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November 12, 2022 – rdspinvestments

November 12, 2022

Collapsed FTX hit by rogue transactions, analysts saw over $600mln outflows

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Stock Markets 18 hours ago (Nov 12, 2022 09:20PM ET)

Collapsed FTX hit by rogue transactions, analysts saw over $600mln outflows© Reuters. FILE PHOTO: FTX logo is seen in this illustration taken, November 8, 2022. REUTERS/Dado Ruvic/Illustration//File Photo

By Summer Zhen, Vidya Ranganathan and Elizabeth Howcroft

HONG KONG/SINGAPORE/LONDON (Reuters) – FTX was engulfed in more chaos on Saturday when the crypto exchange said it had detected unauthorized access and analysts said hundreds of millions of dollars of assets had been moved from the platform in “suspicious circumstances”.

FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

FTX Chief Executive John J. Ray III said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located.”

“Among other things, we are in the process of removing trading and withdrawal functionality,” he said.

The exchange’s dramatic fall from grace has seen its 30-year-old founder Sam Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.

Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts and he denied rumors on Twitter that he had flown to South America. When asked by Reuters whether he had flown to Argentina, he responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.

New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Blockchain analytics firm Nansen said it saw $659 million in outflows from FTX International and FTX U.S. in the last 24 hours.

A separate blockchain analytics firm Elliptic said that around $515 million worth of cryptoassets were “suspected to have been stolen,” while $186 million were likely moved into secure storage by FTX.

Crypto exchange Kraken said: “We can confirm our team is aware of the identity of the account associated with the ongoing FTX hack, and we are committed to working with law enforcement to ensure they have everything they need to sufficiently investigate this matter.”

FTX was not immediately available for comment about the outflows or Kraken’s statement.

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. Ray, a restructuring expert, was appointed to take over as CEO.

A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.

The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.

“Things will continue to simmer after the FTX crash,” said Alan Wong, operations manager of Hong Kong Digital Asset Exchange.

“With a gap of $8 billion between liabilities and assets, when FTX is insolvent, it will trigger a domino effect, which will lead to a series of investors related to FTX going bankrupt or being forced to sell assets.”

Crypto market maker Jump said on Twitter late on Saturday that it had an undisclosed exposure to FTX, adding that the firm remains well capitalized.

MARKET FALLOUT

Since its founding in 2019, FTX had raised more than $2 billion from top investors including Sequoia, SoftBank, BlackRock (NYSE:) and Temasek. In January, FTX had raised $400 million from investors at a $32 billion valuation.

SoftBank and Sequoia Capital said they were marking their investments in FTX down to zero.

Cryptocurrency exchange Coinbase (NASDAQ:) Global Inc will also write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter.

fell below $16,000 for the first time since 2020 after Binance abandoned its rescue deal for FTX on Wednesday.

On Saturday it was trading around $16,800, down by more than 75% from the all-time high of $69,000 it reached in November last year.

FTX’s token FTT plunged by around 91% this week. Shares of cryptocurrency and blockchain-related firms have also declined.

“We believe cryptocurrency markets remain too small and too siloed to cause contagion in financial markets, with an $890 billion market cap in comparison to U.S. equity’s $41 trillion,” Citi analysts wrote.

“Over four years, FTX raised $1.8 billion from venture capital and pension funds. This is the primary way financial markets could suffer, as it may have further minor implications for portfolio shocks in a volatile macro regime.”

The U.S. securities regulator is investigating FTX.com’s handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry said.

Hedge fund Galois Capital had half its assets trapped on FTX, the Financial Times reported on Saturday, citing a letter from co-founder Kevin Zhou to investors and estimating the amount to be around $100 million. Pain in crypto land https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png

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Hedge fund Galois Capital says half its capital stuck on FTX exchange -FT

Stock Markets 5 hours ago (Nov 12, 2022 02:10AM ET)

Hedge fund Galois Capital says half its capital stuck on FTX exchange -FT© Reuters. FILE PHOTO: Representations of cryptocurrencies are seen in front of displayed FTX logo in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration

(Reuters) – Galois Capital is the latest hedge fund caught off guard after close to half its assets were trapped on collapsed crypto exchange FTX, the Financial Times said on Saturday, estimating the amount to be around $100 million.

Galois co-founder Kevin Zhou wrote to investors in recent days that while the fund had been able to pull some money from the exchange, it still had “roughly half of our capital stuck on FTX,” the paper said, quoting a letter it had seen.

“I am deeply sorry that we find ourselves in this current situation,” Zhou wrote as per the report, adding that it could take “a few years” to recover “some percentage” of its assets.

FTX filed U.S. bankruptcy proceedings on Friday and its Chief Executive Officer Sam Bankman-Fried resigned after a rapid liquidity crunch at the group left FTX scrambling to raise about $9.4 billion from investors and rivals.

FTX’s swift fall from grace followed heavy speculation about its financial health that triggered $6 billion of withdrawals in just 72 hours earlier this week. The company had published a valuation of $32 billion as recently as January.

FTX and Galois did not immediately respond to Reuters requests for comment.

FTX says investigating ‘unauthorized transactions’

Stock Markets 3 hours ago (Nov 12, 2022 06:50AM ET)

FTX says investigating 'unauthorized transactions'© Reuters. FILE PHOTO: Representations of cryptocurrencies are seen in front of displayed FTX logo and decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) -Collapsed crypto exchange FTX said on Saturday it had seen “unauthorized transactions”, with analysts saying millions of dollars worth of assets had been withdrawn from the platform.

Blockchain analytics firm Elliptic said that around $473 million worth of cryptoassets were “moved out of FTX wallets in suspicious circumstances early this morning,” but that it could not confirm that the tokens had been stolen.

FTX U.S. general counsel Ryne Miller said in a tweet shortly after 0700 GMT on Saturday that the firm had “expedited” the process of moving all digital assets to cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Earlier on Saturday, Miller said in a tweet that he was “investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges.”

FTX did not respond to a Reuters request for comment.

Prior to Miller’s tweets, FTX officials appeared to confirm rumors of a hack on the firm’s Telegram channel, according to a CoinDesk report which said that the exchange had instructed customers to delete FTX apps and avoid its website.

“FTX has been hacked,” an account administrator in the FTX Support Telegram channel wrote in a message, according to CoinDesk.

Reuters could not immediately verify the details posted on FTX’s private Telegram channel.

FTX filed for U.S. bankruptcy protection on Friday and founder Sam Bankman-Fried resigned as chief executive.

The distressed crypto trading platform had struggled to raise billions to stave off collapse as traders withdrew $6 billion in crypto tokens from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

Exclusive-Tesla has considered exporting EVs from Shanghai to US, Canada – sources

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Stock Markets 14 hours ago (Nov 12, 2022 07:00AM ET)

Exclusive-Tesla has considered exporting EVs from Shanghai to US, Canada - sources© Reuters. FILE PHOTO: Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China January 7, 2020. REUTERS/Aly Song/File Photo

SHANGHAI (Reuters) – Tesla (NASDAQ:) has considered plans for exporting made-in-China electric vehicles to the United States and Canada, two people with knowledge of the planning told Reuters, a step that would connect its largest factory to North America, its largest market.

Tesla has been evaluating whether Model 3 and Model Y electric vehicles made in Gigafactory Shanghai could be sold in North America as soon as next year, according to the people, who declined to be named because the process was confidential.

Tesla’s evaluation has included consideration of whether parts made by Tesla’s China-based suppliers would be compliant with regulations in the United States and Canada, they said.

The Shanghai plant has been working toward an initial plan for a small-batch test run of production of vehicles in the first quarter of 2023 that would be compliant with North American standards for potential export, one of the people said.

After Reuters published its article on Friday, Tesla Chief Executive Elon Musk, in a Twitter post, said “False” without elaborating. Contacted by Reuters, representatives of Austin, Texas-based Tesla did not comment or clarify Musk’s remark. A Tesla representative in China responded with a screenshot of Musk’s denial.

Reuters could not determine if Musk’s comment would affect the feasibility study Tesla had begun on exports from China to the United States and Canada, or the implementation of the plan.

The review of potential exports to North America from Shanghai had been developing as recently as the past two weeks, according to the people who spoke to Reuters and a memo detailing some of the steps being taken by the Shanghai plant to test its readiness by early 2023 that was seen by Reuters.

Tesla would not be the first U.S. automaker to ship made-in-China vehicles to the United States. General Motors (NYSE:) has imported the Buick Envision SUV and unsuccessfully petitioned for an exemption to 25% U.S. tariffs imposed by the Trump administration.

Until now, Tesla’s strategy has been to build the cars it sells in North America at its plants in Fremont, California, and Austin, Texas. Tesla’s Shanghai Gigafactory has the capacity to produce 1.1 million electric vehicles per year after an upgrade earlier this year, making it Tesla’s most productive manufacturing hub.

The Shanghai plant makes Model 3 sedans and Model Y crossovers to sell in China and for export to markets including Europe, Australia and Southeast Asia.

Until recently, Tesla had been selling or shipping for export every vehicle it could produce in Shanghai, but inventory levels rose by their largest margin ever in October, according to data from brokerage CMBI.

In addition, factors including a cheaper yuan against the U.S. dollar, lower raw material prices in China and the rise in Tesla and new-car prices in the United States have combined to make exports from China to the United States potentially cost competitive, the people with knowledge of the plans said.

The U.S. part of the export plan, if implemented, could create new complexity for Tesla buyers. Under the terms of a new electric-vehicle subsidy and production-incentive plan signed into law by U.S. President Joe Biden, the incentive available for an individual vehicle could vary depending on whether it was imported, analysts have said.

Tesla has been widely seen as one of the major beneficiaries of the Biden administration’s Inflation Reduction Act (IRA), which offers rebates of up to $7,500 on EV purchases as part of a law intended to push automakers to reduce their reliance on China.

Tesla said in a filing with the government of Ontario in July that it was working with officials there as part of an effort to set up “an advanced manufacturing facility” in Canada.

Tesla is also ramping up production at a plant it opened in Berlin earlier this year. Output from that plant will reduce the need for some exports from China, one of the sources said.

At the same time, the price gap between Tesla cars sold in China and the United States has been widening, reflecting both higher U.S. prices and new discounts in China. That means Tesla vehicles could potentially be exported to North America at a competitive price.

GRAPHIC: Tesla’s Sticker Shock (https://graphics.reuters.com/TESLA-DEMAND/zgvomqaayvd/chart.png)

In China, where CMBI analysts have warned of a coming “price war,” Tesla slashed the starter prices for Model 3 and Model Y in China by as much as 9% last month.

On Monday, it offered an additional rebate for buyers who take delivery this month and buy insurance from one of Tesla’s partners.

Tesla sells the Model Y for the equivalent of $49,344 in China, compared to the U.S. price of $65,990. China-made cars face a 27.5% U.S. tariff, while light-duty trucks face a 25% tariff.

China, the world’s largest auto market, imposes a 15% tariff on imported vehicles.

In 2018, before Tesla’s Shanghai plant was operating, Musk had asked then-President Donald Trump to raise tariffs on cars imported to the United States from China in order to achieve “a fair outcome” where both sides had equivalent and “equally moderate” tariffs.

($1 = 7.2511 renminbi)

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Russia’s war on Ukraine latest: Russia says 63 servicemen killed in Makiivka

Russia's war on Ukraine latest: Russia says 63 servicemen killed in Makiivka© Reuters. Ukraine’s President Volodymyr Zelenskiy speaks during a joint news conference with Czech Prime Minister Petr Fiala (not seen), as Russia’s attack on Ukraine continues, in Kyiv, Ukraine October 31, 2022. REUTERS/Viacheslav Ratynskyi

(Reuters) – Russia acknowledged that scores of its troops were killed in one of the Ukraine war’s deadliest strikes, drawing demands from nationalist bloggers for commanders to be punished for housing soldiers alongside an ammunition dump.

Ukraine said it had shot down all Russian drones fired in a third straight night of air strikes.

FIGHTING

* Russia said 63 Russian soldiers had been killed in a Ukrainian New Year’s Eve attack on their quarters in the town of Makiivka, triggering furious criticism of the military leadership from lawmakers and pro-war bloggers.

* Ukraine’s air defence systems destroyed 22 air objects above Kyiv early on Monday, its military administration said.

* The strikes knocked out some power and heating, Kyiv Mayor Vitali Klitschko said on Telegram. Earlier, one person was wounded by debris from a destroyed drone.

* The regional military command in Ukraine’s east said air defence systems destroyed nine Iranian-made drones over the Dnipropetrovsk and Zaporizhzhia regions.

* A Ukrainian drone attack damaged an electricity facility in the southwest of Russia’s Bryansk region, bordering Ukraine, cutting power for several hours, the regional governor said.

* Russia is planning a protracted campaign of attacks with Iranian drones to “exhaust” Ukraine, President Volodymyr Zelenskiy said.

PUTIN ADDRESS

* Russian President Vladimir Putin devoted his annual New Year’s address to rallying the Russian people behind his troops fighting in Ukraine and pledging victory over Ukrainian “neo-Nazis” and a West supposedly intent on “destroying Russia”.

* Russian Defence Minister Sergei Shoigu said victory for Russia over Ukraine was “inevitable” as he hailed Russian soldiers’ heroism in a New Year’s video message.

ZELENSKIY ADDRESS

* Zelenskiy said in a New Year message that his only wish for all Ukrainians for 2023 was victory and he resolved to stay the course while the country fights for it. “We fight and will continue to fight. For the sake of the key word: ‘victory’.” 

DIPLOMACY

* Zelenskiy said Ukraine awaiting 2023’s first tranche of European Union (EU) macrofinancial aid in January, after speaking to European Commission chief Ursula von der Leyen.

QUOTE

* “It is a huge tragedy. It is a huge tragedy that cannot ever be forgiven. That is why the New Year is sad.” -Ukrainian soldier Pavlo Pryzhehodskiy, 27, who had lost 12 of his comrades in a single night of fighting.

Five candidates nominated ahead of Nov. 20 election to replace ousted IDB president

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Economy 49 minutes ago (Nov 12, 2022 09:43AM ET)

Five candidates nominated ahead of Nov. 20 election to replace ousted IDB president

WASHINGTON (Reuters) -Five countries – Argentina, Trinidad and Tobago, Mexico, Brazil and Chile – nominated candidates for president of the Inter-American Development Bank ahead of a Nov. 20 board election, the bank said on Saturday.

Argentina had announced on Friday that it would nominate international economic relations Secretary Cecilia Todesca Bocco. Also previously nominated were Mexico’s central bank Deputy Governor Gerardo Esquivel and Chile’s former Finance Minister Nicolas Eyzaguirre.

Brazil’s outgoing President Jair Bolsonaro nominated former central bank chief Ilan Goldfajn, who heads the International Monetary Fund’s Western Hemisphere department.

Trinidad and Tobago nominated Gerard Johnson, a former IDB official now serving as a senior consultant to the Jamaican finance ministry, for the post.

The deadline for submitting nominations was 11:59 p.m. on Friday, the IDB said.

The IDB’s governors, who are usually finance ministers or other high-ranking economic authorities from the Bank’s 48 member countries, will interview the candidates at a virtual meeting on Nov. 13, with the election to follow at a hybrid meeting a week later, it said.

An aide to Brazilian President-elect Luiz Inacio Lula da Silva is seeking to delay the election until next year so that Brazil’s nomination can reflect the newly elected leader.

Former Finance Minister Guido Mantega said he sent a letter to U.S. Treasury Secretary Janet Yellen to support a delay.

A Treasury spokesperson said Washington was not in favor.

“The rules for elections are clear and we expect the elections to occur on the agreed timeline. The nominations period just closed and the U.S. is carefully assessing each candidate,” the spokesperson said.

The U.S. Treasury, which did not nominate any candidate for the leadership role, holds 30% voting power in the bank, followed by Brazil (11%) and Argentina (11%). Colombia and Chile each hold a 3% stake.

Former President Mauricio Claver-Carone, the first American to hold the job, was ousted in an ethics scandal last month.

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FTX founder Bankman-Fried says he is in the Bahamas

Stock Markets 12 hours ago (Nov 12, 2022 09:43AM ET)

FTX founder Bankman-Fried says he is in the Bahamas© Reuters. FILE PHOTO: FTX CEO Sam Bankman-Fried poses for a picture, in an unspecified location, in this undated handout picture, obtained by Reuters on July 5, 2022. FTX/Handout via REUTERS

NEW YORK (Reuters) – FTX founder Sam Bankman-Fried told Reuters on Saturday that he was in the Bahamas, denying speculation on Twitter that he had flown to South America after the exchange filed for bankruptcy and he was removed as chief executive.

When asked by Reuters whether he had flown to Argentina, Bankman-Fried responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

Hot M&A catch-up this week: FTX, Peabody, IBEX

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Stock Markets 23 hours ago (Nov 12, 2022 10:15AM ET)

Hot M&A catch-up this week: FTX, Peabody, IBEX© Reuters.

By Sarina Isaacs, Davit Kirakosyan, Reuters

Investing.com – Here are the hottest pieces of M&A news from the past week, as covered first on InvestingPro+.

in a rapid reversal, Binance said Wednesday that it would not buy FTX after having announced a rescue offer for the second-largest cryptocurrency exchange a day earlier. Binance said its hope had been supporting customers of the collapsing exchange in order to provide liquidity, but said the issues were beyond its control or ability to help.

Sam Bankman-Fried, now-former FTX CEO, told investors Wednesday about the company’s need for emergency funding to cover a shortfall of up to $8 billion due to recent withdrawal requests, according to sources cited by WSJ. FTX has halted both crypto and fiat withdrawals from the exchange.

Radius Global Infrastructure Inc (NASDAQ:) is being targeted in a potential takeover by New York-based private equity firm Stonepeak Partners, according to a source cited by StreetInsider. Both sides are said to be working with advisors although there is no guarantee a definitive agreement will be reached. Radius Global Infrastructure is one of the largest aggregators of rental streams underlying wireless and other essential communications infrastructure sites through the acquisition of telecom real property interests and contractual rights. Shares soared more than 23% for the week.

Chart Industries (NYSE:), Inc. has agreed to acquire Howden from affiliates of KPS Capital Partners, LP for $4.4 billion in cash and preferred stock. Chart shares plunged some 40% for the week.

Peabody Energy Corp (NYSE:) and Coronado Global Resources Inc (ASX:) ended merger talks, which Coronado had confirmed less than a month earlier. Peabody was off 4.5% for the week; Coronado lost more than 8%.

Superior Industries International (NYSE:) received a $5.85-per-share buyout offer from M2 Capital. Superior stock was up 12% for the week.

IBEX Limited was said to be drawing initial interest from suitors including CVC, according to Bloomberg. Ibex shares climbed 12.8% for the week; CVC was down 1.9%

Oyster Point Pharma Inc (NASDAQ:) agreed to be acquired by Viatris Inc (NASDAQ:) for $11 per share plus contingent value right (CVR) representing the right to receive a potential cash payment of up to $2.00 per share, depending on certain performance targets. Oyster stock slipped some 3% for the week; Viatris jumped 10.7%.

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Biden says U.S.-ASEAN pact to address ‘biggest issues of our time’

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World 20 minutes ago (Nov 12, 2022 12:12PM ET)

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Biden says U.S.-ASEAN pact to address 'biggest issues of our time'© Reuters. U.S. President Joe Biden is greeted upon his arrival at the Phnom Penh International Airport to attend the 2022 ASEAN summit in Phnom Penh, Cambodia, November 12, 2022. REUTERS/Kevin Lamarque

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By Nandita Bose

PHNOM PENH (Reuters) -Southeast Asian heads of government held talks on Saturday with visiting global leaders including U.S. President Joe Biden, who hailed the launch of a new U.S.-ASEAN pact as a critical step towards tackling “the biggest issues of our time”.

In his first visit to Southeast Asia as president, Biden said the region was at the heart of his administration’s Indo-Pacific strategy and Washington was committing resources, not just rhetoric, under a new Comprehensive Strategic Partnership.

“Together we will tackle the biggest issues of our time, from climate, to health security, to defend against the significant threat to the rule-based order,” he said, opening a meeting in Cambodia with leaders of the 10-member Association of Southeast Asian Nations.

“We will build an Indo Pacific that’s free and open, stable and prosperous, and resilient and secure,” he added.

ASEAN is engaging a host of leaders, including Biden, Japanese Prime Minister Fumio Kishida, Australian Prime Minister Anthony Albanese and South Korean President Yoon Suk-yeol.

The event is the first in a series of summits in Southeast Asia over the next seven days that are expected to discuss tricky global issues, from the war in Ukraine, climate, and regional tensions over the Taiwan Strait, the South China Sea and North Korean missile launches.

Biden’s presence comes as the United States seeks to reassert itself after a period of regional uncertainty about its commitment under U.S. predecessor Donald Trump, and concerted efforts by rival China to boost its influence and fill the void.

China and ASEAN announced an upgrade in their ties to the comprehensive strategic partnership level last year.

SERIOUS THREAT

Earlier on Saturday, South Korean leader Yoon proposed a mechanism for dialogue with China and Japan to address future crises including from the impacts of war on areas like security of food and energy as well as climate change.

Yoon and Japan’s Kishida also criticised North Korea’s attempt to boost its nuclear and missile capabilities, calling it a serious and unacceptable threat.

In a separate exchange with Chinese Premier Li Keqiang, Kishida said Japan and China should strive toward building a “constructive and stable” relationship.

ASEAN leaders on Friday issued a “warning” to Myanmar’s military leaders, who were barred from the summit, to make measurable progress on a peace plan.

Global leaders will attend an East Asia Summit in Phnom Penh on Sunday, ahead of a business gathering and a G20 leaders summit in Bali next week, before moving to Bangkok for the Asia-Pacific Economic Cooperation (APEC) forum.

At the gatherings, Biden will focus on the Indo-Pacific region and talk about U.S. commitment to a rules-based order in the South China Sea, a senior administration official said earlier this week.

Some analysts played down expectations of any dramatic developments from Biden’s presence, but noted it demonstrated the United States was getting back to “normal diplomacy”, including with the upgrade in strategic ties with ASEAN.

“That doesn’t mean anything concrete, but symbolically it puts the U.S. at the same level as China,” said Greg Poling, head of the Southeast Asia programme at Washington’s Center for Strategic and International Studies.

Biden on Saturday said the meetings would discuss Russia’s “brutal” war against Ukraine and U.S. efforts to address the war’s global impact.

Russian Foreign Minister Sergei Lavrov is attending those events on behalf of President Vladimir Putin, while hosts Indonesia on Saturday confirmed Ukraine’s President Volodymyr Zelenskiy will address the G20 meeting virtually.

Ukraine is seeking to strengthen its engagement with ASEAN and its foreign minister, Dmytro Kuleba, is asking its leaders to condemn Russia’s invasion of Ukraine, warning that staying neutral is not in their interests.

He has also urged them to prevent Russia from holding up the movement of Ukrainian agricultural products under a Black Sea grain deal, which could expire on Nov. 19, and “stop Russia from playing hunger games with the world.”

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Exclusive: As split Congress odds increase, Yellen warns of need to lift debt ceiling

Exclusive: As split Congress odds increase, Yellen warns of need to lift debt ceiling© Reuters. US Treasury Secretary Janet Yellen attends the G20 Finance and Health Ministers meeting in Nusa Dua, Bali, Indonesia, November 12, 2022. Made Nagi/Pool via REUTERS

By David Lawder

NUSA DUA, Indonesia (Reuters) – With odds of a split U.S. Congress rising, Treasury Secretary Janet Yellen warned that lawmakers’ failure to raise the statutory limit on U.S. debt posed a “huge threat” to America’s credit rating and functioning of U.S. financial markets.

Yellen told Reuters in an interview in New Delhi on Friday that cooperation is still possible with Republicans on some issues, but lifting the debt ceiling is a non-negotiable item.

Some Republicans have threatened to use the next hike in the $31.4 trillion debt ceiling as leverage to force concessions from U.S. President Joe Biden, a Democrat. U.S. public debt stood at $31.2 trillion on Wednesday and without an increase, analysts anticipate a potential default crisis by the third quarter of 2023.

Republicans who took back control of Congress in 2010 elections brought the United States to the brink of default in a demand for spending cuts the next year, prompting a first-ever ratings cut on U.S. Treasury debt by Standard and Poor’s (NYSE:).

Asked whether Democrats should pass legislation in the post-election session, while they would still retain a majority until January, regardless of the election outcome Yellen said raising the debt ceiling was urgently needed.

“I think it’s irresponsible not to raise the debt ceiling. It’s always been raised,” Yellen said. “It would be a huge threat to the country not to do it, and completely irresponsible to threaten the credit rating of America and the functioning of the single most important financial market.”

A U.S. Treasury official said the department would be happy to see the measure passed before the newly elected Congress convenes in January, adding, “It needs to be done.”

BIPARTISAN WORK STILL POSSIBLE

Yellen said she was not ready to concede that Biden’s legislative agenda would be stalled by gridlock, adding that she would defend recently passed measures against Republicans who want to gut some of his spending and tax policies.

“We’re certainly going to try to protect the gains we’ve made over the last year and a half,” Yellen said.

If Republicans can win both House and Senate control, some have vowed to pass legislation to make Trump-era tax cuts permanent and roll back parts of Biden’s $430 billion green energy and healthcare subsidy law passed by Democrats.

Among the most frequently targeted measures is $80 billion in new funds for the Internal Revenue Service to boost tax compliance and customer service and a 15% domestic alternative minimum tax for large corporations — the measure’s key funding sources.

Yellen, who is now participating in G20 summit meetings in Indonesia, spoke before Mark Kelly prevailed in a tight Arizona Senate race, leaving Democrats needing just one of two other undecided seats to retain control of the Senate.

In the House, Republicans had won 211 seats, seven shy of a 218 majority.

She said some Republicans backed last year’s infrastructure act and this year’s investments in semiconductors and research, and the administration would look for measures that could draw further bipartisan support.

GLOBAL TAX DEAL

Another problem Yellen faces with a potentially split Congress is failure to implement a global deal to erect a 15% corporate minimum tax after one Democratic senator objected.

“I want to see it get done. I would have liked the United States to go first. That didn’t happen,” said Yellen, who helped broker last year’s deal aimed at ending a competitive downward spiral on corporate taxes by countries luring investment.

She said she believed most European Union countries would proceed to implement the 15% corporate minimum, which means U.S. firms now paying overseas U.S. taxes of 10.5% may wind up paying the difference to those governments possibly starting in 2024.

“And eventually, as they do, pressure will increase on the United States to come into compliance as well. Because countries that adopted the label will be able to put in place taxes on companies based in undertaxed countries like the United States.”

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