Asia/Pacific Economic News

Oct. 19 (Bloomberg) -- Temasek Holdings Pte, Singapore’s
government-owned investment company, hired Deutsche Bank AG,
Goldman Sachs Group Inc. and Morgan Stanley to help it sell
10-year bonds in U.S. dollars.
The sale will be benchmark, Temasek said in a stock market
filing today, without being more specific about the size.
Benchmark typically means at least $500 million.
“We’re not expecting any major acquisitions but obviously
that’s what this company is all about,” Standard & Poor’s
credit analyst Manuel Guerena said in a phone interview from
Singapore. “These bonds will help extend Temasek’s debt
maturity profile, and I guess it’s a bit of a signal to the
market that the volatility in equity markets over the past year
or so hasn’t affected Temasek’s financial rating.”
Temasek, which reported a 66 percent drop in profit to
S$6.2 billion ($4.45 billion) for the year to March 31 after
selling stakes in Bank of America Corp. and Barclays Plc, has
slowed investments after losing money on financial companies. It
invested S$9 billion in the period, down from S$32 billion a
year earlier, of which S$3 billion was in rights offerings by
portfolio companies including London-based Standard Chartered
Plc and Singapore’s DBS Group Holdings Ltd.
Liquidity Buffer
Chief Executive Officer Ho Ching said on Sept. 17 that
Temasek has been building up liquidity “methodically” over the
last two years because of the risk of a slump, though it didn’t
anticipate “the speed and ferocity of the worst global
financial crisis since the Great Depression.”
The company said in August that it plans to work with
companies in which it owns stakes, the first change to its
charter in seven years, reflecting a transformation from a
passive holder of stakes in government-controlled companies to
an investor with more than two-thirds of its assets outside
Singapore.
Temasek sold $1.75 billion of 4.5 percent, 10-year notes in
September 2005 that were yielding 3.604 percent today, according
to Royal Bank of Scotland Group Plc prices on Bloomberg. The new
securities may be priced to yield about 1 percentage point more
than similar-maturity U.S. government debt, said a person
familiar with the matter, who asked not to be identified as
they’re not authorized to discuss pricing.
‘Singing Canary’
The spread on Temasek’s 2005 bonds are “a real-time
indicator of credit risks, much like the role of a singing
canary in a coal mine,” Ho said July 29.
The new securities will be issued under Temasek’s $5
billion guaranteed global medium-term note program, today’s
statement said. Temasek spokesman Jeffrey Fang declined to
comment beyond the statement.
Moody’s Investors Service ranks Temasek’s bonds at Aaa, its
highest investment-grade rating. S&P grades the debt an
equivalent AAA.
“The strength of Temasek comes from its very strong
liquidity and also its portfolio, which is quite diversified and
also quite liquid,” S&P’s Guerena said. “Many of its
investments also have strong business profiles and provide the
company with a nice amount of cash flow.”

Damn nice find Batman! Watch out for the return of sovereign wealth funds. Just like pre crisis it seems that Temersak is scheming once again! China's Sovereign wealth fund is another big guy to watch out for! Kinda scary of the implications of government controlled funds.

"The outside world is very suspicious of us, saying we have a national
agenda, but our strategy is just one of long-term risk-adjusted
returns, it is to make money,” Mr Lou said. “I don’t care how many
tonnes of oil we ship home, I care about the level of the stock price.”

CIC head warns of asset price bubble


By Jamil Anderlini in Beijing and Sundeep Tucker in Hong Kong
Published: October 28 2009 08:57 | Last updated: October 28 2009 08:57

China’s sovereign wealth fund has invested about half its $110bn in available
capital in overseas stocks, mining, energy and real estate and has
earned decent returns so far, the head of the fund said on Wednesday.But
Lou Jiwei, chairman of China Investment Corp, warned that a “small
bubble” has already formed in global asset prices and CIC was focused
on investments in commodities-related assets and real estate as a hedge
against inflation and currency depreciation.


“Our returns at the moment are not bad,” Mr Lou told a conference in
Beijing. “But I dare not say they will be good by the end of the year.”CIC
has made a rapid succession of investments in commodity-related
companies in recent months, a move Mr Lou said was part of the fund’s
strategy to hedge against long-term inflation and the “likelihood that
the value of major currencies will fall to a new equilibrium point”.He
did not name a specific currency but Chinese officials have repeatedly
expressed concern over the stability of the US dollar and the potential
for US policies to precipitate a slide in its exchange rate.Mr
Lou’s comments came as it emerged that CIC would invest up to $700m in
Iron Mining International, a privately-owned Hong Kong-registered
company whose chief asset is a coveted mine in Mongolia. According
to people familiar with the matter, the Chinese sovereign wealth fund
has agreed to subscribe to a $500m convertible loan and could increase
its investment by a further $200m.Iron Mining was founded by a
mainland Chinese entrepreneur and his Mongolian partner. It is planning
an initial public offering in Hong Kong next year which could value the
group at about $5bn and create an exit opportunity for holders of its
debt.Credit Suisse, which invested in Iron Mining in May 2007,
advised the company on the CIC deal. Singapore’s Temasek and Hopu
Investment Management, a Beijing-based private equity fund, also
invested a combined $300m in the group two years ago.The deal came just a day after CIC announced plans to invest $500m to fund the expansion of a Canadian coal mining company in Mongolia. Last month, CIC bought an 11 per cent stake in London-listed JSC KazMunaiGas Exploration Production. CIC also recently bought $1.9bn of debt from Bumi Resources, Indonesia’s biggest coal producer, and paid $850m for a 15 per cent stake in commodities shipping company Noble Group.Mr
Lou said on Wednesday that commodity investments were the fund’s main
focus because it wanted to take advantage of the China growth story and
he repeatedly dismissed concerns that CIC was making investments as
part of Beijing’s strategic agenda to acquire control of global
resource assets.“The outside world is very suspicious of us,
saying we have a national agenda, but our strategy is just one of
long-term risk-adjusted returns, it is to make money,” Mr Lou said. “I
don’t care how many tonnes of oil we ship home, I care about the level
of the stock price.”CIC was established in September 2007 to
earn better returns on a portion of the country’s $2,273bn in foreign
exchange reserves.As the financial crisis worsened, its two earliest investments – in US private equity group Blackstone and investment bank Morgan Stanley – plummeted and the fund switched its strategy to hold most of its funds in cash.CIC
decided that global markets had stabilised by the second quarter of
this year and has now invested about half the $110bn it had available
for offshore investment, Mr Lou said.That means the fund has
invested this year nearly nine times the $4.8bn it spent abroad in
2008, when the return on its global portfolio was negative 2.1 per cent.In
spite of CIC’s explicit focus on commodity investments, the bulk of the
fund’s offshore investments are allocated to external managers and
invested in public securities markets, Mr Lou said.“We don’t
have enough experience in managing a portfolio of financial products
but we area able to entrust our assets to external managers with good
investment performance,” Mr Lou said. “Of course, as we gain more
experience we will gradually increase the proportion that we invest
ourselves.”

Chinese Exports: Can Emerging Markets Replace the U.S. Consumer?


After the credit crisis last year, China is increasingly focusing more on developing markets for growth. Chinese companies have been making large investments especially in developing resource-rich Middle East and Africa.

An interesting article in the Der Spiegel titled Reluctant Partners - Global Crisis Makes US More Dependent on China than Ever discusses the trade relationship between the USA and China and the rising power of China.

From the article:

When US President Barack Obama visits China this weekend, he will encounter a rival that sees the financial crisis as more of an opportunity than a threat. America, on the other hand, has been fundamentally weakened by the global crunch — and is more dependent on the goodwill of the rising superpower than ever.

The scientists at the National University of Defense Technology in Changsha, China, had plenty to celebrate: They had developed a supercomputer that could perform more than a quadrillion calculations per second.

The announcement, released just in time for US President Barack Obama’s visit to China this weekend, had symbolic value: With their new computer, dubbed “Tianhe” (”Milky Way”), the Chinese claim they will be the first country to become a direct rival to the superpower.

China is bursting with self-confidence. The new world power sees itself as a winner in the financial crisis, with its economy growing by an impressive 9% in the third quarter, while the economies of the West struggle to recover from a deep recession. And while the Americans are focused on their own problems, China is expanding its influence, both in Asia and among resource-rich African countries.

Writing about the American consumption of Chinese goods the authors write:

“Suddenly the crisis hit China, whose economy had been oriented almost completely toward the United States. In Dongguan, home to one low-wage factory after the next, entire neighborhoods have died out. “We have lost a third of our orders,” says Li Zhaoyuan, who owns Dongguan Singyan, a company that makes metal parts. He has laid off 40% of his workforce.

The remaining workers sit at outdated machines on the two floors of the plant, punching and pressing pieces of metal into objects like fishhooks and housings for Motorola mobile phones. “We used to work 24 hours a day,” says Li, “but now one eight-hour shift is enough.” He doesn’t believe that American consumers will soon be buying Chinese products as enthusiastically as they did before the crisis. He prefers to follow the advice of the strategists in Beijing, namely to focus on new markets in Asia, the Middle East and Africa.”

I agree with Mr.Li 100%. The once free-spending American consumer will not be going back to old ways any time soon with real wages in the private sector going down and rising unemployment levels. The American consumer is in belt-tightening mode now. Most of the Chinese-made cheap goods were bought with credit. As consumers shop less, credit growth has slowed for many months consecutively. China’s strategists have clearly understood that they need to rely less on America as the main export destination and focus more on emerging markets.

While China’s economic growth since 1990 is astonishing, China has a long way to go before it can beat or overtake the US economy. Despite the strong growth the Chinese economy still is relatively small compared to the US economy. So in that sense it may be premature to call China as the rising superpower.

Emerging markets in Asia, Africa, etc. may not be able to consume as much of the Chinese goods as the US did simply because consumers in those markets do not have the purchasing power as Americans do. For example, it would be wrong to assume that many Asians such as Indonesians, Indians, Vietnamese, etc. would spend as frivolously as Americans did in buying Chinese products. So the answer to my title question is that it is too early to tell whether China will be able to successfully replace USA with new markets in Asia, Africa and the Middle East as its main exports destination.

ETF Volatility in China


Observers are noting the rise of China while other countries are languishing. Still, China’s economy and related ETFs could be hindered if the country’s domestic issues are not addressed.

Many politicians and intellectuals feel that the balance of power is shifting from the United States to China and some believe that the co-operation of the near-equals could solve world’s woes, according to The Economist.

China is the world’s biggest holder of American debt, which gives the country a unique hold on the American economy and reserve-currency status. Nevertheless, China will continue to lend to America and talks about the Chinese yuan becoming a world reserve currency may be just that.

With the Occident in a less-than-satisfactory state, Chinese companies may push to lift the trade barriers on high-technologies imposed by the West and start to court America’s high-tech industries. Perhaps, China may soon have a more permanent presence in the United States in areas such as the car industry.

Some Chinese leaders have voiced caution over the stability of China’s recovery. Yu Yongding, former adviser to China’s Central Bank, argues that wasteful spending on unnecessary infrastructure projects could drain the country’s fiscal strength, which would leave China with “no more drivers for growth.”

China is still grappling with many issues that need attention inside the country including rising protests, corruption, surging crime and leaders who fear their own citizens. If you’re invested in China, be sure to have a strategy for both entry and exit. It’s a country with tremendous growth potential, but it’s not without its issues, either.[b]

ETFs:
-FXI
-GXC
-PGJ
-HAO
-YAO

China's GDP does not add up

China largely escaped the ruin that came over Western financial institutions last fall, but it could not avoid the economic effects of the debacle. The Chinese government has attempted to sustain its economy by spending more than $900 billion of its own and state bank’s funds to support its $4.3 trillion economy until the global trade system recovers and demand for goods once again flows to Chinese factories.

Chinese economic growth since the crash of last September has never approached the standard recession definition of two consecutive quarters of negative GDP. Third quarter growth as recorded by the government was 8.9%. It was 7.9% in the second and 6.1% in the first.

These figures are deceptive twice over. China’s population of 1.33 billion is still growing, though only 0.65% a year and the government estimates that 8.0% GDP expansion is necessary just to give each year’s new workers employment. But internal migration of rural agricultural workers to the cities and economic development zones is adding uncounted millions more job seekers to the unemployment roles of the new industrial China. These workers have to be accommodated or sent home.

Obtaining an 8% year-on-year increase in GDP is the bare minimum acceptable to the Beijing economic planners. In the minds of the central authorities anything lower risks the civil unrest that has so often in China’s history shaken the hold of the central government.

Is it really surprising that a cash and credit stimulus over a year worth almost one quarter of national GDP has produced a burst of economic action? How could it be otherwise? But even the reality of the 8.9% growth can be called into question.

Various secondary statistics including year-over-year figures for exports, down 23.0% in July, 23.4% in August and 15.2% in September and imports, off an average 11.8% monthly in the third quarter do not draw a picture of economic expansion let alone 8.9% activity. The Chinese economy is almost 40% dependant on exports for GDP; if exports are not increasing what is generating the demand for Chinese products? Domestic consumption, retail sales?

But, if the Chinese economy really grew at 8.9% in the 3rd quarter, then secondary statistics should concur. However, several important measures cast doubt on the probability that all is as reported.

For one, exports and imports seemed to be out of line. Exports were down an average of 20.5% monthly in the third quarter and imports fell an average of 11.8%. The Chinese economy is 38% dependant on exports for GDP and it seems odd that goods produced for export orders are then not exported. Imports include both industrial and consumer products, raw materials, components and finished products. It is counter to logic that an economy that is expanding at an 8.9% rate would not need more imports to produce its manufactures especially since a good deal of Chinese exports are assembled from imported components.

The question now is: do the statistics make sense? If the M2 is growing at the documented rates but deflation exists at all levels of the price chain, are retail sales really expanding at the reported 15%? Where are the price pressures? If exports are down and retail sales are questionable is the 8.9% GDP creditable or sustainable?

Chinese M2 money supply grew at a year-over-year average rate of 28.75% in the third quarter, 26.70% in the second quarter and 21.59% in the first. These are Chinese government figures from the People’s Bank of China (PBOC) via Bloomberg. At the same time all price measures, from wholesale goods to CPI, have fallen.

The wholesale price index, the price of goods in inter-business transactions is down an average of 7.0 % in the third quarter, 7.6% in the second and 5.6% in the first (PBOC via Bloomberg). The producer price index representing changes in post production prices dropped 7.7 % in the third quarter, 7.2% in the second and 4.6 % in the first. Prices of retail goods slid 2.25 % in the third quarter (July and August only), 2.03 % in the second and 0.8 % in the first. The producer and retail indices are from the National Bureau of Statistics (NBS) via Bloomberg. Likewise the purchasing price index (raw materials, fuels and power) dropped 11.06 % in quarter three, 10.4 % in quarter two and 7.1 % in quarter one (NBS via Bloomberg). And finally the overall CPI was off 1.26 % in Q3, 1.53 % in Q2 and 0.6 % in Q1. The uniformity of the price direction is striking.

For comparison, United States M2 year on year growth averaged 7.6 % in the third quarter, 8.6 % in the second and 9.4 % in the first. The US Producer Price Index (PPI) was down 5.3% year on year in Q3, 4.3% in Q2 and 1.9% in Q1. CPI is down an average of 1.6% in the third quarter, 1.1% in the second and 0.06% in the first.

Chinese M2 grew 3.8 times faster than the US in the third quarter, 3.1 times faster in the second, and 2.3 in the first. However, Chinese CPI is essentially the same as the US and Chinese producer prices at several levels fell at a much faster course despite more than triple the money supply growth.

The purpose of this exercise is not to make minute comparison of the composition of inflation rates and money supply between China and the United States but to ask the logical question--can M2 grow at these rates in an economy where GDP is expanding at 8.9% and retail sales are rising at 15% and not produce appreciably different inflation rates? And if that is logically farfetched, then which parts of the M2, GDP, retail sales equation is overstated?

The Chinese Government and the PBOC have flooded the economy with cash and loans, but money by itself cannot create demand. And without demand it does not even produce inflation. Judging from the price levels in the Chinese economy consumer demand is minimal. If exports do not pick up who will buy the products of 8.9% growth?

Goldman to Start in Malaysia


KUALA LUMPUR -- Goldman Sachs
said Tuesday it expects to start its fund management and corporate
finance operations in Malaysia in the first half of 2010 after its
application was approved by the Securities Commission.
"We expect to have physical presence on the ground in Kuala Lumpur
in the first half of next year," the investment banking firm said in an
email to Dow Jones Newswires.
The regulator said the application was made after Prime Minister
Najib Razak announced measures to liberalize the financial sector in
June, including relaxing foreign ownership requirements.
The measures are intended to attract foreign capital, the regulator said.
Securities Commission Chairman Zarinah Anwar called Goldman Sachs'
decision a "significant" one for the local capital market and
"demonstrates the group's confidence in the growth opportunities
available in the Malaysian capital market," she said.
Goldman Sachs will join other global broking and fund management
companies that have established operations in Malaysia, the regulator
said.
"The future outlook for Malaysia's capital markets and its asset
management industry is very positive and through our local presence we
look forward to playing a larger role in their development," said Tim
Leissner, co-president of South East Asia for Goldman Sachs.

Malaysia is the new hot-spot along with India. It will be truly educational watching Asia turn in to a financial powerhouse over the next 20 years.

=================================================================================================================================

HSBC closes in on Asian retail assets of RBS

By Sundeep Tucker and Sharlene Goff
Published: December 10 2009 02:00 | Last updated: December 10 2009 02:00

HSBC is closing in on the acquisition of the rest of the Asian retail and
commercial assets being divested by Royal Bank of Scotland.,People
familiar with the matter said that the sides had struck a deal for the
assets in China, India and Malaysia but that it was subject to
regulatory approval in the three countries.The acquisition would
underscore HSBC's push to expand in Asia. Michael Geoghegan, HSBC's
group chief executive, is scheduled to relocate from London to Hong
Kong by the end of January to oversee operations in such markets as
China and India.HSBC came close in October to acquiring the
Asian private banking assets sold by Dutch group ING. Singaporean bank
OCBC bought them for $1.5bn (£935m).RBS said it was "in ongoing
discussions for the remaining retail and small and medium enterprises
it has decided to sell in Asia and will make further announcements as
appropriate".HSBC declined to comment.RBS put the Asian
assets up for sale in March following a strategic review, after posting
the biggest loss in UK corporate history. The assets include 28
branches in India and 13 in China and are expected to fetch about $300m.RBS,
which is majority-owned by the UK government, made a loss of £24.1bn
last year and has moved to shrink its £2,000bn balance sheet.The
sale has been complicated and delayed by RBS's decision to retain
wholesale banking operations in key regional markets across Asia.Standard
Chartered had been in talks since August to acquire the RBS operations
in China, India and Malaysia. When the sides failed to agree a price,
discussions reopened with HSBC.ANZABN Amro*More than a dozen
investment banks and other companies have signalled interest in buying
RBS's stake in US energy trading business Sempra Commodities.RBS has appointed Lazard to seek potential bidders and manage the sale.The bank is thought to have been approached by 12 to 20 possible buyers.Consultants
said banks are investing heavily in commodities in spite of the
financial crisis due to the profitability of the business and the
belief that dealing in raw materials represents a rare opportunity for
growth while other banking sectors are shrinking.RBS acquired a 51 per cent stake in the venture in 2007 for $1.35bn. Traders said the bank was likely to recover its investment.

"Two things in life are certain, Death and Taxes." That quote sums up the whole crisis in one swoop. Switzerland, Asia, and the Wall Street just became popular again.

================================================================================================================================================================

France to impose tax on bank bonuses

By Ben Hall in Paris
Published: December 10 2009 10:38 | Last updated: December 10 2009 16:03

President Nicolas Sarkozy is to follow Britain’s lead and impose a one-off tax on bonus pay-outs by banks operating in France. The French government is still working out the details, but intends to bring Paris in line with London by forcing banks to pay 50 per cent in tax on bonus pay-outs for 2009 above €27,000.


French banks already pay an average of 14 per cent on bonus pay-outs so the
additional levy may be smaller than London’s new 50 per cent supertax.Mr
Sarkozy is expected to confirm the move on Friday. The French president
will meet Gordon Brown, UK prime minister, on the margins of an
European Union summit in Brussels on Thursday. The two leaders will
urge their EU counterparts to adopt similar one-off taxes.

//the JS file that is included is called .js - the id value is the playername again
The UK on Wednesday announced that it would impose a one-off levy on bonus payments paid by banks above £25,000. A
senior French official told the Financial Times on Thursday that the
French government had been considering such a tax for some time but had
been deterred from doing so by the threat to the competitiveness of
Paris as a financial centre.“There is no obstacle to doing it
now if it has been done in London,” the official said. “The fact that
London has introduced it has changed the landscape.”On Thursday
German Chancellor Angela Merkel joined the clamour about bankers’
bonuses, saying moves to curb payouts would help the financial sector
learn from its mistakes. “The Germans always said that we want
the banks and the people who work in these banks to share the burden
resulting from this crisis. We should not place the burden squarely on
the taxpayers’ shoulders,” Ms Merkel told reporters. “We have
committed ourselves to a transaction tax in the financial market. I
think that would be a more sustainable solution to the problems,” she
said. “But still, I think the idea that arose in the City of
London ... to have a one-off tax on managers’ bonuses is a charming
idea that maybe will produce a learning effect.” Officials in
Paris said France wanted to see further details of how the UK supertax
would work – and how much revenue it would bring in – before deciding
on the final shape of its tax. Paris could take into account features
of the UK tax system, such as non-domicile status, to ensure that
France-based bankers are not unfairly penalised.French officials
insisted the tax move was not intended to punish French banks but to
encourage them to retain more profits to bolster their capital ratios.French
banks, which traditionally had more conservative remuneration policies
than their London or New York-based counterparts, needed far less state
support than their British counterparts during the financial crisis and
have already paid it back.Paris could introduce the new tax either in the budget bill currently before parliament or in new banking regulation.French
officials pointed out that Mr Sarkozy first proposed an
internationally-agreed tax on bonus payments in August, with the idea
of using the proceeds to bolster national deposit guarantee schemes.
Paris has not yet decided whether to use the revenues from its bonus
tax for that purpose. The French government temporarily quelled
public disquiet earlier this year over the prospect of large bonus
pay-outs by French banks by persuading them to defer half of their
bonus awards for 2009 until 2010. But Britain’s move to impose a bonus
tax put the French president under intense political pressure to follow
suit. Elysée officials hope that Mr Sarkozy’s commitment to a
bonus supertax will help to draw a line under the furore triggered by
the appointment of Michel Barnier, a
former French minister, to the job of European Commissioner for the
internal market, where he will set the agenda for financial regulation.Mr
Sarkozy gleefully described Mr Barnier’s appointment as a triumph of
French ideas over Anglo-Saxon capitalism, prompting a backlash in the
City.Elysée palace officials on Wednesday played down the row,
describing it as a “storm in a tea-cup. The teacup is now empty. The
storm has passed.”Mr Sarkozy’s intention of emulating the
British bonus tax strengthens diplomats’ claims that they are working
along the same lines.“If there are two heads of state and
government who are on exactly the same line, it is Gordon Brown and
Nicolas Sarkozy, so the fuss over the City is misplaced,” said a senior
official.

Batman wrote:

Malaysia is the new hot-spot along with India. It will be truly educational watching Asia turn in to a financial powerhouse over the next 20 years.

=================================================================================================================================

HSBC closes in on Asian retail assets of RBS

By Sundeep Tucker and Sharlene Goff
Published: December 10 2009 02:00 | Last updated: December 10 2009 02:00

HSBC is closing in on the acquisition of the rest of the Asian retail and
commercial assets being divested by Royal Bank of Scotland.,People
familiar with the matter said that the sides had struck a deal for the
assets in China, India and Malaysia but that it was subject to
regulatory approval in the three countries.The acquisition would
underscore HSBC's push to expand in Asia. Michael Geoghegan, HSBC's
group chief executive, is scheduled to relocate from London to Hong
Kong by the end of January to oversee operations in such markets as
China and India.HSBC came close in October to acquiring the
Asian private banking assets sold by Dutch group ING. Singaporean bank
OCBC bought them for $1.5bn (£935m).RBS said it was "in ongoing
discussions for the remaining retail and small and medium enterprises
it has decided to sell in Asia and will make further announcements as
appropriate".HSBC declined to comment.RBS put the Asian
assets up for sale in March following a strategic review, after posting
the biggest loss in UK corporate history. The assets include 28
branches in India and 13 in China and are expected to fetch about $300m.RBS,
which is majority-owned by the UK government, made a loss of £24.1bn
last year and has moved to shrink its £2,000bn balance sheet.The
sale has been complicated and delayed by RBS's decision to retain
wholesale banking operations in key regional markets across Asia.Standard
Chartered had been in talks since August to acquire the RBS operations
in China, India and Malaysia. When the sides failed to agree a price,
discussions reopened with HSBC.ANZABN Amro*More than a dozen
investment banks and other companies have signalled interest in buying
RBS's stake in US energy trading business Sempra Commodities.RBS has appointed Lazard to seek potential bidders and manage the sale.The bank is thought to have been approached by 12 to 20 possible buyers.Consultants
said banks are investing heavily in commodities in spite of the
financial crisis due to the profitability of the business and the
belief that dealing in raw materials represents a rare opportunity for
growth while other banking sectors are shrinking.RBS acquired a 51 per cent stake in the venture in 2007 for $1.35bn. Traders said the bank was likely to recover its investment.

Thats really funny how I just posted a article about goldman seting up business in Malaysia for the first time. I actually a big MD executive at HSBC in KL malaysia in charge of the whole commercial banking arm. I can definitely get more D/L on this.

-snapman

Snapman, that would be fantastic. We can get that HSBC hookup.

China’s Output Beats Estimates as Export Slide Slows
By Bloomberg News


Dec. 11 (Bloomberg) -- China’s industrial production grew
more than economists estimated in November, exports fell the
least in 13 months and imports surged, confirming the nation’s
role as leader of the world recovery.
Factory output climbed 19.2 percent from a year earlier,
the statistics bureau said in Beijing. That was more than the
18.2 percent median estimate in a Bloomberg News survey of 25
economists. Exports slid 1.2 percent. Imports rose 26.7 percent.
New loans topped forecasts and money supply expanded by a
record, extending a credit boom that may fuel asset bubbles and
inflation and has prompted plans by lenders including Bank of
China Ltd. to replenish capital. The government this week
adjusted its stimulus policies to curb property speculation,
while extending subsidies for rural purchases of consumer goods
and pledging a “moderately loose” monetary policy in 2010.
“Industrial output, money supply growth and fixed-asset
investment are not only restored to pre-crisis levels but are
approaching overheating territory,” said Isaac Meng, a senior
economist at BNP Paribas SA in Beijing. The central bank may
raise lenders’ reserve requirements in the first quarter of 2010
“to mitigate the inflation and bubble risk,” he said.
Consumer prices rose 0.6 percent, the first increase in 10
months, the statistics bureau said.
The Shanghai Composite Index swung between gains and losses
today after climbing almost 80 percent this year. Data released
yesterday showed property prices rose by the most in 16 months
in November.
Economic Acceleration
China’s growth accelerated to 8.9 percent in the third
quarter on the record lending and a $586 billion, two-year
stimulus package, helping Asia to lead the recovery from the
global economic slump. Today’s figures showed Southeast Asian
demand aiding exports. Shipments to the region jumped 20.8
percent as those to the U.S. and Europe fell at a slower pace.
The industrial output number was boosted by the low base in
November 2008, after the collapse of Lehman Brothers Holdings
Inc. intensified the global financial crisis. Steel product
output reached a record last month and power generation rose by
the most in five years.
In contrast, India reported a lower-than-forecast 10.3
percent gain in industrial production today, partly because of
weakness in electricity output.
In China, urban fixed-asset investment gained 32.1 percent
in the January-to-November period from a year earlier after
climbing 33.1 percent through October, today’s data showed.
BMW, Sinopec
Forecasts for China to maintain the fastest growth of any
major economy are encouraging companies to expand. The nation’s
gross domestic product will expand 9.3 percent next year,
according to a Bloomberg News survey of economists.
China Petroleum & Chemical Corp., the country’s biggest
refiner, said this month that it plans to expand the capacity of
its second-biggest oil-processing plant by a third. Bayerische
Motoren Werke AG, the world’s largest maker of luxury cars, said
last month that it will build a new factory worth 5 billion yuan
($732 million) to tap an auto market set to overtake the U.S. as
the world’s largest this year.
Imports climbed the most in 16 months because of rising
commodity prices, the boost to domestic demand from stimulus
policies and the low base in November 2008. The trade surplus
narrowed to $19.1 billion.
Twelve-month non-deliverable yuan forwards slipped 0.2
percent to 6.6665 per dollar as of 2:22 p.m. in Hong Kong after
the improvement in exports was smaller than economists forecast.
Climbing Retail Sales
Retail sales climbed 15.8 percent in November from a year
earlier, compared with 16.2 percent in October, according to the
statistics bureau. Producer prices fell 2.1 percent. New loans
were 294.8 billion yuan. M2 money supply grew 29.7 percent.
The State Council said this week that the government will
re-impose a sales tax on homes sold within five years after
cutting the period to two years in January. It also extended
subsidies for rural consumer purchases, while scaling back tax
breaks for some car buyers.
“Beijing’s fine-tuning of stimulus measures shows that
it’s getting more comfortable with the economy’s recovery,”
said Lu Ting, an economist at Bank of America-Merrill Lynch in
Hong Kong. “The government may start to exit stimulus via
curbing investment and loans from April.”
China’s banking regulator plans to slow new lending to
between 7 trillion yuan and 8 trillion yuan next year, a person
familiar with the matter said this week. In the first 11 months
of this year, loans reached 9.21 trillion yuan.
The government is wrestling with overcapacity and excess
production in some industries, such as steel, where an
oversupply is depressing profits for mills including Baoshan
Iron & Steel Co.
--Li Yanping, Kevin Hamlin, Zhang Dingmin. Editors: Paul
Panckhurst, Russell Ward.

India’s Industrial Production Rises Most in 25 Months

By Kartik Goyal

Jan. 12 (Bloomberg) -- India’s industrial production grew
at the fastest pace in 25 months in November, strengthening the
case for the central bank to raise interest rates in the first
half of this year.

Output at factories, utilities and mines rose 11.7 percent
from a year earlier after gaining 10.3 percent in October, the
statistics agency said in New Delhi today. The gain exceeded the
median estimate of 10 percent in a Bloomberg News survey of 25
economists.

The acceleration of India’s economy, Asia’s third-largest,
parallels a rebound in China that may also see policy makers
there boost borrowing costs in the coming months. India’s
biggest stock-market advance in 18 years, along with fiscal and
monetary measures, have stoked demand for cars made by Maruti
Suzuki India Ltd. and plasma screens from LG Electronics Inc.
“The pace of growth is much stronger than anticipated and
clearly indicates that consumption is in a self-propelling
mode,” said Shubhada M. Rao, chief economist at Yes Bank Ltd.
in Mumbai. “And with inflation surging, the probability of an
increase in the cash reserve ratio in the central bank’s Jan. 29
policy statement is now very high.”

India’s bonds fell after the report. The yield on the 6.35
percent note due in January 2020 climbed to the highest level in
almost two months, rising by five basis points to 7.71 percent
as of 1:05 p.m. The Bombay Stock Exchange’s Sensitive Index
declined 0.51 percent at 2:11 p.m., after rising 0.4 percent
earlier, on concern a faster recovery will prompt the central
bank to raise rates.

Stimulus Measures
Economies are recovering across Asia after the region’s
policy makers unveiled about $1 trillion in stimulus measures
and cut rates to spur growth. China’s industrial production rose
19.2 percent in November and its exports climbed 17.7 percent in
December.
Recent data show growth is gaining traction in India as
well, with manufacturing rising at the fastest pace in seven
months in December, according to the Purchasing Managers’ Index
compiled by HSBC Holdings Plc and Markit Economics. Exports
surged to a 15-month high in December after rising 18.2 percent
in November, the first increase in 14 months.
RBI Governor Duvvuri Subbarao “should begin monetary
action by shrinking the excess liquidity in the local money
markets and then move to increasing policy rates around March
and April,” said Rajeev Malik, an economist at Macquarie Group
Ltd. in Singapore. The central bank “will be concerned about
the excess liquidity and second-order inflationary effects of
high food inflation.”

Food Prices
India’s benchmark wholesale-price inflation rate rose to
4.78 percent in November, more than three times October’s 1.34
percent. Wholesale food prices soared 18.22 percent in the week
to Dec. 26 from a year earlier, near the most in 11 years. The
government is next due to release food inflation data on
Thursday.

“This release, together with the likelihood of a strong
December inflation number on Thursday, seals India’s near-term
interest rate fate,” said Robert Prior-Wandesforde, Singapore-
based senior Asia economist at HSBC Holdings Plc. He expects the
RBI to start increasing its key policy rates in April after
raising lenders’ reserve requirements at this month’s meeting.
Subbarao slashed the cash reserve ratio by 400 basis points
to 5 percent between October 2008 and January 2009 to shield the
economy from the global recession. The central bank has left its
reverse repurchase rate and repurchase rate unchanged since
April, after respective cuts of 2.75 and 4.25 percentage points.

Fridges, TVs
By comparison, China’s one-year lending rate is at a five-
year low of 5.31 percent and its one-year deposit rate is 2.25
percent.

Manufacturing output increased 12.7 percent in November
from a year earlier, accelerating from an 11.1 percent gain in
October, today’s report showed. Mining grew 10 percent, compared
with 9 percent in the previous month and electricity rose 3.3
percent from 4.7 percent. Production of consumer durables such
as refrigerators and televisions surged 37.3 percent in
November, compared with a 20.2 percent gain.
Prime Minister Manmohan Singh last year cut taxes on
consumer products, increased spending on roads and utilities,
raised salaries for government workers and waived farm loans.
The central bank injected about $130 billion into India’s
banking system by reducing interest rates and lowering lenders’
reserve requirements. That helped the $1.2 trillion economy to
grow 7.9 percent in the three months ended Sept. 30, the most in
1 1/2 years.

Surpassing China
Faster growth has attracted overseas inflows into stocks,
taking the Sensitive Index to the highest in 18 years in 2009.
The rupee gained 4.8 percent.
India’s growth may quicken to 10 percent in a “couple of
years,” exceeding that of China as early as 2014, Kaushik Basu,
chief economic adviser to the South Asian nation’s finance
ministry, said Jan. 4. The government has no plans to
“suddenly” withdraw last year’s stimulus, he said.
The strength of the Indian economy is enticing foreign
companies to expand and set up operations. Toyota Motor Corp.,
Volkswagen AG and other carmakers introduced 10 new models at
the Delhi Auto show last week. Passenger car sales hit 1.43
million units in 2009, the most in three years, according to the
Society of Indian Automobile Manufacturers on Jan. 8.
ArcelorMittal, the world’s biggest producer of steel, and
Posco, the sixth-biggest maker of the alloy, plan to set up new
steel mills in southern India. Posco will invest 323 billion
rupees ($7 billion) on a mill in Karnataka state, the regional
government said Jan. 7. ArcelorMittal plans to sign an accord in
June for a 300 billion-rupee project in the same state.

The central bank “will be concerned about
the excess liquidity and second-order inflationary effects of
high food inflation.”

At least someone's central Bank is concerned about inflation. Don't mean to be cynical. I am just surprised deflationary concerns are still a concern in developed economies with excess liquidity.

China Raises Banks’ Reserve Ratio to Cool Economy


Jan. 12 (Bloomberg) -- China raised the proportion of
deposits that banks must set aside as reserves to cool the
world’s fastest-growing major economy as a credit boom threatens
to stoke inflation and create asset bubbles.
Reserve requirements will increase by 50 basis points from
Jan. 18, the central bank said on its Web site this evening. The
existing levels are 15.5 percent for big banks and 13.5 percent
for smaller ones.
Chinese lenders added a record 9.21 trillion yuan ($1.3
trillion) of loans in the first 11 months of 2009, driving an
economic rebound after the global financial crisis slashed
exports. Credit growth surged last week, local media reported
yesterday, and exports rose for the first time in 14 months in
December, trade data showed on Jan. 10.
Policy makers “are following through on their pledge to
guide credit in order to pre-empt rising inflation and avoid
asset-price bubbles,” said Jing Ulrich, chairwoman of China
equities and commodities at JPMorgan Chase & Co. in Hong Kong.
The increase, the first since June 2008, excludes rural
cooperatives to aid agricultural output, the central bank said.
The People’s Bank of China also sold bills at a higher
yield for the second time in a week today. The moves fueled
speculation that policy makers will raise benchmark interest
rates in the first half of the year.
Interest-Rate Forecasts
BNP Paribas SA brought forward its forecast for higher
rates to the second quarter from the third. China’s benchmark
one-year lending rate is at a five-year low of 5.31 percent.
“The central bank may raise policy rates earlier than
market consensus which is the second half of this year,” said
Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong.
“The trigger for the central bank is inflation as consumer
prices may have climbed a higher-than-expected 2 percent in
December.”
Banks lent about 100 billion yuan ($14.6 billion) each day
last week, the official China Securities Journal reported. That
compares with 294.8 billion yuan for all of November. December
data is yet to be released.
While Chinese lending is typically biggest at the start of
each year, the central bank said last week that it is aiming for
“moderate” credit growth in 2010.
Economic Acceleration
China’s economy grew 8.9 percent in the third quarter of
2009 from a year earlier, the fastest pace in a year. Yao
Zhizhong and He Fan, economists with the Chinese Academy of
Social Sciences, warned this week that growth could accelerate
to 16 percent this year, overheating the economy, unless
stimulus measures are reined in.
Today’s move “sends a pretty strong signal that a more
substantive tightening is probably coming,” said Mark Williams,
senior China economist at Capital Economics Ltd. in London. “It
warns banks and it warns firms that they’re going to face higher
interest rates down the road.”
Economists are ratcheting up 2010 inflation forecasts for
China. Citic Securities Co., the nation’s biggest listed
brokerage, raised its estimate to 3.2 percent from 2.6 percent
in a report dated yesterday. Bank of America Merrill Lynch last
week increased its forecast to 3.1 percent from 2.5 percent.
Premier Wen Jiabao pledged Dec. 27 to curb excessive
property-price gains in some parts of China after the biggest
nationwide increase in 16 months in November.

I'd like more details on the property boom

FT
By Robin Harding and Lindsay Whipp in Tokyo

The Bank of Japan on Friday announced details of a scheme to encourage commercial banks to lend to riskier companies in growth industries, in order to strengthen “the foundations for economic growth”.

The Japanese central bank said it would offer one-year, 0.1 per cent loans to eligible banks. It wants to encourage lending to companies in industries such as health and the environment.

The policy marks an almost unprecedented move into industrial policy by a central bank. In essence, the BoJ will offer cheap finance to commercial banks that are willing to take on more risk, but it will not take any credit risk itself. That may limit the effectiveness of its move.

The cheap, one-year loans are likely to prove popular with banks even if there is no net increase in loans to growth companies. If markets judge that the BoJ will now keep rates “lower for longer” the policy may stimulate the economy by lowering six-month or one-year interest rates.

Allan Bedwick, principal of the OGI global macro fund, said: “It’s meaningful without doubt. It should alleviate [pressure on the BoJ to pursue other measures] for now. Moving these operations to one year is quite out of the box for the BoJ.”

The central bank will not accept the risky loans as collateral and commercial banks will still have to put up high-quality assets such as government bonds in order to borrow the cheap funds. It has also made clear that the policy is not a “quantitative easing” measure that will expand its balance sheet.

In the run-up to upper house elections in July, the BoJ is under political pressure to do more to end persistent deflation. Headline consumer prices fell by 1.1 per cent in March and the decline is set to accelerate as government cuts to high school tuition fees take effect.

The new policy reflects the BoJ’s view that structural reforms to boost Japan’s growth rate, such as boosting investment in growth industries, are the only way to cure deflation. Structural reform is the government’s responsibility but the BoJ is trying to give a lead.

“The root problem confronting the Japanese economy is a decline in the potential growth rate. I think that is the basic cause of Japan’s deflation,” said Masaaki Shirakawa, governor of the BoJ.

Deflation and a perception that growth prospects are weak have meant that bank lending has stagnated even with interest rates close to zero.

But the stagnation also reflects a lack of willing borrowers judged by commercial banks to be good credit risks. That will not change even if the BoJ makes funds cheaper for the banks.

The central bank on Friday said it was working on the operational details of the new plan. Its policy board kept overnight interest rates on hold at 0.1 per cent.

It also noted “developments regarding fiscal conditions in some European economies” as a downside risk to growth, but its economic commentary remained upbeat, suggesting that it does not yet see the problems in Europe or the weak euro as a serious threat to Japan’s growth.

Preliminary estimates suggest that Japan’s economy grew at an annualised rate of 4.9 per cent in the first quarter of 2010. Domestic consumption improved slightly, but the growth was still driven by a recovery in exports.

June 11 (Bloomberg) -- The Bank of Japan is set to detail a plan to stimulate credit for private companies that may prove insufficient to spur economic growth and defeat deflation.

The program is unlikely to exceed a few trillion yen (tens of billions of U.S. dollars) two people familiar with the matter said on condition of anonymity because the talks are private. The facility would do little to stoke domestic demand, said former BOJ board member Teizo Taya, adding that the effort is mainly aimed at fending off calls for broader monetary easing. Pressure may rise in coming months as newly appointed Prime Minister Naoto Kan, who as deputy repeatedly called on the central bank to step up its efforts, lays out his government’s priorities. With Japan’s recovery reliant on exports, U.S. officials have joined the call, pressing for the second-largest economy to contribute more to the global recovery.

“Under the new administration, political pressure on the BOJ will probably strengthen, and the economy and prices are unlikely to provide much of a tailwind,” said Taya, who served on the board until 2004 and now advises the Daiwa Institute of Research in Tokyo. “The latest lending program may not enable the central bank to weather such pressure for long.” Governor Masaaki Shirakawa instructed his staff to work on the plan in April, after previous efforts failed to stem the deflation that has discouraged spending and squeezed profits.

Rate Floor

The bank cut the benchmark interest rate to 0.1 percent in December 2008, and will keep it on hold at the two-day meeting that ends June 15, according to all 14 economists surveyed by Bloomberg News. Last December, following calls to act from politicians including Kan, the board unveiled a credit program that it doubled to 20 trillion yen ($220 billion) in March. Policy makers said last month that the latest measure will provide lenders with one-year loans at 0.1 percent. The duration and size have yet to be determined. Including rollovers, the loans may last about four years, the two people said. One of them said that if the economy were to receive a severe shock, the BOJ would consider expanding the separate 20 trillion yen facility. Europe’s debt crisis has clouded the outlook for external demand for Japan’s goods.

Pumping more cash toward lenders will be fruitless because of weak demand for credit, some economists said. “The new program won’t do much to inspire additional demand,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, who worked at the BOJ for 25 years. “Adding funds will only have a limited impact because the problem doesn’t stem from a liquidity shortage.”

Lending Falls

Bank lending declined for a sixth month in May, the central bank said this week. Treasury Secretary Timothy F. Geithner wrote in a letter last week that higher savings in the U.S. must “be complemented by stronger domestic demand growth in Japan and in the European surplus countries.” Other data indicate Japan’s export-led recovery remains intact. Gross domestic product rose at an annualized 5 percent rate last quarter, the most since the second quarter of 2009, the government said yesterday. Machinery orders climbed for a second month in April.

JFE Holdings Inc., Japan’s second-largest steelmaker, said last month that it plans to spend 1 trillion yen over three years to tap demand in Asia as profitability increases. Kan, who was finance minister before taking office as Japan’s leader this week, has advocated inflation targeting and said he wants consumer prices to resume rising this year. Prices have slumped for 14 straight months.

Noda, Ikeda

Fresh leadership at the Finance Ministry has yet to be tested: While Kan’s replacement Yoshihiko Noda said this week he has “no intention” of forcing the BOJ to adopt an inflation target, his newly appointed deputy Motohisa Ikeda, who will be allowed to represent the government at monetary policy meetings, urged the BOJ in February to buy more government bonds. “Ikeda’s appointment attracts our attention,” said Jun Ishii, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “If he attends any board meetings, he may ask for a price-targeting commitment immediately.”

Kiichi Murashima, chief economist at Citigroup Global Markets Japan Inc. in Tokyo, said “the government may also press the BOJ to buy more bonds should long-term interest rates surge or the yen advance.” Benchmark 10-year government bonds yielded 1.205 percent yesterday. The yen touched an eight-year high against the euro on June 7, threatening Japanese export competitiveness. The BOJ buys 1.8 trillion yen of government bonds from lenders each month. “The BOJ probably wants to avert the adoption of specific inflation targeting and government bond purchases at any cost,” said Ishii at Mitsubishi UFJ Morgan Stanley.

June 11 (Bloomberg) -- China’s inflation accelerated in May
to the quickest pace in 19 months, highlighting overheating
risks in the fastest-growing major economy.
Consumer
prices rose 3.1 percent from a year earlier, the
statistics bureau said in Beijing today. That was more than the
median 3 percent estimate in a Bloomberg News survey of 32
economists and April’s 2.8 percent gain.
Today’s data, combined with surging exports
and near-
record property-price gains, underscore U.S. arguments for a
more flexible yuan ahead of a Group of 20 nations meeting in
Toronto in two weeks’ time. U.S. Treasury Secretary Timothy F.
Geithner told the Senate Finance Committee yesterday that a move
could redress global economic “distortions” and help China
cool prices.
“China’s economy is still in a cycle towards overheating
and the government should step up measures to curb inflation
expectations,” Liu Li-Gang, a
Hong Kong-based economist at
Australia and New Zealand Banking Group Ltd., said before
today’s release. “This weekend or this period of time in
general before the G-20 summit would be an excellent time” for
China to widen the yuan’s trading band, Liu said.
Producer-price
inflation quickened to 7.1 percent from 6.8
percent. New loans were a more-than-forecast 639.4 billion yuan
($93.6 billion) the central bank said separately.
UBS AG said yesterday that officials may de-peg the
currency from the yuan in the “coming weeks.”

Time for the Yen to depreciate!!!

Very interesting article with the title: " Currency Controls Mount in Asia as Euro Hurts Exports"

June 11 (Bloomberg) -- The world’s biggest expected swings in foreign-exchange markets and the euro’s record depreciation are prompting Asian exporters to seek currency controls.

TLtek Co., a South Korean exporter of auto-part making machines, called on policy makers to limit volatility caused by “gambling” on the won. Kuala Lumpur-based Sime Darby Bhd., the world’s biggest listed palm-oil producer, needs to revise its business plan to account for the euro’s 19 percent drop against the ringgit this year. Taipei-based Maestro Innovations Corp., which makes infrared lamps for muscle pain, said curbs on the Taiwan dollar and China’s yuan would support orders.

Policy makers in South Korea, Taiwan and China are responding to Europe’s debt crisis by selling their own currencies, limiting investment inflows and delaying interest- rate increases. Goldman Sachs Group Inc. slashed its three-month Indian rupee forecast by 7 percent yesterday, Westpac Banking Corp. cut its year-end estimate for the won by 8 percent and ING Groep NV said the yuan won’t be revalued for a year.

“With the euro plunging, some central banks seem to be quite aggressive in stemming gains in their currencies,” said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo and favors Brazilian and Australian debt over emerging-market Asian bonds. “China may delay revaluation and that, together with low yields in Asia, give little incentive to buy them.”

Business-Plan Revision

The Korean won’s one-month implied volatility, a measure of exchange-rate swings used to price options, climbed 146 percent this quarter, the second-biggest jump among 47 currencies tracked by Bloomberg. Seven of the top 10 increases are in Asia. The won has the widest expected fluctuations at 25 percent, compared with 12 percent for both the Indonesian rupiah and the ringgit.

Exporters are seeking help from policy makers because the 10 most-active currencies in Asia outside Japan have strengthened an average of 19 percent against the euro this year. Shipments to the European Union fell in April from a month earlier, ranging from 5.6 percent for Malaysia to 19.5 percent for Thailand, according to government statistics. Europe took in 27 percent of India’s exports and 23 percent of China’s.

Sime Darby will have to revise its plans after the ringgit rose beyond 4 per euro for the first time since 2003, 13 percent stronger than its estimate, Chief Financial Officer Tong Poh Keow said in an interview on May 14 in Kuala Lumpur.

“We are doing our management plan and we will adjust based on our full-year expectations,” she said. “The decline in the euro will affect us.”

quidproquo wrote:

Time for the Yen to depreciate!!!

Very interesting article with the title: " Currency Controls Mount in Asia as Euro Hurts Exports"

June 11 (Bloomberg) -- The world’s biggest expected swings in foreign-exchange markets and the euro’s record depreciation are prompting Asian exporters to seek currency controls.

TLtek Co., a South Korean exporter of auto-part making machines, called on policy makers to limit volatility caused by “gambling” on the won. Kuala Lumpur-based Sime Darby Bhd., the world’s biggest listed palm-oil producer, needs to revise its business plan to account for the euro’s 19 percent drop against the ringgit this year. Taipei-based Maestro Innovations Corp., which makes infrared lamps for muscle pain, said curbs on the Taiwan dollar and China’s yuan would support orders.

Policy makers in South Korea, Taiwan and China are responding to Europe’s debt crisis by selling their own currencies, limiting investment inflows and delaying interest- rate increases. Goldman Sachs Group Inc. slashed its three-month Indian rupee forecast by 7 percent yesterday, Westpac Banking Corp. cut its year-end estimate for the won by 8 percent and ING Groep NV said the yuan won’t be revalued for a year.

“With the euro plunging, some central banks seem to be quite aggressive in stemming gains in their currencies,” said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo and favors Brazilian and Australian debt over emerging-market Asian bonds. “China may delay revaluation and that, together with low yields in Asia, give little incentive to buy them.”

Business-Plan Revision

The Korean won’s one-month implied volatility, a measure of exchange-rate swings used to price options, climbed 146 percent this quarter, the second-biggest jump among 47 currencies tracked by Bloomberg. Seven of the top 10 increases are in Asia. The won has the widest expected fluctuations at 25 percent, compared with 12 percent for both the Indonesian rupiah and the ringgit.

Exporters are seeking help from policy makers because the 10 most-active currencies in Asia outside Japan have strengthened an average of 19 percent against the euro this year. Shipments to the European Union fell in April from a month earlier, ranging from 5.6 percent for Malaysia to 19.5 percent for Thailand, according to government statistics. Europe took in 27 percent of India’s exports and 23 percent of China’s.

Sime Darby will have to revise its plans after the ringgit rose beyond 4 per euro for the first time since 2003, 13 percent stronger than its estimate, Chief Financial Officer Tong Poh Keow said in an interview on May 14 in Kuala Lumpur.

“We are doing our management plan and we will adjust based on our full-year expectations,” she said. “The decline in the euro will affect us.”

I'm guessing you are short the yen now? It is true the Yen has gaind so much value since the crises, it has been relatively favored currency vs. the more volatile majors. what levels would you look at for the USD/JPY? 100+?

FT: By Mure Dickie in Tokyo

Japan on Tuesday moved to shore up confidence in its state finances by issuing a "fiscal management strategy" that aims to cap government bond issuance at current levels, curb future spending growth and target primary budget balance by 2020. The new plan highlights the Democratic party-led government's efforts to demonstrate that it is serious about fiscal sustainability despite a gross state debt that has soared in recent years to almost 200 per cent of gross domestic product. However, the new fiscal strategy leaves unresolved the central question of how to raise state revenues, merely promising a "comprehensive reform" of taxes to be decided “soon”.

Naoto Kan, Japan's prime minister, has made fiscal consolidation a central theme of his new administration and has promised cross-party negotiations on tax reforms including a possible rise in the politically contentious 5 per cent consumption tax. With an important upper house election scheduled for July 11, Mr Kan has sought to win political cover for such a rise by citing a proposal to double the consumption tax to 10 per cent from the main opposition Liberal Democratic party as an important reference for negotiations. However, a televised election debate among party leaders on Tuesday made clear that smaller opposition groups such as the Social Democratic party, New Komeito and Your party are seeking to capitalise on voter opposition to a consumption tax rise that some polls suggest has already hurt Mr Kan’s poll ratings.

Under its new “medium-term fiscal framework” the government aims to ensure that debt issuance next fiscal year does not exceed the roughly Y44,000bn expected this year, and that it “steadily decreases” thereafter. A “pay-as-you-go” principle is to be adopted for government spending, with general expenditure not including debt repayment and interest to be basically capped at the Y71,000bn level for this fiscal year, unless new and permanent tax revenues are secured. While the framework marks an effort to basically cap debt and spending at what are record levels, Hideki Takada of the government’s National Policy Unit said the limits should be seen in the light of the growing social security costs associated with a rapidly ageing population.

The plan was a “painful and serious” attempt to ensure long-term fiscal sustainability, said Mr Takada. Under the strategy, Japan aims to at least halve its primary budget balance deficit by 2015 from the current estimated level of 6.4 per cent of GDP. By 2020, it aims to achieve a primary balance surplus, paving the way for stable reduction of state debt relative to GDP from then on. Financial markets were largely unmoved by the release of the new strategy, with economists saying it had few immediate economic implications and that the government’s ability to deliver fiscal sustainability was still open to question.

“While these objectives also deserve high praise, the details are wanting. For example, how will the revenue needed to achieve these objectives be secured? How much will spending have to be cut and taxes have to be raised?,” wrote Ryutaro Kono, economist at BNP Paribas, in a research note. Tax reform discussions, which Mr Kan hopes to complete by the end of next March at the latest, are likely to centre on a consumption tax rise, which is seen as the most dependable and easily imposed way of raising revenues. While Mr Kan has said a rise in consumption tax would take two or three years at least to prepare, his government should benefit in the short term from a rebound in tax revenues from the economy’s continued recovery. The Cabinet Office on Tuesday raised its growth forecast for the year to next March to 2.6 per cent, compared with an estimate of 1.4 per cent made earlier this year.

=================================================

Can someone explain to me why governments think they can always put off cut-backs and fiscal rebalancing? Also, something the article does not note is that the majority of JGB's are owned by Japanese citizens....At least Japan is not borrowing from China.

Having a shop in Asia is looking more and more promising every day.


Via Hedgeweek



--------------








Hedgeweek’s Asia Alternative Investment Summary


Friday 26 June, 2010
Cosmo founder to leave firm

Cosmo Investment Management, the South Korean arm of SPARX Group Co., Ltd., has confirmed that its founder, Kevin Choi, is to leave the firm. Choi has carved out a reputation as a leading Korea equity long/short specialist, turning Cosmo into one of South Korea’s largest independent advisory firms. Choi was unavailable to comment.



Boyer Allan launches UCITS Asian L/S fund

Boyer Allan, the London and Hong Kong-based Asian equity shop with USD800 million in assets, has rolled out its first UCITS-compliant fund on the Merrill Lynch platform. Hot on the heels of a long-only China-focused fund launched in March, the MLIS Boyer Allan Asian Long Short Fund opened to public subscription on June 11 in what Boyer Allan’s CEO, Roger Denby-Jones, described as “both an offensive and defensive move”. “The fund is currently up 3.5% and holds 80 positions in large cap listed companies,” continues Denby-Jones. Using the MSCI APAC benchmark, the fund aims to reach USD100 million within the next year.



New CEO for Pacific Alliance

Hong Kong-based Pacific Alliance Group, which manages USD5 billion in alternative investments, has brought in Weijian Shan, a top private equity dealmaker in China, as group chairman and CEO. Shan joins from TPG Asia where he recently helped push through the firm’s exit from Shenzhen Development Bank Co. - a deal which secured TPG USD1.25 billion. Shan declined to comment on his new role.



Asian investment in alternatives set to climb

A Russell Investments survey released this week indicates that alternative investments made by Asian investors are expected to climb from 11% to 17% by 2012. That should be music to the ears of Asian fund managers. With the EU’s AIFM directive (specifically the “third country” rules) looming ominously on the horizon, targeting regional and US-based investors is likely to become a more pertinent strategy in Asia over the next few years.



Ignis goes bullish on Japan

Ignis Asset Management’s Simon Mungall has adopted a bullish stance on Japan equities, taking overweight positions in three long only Japan funds owned by the UK-based firm: GLG Japan Core Alpha Equity fund, Schroder Japan Alpha Fund, and Melchior Japan Opportunities Fund. “Real growth is driven by education, technology and trade. Japan is good at all these things, and their importance is reasserting itself in the eyes of investors,” explains Mungall. He sees Asian markets being successful in the long term, particularly those with political accountability and the ability to generate real growth, citing India as a stand out candidate. “We are cautiously positioned in Asian equities at present, on general macro concerns,” adds Mungall.



J.P.Morgan prepares to increase fund admin activity in Asia

Adam Wallace has joined J.P. Morgan Hong Kong as executive director and product head of its hedge fund administration service in Asia as the bank looks to ramp up activity. The US firm believes the market is growing, with ever-more sophisticated funds being launched, and the hire of Wallace looks set to be just the start. Speaking about his key aims for 2010 via email, Wallace says: “At a high level, my focus will be to continue building on the strong momentum, working across the hedge fund spectrum – from high-potential start-up funds to established local and global players.” In response to the AIFM directive and any trends being observed Wallace goes on to say that “for Asian investors UCITS is seen as an attractive alternative to “traditional” hedge funds due to improved liquidity, but we’re not seeing this demand so much from institutional investors.”



Jane Street Capital looks set to land in Hong Kong

New York-based quant prop trading firm Jane Street Capital is set to put down its footprint in Hong Kong, having leased a large prime office space in the city. Nobody was available for comment at the time of writing.



A round-up of this week's investment industry launches and developments in Asia

CFTC issues exemption to Bursa Malaysia Derivatives

Bingham expands investment management practice to Hong Kong

Singapore Exchange launches Asia’s first dividend futures

Asian institutions building out internal investment capabilities

Asia Pacific ETF AUM rises 6.1 per cent

Asia to trump rest of the world, says First State's Alistair Thompson

Fund managers upbeat on Japan

Fortress closes Japan Opportunity Domestic Fund

Vanguard signs business development agreement with Genesis Venture Fund India I

AMB Property leases 227,300 square feet in China

LaSalle names Mark Gabbay chief investment officer, Asia Pacific

Published on Global Fund Wire (http://www.globalfundwire.com)
Home > Fund managers upbeat on Japan
Fund managers upbeat on Japan

By Emily.perryman
Created 17/06/2010 - 11:08

Despite years of bad experience in Japan, managers of Japanese equity funds are finally favouring the sector and believe investors should think again about the Japanese market, according to the latest sector review published by Standard & Poor’s Fund Services.

S&P Fund Services spoke to 29 Japan equity funds including those run by GLG, IFDC, Invesco, Orbis and Goldman Sachs.

“The overwhelming majority of these managers felt very positive about the Japanese market,” says S&P Fund Services lead analyst, Guy Boden. “They believe that Japan has gone through its banking crisis while the US and European banks need to further recapitalise.”

This view is reinforced by the weighting to Japan in groups’ global portfolios. S&P Fund Services looked at the exposure that a sample of global equity funds have in Japan relative to the MSCI World index weight.

“Most groups are overweight Japan in their global equity portfolios,” adds Boden. “We found that 60 per cent were overweight, 20 per cent neutral and 20 per cent underweight.”

Many fund managers noted Japan's attractiveness relative to other equity markets, both on a price-to-book and an earnings basis. Nomura, for example, forecast earnings growth in the 12 months to March 2010 of around 60 per cent, while Nippon Growth Fund’s Yutaka Uda expects company earnings to come in even higher, at 80 to 90 per cent.

Small-caps are seen as attractive, with some managers expecting further relative gains. Akihide Kinugawa, who works for T&D Asset Management and manages the Metzler Japanese Equity Fund, feels that there is a greater possibility of alpha from mid- and small-caps than from large-caps. Stephen Harker and Neil Edwards, managers of the GLG Japan CoreAlpha Fund, note that at 1.4x price-to-book level Japan remains cheap.

Akihiro Sekiya at Pinebridge believes that Japan can decouple from other markets and expects exporters to benefit from a global recovery. Meanwhile, Lesley Kaye, manager of GAM Star Japan Equity Fund, thinks that Japan and the global economy are intertwined and does not believe that it can act independently. As a result, she has only marginally increased domestic plays.

Sector bets in financials and real estate reflect the view that Japanese banks have already weathered their storm. Invesco Japan Core and Invesco Perpetual Far Eastern Japan have 43 per cent in financials and real estate, Orbis has 28 per cent and Jupiter Japan Income 24 per cent, compared with 17 per cent in the benchmark. Electrical appliances were another large sector bet, for example in the GLG Japan Fund.

Articles and Features
Copyright © 2009 Hedgemedia Ltd. All Rights Reserved
Source URL: http://www.globalfundwire.com/2010/06/17/51071/fund-managers-upbeat-japan

(Bloomberg) June 27--Group of 20 leaders are poised to endorse targets to tackle deficits while giving nations flexibility on when to start balancing their books, according to officials with knowledge of drafts of the final statement. Leaders will agree today on the need to cut deficits, while urging countries with the most precarious fiscal positions to accelerate their plans, according to the officials who declined to be identified by name because a final version of the statement hasn’t been completed. The G-20 has to bridge a gap between leaders such as President Barack Obama who want to focus on growth and officials such as German Chancellor Angela Merkel who favor budget cuts.

“Discussions in the G-8 have shown that it is possible to reconcile some conceptual differences,” European Commission President Jose Barroso told reporters in Toronto yesterday. “We expect the G-20 to agree on concrete targets for deficit reduction and the stabilization and reduction of debt.” The draft of the statement includes targets championed by Canadian Prime Minister Stephen Harper for countries to halve deficits by 2013 and start to stabilize their debt-to-output ratios by 2016, the officials said. Some countries, such as Brazil, are resisting the inclusion of those specific deadlines.

Draconian, Difficult

“It is draconian, a little difficult, a little exaggerated,” said Brazilian Finance Minister Guido Mantega. “Some countries would not be able to do it. It is clear that a cut is needed, but at what velocity? It can’t be too fast.” The officials said the G-20 statement today will echo an agreement reached by finance chiefs in Busan, South Korea, earlier this month. The agreement would effectively endorse the austerity plan set out by the U.K., which has the highest deficit in the group, while acknowledging U.S. concerns that countries shouldn’t be required to start cutting public spending until their own recoveries are fully entrenched. The G-20 will call also on countries with current account surpluses, such as Germany and China, to increase sustainable economic growth, the official added. “The speed and timing” of fiscal consolidation “must be tailored to national circumstances, so we do not derail the recovery under way,” Australian Deputy Prime Minister Wayne Swan told a business audience in Toronto yesterday.

Larger Group

The G-20, which accounts for about 85 percent of the global economy, replaced the G-8 last year as the world’s foremost international policy-coordinating forum. The larger group means developed and emerging economies are trying to find common ground amid differences in prosperity that vary from the U.S.’s $46,400 in GDP per capita to India’s $3,100. The leaders may opt to include fewer specifics in their final statement. Yesterday, they emphasized areas of accord in their fiscal policies, with Obama saying he and U.K. Prime Minister David Cameron are “aiming at the same direction.” French President Nicolas Sarkozy said he saw no “clash” between countries on the issue, and Harper called it a “balancing act.” “As recovery takes hold at different rates around the world and as domestic political pressures figure more prominently than the threat of a global meltdown, one can expect these declarations to become increasingly general,” said Dan Price, who served as former President George W. Bush’s G-20 negotiator.

Leading the Charge

European nations have led the charge on the deficits. Merkel said in an interview with ZDF television that she lobbied her counterparts at the G-8 meeting to pursue “solid” fiscal policies and defended her own plan to reduce Germany’s budget deficit by about 10 billion euros ($12.4 billion). U.S. Treasuries are having their best year since 1995, returning 5 percent through June 24, according to Bank of America Merrill Lynch index data, as investors seek alternatives to Europe, where Greece and Spain had their credit ratings downgraded. “European countries just had a near-death experience over Greece,” said Tony Fratto, a former Treasury and White House official under Bush. “Some are afraid of suffering the same fate.” U.S. Treasury Secretary Timothy Geithner urged G-20 leaders to focus on growth. The world economy is still emerging from the “fires of the crisis” and “the scars of this crisis are still with us” he said in prepared remarks for a press conference.

‘Same Target’

“We’re aiming at the same target, which is world growth and stability,” Cameron told reporters as he met with Obama in Toronto yesterday. “But it means those countries that have big deficit problems like ours” have to take “action in order to keep that level of confidence in the economy.” Obama agreed that rising debt is an issue. “We have long-term deficits that have to be dealt with,” Obama said. “There are going to be differentiated responses between the two countries because of our different positions, but we are aiming at the same direction.” Outside the security zone that surrounds the meeting forum, protests turned violent as thousands of demonstrators marched through central Toronto. Protesters set fire to cars; others threw rocks at the windows of First Canadian Place, headquarters of the Bank of Montreal, and spray-painted “Bomb the banks” on the building.

Hedgeweek’s Asia Alternative Investment Summary


Friday 2 July, 2010
Tracking the latest hedge fund developments across Asia Pacific


Japan Fund hires Chinese economist to widen client base

Funnex Asset Management Co., a Japanese fund manager, is planning to tap into Asia’s regional growth story by appointing Xiao Minjie, a Chinese native and former senior economist at Daiwa Institute of Research, as its President. The company’s $85 million KPI hedge fund uses a long/short strategy to invest in large and small cap listed Japanese equities. It is hoped that Xiao’s appointment will widen the fund’s exposure and client base. “With Xiao joining our firm we are seeking new opportunities to bring Asian money into Japan’s stock market,” says Eriko Ishida-Kawai, Head of Global Business.



Asia Volatility Fund goes operational

Singapore-based RSR Capital Pte has today launched its Caerus Arbitrage Asia Fund. Remi Colinmaire, one of four ex-derivatives traders in the RSR Capital partnership (along with Christophe Delorme, Robert Webb and Serge Handjian) said in a phone interview that the fund will initially target private investors during its offering period and hopes to secure $15-25 million before trading in August. Delorme is confident about the timing. “There’s no good news in sight. Occurring default in sovereign debts in the near future is a possibility.” The fund will look to capture market volatility and the accompanying alpha using multiple strategies, some of which will be more algorithmic-based. “We will be a pure Asia arbitrage fund and take opportunities in the fact that Asian countries are not that correlated economically anymore,” adds Delorme. The fund hopes to reach $500 million.

Asia’s dark pool space deepens

The number of Asian dark pools is rising. Citigroup recently launched its Citi Match platform, noting strong growth in Hong Kong and Japan and hitting a record A$1.53 billion in Australia last month. Many commentators expect dark pools to become aggregated across the region, but Yang Xia, UBS head of direct execution services Asia Pacific, is more pragmatic: “In terms of numbers we have not seen a dramatic uptick in Asia.” Such growth could be in response to brokers’ desire to lower front-2-back execution costs/fees, and Xia believes that “with more alternative 3rd party trading destinations, Asia will need a solution on market share calculation and trade reporting.”



Matrix to launch Asia Ucits III fund

Matrix Asset Management is preparing to launch a pan-Asian long/short equity UCITS III fund at the end of July. The fund will be managed by Rupert Foster and will look to replicate the firm’s Asia hedge fund strategy by focusing on China and Japan. “I’m trying to offer a traditional hedge fund in the Ucits model,” explains Foster. “Many are long-biased, but I’m looking to add value on the short.” Key sectors will include consumer, industrial and technology. Two analysts will join the team and locate to Hong Kong. Strategically, Foster says: “I expect the portfolio to be short on China and long Japan until some time later this year when I expect to reverse the positions.”



Prudent Fund targets Asian credit markets

Prudent Asia Capital Management, a Singapore-based firm, has launched the Prudent Asia Balanced Fund with a focus on low-grade corporate bonds that co-founder, James Lee, believes will be less affected by market volatility. Lee was quoted in Bloomberg as saying: “We’re more focused on developed economies within Asia, such as Japan, Korea and Australia. Within that, defensive sectors which aren’t cyclical, like banks, utilities and waste-management companies.” At 4.85%, spec-grade Asian debt has outperformed investment-grade debt (4.21%) so far this year.



People Moves

RAB Capital has appointed David Seex as its Asia CEO. Seex will oversee the company’s Hong Kong office. FRS Global is to open an office in Shanghai, with Mark Looi joining to become regional sales director for SE Asia. Looi will be based in Singapore. State Street has appointed Yvonne Wong as MD and head of business development for Asia Pacific to its enhanced custody business.



A round-up of this week's investment industry launches and developments in Asia

Asia Tigers Fund starts semi-annual repurchase offer

CB Richard Ellis Investors closes Asia Pacific fund of funds

RAB Capital appoints David Seex as chief executive Asia

J.P. Morgan appointed depositary bank by JinkoSolar

Sarath Sathkumara joins Taiyo Pacific Partners

Origo invests in Jinan Eco-Energy Technology

Macau Property Opportunities Fund debuts on LSE Main Market

Batman wrote:

(Bloomberg) June 27--Group of 20 leaders are poised to endorse targets to tackle deficits while giving nations flexibility on when to start balancing their books, according to officials with knowledge of drafts of the final statement. Leaders will agree today on the need to cut deficits, while urging countries with the most precarious fiscal positions to accelerate their plans, according to the officials who declined to be identified by name because a final version of the statement hasn’t been completed. The G-20 has to bridge a gap between leaders such as President Barack Obama who want to focus on growth and officials such as German Chancellor Angela Merkel who favor budget cuts.

“Discussions in the G-8 have shown that it is possible to reconcile some conceptual differences,” European Commission President Jose Barroso told reporters in Toronto yesterday. “We expect the G-20 to agree on concrete targets for deficit reduction and the stabilization and reduction of debt.” The draft of the statement includes targets championed by Canadian Prime Minister Stephen Harper for countries to halve deficits by 2013 and start to stabilize their debt-to-output ratios by 2016, the officials said. Some countries, such as Brazil, are resisting the inclusion of those specific deadlines.

Draconian, Difficult

“It is draconian, a little difficult, a little exaggerated,” said Brazilian Finance Minister Guido Mantega. “Some countries would not be able to do it. It is clear that a cut is needed, but at what velocity? It can’t be too fast.” The officials said the G-20 statement today will echo an agreement reached by finance chiefs in Busan, South Korea, earlier this month. The agreement would effectively endorse the austerity plan set out by the U.K., which has the highest deficit in the group, while acknowledging U.S. concerns that countries shouldn’t be required to start cutting public spending until their own recoveries are fully entrenched. The G-20 will call also on countries with current account surpluses, such as Germany and China, to increase sustainable economic growth, the official added. “The speed and timing” of fiscal consolidation “must be tailored to national circumstances, so we do not derail the recovery under way,” Australian Deputy Prime Minister Wayne Swan told a business audience in Toronto yesterday.

Larger Group

The G-20, which accounts for about 85 percent of the global economy, replaced the G-8 last year as the world’s foremost international policy-coordinating forum. The larger group means developed and emerging economies are trying to find common ground amid differences in prosperity that vary from the U.S.’s $46,400 in GDP per capita to India’s $3,100. The leaders may opt to include fewer specifics in their final statement. Yesterday, they emphasized areas of accord in their fiscal policies, with Obama saying he and U.K. Prime Minister David Cameron are “aiming at the same direction.” French President Nicolas Sarkozy said he saw no “clash” between countries on the issue, and Harper called it a “balancing act.” “As recovery takes hold at different rates around the world and as domestic political pressures figure more prominently than the threat of a global meltdown, one can expect these declarations to become increasingly general,” said Dan Price, who served as former President George W. Bush’s G-20 negotiator.

Leading the Charge

European nations have led the charge on the deficits. Merkel said in an interview with ZDF television that she lobbied her counterparts at the G-8 meeting to pursue “solid” fiscal policies and defended her own plan to reduce Germany’s budget deficit by about 10 billion euros ($12.4 billion). U.S. Treasuries are having their best year since 1995, returning 5 percent through June 24, according to Bank of America Merrill Lynch index data, as investors seek alternatives to Europe, where Greece and Spain had their credit ratings downgraded. “European countries just had a near-death experience over Greece,” said Tony Fratto, a former Treasury and White House official under Bush. “Some are afraid of suffering the same fate.” U.S. Treasury Secretary Timothy Geithner urged G-20 leaders to focus on growth. The world economy is still emerging from the “fires of the crisis” and “the scars of this crisis are still with us” he said in prepared remarks for a press conference.

‘Same Target’

“We’re aiming at the same target, which is world growth and stability,” Cameron told reporters as he met with Obama in Toronto yesterday. “But it means those countries that have big deficit problems like ours” have to take “action in order to keep that level of confidence in the economy.” Obama agreed that rising debt is an issue. “We have long-term deficits that have to be dealt with,” Obama said. “There are going to be differentiated responses between the two countries because of our different positions, but we are aiming at the same direction.” Outside the security zone that surrounds the meeting forum, protests turned violent as thousands of demonstrators marched through central Toronto. Protesters set fire to cars; others threw rocks at the windows of First Canadian Place, headquarters of the Bank of Montreal, and spray-painted “Bomb the banks” on the building.

Japanese Equities are becoming popular in the HF community.

PRESS DIGEST - Hong Kong - July 5
Sun, Jul 4 2010
HONG KONG, July 5 (Reuters) - These are some of the leading stories in Hong Kong newspapers on Monday. Reuters has not verified these stories and does not vouch for their accuracy.

SOUTH CHINA MORNING POST
-- Standard Chartered (2888.HK: Quote, Profile, Research, Stock Buzz)(STAN.L: Quote, Profile, Research, Stock Buzz) Chairman for Greater China Katherine Tsang said Agricultural Bank of China [ABC.UL] had the highest growth rate and the largest room for growth in the future, the key reason StanChart put in US$500 million as a cornerstone investor in the bank's IPO.

HONG KONG ECONOMIC JOURNAL
-- Public demand for Agricultural Bank of China's [ABC.UL] IPO has been lukewarm so far, but the institutional investor segment of the bank's H-share offering is about 10 times oversubscribed, with interest from Hong Kong banks such as Wing Lung Bank.

SING TAO DAILY
-- Mainland-backed financial firms including China Taiping Insurance (0966.HK: Quote, Profile, Research, Stock Buzz), China Cinda Asset Management Corp and China Great Wall Asset Management Corp had subscribed to Agricultural Bank of China H-shares, sources said. Bank of East Asia (0023.HK: Quote, Profile, Research, Stock Buzz) and Wing Lung Bank invested an unspecified sum in the Hong Kong IPO, according to a source the newspaper didn't identify.

WEN WEI PO
-- Air China (0753.HK: Quote, Profile, Research, Stock Buzz)(601111.SS: Quote, Profile, Research, Stock Buzz) will adjust prices on domestic flights from July 1, with first and business class passengers seeing the biggest increases of 2.3 times and 1.8 times, respectively.

TA KUNG PAO
-- Chinese real estate developer Country (2007.HK: Quote, Profile, Research, Stock Buzz) said it recorded sales of 13.2 billion yuan in the first six months of 2010, up 50 percent from a year earlier.

Snapman wrote:

PRESS DIGEST - Hong Kong - July 5
HONG KONG ECONOMIC JOURNAL
-- Public demand for Agricultural Bank of China's [ABC.UL] IPO has been lukewarm so far, but the institutional investor segment of the bank's H-share offering is about 10 times oversubscribed, with interest from Hong Kong banks such as Wing Lung Bank.

I'm really intrigued by AgriBanks IPO. About 2 months ago it was reported to seek $35 USD for a 25% float. Now only $23B. Was the demand really there in the first place or was this all hype? More hype if you ask me. Chinese Equities (CSI) is in the early stages of a Bear Market (secular or cyclical: secular is still possible). IPO demand is anti-ubiquitous. Though these reports contradict and say H-shares are high in Demand. This is the type of situation where China would benefit from granting other Sovereigns access to Shanghai.

As I type, the WSJ (i Know) is reporting the Bank raised only $19.21 B.

Fantastic Interview with Jing Ulrich who holds the post of chairwoman for China equities and commodities at JPMorgan Chase & Co. One of the first people I have seen reiterate to the media that economic data does not drive equity prices, specifically GDP growth.

http://www.bloomberg.com/video/61072050/

From Marc Faber on China's GDP numbers:

"Whereas a significant slowdown in the Chinese economy in he second half of the year is almost a certainty a crash should not be ruled out. Such an event would obviously have dire consequences for the global economy."

Batman wrote:

From Marc Faber on China's GDP numbers:

"Whereas a significant slowdown in the Chinese economy in he second half of the year is almost a certainty a crash should not be ruled out. Such an event would obviously have dire consequences for the global economy."

Did he say why? I think this would be a great opporutnity for other EM to step up their game and fill that gap that chinese exports might not be able to fill. or give rise to FDI flows in other regions. That certianly would be a very interesting case. Though depending on the expectation and sentiment going into this it could be another catalyst for a "second dip"

Snapman wrote:

Batman wrote:

From Marc Faber on China's GDP numbers:

"Whereas a significant slowdown in the Chinese economy in he second half of the year is almost a certainty a crash should not be ruled out. Such an event would obviously have dire consequences for the global economy."

Did he say why? I think this would be a great opporutnity for other EM to step up their game and fill that gap that chinese exports might not be able to fill. or give rise to FDI flows in other regions. That certianly would be a very interesting case. Though depending on the expectation and sentiment going into this it could be another catalyst for a "second dip"

Unfortunately no, his blog is only full of his quotes/ideas on market movements. SHould be intersting to see if other asian countries or eastern europe step up to the plate.

Asia is looking better and better everyday to setup shop.


----




Published on Hedgeweek (http://www.hedgeweek.com)
Home > HSBC deepens plans to roll out PB service in Asia Pacific
HSBC deepens plans to roll out PB service in Asia Pacific

By mkitchen
Created 15/07/2010 - 13:28

UK banking giant HSBC has stepped up plans to develop its prime brokerage business in Asia with several key hires joining the firm. Last week, ex-Merrill Lynch PB veteran, Melvyn Ford, joined to head up hedge-fund coverage in Asia to strengthen the bank’s existing relationships with hedge funds (custodial, private banking). Unfortunately Ford was unavailable to comment on his newly created role. Additionally, two more hires have been confirmed this week in the form of Matt Kiraly and Lauren Degney, both from Citi. A clear sign that momentum is building as HSBC attempts to compete in the PB space across APAC. Kiraly and Degney will be working in HSBC’s equity finance team.


Weekly Asia News (Friday)
Copyright © 2009 Hedgemedia Ltd. All Rights Reserved
Source URL: http://www.hedgeweek.com/2010/07/15/54634/hsbc-deepens-plans-roll-out-pb-service-asia-pacific

Unfortunately but yes this is from WSJ

HONG KONG—Bank of Communications Co. posted a 30% rise in first-half net profit on wider lending margins and higher interest and fee income, but the results were eclipsed by smaller rival China Merchants Bank Co., whose first-half earnings jumped 60%.

The results from BoCom, China's fifth largest bank by assets, and China Merchants Bank, the country's sixth, bode well for other state-run lenders' earnings. Still, analysts say concerns about the health of China's banks remain following last year's lending binge and increased evidence of a slowdown in the domestic economy.

BoCom, which is 19%-owned by HSBC Holdings PLC, said net profit for the six months ended June 30 rose to 20.36 billion yuan ($3 billion) from 15.65 billion yuan a year earlier, in line with the average 20.77 billion yuan forecast of five analysts.

Net interest income rose 34% to 39.9 billion yuan from 29.79 billion yuan, as a slightly tight credit environment in the first half improved banks' ability to price loans and borrowing demand remained strong. Net interest margin rose to 2.43% from 2.30% at the end of last year.

Strong credit-card and wealth-management product sales also helped BoCom's net fee and commission income rise 30% to 7.13 billion yuan from 5.48 billion yuan.

China Merchants Bank's net jumped to 13.2 billion yuan from 8.26 billion yuan, slightly higher than the average 12.89 billion yuan forecast of six analysts. Net interest income rose 41% to 26.34 billion yuan, as net interest margin rose sharply to 2.56% from 2.23% at the end of 2009. China's midsize banks can charge small and midsize companies, which comprise their client base, higher interest rates on loans than the country's big banks charge their customers.

The robust first-half performance comes as analysts are lowering their full-year earnings forecasts for China's banks because of a decreasing likelihood of interest-rate increases amid a cooling domestic economy and rising credit provisioning. The increased provisioning owes to government efforts to curb surging property prices as well as increased regulatory scrutiny of local governments' ability to repay loans.

China's recent order to banks to move loans they had sold to trust companies back onto their balance sheets also will crimp their fee income. Banks had transferred loans to trust firms to be repackaged as wealth-management products as a way of circumventing lending quotas.

Last week, UBS lowered its earnings forecasts for China's three big banks—Industrial & Commercial Bank of China Ltd. , China Construction Bank Corp. and Bank of China Ltd.—by an average 5% for 2010 and 11% for 2011. J.P. Morgan Chase cut its earnings forecasts for China's banking sector by 3% to 4% in 2011.

Despite market concerns about a rise in banks' bad assets, BoCom said its nonperforming loan ratio fell to 1.22% at the end of June from 1.36% at the end of last year. It said it raised its provision coverage ratio to 161.17% of bad loans from 151.05% in the same period, reflecting caution about the asset quality trend.

Qian Wenhui, BoCom's vice president, said at a news conference that the lender recently conducted a stress test on its loans to homeowners and property developers, assuming home prices will fall 30% to 50%.

"Even based on the worst scenario [when property prices may fall by 50%], the increase in nonperforming loans will still be small. Credit risks in property development or mortgage loans appear controllable to me," he said.

BoCom was among the first Chinese banks to complete fund-raising to shore up its capital base after last year's credit boom in support of the government's economic stimulus program. The bank said in July it had raised 33 billion yuan via a rights issue in Shanghai and Hong Kong.

As of June 30, BoCom's capital adequacy ratio was 12.17%, up from 12.00% at the end of last year and above the 11.5% regulatory minimum for large Chinese banks.

China Merchants Bank raised a total of US$3.18 billion from selling rights shares in Shanghai and Hong Kong in April. As of end-June, its capital adequacy ratio was 11.60%, up from 10.45% at the end of last year.

—Rose Yu and Aries Poon
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Bloomberg--Australia’s central bank is likely to resume raising interest rates as the biggest mining boom in more than a century stokes the economy next year and drives up inflation, Reserve Bank of Australia Governor Glenn Stevens said. “If downside possibilities do not materialize, the task ahead is likely to be one of managing a fairly robust upswing,” Stevens told a forum in the regional city of Shepparton in Victoria state today. “Part of that task will, clearly, fall to monetary policy.” Stevens’s comments suggest policy makers, after leaving the benchmark lending rate unchanged at their last four meetings, may begin tightening monetary policy in coming quarters from a setting they have described as “average.” Demand from China for iron ore and coal has pushed Australia’s jobless rate to a level Assistant Governor Philip Lowe said last week was almost “at what would be considered full employment.”

“Even with continued caution by households, that probably means that overall growth, which has been at about trend over the past year, will increase in 2011 to something above trend,” Stevens said at the gathering of local business people. “We think that means that the fall in inflation over the past two years won’t go much further.” Concern Australia’s economy, one of the few to skirt last year’s global recession, is rebounding enough to fuel inflation to the top of the bank’s target range of 2 percent to 3 percent, was a key reason Stevens led Group of 20 members by raising borrowing costs in six quarter-percentage-point steps from October to May to 4.5 percent.

Local Dollar

The rate moves have helped stoke an 8.2 percent gain in the nation’s currency against the U.S. dollar in the past 12 months, the best performer among the 16 most actively traded currencies. Investors are also increasing bets that Stevens will resume raising rates as early as next month. Traders calculate a 68 percent chance of a quarter-point increase in the benchmark rate to 4.75 percent by early December, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 11:04 a.m. today. Last month, chances of an increase this year stood at zero. Stevens reiterated today the bank’s view that the global economy will “record reasonable growth” over the coming year, helping keep “high” Australia’s terms of trade, a measure of income earned from exports.

Export Prices

“We expect that this high level of relative export prices will add to incomes and spending, even as the stimulative effects of earlier low interest rates and budgetary measures continue to unwind,” Stevens said. “We expect, and indications from businesses are that they do as well, that resource sector investment will rise further -- as we experience the largest minerals and energy boom since the late 19th century,” he said. The remarks echo comments by Assistant Governor Lowe on Sept. 16 that the economy over the next year will “be travelling along pretty much close to full capacity.”

Reports published since the RBA’s last meeting on Sept. 7 show business confidence jumped last month to the highest level in four months and employers added 30,900 workers, pushing the jobless rate down to 5.1 percent, matching the lowest level since January 2009. Gross domestic product also expanded 1.2 percent in the second quarter from the previous three months, the fastest expansion in three years.

Potential Risks

Stevens said today that the bank spends “a fair bit of timing thinking” about potential risks to its forecast for Australia. “Possible candidates might be a return to economic contraction in the U.S., or a bigger than expected slowdown in China, or the resumption of financial turmoil that abruptly curtails access to capital markets for banks around the world and damages confidence generally,” he said. Australian stocks fell today, paced by raw-material producers such as BHP Billiton Ltd., after an unexpected drop in U.S. consumer confidence. Australia’s S&P/ASX 200 Index fell 0.5 percent to 4,615.4 at 11:23 a.m. in Sydney.

Stevens also used his speech to defend the bank’s use of what he said some observers have described as the “blunt instrument” of monetary policy, which doesn’t take into account different speeds of economic growth across regions. “As a physically large country, with quite a diverse set of industries, and our largest population centers separated by long distances and even living in different climates, Australia is always likely to see some differences in economic experience by region,” the governor said.

“What is remarkable, in fact, is that the differences are not, in the end, larger,” he said. “That they are not is testimony to the degree of flexibility within our national economy that has been built up over time, and to the design of national policies that aim to lessen the more stark differences that might otherwise occur.” While the central bank’s monetary policy can’t make those differences disappear, the RBA “remains committed” to the goal of using interest rate changes to deliver “reasonable macroeconomic stability,” Stevens said.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net