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Analysis-China property financing tweaks fall short of investor expectations

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November 11, 2021

BEIJING (Reuters) – China will stand firm on policies to curb excess borrowing by property developers even as it makes financing tweaks to help home buyers and meet “reasonable” demand amid an industry liquidity crunch, say bankers and analysts.

Investors are worried about wider contagion from the property sector which has seen a string of missed offshore debt payments and sell-offs in shares and bonds as China Evergrande Holdings, the world’s most indebted developer, repeatedly lurches to the brink of default.

On Thursday, stocks rose as investors snapped up battered property shares, heartened by Evergrande’s last-minute coupon payment and bets on a potential relaxation of curbs on finance in the sector after data showed a surge in October mortgages.

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State media also reported that developers and a bond market industry group discussed potential debt issuance by developers in the inter-bank market, in what would be an easing of restrictions.

But there is little evidence that rules to contain a debt build-up in a sector – including related businesses – that accounts for a quarter of the world’s second largest economy, will be pared back.

“There are absolutely no fundamental changes or relaxations on the property lending caps,” said a banker at a state lender in Beijing who declined to be named as they are not authorised to speak to media. “But there’s always leeway for lenders to adjust for themselves to reflect the latest guidance of ‘meeting the normal financing needs’ of both home buyers and developers.”

Many developers including Evergrande, have grown desperately short of cash since authorities last year unveiled the “three red lines” – a key policy of President Xi Jinping that imposes limits on liabilities-to-assets, net debt-to-equity, and cash-to-short term borrowing ratios.

Authorities have also slapped lending restrictions on mortgages to deter speculative home buying that has driven up prices and exacerbated an affordability crisis for city dwellers struggling to get on the property ladder.

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While some banks have accelerated disbursement of approved home loans in some cities, no fresh wave of new approvals has been granted, bankers recently told Reuters.

In a departure from its practice of releasing mortgage data on a quarterly basis, the central bank on Wednesday issued a one-line statement to announce that new mortgage loans had jumped 40% in October from the previous month to 348.1 billion yuan ($54.5 billion). However, the amount was just 7% higher than the monthly average in the first nine months of the year.

“We’re making flexible adjustments in line with the market situation, but the general direction will not change,” said Zong Liang, chief researcher at Bank of China, one of the country’s biggest state lenders.

“Our goal is very clear – we want to maintain steady development of the property market, and our policy adjustments are based on the economic situation,” he told Reuters.

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Some lenders had held back issuance of home loans earlier in the year, wary of being accused of fuelling debt bubbles as regulators were cracking down on new borrowing by developers, the bankers said.

“There is no increase in (loan) quotas, but the pace of loan disbursement has been picking up,” said a banker at a state lender in Shanghai.

In early September, China’s banking watchdog said banks should offer financial support for home buyers with “rigid” demand, referring to those recently married or seeking low-cost housing.

Banks should implement differentiated mortgage polices and down-payment requirements, the China Banking and Insurance Regulatory Commission also said at the time, avoiding inflexible rules that penalise non-speculative, legitimate home buyers.

“We hope to maintain steady and sustainable development of the property sector, and do not want excessive tightening or one-size-fits-all tightening to affect normal business activities and normal property developers,” Wang Jun, chief economist at Zhongyuan Bank, told Reuters on Thursday.

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“Now, we are trying to correct over-tightening. We should ensure normal start and completion of projects, otherwise there could be impact on home buyers and suppliers.”

($1 = 6.3916 Chinese yuan renminbi)

(Reporting by Kevin Yao, Cheng Leng, Zhang Yan and Samuel Shen; Writing by Ryan Woo; Editing by Tony Munroe and Emelia Sithole-Matarise)

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Arnault-backed group launches second SPAC listing

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December 7, 2021

By Emma-Victoria Farr

LONDON (Reuters) – France’s richest man Bernard Arnault and former UniCredit head Jean Pierre Mustier will publicly list a second blank cheque vehicle in Amsterdam, raising 200 million euros ($226 million), the bookrunners on the deal said.

Earlier this year, the duo raised half a billion euros from their special purpose acquisition company (SPAC), Pegasus Acquisition Company Europe B.V., which is searching for takeover targets in the financial sector.

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On Tuesday, the same group of backers announced they would list a second vehicle with a similar focus, Pegasus Entrepreneurial Acquisition Company Europe, in Amsterdam.

SPACs are listed on a stock exchange by a group of entrepreneurs, who use the money raised to target a private company – allowing the target to get a stock market listing without the arduous process of launching a public listing.

Mustier is working with former Bank of America banker Diego De Giorgi and entrepreneur and investor Pierre Cuilleret in launching the 200 million euro listing.

Several SPACs have listed in Amsterdam, potentially boosting the Dutch financial capital’s credentials as a hub for fast-growing companies. London has only hosted one major SPAC in 2021, after updating its rules to make them easier.

Pegasus is backed by institutional sponsors Tikehau Capital and Financière Agache and by sponsors De Giorgi, Cuilleret and Mustier. Citi, Goldman Sachs and BNP Paribas are the bookrunners on the deal.

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($1 = 0.8860 euros)

(Reporting by Emma-Victoria Farr; editing by John O’Donnell and Louise Heavens)

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Bulls back in charge as Omicron worries wane

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December 7, 2021

By Marc Jones

LONDON (Reuters) – Waning Omicron COVID-19 variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday and left traders offloading safe-haven currencies and bonds again.

The FTSEurofirst 300 index was on track for its first back-to-back run of plus 1% gains since February while Asia saw record bounces from some of China’s biggest firms such as Alibaba and Baidu. [.SS][.EU]

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The risk-on mood also helped the dollar climb against safe haven currencies such as the Japanese yen,, which had lost 0.6% overnight, as the confidence-sensitive Australian dollar also found buyers. [FRX/]

Safe-harbour government bonds went the other way with yields – which move inverse to bond prices – up 2.5% on Germany’s benchmark 10-year Bund after falling to a three-month low on Monday. [GVD/EUR]

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN “it does not look like there’s a great degree of severity” so far.

“Good news relating to the severity of Omicron should be taken with a pinch of salt. Faster transmission could offset the benefits of milder symptoms,” researchers at ING said in a note. “More broadly, it is still early days, even if markets are starting to display Omicron fatigue.”

The gains also came after China’s central bank on Monday injected its second shot of stimulus since July by cutting the amount of cash that banks must hold in reserve.

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There was still uncertainty about its property sector as Evergrande teetered on the brink of default again but data showing much stronger import growth was “a positive sign on the strength of domestic demand”, RBC analyst Adam Cole said.

Elsewhere, Australia’s S&P/ASX200 rose 0.95%, while Japan’s Nikkei advanced 2.1% as risk-on sentiment pushed markets higher.

MSCI’s main Asia ex-Japan benchmark has lost about 5% so far this year, with Hong Kong markets figuring among the big losers, while Indian and Taiwan stocks outperformed.

Shares in embattled developer Evergrande edged up 1.7% after hitting a record low on Monday as markets waited to see if the real estate giant has paid $82.5 million with a 30-day grace period coming to an end.

Elsewhere, markets were supported by gains on Wall Street, where economically sensitive stocks outperformed.

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“While epidemiologists have rightly warned against premature conclusions on Omicron, markets arguably surmised that last week’s brutal sell-off ought to have been milder,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.

“After all, early assessments of Omicron cases have been declared mild, spurring half-full relief.”

Also supporting the dollar in FX markets was the expectation the Federal Reserve will accelerate the tapering of its bond-buying programme when it meets next week in response to a tightening labour market.

Oil prices jumped another 2% to $74.60 a barrel, adding to a near 5% rebound the day before as concerns about the impact of Omicron on global fuel demand eased. [O/R]

Copper prices also ticked higher while gold was steady at $1,778.5 per ounce on expectations U.S. consumer price data due later this week will show inflation quickening.

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(Additional reporting by Anshuman Daga in Singapore; Editing by Nick Macfie)

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Exclusive: EU antitrust regulator seeks input on Microsoft’s $16 billion Nuance deal

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December 7, 2021

By Paresh Dave

(Reuters) – EU’s antitrust regulator is taking a deeper look into Microsoft Corp’s $16 billion deal for transcription technology company Nuance Communications Inc, asking customers and competitors to draw up a list of concerns, according to a questionnaire from last month seen by Reuters.

The previously unreported outreach is the most extensive by an antitrust authority since the companies announced the acquisition in April, according to a person familiar with the matter.

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Microsoft declined to comment, and Nuance did not respond to a request for comment.

After minimal review, the U.S. Department of Justice in June and the Australian Competition Commission in October said they would not contest the deal. The companies filed for approval from the European Commission’s competition bureau last month, and the regulator has until Dec. 21 to clear the deal or open a bigger investigation.

The companies had expected to close the deal by the end of this year, but said last month the timeline could slip to early next year.

The questionnaire asks whether Microsoft and Nuance are competitors and whether a tie-up could affect clients and rivals, including whether Microsoft could favor Nuance over competing services.

Nuance primarily sells transcription technology that is popular among doctors and call centers that want to automate note-talking. Analysts view the deal as bolstering Microsoft’s presence in the healthcare market, and bringing it new voice and medical data to train artificial intelligence offerings in health, speech and biometric security.

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Like other big tech companies, Microsoft for years has grown its business through acquisitions, such as in advertising and video gaming. But in the last decade, Microsoft has avoided the target that recently has dogged its competitors Alphabet Inc’s Google, Facebook Inc, Apple Inc and Amazon.com Inc, all of which are facing antitrust lawsuits and investigations on numerous issues.

Steven Weber, a University of California Berkeley professor studying the intersection of technology and health care, said possible concerns about the pending deal could include Microsoft forcing its Office suite on Nuance customers by bundling them together.

Nuance has said it serves 77% of U.S. hospitals.

A key to its success has been has ensuring in deals with customers that it could use their data to advance its voice recognition systems, according to former chief executive Paul Ricci and another former employee.

For instance, a Nuance contract with Augusta University Medical Center, obtained by Reuters this year through a public records request, reads, “Customer shall provide Nuance access to voice and text data…and grants Nuance a perpetual, royalty-free license to copy, use and analyze such data for speech recognition research.”

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Big cloud vendors such as Amazon and Microsoft typically do not have unfettered access to customers’ data for research and development. But the opportunity to acquire those relationships and data explains Microsoft’s interest in Nuance, the former employees said.

Other providers of health transcription technologies include 3M Co and Philips.

(Reporting by Paresh Dave; Editing by Kenneth Li and David Gregorio)

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