In all, we doubt that growth will be as strong as the Ifo now suggests, particularly with a modest rise in inflation set to damage the previously healthy consumer recovery,” she said.
“But it does suggest that the German economy will continue to outperform its peers and reduces concerns raised by the latest hard data that growth could be grinding to a halt.”
Ifo’s headline figure is based on a survey of some 7,000 businesses who are asked about the current climate and their expectations for the next six months.
Within the index, current business sentiment climbed from just under 113 points in August to 114.7.
Confidence in the future outlook soared from 100.1 points to 104.5.
Germany’s Bundesbank expects the economy to grow by 1.7 percent this year and 1.4 percent in 2017, according to forecasts released before the Brexit referendum was held in June.


Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

Updated 56 min 28 sec ago

Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

  • Growing pressure to crack down on Chinese companies that avail themselves of US capital markets but do not comply with rules
WASHINGTON: Trump administration officials have urged the president to delist Chinese companies that trade on US exchanges and fail to meet US auditing requirements by January 2022, Securities and Exchange Commission and Treasury officials said on Thursday.
The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton, with drafting a report with recommendations to protect US investors from Chinese companies whose audit documents have long been kept from US regulators.
It also comes amid growing pressure from Congress to crack down on Chinese companies that avail themselves of US capital markets but do not comply with US rules faced by American rivals.
“We are simply leveling the playing field, holding Chinese firms listed in the US to the same standards as everyone else,” a Treasury official told reporters in a briefing call about the report.
The US Senate unanimously passed legislation in May that could prevent some Chinese companies from listing their shares on US exchanges unless they follow standards for US audits and regulations.
Democratic Senator Chris Van Hollen, who sponsored the bill described the recommendations as “an important first step,” but said that “without the added teeth of our bill, this report alone does not implement the requirements necessary to protect everyday American investors.”
The administration’s recommendations, if implemented via an SEC rulemaking process, would give Chinese companies already listed in the United States until Jan. 1, 2022, to ensure the US auditing watchdog, known as the PCAOB, has access to their audit documents.
They can also provide a “co-audit,” for example, performed by a US parent company of the China-based affiliate tasked with auditing the Chinese firm. However, companies seeking to list in the United States for the first time will need to comply immediately, the officials said.
A State Department official told Reuters the administration plans soon to scrap a 2013 agreement between US and Chinese auditing authorities to set up a process for the PCAOB to seek documents in enforcement cases against Chinese auditors.
China said on Friday that the two countries have “good cooperation” in monitoring publicly listed firms.
“The current situation is that some US monitoring authorities are failing to comply with their obligations, and what they are doing is political manipulation — they are trying to force Chinese companies to delist from US markets,” foreign ministry spokesman Wang Wenbin told a media briefing.
The PCAOB has long complained of China’s failure to grant requests, giving it scant insight on audits of Chinese firms that trade on US exchanges.
The report also recommends requiring greater disclosure by issuers and registered funds of the risk of investing in China, as well as mandating more due diligence by funds that track indexes and issuing guidance to investment advisers about fiduciary obligations surrounding investments in China.
The moves come amid rising tensions between Washington and Beijing over China’s handling of the coronavirus and its moves to curb freedoms in Hong Kong, among other issues.