Hi there,

In today's newsletter, President Nicolás Maduro, who is seeking a third term but faces a polling deficit, aims to garner support by fueling nationalist sentiments. Simultaneously, the People's Bank of China (PBOC) is contemplating measures to stimulate economic recovery. Additionally, South Africa's rand continued its depreciation against the US dollar due to a strengthened greenback.

Matheus Zani & Daniel Porto

R&D Featured Article

Creating a foreign share class: what GPs need to know

As currency volatility in key growth areas prompts General Partners (GPs) to explore beyond dollarized share classes, foreign share classes emerge as a strategic solution for mitigating currency risk. Despite historical reluctance due to perceived complexity and cost, funds are increasingly adopting foreign share classes to attract international investors and diversify exposure. These classes, denominated in currencies different from the fund's base, offer flexibility and reduce currency exposure for investors. However, the adoption comes with complexities, requiring careful consideration of risks, benefits, costs, and regulatory implications. Technology, exemplified by providers like Deaglo, plays a pivotal role in optimizing hedging strategies, offering visibility, risk analytics, and scenario modeling to navigate the challenges associated with foreign share classes in an evolving market.

2. China Publicly Rebuked Singapore

Amidst efforts to stimulate economic recovery, the People's Bank of China (PBOC) is considering reducing lending rates and banks' reserve requirement ratio in the first quarter, following its decision to keep the MLF rate unchanged, as reported by China Securities Journal. Simultaneously, China publicly rebuked Singapore for congratulating Taiwan's new leader, Lai Ching-te, underscoring its "one-China" stance. This rare display of disapproval serves as a reminder to the island republic of China's unwavering position on the matter. The juxtaposition of economic measures and geopolitical tensions highlights the multifaceted challenges facing China on both the economic and diplomatic fronts.

3. Rand Weakens on Finance Minister's Consideration of Contingency Fund Amidst Dollar Strength

South Africa's rand continued its decline against the US dollar as the greenback strengthened, and Finance Minister Enoch Godongwana mentioned the possibility of accessing a 497 billion-rand ($26.6 billion) contingency fund. Godongwana acknowledged the increase in reserves but emphasized the complexity of such a decision, requiring agreement between himself and the central bank governor. Speaking on the sidelines of the World Economic Forum in Davos, he stated, "It raises challenges about the impact on the balance sheet of the central bank, and so on. We have to take a lot of those things into account." Currently, there is no finalized deal, and both the government and central bank feel no immediate pressure. The rand experienced its longest losing streak in three weeks, reaching its lowest levels since December 12.

Charted Territory

What to look out for today

World Economic Forum Annual Meetings
GBP - Unemployment Rate (Nov)
BRL - Brazilian Service Sector Growth (Nov)
CAD - CPI (Dec)

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