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Leonardo DiCaprio cooperating in 1MDB probe

Leonardo DiCaprio is aiding the investigation into a Malaysian embezzlement scam that involved his hit film about financial market fraud, “The Wolf of Wall Street,” according to his spokesperson on Tuesday (Oct 18).

The Hollywood star contacted the US Justice Department in July just after it filed a lawsuit to seize more than US$1 billion in allegedly ill-gotten assets tied to Malaysian state investment fund 1MDB, including rights to the film, DiCaprio’s spokesperson said.

Allegations of a vast international scheme of embezzlement and money-laundering involving billions of dollars of 1MDB money began to emerge two years ago, rocking Malaysia’s political establishment.

In a July lawsuit, the US Justice Department detailed how “Malaysian Official 1” – later identified by officials as Malaysian Prime Minister Najib Razak – family members, and close associates diverted billions from the now-stricken fund.

Najib launched the fund, 1Malaysia Development Berhad in 2009 and closely oversaw it. Both he and 1MDB deny any wrongdoing.

The money allegedly siphoned from 1MDB was used to buy hundreds of millions of dollars worth of assets around the world, and allegedly financed the production of “The Wolf of Wall Street.”

DiCaprio’s 2013 film about Wall Street corruption and greed was financed by Red Granite Pictures, co-founded by Riza Aziz, stepson of the Malaysian prime minister. DiCaprio reportedly was friends with Aziz associate Jho Low, also named in the lawsuit.

The Justice Department wants to seize royalties from the film, as well as real estate in Beverly Hills, New York and London, artworks by Monet and Van Gogh, and a Bombardier jet.

A Leonardo DiCaprio Foundation spokesperson said that after hearing about the lawsuit, DiCaprio’s had his representatives contact the Justice Department “to determine whether he or his foundation … ever received any gifts or charitable donations directly or indirectly related to these parties, and if so, to return those gifts or donations as soon as possible.”

The move to seize the funds, which is subject to what could be lengthy legal proceedings, emerges from a 2010 Justice Department anti-kleptocracy initiative intended to confiscate the ill-gotten gains of world leaders which pass through the US banking system.

The Bruno Manser Fund, a Swiss NGO campaigning against corruption in Malaysia, said Tuesday it welcomed DiCaprio’s announcement but called on the actor to fully disclose his financial ties to Low, Aziz and Red Granite Pictures.

“DiCaprio’s public statement leaves key questions open,” said Lukas Straumann, the executive director of the Bruno Manser Fund. “How much money did Leonardo DiCaprio and his foundation get from Politically Exposed Persons (PEPs) from Malaysia and why didn’t he conduct due diligence upon receiving these funds?”

The organisation also questioned whether DiCaprio would pay back the estimated US$25 million he received for his role in The Wolf of Wall Street.

“While we appreciate the statement and his cooperation with the Department of Justice, there is clearly more DiCaprio could do to end this disgraceful chapter in Hollywood history,” the statement said.

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Yuan Faces Pressure from Currency Basket Re-Balancing

This daily digest focuses on Yuan rates, major Chinese economic data, market sentiment, new developments in China’s foreign exchange policies, changes in financial market regulations, as well as market news typically available only in Chinese-language sources.

– The Yuan has gained more than 0.6% against a currency basket over the past week despite losses against the U.S. Dollar.

– The gap between M1 and M2 growth narrowed and home loans dropped in September.

– China’s State Council approved special supports to the Northeast region with the slowest growth in China.

Yuan Rates

– The PBOC strengthened the Yuan by +76 pips or +0.11% against the U.S. Dollar to 6.7303 on Tuesday. Both the onshore and offshore Yuan remained below the guided level: the USD/CNY was trading around 6.7400 and the USD/CNH was retracing around 6.7428 as of 11:35am EDT.

Over the past two weeks, the Yuan has lost more than -0.8% against the U.S. Dollar onshore and over -0.9% offshore; however, the Chinese currency has gained over +0.55% against a basket of currencies during the same span of time. In specific, the CFETS Yuan Index, BIS Yuan Index and SDR Yuan Index, measures for the Yuan to a currency basket, increased +0.61%, +0.62% and +0.82% respectively from October 7th to 14th, amid the weakness in Pound, Euro and Yen.

The PBOC’s current exchange rate target is to maintain the Yuan relatively stable against a basket of currencies. If the regulator wants to offset Yuan’s gains in the currency basket, the Yuan may need to devalue further against the U.S. Dollar, which means that the USD/CNH and USD/CNY could reach new highs over the following periods.

China's Market News: Yuan Faces Pressure from Currency Basket Re-Balancing

Data downloaded from Bloomberg; chart prepared by Renee Mu.

Key Economic Indicators

The gap between the growth in M1 and M2 continued to narrow in September, according to a report released by the PBOC on Tuesday. The spread has dropped to 13.2% in September following 13.9% in August and a record-high level of 15.2% in July. As we discussed earlier, wide gaps between the growth in M1 and M2 in recent months mostly result from a lack of investment opportunities; this has become a major constraint for the PBOC to introduce additional easing measures. A narrowed gap indicates that more companies and individuals began to spend their money rather than holding it in banks.

China's Market News: Yuan Faces Pressure from Currency Basket Re-Balancing

Data downloaded from Bloomberg; chart prepared by Renee Mu.

China’s New Yuan Loans rose to 1.220 trillion Yuan in September, larger than 949 billion Yuan in the month prior; the print is also well above a consensus forecast of 1.000 trillion Yuan from Bloomberg. More importantly, new home loans dropped to 574.1 billion Yuan from 675.5 billion Yuan in August; the proportion of home loans to total new lending also fell to 47.1% from 71.2% in August. Property loans became the sole driver to banks loans in the past two months, which increased the risk of price bubbles in the housing market. Chinese regulators have introduced a series of tightened regulations, including restrictions on mortgage issuance, in the effort of cooling the overheated housing sector.

China's Market News: Yuan Faces Pressure from Currency Basket Re-Balancing

Data downloaded from Bloomberg; chart prepared by Renee Mu.

Total outstanding funds held by China’s Central Bank dropped -337.5 billion Yuan in September, the largest monthly decline since January. Under China’s current policy, foreign currencies cannot be used directly within the country and must be converted into Yuan. Yuan funds outstanding for foreign exchange is the amount of the Yuan spent by the PBOC to purchase foreign currencies from financial institutions. A decline in the indicator means that the Central Bank receives less foreign currencies and may hint at capital outflows.

China's Market News: Yuan Faces Pressure from Currency Basket Re-Balancing

Data downloaded from Bloomberg; chart prepared by Renee Mu.

Looking forward, China will published the Third Quarter GDP print tonight, which is a primary driver for Yuan rates. The Chinese economy is mostly likely to remain a steady growth of 6.70% in the third quarter, the same as what was seen in the previous two quarters.

China's Market News: Yuan Faces Pressure from Currency Basket Re-Balancing

Market News

China Finance Information: a finance online media administrated by Xinhua Agency.

– China’s State Council approved a national strategy designated to promote the development of Northeast region. The region, once famous for its heavy industries, is in the middle of a crisis amid production cuts and increasing defaults. In the first half of 2016, the regional economy only expanded 2.2%, far less than the national growth of 6.7%. In specific, Liaoning province, one of the three provinces in the region, contracted -1.0% in the first half; this is the only Chinese province with a negative growth rate. As a result, the Central Government puts the region in focus and provides multiple supports.

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Clinton widens lead in latest poll as Trump cries foul

Hillary Clinton has widened her lead over Donald Trump nationally and in key swing states three weeks before Election Day, a poll showed on Monday (Oct 17), as the Republican presidential nominee struggled to find a way back into the race.

Trump, whose campaign has been reeling in the face of lewd comments about women and accusations of sexual assault, has doubled down on claims of “large scale voter fraud” in the US election, despite denials from within his own party.

And his team has deployed his wife Melania in a media blitz to try to tamp down the furore over the allegations, with interviews set to air late Monday on CNN and early Tuesday on Fox News.

“Those words, they were offensive to me and they were inappropriate. And he apologised to me. And I accept his apology. And we are moving on,” Trump told Fox, in an excerpt released by the network.

The Republican nominee takes the stage Wednesday with his Democratic rival Hillary Clinton in their final debate before voters make their choice on Nov 8.

Clinton leads Trump by 12 points – 50 per cent to 38 per cent – among likely voters nationwide, in a four-way contest with third-party candidates, a poll by Monmouth University showed. Among registered voters, her lead is 11 points.

Meanwhile, a survey from Quinnipiac University showed Clinton leading in several key battleground states – Colorado, Florida and Pennsylvania – and even with Trump in Ohio.

A CNN poll puts Trump ahead by four points in Ohio, but gives Clinton a slight lead in North Carolina and Nevada.

Her leads in key states corresponds to her advantage of 6.4 percentage points in an average of recent national polls given by RealClearPolitics.

The polls indicate that the allegations swirling around Trump have taken their toll. Monmouth University found that six in 10 voters believe he made unwanted sexual advances towards women – claims he vehemently denies.

Trump, who was headed to Wisconsin for a rally, is scheduled to hold two events on Tuesday in Colorado.

‘SEE WHAT HAPPENS’

After the first debate, Trump said he would respect the election result. But he backtracked in an interview with The New York Times last month, saying, “We’re going to see what happens.”

And since then, he has unleashed a litany of complaints about the nation’s election system, and also blamed the media for his woes, raising concerns about possible unrest should he lose.

“Of course there is large scale voter fraud happening on and before election day,” Trump wrote on Twitter, without offering corroborating evidence. “Why do Republican leaders deny what is going on? So naive!”

Trump’s running mate Mike Pence sought to ease tensions, insisting his camp would accept defeat if voters reject the Republican ticket at the polls. “We will absolutely accept the results of the election,” he told CBS on Sunday.

Ohio Secretary of State Jon Husted, a Republican who oversees election operations in his state, insisted Monday that Trump was being “irresponsible” for warning of voter fraud. “If there is a systemic problem, please identify it. Don’t just make an allegation on Twitter. Tell me,” Husted said on CNN.

For Clinton’s campaign manager Robby Mook, Trump is “desperately trying to shift attention from his own disastrous campaign.” “He knows he’s losing and he’s trying to blame that on the system. This is what losers do,” Mook said during a press call on Monday.

STOLEN?

But Trump’s warnings may be having an impact. A new poll by Politico and Morning Consult reveals that some 41 per cent of voters believe the election could be “stolen” from Trump through massive voter fraud.

More than seven in 10 Republicans believe the election could be taken from them, while 17 per cent of Democrats agree with the potential for serious ballot box fraud.

The poll of 1,999 registered voters was conducted on Oct 13-15.

The nation’s top elected Republican, House Speaker Paul Ryan, who has declared that he would no longer “defend” the party’s nominee, rebuked Trump over his comments questioning the validity of the election process.

Ryan is “fully confident the states will carry out this election with integrity,” his spokeswoman AshLee Strong said.

CLINTON LOW-KEY BEFORE DEBATE

Clinton is lying low ahead of the final debate, apparently relying on Trump self-destructing.

“She is trying to avoid issues for the next 22 days in the hopes that this will just end up being about Mr Trump,” his campaign manager Kellyanne Conway told CNN on Monday outside of Trump Tower in New York.

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Russia announces brief Aleppo truce as EU warns of ‘war crimes’

Russia on Monday (Oct 17) announced an eight-hour “humanitarian” ceasefire in Aleppo later this week, as the EU warned that the Syrian regime’s Moscow-backed assault on the city could amount to war crimes.

The United Nations and European Union welcomed the announcement, but said Thursday’s planned pause in fighting needed to be longer to allow the delivery of humanitarian aid.

In the latest violence, dozens of civilians including 12 members of the same family were killed in heavy bombardment of rebel-held eastern sectors of the embattled city, a monitoring group said.

“We have taken a decision not to waste time and to introduce ‘humanitarian pauses’, mainly for the free passage of civilians, evacuation of the sick and wounded and withdrawal of fighters,” senior Russian military officer Sergei Rudskoi told a press briefing in Moscow.

The ceasefire would run from 0800 to 1600 local time (1.00pm to 9.00pm Singapore time) “in the area of Aleppo”, Rudskoi said.

“During this period the Russian air force and Syrian government troops will halt air strikes and firing from any other types of weapons.”

Russia’s announcement, to which there was no immediate reaction from rebels, came as the EU condemned the ferocious air war waged on Aleppo over the past three weeks.

“Since the beginning of the offensive by the regime and its allies, notably Russia, the intensity and scale of the aerial bombardment of eastern Aleppo is clearly disproportionate,” EU foreign ministers said in Luxembourg.

“The deliberate targeting of hospitals, medical personnel, schools and essential infrastructure, as well as the use of barrel bombs, cluster bombs, and chemical weapons, constitute a catastrophic escalation of the conflict … and may amount to war crimes,” they said in a statement.

‘POSITIVE STEP’

The EU ministers said they would also press ahead with extending sanctions against Syrian President Bashar al-Assad’s regime, but stopped short of threatening measures against Russia.

EU foreign affairs chief Federica Mogherini called Moscow’s announcement “positive” but not long enough to allow humanitarian aid to reach the besieged city.

“It can be a start … for sure it is a positive step,” she told reporters at the close of the ministerial meeting in Luxembourg.

“The latest assessment from the aid agencies (however) is that 12 hours is needed so work is needed to find common ground,” she added.

UN spokesman Stephane Dujarric also welcomed the truce announcement but stressed the “need for a longer pause in order to get the aid in”.

Once Syria’s thriving commercial hub, Aleppo has been ravaged by air raids and intensifying clashes as regime forces fight to capture the rebel-held east.

Russian air support for the onslaught – which has destroyed hospitals and other civilian infrastructure – has spurred the accusations of potential war crimes.

Monday’s air strikes on Aleppo killed 13 civilians in the rebel-held district of Marjeh, including 12 members of the same family, said the Syrian Observatory for Human Rights.

“Nine of the family members were minors, including a 17-year-old girl and her newborn,” said the Britain-based group’s head Rami Abdel Rahman.

The deaths brought to 47 the number of people killed since Sunday morning in east Aleppo, the Observatory said.

The deadliest raids were overnight on a residential block in Qaterji, where the Observatory said Russian strikes killed 18 civilians.

DIPLOMATIC EFFORTS

“There are still families under the ruins. We pulled out seven or eight bodies and dozens of wounded,” said ambulance driver Abu Mohamed. “The hospitals are full of casualties. It’s a disaster.”

More than 430 people have been killed in bombardment on the eastern half since the assault on Aleppo was announced on Sep 22, according to the Observatory.

Another 82 people have died in rebel fire on government-held neighbourhoods in the west.

Further west in Aleppo province, Russian raids killed 23 people in the village of Uwaijal on Monday, said the Observatory.

US Secretary of State John Kerry met his counterparts from Russia, Iran, and Syria’s neighbours in Switzerland on Saturday, and travelled on to London for meetings with the British and other European foreign ministers.

Kerry said the Lausanne meeting produced new ideas on reviving a Syrian truce, after a ceasefire jointly brokered by Moscow and Washington broke down last month, but said high-level contacts to flesh them out would continue Monday.

Syria’s war has devolved from a widespread protest movement against Assad’s rule to a multi-front war between rebels, militants, Kurds and regime forces.

Turkish-backed rebels dealt a major symbolic blow to the Islamic State jihadist group on Sunday by overrunning the northern Syrian town of Dabiq.

Across the border in Iraq, Prime Minister Haider al-Abadi announced the launch on Monday of a long-awaited operation to recapture Mosul – IS’s last major stronghold in the country.

In June 2014, IS declared a self-styled Islamic “caliphate” in territory straddling Syria and Iraq.

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