Asian stocks surge

Asian stocks put in a strong performance over the past five days, posting their best week since early May 2009 and driving the bellwether MSCI Asia Pacific Index up 7.4% to 124.54 as of early afternoon Tokyo local time on Friday, with high volatility across the region.

Asia Currencies Jump Most Since 2009, Led by Won, as Europe Combats Crisis

Asian currencies strengthened this week by the most in more than two years, led by South Korea’s won, after European leaders agreed measures to tackle a debt crisis that drove investors from emerging-market assets.

Lessons From Li Ning's China Stumble

The ongoing turmoil at Li Ning, China’s leading sporting-goods company, holds important lessons for Chinese as well as foreign companies about how to win in the country’s rapidly growing and constantly changing market.

Oil above $US88 amid signs of Asia economic strength

OIL prices rose above $88 a barrel today in Asia amid signs of resilience in the economies of Japan and China.

Myths About China and India's Africa Race

The two Asian giants are focusing on Africa as never before, write columnists Anil K. Gupta and Haiyan Wang, leading to many misconceptions about the role Chinese and Indian companies are playing there

India cabinet approves manufacturing push

India's cabinet has approved a major new policy to develop national manufacturing.

Thailand floods: Crisis 'to last four to six weeks'

Thailand's worst flooding in decades is set to last another four to six weeks, the country's prime minister has said.

Powerful earthquake strikes poor eastern Turkey

Istanbul, Turkey (CNN) -- As night fell over eastern Turkey on Sunday following the most powerful earthquake in at least a decade, citizens were using flashlights and shovels as they clambered over the rubble of collapsed buildings looking for survivors.

Japan approves $157bn quake budget for reconstruction

Japan's government has approved a 12.1tn yen ($157bn; £100bn) budget for the reconstruction of areas devastated by the earthquake and tsunami. 

The extra budget is the latest effort by authorities to stimulate growth in the Japanese economy, which is currently in recession.

A part of the budget will also be used towards measures to help businesses counter the rising yen.
The budget will be presented to parliament next week.

This is the third extra budget introduced by the government this year after taking the size of the overall budget to a record 106.4tn yen.
Delayed implementation The proposal is the second-biggest extra budget ever approved by the Japanese government.

It comes after a 4tn yen supplementary budget in May and a 2tn yen special budget in July.
However, analysts said that although the government had been quick in sanctioning extra money, its impact had yet to be noticed.

"So far, we haven't seen any strong evidence of increase in public works projects," Takuji Okubo of Societe Generale told the BBC.

Mr Okubo added that the delay in implementation of plans was due to a lack of political will.
"Former prime minister Naoto Kan lingered on in his position and wasted precious time just pondering what to do with the money," he said.

Yen trouble The government said it will use almost 2tn yen from the extra budget to implement measures to keep the yen's price in check.

The move comes amid concerns over the long-term future of the manufacturing sector in the country as the Japanese currency continues to strengthen, despite recent efforts by the authorities to stem its rise.
Global economic uncertainty has seen investors flock to the yen, traditionally seen as a safe asset, sending the currency to record highs against the US dollar.

It was trading close to 76.78 yen against a US dollar in Asia trade on Friday.
A strong currency hurts Japanese exporters by not only making their goods more expensive but also denting their profits.

According to a recent survey by the government, 46% of big Japanese manufacturers said they would consider shifting their production oversees if the yen remained as high as current level for six months.
Any such moves by the big exporters could have a big impact on the country's economic growth.

Source: www.bbc.co.uk

Lessons From Li Ning's China Stumble

Companies can learn from the Chinese sporting-goods maker's failed attempt to reposition itself as an upscale brand, say columnists Anil K. Gupta and Haiyan Wang

 

The ongoing turmoil at Li Ning, China’s leading sporting-goods company, holds important lessons for Chinese as well as foreign companies about how to win in the country’s rapidly growing and constantly changing market. Founded in 1989 by the famous gymnast of the same name, Li Ning has established itself as a solid No. 2 in China’s sports footwear and apparel market—behind Nike (NKE) but just ahead of Adidas. With an unbroken record of rapid growth in both sales and profits, the company delivered 2010 revenue of more than $1.5 billion and aftertax profits of more than $170 million.
Over the last 12 months, however, Li Ning has stumbled badly, largely as a result of a major brand repositioning in mid-2010 that has gone awry. In the first half of 2011, the company’s revenues declined, in stark contrast to an average annual growth of more than 30 percent during the previous 10 years. In the 18 months to June 30, 2011, Li Ning’s stock price dropped by 55 percent, compared with a 20 percent gain for its downscale Chinese rival Anta  and 36 percent and 45 percent gains, respectively, for the global giants Nike and Adidas.
Li Ning’s missteps centered around an attempt to take its flagship brand upscale. Accompanied by a revamped logo and a new ad campaign (“Make the change”), the company hiked prices and started shifting its distribution focus from lower-tier markets to first-tier cities such as Beijing and Shanghai. These moves failed to attract brand-conscious youngsters who were happy to spend a bit more to buy Nike or Adidas. Worse, the price hikes gave Anta an opening to steal value-conscious customers away from Li Ning.
The Li Ning episode yields several important observations about the quest for the hearts, minds, and wallets of Chinese customers.

Two Economies

First, it is useful to think of China as two economies—China-1 (comprising most consumer goods and services such as sportswear, personal care products, food and beverages, fast food, and retailing) and China-2 (comprising many “strategic” industries such as steel, airlines, telecoms, financial services, and energy).
In China-1 industries, competitive battles are won or lost largely by the logic of the market. In these industries, who emerges as the market leader depends on company-specific advantages, strategic smarts, and timing. Depending on the context, victory could easily go either way: to a global giant or a Chinese champion. Nike is the favorite of Chinese customers in sports shoes and apparel. Procter & Gamble dominates fast-moving consumer goods, and Yum! Brands  is the clear leader in fast foods. In contrast, Haier dominates the home appliance sector and, in electronics retailing, the market leaders are the Chinese companies Gome and Suning rather than Best Buy .
China-2 industries are an entirely different story. In these industries, the government has an explicitly stated goal to help domestic companies emerge as first national and then global champions. Foreign companies face a tough challenge from state-owned or state-supported Chinese players. Often the best option for multinationals in these industries is to partner with Chinese players while lobbying (through their governments) for open markets. The wind turbine industry—where the Chinese company Goldwind has rapidly moved ahead of General Electric  and Denmark-headquartered Vestas—is a classic example of a China-2 industry.
Because the competitive dynamics differ radically across China-1 vs. China-2, it is important for corporate leaders as well as analysts to take note of the type of industry the company competes in.

Multi-Segmented Industries

Second, as the Chinese economy continues to power ahead, most industries are becoming even more multi-segmented than before. At the upper end, China is creating billionaires, millionaires, and the merely affluent in larger numbers than any other country. Even the top 2 percent wealthiest people in China add up to nearly 30 million—a large and very diverse customer base. At the lower end, the next 10 years will see about 150 million people move up from poverty to lower middle income status. Their buying power and needs will be very different from those of their less as well as more fortunate compatriots.

Li Ning was justified in wanting to compete not just in the mid- and low-tier segments (with its Li-Ning and Z-Do brands, respectively) but also the upper end of the market. It stumbled because it pursued an ill-conceived strategy to do so. Companies such as Nike and Adidas face a reverse challenge. They are well-positioned at the top end; however, given the multi-segmented nature of China’s market, they must figure out how to compete effectively against players such as Li Ning and Anta in the mid- and low-tier segments without diluting the brand cachet at the top end.

A Recipe for Disaster

Third, trying to reposition a solid mid-tier brand as an upscale brand is nearly always a recipe for disaster. Brand cachet is a far more important attribute at higher levels on the price spectrum. By definition, an established mid-tier brand does not have the cachet needed to attract brand-conscious customers at the top end. Trying to reposition the mid-tier brand is thus tantamount to competing without competitive advantage.
Companies such as Li Ning need to draw lessons from the strategies of other mid-tier players such as Tata Motors, Geely, and Toyota. It is hard to imagine how any of these brands could ever be associated with a luxury car. That is why Tata Motors acquired Jaguar and Land Rover, Geely acquired Volvo, and Toyota cracked open the luxury segment by launching an entirely new brand, Lexus.
In its zeal to carve out a share of the top end, Li Ning should also remember that, in China as well as other emerging economies, the middle income segment is and will remain the largest market segment for many decades to come. Thus, as the company attempts to diversify into adjacent segments, it should avoid, at all costs, any risk to its lock on this most important market segment.

Ani K. Guptais a professor of strategy at the Smith School of Business at the University of Maryland and a visiting professor in strategy at INSEAD. Haiyan Wang is managing partner of the China India Institute. They are the co-authors of Getting China and India Right (Wiley, 2009) and The Quest for Global Dominance (Wiley, 2008).

Source: www.businessweek.com

China cuts holdings of US debt after ratings downgrade

China has reduced its holdings of US debt to their lowest level in a year, after the US's credit rating was downgraded by Standard & Poor's (S&P).

China sold $36.5bn (£23.2bn) in US Treasuries or bonds to cut its holding to $1,137bn in August, latest data by the US Treasury department showed.

Thai interest rates kept on hold despite floods

Thailand's central bank has left interest rates on hold at 3.5%, despite calls for them to be cut to help the economy recover from the worst floods the country has seen in decades.

Instead, the Bank of Thailand said government spending to aid the flood recovery could raise inflation.

Thai flooding: Floodwalls reinforced to protect Bangkok

Thai soldiers and civilians worked frantically to shore up sandbag defences on the northern edge of the Bangkok on Tuesday.

The action came after the city's governor warned that the threat posed by the worst flooding in Thailand in half a century was not yet past.

China's Economic Growth Slows

BEIJING—China's economic growth slowed in the third quarter but remained at a relatively healthy pace, adding to evidence that the Chinese economy is headed for a soft landing.

Economists are now divided on whether a loosening of Beijing's economic policies is imminent.

Thailand floods disrupt production and supply chains

Factories and supply chains are facing disruption as some of the worst flooding in decades starts to affect Thailand's economy.

Western Digital, Honda Motor and many other companies have been forced to suspend production in central Thailand because of the floods.

Most of the factory closures are due to disruptions to local supply chains.

IMF says China has scope to respond to global risks

TOKYO: China has the scope to respond if global economic risks materialise, and the country's response could partially but not entirely offset the impact of a global crisis, the International Monetary Fund's Asia and Pacific director said on Thursday.

Anoop Singh, director of the IMF's Asia and Pacific department, added that the yen's current level did not pose an immediate risk to Japan's economic recovery and that recent data reinforced the Bank of Japan's view that the economic recovery was taking hold.

S Korean banks' household lending growth slows in September

SEOUL, Oct. 12 (Xinhua) -- South Korean banks' lending to households grew at a slower pace in September than a month before due to a reduction in credit loans, the central bank said Wednesday.

Household loans extended by local banks reached 448.7 trillion won (382.65 billion U.S. dollars) as of the end of September, up 0.6 trillion won from a month earlier, the Bank of Korea (BOK) said in a statement.

China expands resource tax across the country

China will expand a tax on oil and natural gas sales to the entire country as of 1 November, to try and reduce consumption.

The tax will be 5-10% of sales, the State Council said Monday.

A 5% experimental resource tax was introduced in the western province of Xinjiang in July last year, with revenues going to the local government.

Asian stocks higher on ECB, Bank of England moves

HONG KONG (AP) — Asian stocks climbed Friday after Europe's move to backstop troubled banks and Britain's plan to pump more stimulus into its fading economy gave a boost to confidence.

After a week of wild gyrations stemming from Europe's debt crisis, investors in Asia reacted positively to news that the Bank of England will turn on its stimulus taps and that the European Central Bank will offer new short-terms to banks that are facing difficulties securing funding.

U.S. and China moving toward trade war?

Hong Kong (CNN) – China says it could be on the march to a trade war with the United States. That’s after the U.S. Senate on Monday passed a key test vote that targets countries believed to keep their currencies artificially weak.

If the bill passes in the Senate – perhaps as early as this week – it would be the next step at shooting new tariffs onto exports from those countries. Looking between those Congressional crosshairs, this week’s legislation is clearly aimed at China.

Japan's big manufacturers expect conditions to improve

Japan's big manufacturers expect conditions to improve in the next three months, according to the Bank of Japan's Tankan survey.

The business sentiment index stood at plus two for September, up from minus nine in June, the survey showed.

Confidence was badly damaged by the March 11 earthquake, but factory output is now increasing as supply chains are restored and infrastructure rebuilt.