By Alan Wheatley, Global Economics Correspondent
GYEONGJU, South Korea
(Reuters) - The past is not an infallible guide to the future, but a reading of how East Asia's economies developed suggests China needs to get ready for an appreciable slowdown in growth in the years ahead.
And that same history lesson must have Beijing praying that it can follow in the footsteps of vibrant South Korea, not stagnant Japan.
Last weekend's gathering of the Group of 20 major economies was aimed at securing short-term growth and currency stability.
But the opulence of the lake resort where G20 finance ministers met was a vivid illustration of how South Korea has avoided the so-called middle-income trap and continued to push living standards closer to those of advanced countries.
For decades, many countries in Latin America and the Middle East have failed in this task. In Asia, the Philippines is a prominent example.
"Many countries make it from low-income to middle-income, but very few actually make that second leap to high-income. They seem to get stuck in a trap where your costs are escalating and you lose competitiveness," said Ardo Hansson, a World Bank economist in Beijing.
Not so South Korea. When war on the divided peninsula ended in 1953, the south was poorer than the north.
By 1997, though, South Korean per capita GDP (at purchasing power parity exchange rates) had reached 57 percent of the average of the Organisation for Economic Co-operation and Development, a forum of industrial democracies that Seoul joined a year earlier.
The 1997/98 Asian financial meltdown set back many middle-income countries across the region. Investment, vital to sustain medium-term growth, has still not recovered to pre-crisis levels in Thailand, Malaysia and the Philippines.
South Korea, though, after nearly defaulting on its debts at the end of 1997, pulled itself together and resumed its march up the value chain.
DON'T STOP REFORMING
The key reason is that Seoul embarked on far-reaching market reforms. In particular, the government reduced the power of the chaebol, sprawling debt-heavy conglomerates whose links to the state created the impression that they were too big to fail.
But many did fail as South Korea injected more competition into the economy, liberalised imports and deregulated the financial sector that was a captive source of funding for the chaebol.
"They really changed the rules of the game for the large corporations. It became clear that being big and being close to government was not enough to keep you alive," said Randall Jones, who heads the OECD's South Korea desk.
Since the crisis, the country has grown more than twice as fast as the OECD norm, propelling per capita GDP to 83 percent of the group average by 2008.
"Korea is a success story because of what they've been able to do during the past decade, and it's the wave of reform back in 1997/98 that gave them that second wind," Jones said.
The lessons for Beijing seem evident. The chaebol can be likened to China's state-owned enterprises, which generally enjoy cosy monopolies and favourable financing from state-owned banks that are themselves cossetted.
Beijing needs to emphasise the efficiency of investment, not its scale. It must foster innovation and make it easier for more-productive private firms to enter sectors such as finance and logistics.
"Part of it is just making sure that you are creating new sources of growth all the time," said Hansson at the World Bank.
A HISTORY LESSON
A particular lesson from South Korea is that investing in human capital is critical to avoiding the middle-income trap.
"Korea, 50 years ago, already had very high levels of educational attainment. There has to be some sense in which making that final leap really depends upon widespread access to high-quality education," Hansson at the World Bank said.
Emulating South Korea would help China to improve the structure of its economy and actually benefit from the loss of momentum that history suggests is looming.
According to data compiled by the late economic historian Angus Maddison and cited by Morgan Stanley, about 40 economies have attained a per capita GDP level of $7,000 over the past century or so.
Remarkably, the average growth rate of 31 of those 40 countries was 2.8 percentage points less in the decade after the $7,000 inflection point was reached than in the preceding decade.
Japan and South Korea hit the $7,000 mark around 1969 and 1988, whereupon their annual average GDP growth rates decelerated in the following decade by 4.1 and 2.4 percentage points respectively, Morgan Stanley calculates.
China's per capita GDP today is less than $4,000 at market exchange rates, but the bank reckons it reached Maddison's magic number, which is based on purchasing power, in 2008.
"If history is a guide and the law of gravity applies to China, China's economic growth is set to slow," Morgan Stanley said in a recent report.
China's slowdown might be gentler given its continental-sized economy and the potential for catch-up in the poorer interior. But the development experience of its neighbours, including Taiwan, is a benchmark too powerful to ignore.
Morgan Stanley has pencilled in average GDP growth of 8.0 percent a year from 2010-2020, down from 10.3 percent from 2000-2009.
Slower, though, can mean a better balance. In Japan and South Korea consumption and labour income rose sharply as a share of GDP in the decade after growth peaked, while their service sectors expanded strongly.
China's new five-year plan proclaims the same goals.
"China is not unique. It will follow the pattern of Korea and Japan and, after the inflection point, consumption will take off and investment will decline," said Steven Zhang, a Morgan Stanley economist in Shanghai.
(Additional reporting by Aileen Wang; editing by Richard Pullin)
Source: www.bx.businessweek.com
Monday, October 25, 2010
U.S., China discuss economic ties amid tension
Beijing, China (CNN) -- U.S. Treasury Secretary Timothy Geithner met China's Vice-Premier Wang Qishan on Sunday and "exchanged views" about economic relations between their countries, both sides said.
The meeting came shortly after Geithner publicly hammered China over its currency, which Washington says Beijing keeps at artificially low levels to boost exports.
Geithner had urged the world's leading finance ministers to take strong action to ensure emerging markets nations allow their currency to rise in value in line with the free market.
The worry is that if such currency manipulation continues, it could wreak havoc on international trade.
He insisted that "countries that have traditionally run large trade and current account surpluses" -- which China has done -- needed to move "away from export dependence and toward stronger domestic demand led growth."
He said rich countries like the United States needed to play their part too by saving, investing and exporting more.
He was speaking at a meeting of finance ministers of the G-20 group of nations. Their two-day meeting wrapped up Saturday in Gyeongju, South Korea, with the ministers pledging not to engage in currency wars.
Geithner then flew on to China, where he met Wang at the Qingdao Airport.
They also discussed plans for the G-20 leaders meeting in Seoul, South Korea, next month, the Americans said.
In the G-20 finance ministers' closing statement, they said they would "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies."
The ministers added that the G-20 member nations would "continue to resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade."
The G-20 stopped short of outright banning currency manipulation though.
The meeting was a precursor to the larger G-20 meeting taking place in Seoul on November 11 and 12. That summit will involve the heads of state from the G-20 nations. President Obama will attend.
Tensions about currency and trade are likely to be high at that meeting as well.
The G-20 acknowledged in Saturday's statement that the global economic recovery is currently advancing, but it was doing so in "a fragile and uneven way."
The ministers added that "growth has been strong in many emerging market economies, but the pace of activity remains modest in many advanced economies."
As further evidence of that, China announced earlier this week that its gross domestic product for the third-quarter rose at an annual rate of 9.6 percent.
While that's slower than in previous quarters, it is still far higher than the growth rates of the United States, Japan and nations in Europe.
China's central bank also announced earlier this week that it was raising a key interest rate for the first time in nearly three years.
That comes at a time when many expect the Federal Reserve to soon announce more details about how it intends to further ease its own monetary policies.
In a nod to the increased economic clout of China and other emerging markets, such as Brazil, India and Russia, the G-20 ministers also announced a deal Saturday that would give emerging markets countries more seats on the board of the International Monetary Fund.
By the CNN Wire Staff
Source: CNN
www.cnn.com
The meeting came shortly after Geithner publicly hammered China over its currency, which Washington says Beijing keeps at artificially low levels to boost exports.
Geithner had urged the world's leading finance ministers to take strong action to ensure emerging markets nations allow their currency to rise in value in line with the free market.
The worry is that if such currency manipulation continues, it could wreak havoc on international trade.
He insisted that "countries that have traditionally run large trade and current account surpluses" -- which China has done -- needed to move "away from export dependence and toward stronger domestic demand led growth."
He said rich countries like the United States needed to play their part too by saving, investing and exporting more.
He was speaking at a meeting of finance ministers of the G-20 group of nations. Their two-day meeting wrapped up Saturday in Gyeongju, South Korea, with the ministers pledging not to engage in currency wars.
Geithner then flew on to China, where he met Wang at the Qingdao Airport.
They also discussed plans for the G-20 leaders meeting in Seoul, South Korea, next month, the Americans said.
In the G-20 finance ministers' closing statement, they said they would "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies."
The ministers added that the G-20 member nations would "continue to resist all forms of protectionist measures and seek to make significant progress to further reduce barriers to trade."
The G-20 stopped short of outright banning currency manipulation though.
The meeting was a precursor to the larger G-20 meeting taking place in Seoul on November 11 and 12. That summit will involve the heads of state from the G-20 nations. President Obama will attend.
Tensions about currency and trade are likely to be high at that meeting as well.
The G-20 acknowledged in Saturday's statement that the global economic recovery is currently advancing, but it was doing so in "a fragile and uneven way."
The ministers added that "growth has been strong in many emerging market economies, but the pace of activity remains modest in many advanced economies."
As further evidence of that, China announced earlier this week that its gross domestic product for the third-quarter rose at an annual rate of 9.6 percent.
While that's slower than in previous quarters, it is still far higher than the growth rates of the United States, Japan and nations in Europe.
China's central bank also announced earlier this week that it was raising a key interest rate for the first time in nearly three years.
That comes at a time when many expect the Federal Reserve to soon announce more details about how it intends to further ease its own monetary policies.
In a nod to the increased economic clout of China and other emerging markets, such as Brazil, India and Russia, the G-20 ministers also announced a deal Saturday that would give emerging markets countries more seats on the board of the International Monetary Fund.
By the CNN Wire Staff
Source: CNN
www.cnn.com
Singapore stock exchange bids $8.3bn for Australian ASX
The Singapore stock exchange (SGX) has unveiled a multi-billion dollar bid for the company that owns the Australian Stock Exchange (ASX) in Sydney.
If approved, the $8.3bn takeover would mark the first stock exchange merger in the Asia Pacific region.
The deal would enhance Singapore as a major financial hub in the region and benefit Australian investors by giving them greater access to Asian markets.
A merged exchange would hope to compete more effectively with Hong Kong.
ASX shares soared more than 20% to A$43.49 ($43.17) after the announcement, while SGX shares fell back 4.35% to S$9.13 ($7.05).
A merger would create the second-largest exchange in the region by number of companies listed with 2,700 quoted firms.
However, in terms of market value of the companies listed, the new exchange would still lag behind Hong Kong, Tokyo and Shanghai.
SGX chief executive Magnus Bocker, said: "The capital flow we see today is really changing from West to East. This will be the gateway to Asian capital markets."
The Singapore bid values ASX at A$48 ($47.50) per share, nearly 40% higher its latest traded price before the announcement.
The offer is made up of A$22 plus 3.473 SGX shares for each ASX share.
Any merger deal would require approval by the regulatory authorities in both countries.
Graeme Samuel, the chairman of the Australian Competition and Consumer Commission, said he did not see any potential problems with the proposed deal.
"I think it's a matter between the Singapore Exchange and the Australian exchange, and I can't see that raising competition issues for us."
Sourse: BBS
www.bbc.co.uk
If approved, the $8.3bn takeover would mark the first stock exchange merger in the Asia Pacific region.
The deal would enhance Singapore as a major financial hub in the region and benefit Australian investors by giving them greater access to Asian markets.
A merged exchange would hope to compete more effectively with Hong Kong.
ASX shares soared more than 20% to A$43.49 ($43.17) after the announcement, while SGX shares fell back 4.35% to S$9.13 ($7.05).
A merger would create the second-largest exchange in the region by number of companies listed with 2,700 quoted firms.
However, in terms of market value of the companies listed, the new exchange would still lag behind Hong Kong, Tokyo and Shanghai.
SGX chief executive Magnus Bocker, said: "The capital flow we see today is really changing from West to East. This will be the gateway to Asian capital markets."
The Singapore bid values ASX at A$48 ($47.50) per share, nearly 40% higher its latest traded price before the announcement.
The offer is made up of A$22 plus 3.473 SGX shares for each ASX share.
Any merger deal would require approval by the regulatory authorities in both countries.
Graeme Samuel, the chairman of the Australian Competition and Consumer Commission, said he did not see any potential problems with the proposed deal.
"I think it's a matter between the Singapore Exchange and the Australian exchange, and I can't see that raising competition issues for us."
Sourse: BBS
www.bbc.co.uk
Saturday, October 23, 2010
Geithner calls for cap on trade surpluses
Gyeongju, South Korea (FT) -- Washington has taken a fresh line of attack in attempts to get Beijing to allow its currency to appreciate, calling for the G20 group of leading economies to agree a cap on current account surpluses.
The U.S. has long sought faster and sustained appreciation of the renminbi but Beijing has consistently resisted specific targets.
In order to break this impasse, Timothy Geithner, U.S. Treasury secretary, said G20 finance ministers, meeting in the South Korean city of Gyeongju on Friday, should commit to limit trade deficits and surpluses that create imbalances in the global economy.
"G20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand," Mr Geithner wrote in a letter to G20 ministers that was circulated among reporters.
Still, much of Mr Geithner's language was tailored to the challenge posed by the renminbi. By building up domestic demand and increasing imports, China would be inclined to allow a faster strengthening of its currency.
"Emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals," he added.
G20 officials on Friday said the U.S. initially proposed that trade surpluses should be capped at 4 per cent of gross domestic product.
One senior G20 official said the letter, drafted after a proposal from South Korea, would not come as a shock to the Chinese because financial officials had been sounding out Beijing in earlier meetings.
The G20 official said the Chinese had cautiously welcomed the suggestion of shifting the debate away from the narrow focus on currency and could even be open to the 4 per cent target because it chimed with their own forecasts.
"I do not know whether the Chinese fully agreed in advance or not, but if the Americans decided to circulate the letter, it should be a sign they have already agreed something. The bigger worry is opposition from Germany and Japan."
China gave no immediate reaction. Cui Tiankai, Beijing's representative to the G20, last week said any U.S.-led offensive on Chinese currency would be "wrong" but said he was "cautiously optimistic" a final deal could be done if it took broad macroeconomic factors into account.
He said asking China to set targets on currency was tantamount to asking it to manipulate the renminbi. He repeated Beijing's assertions that it was already doing enough to stimulate domestic demand and that it was unfair to expect a sudden change in consumers' habits.
Jim Flaherty, Canada's finance minister, said Mr Geithner's proposal was helpful and added that it could be regarded as part of an action plan to be agreed by a summit of G20 leaders in Seoul on November 11. A French official told reporters that Paris was also sympathetic to the suggestion, which echoed its complaints about Germany's surpluses.
However, Yoshihiko Noda, Japan's finance minister, told reporters that numerical targets would be difficult to implement. A senior German official also reacted negatively, telling Deutsche Presse-Agentur that Germany's surplus could not be likened to that of China. He argued that Berlin's surpluses were unrelated to the euro and were simply a sign of trading strength.
Mr Flaherty held out hopes that an initial compromise could be reached by the end of the Gyeongju meeting on Saturday.
"No one wants to walk out from here without an agreement on an action plan," he told reporters.
It was unclear whether a demand for action on current accounts would be any more acceptable to Beijing as it argues it is already taking sufficient steps to stimulate domestic demand. "We are not just an exporter," Mr Cui told a conference in Seoul. "We are making our best efforts to diversify our economy to base economic growth on domestic consumption and we are going to import more."
Despite the growing divisions, Lee Myung-bak, South Korea's president, joked he would not let any of the ministers leave until a deal was done.
"If you do not reach an agreement, when you come to leave, we may not operate buses, trains or planes," he said.
By Christian Oliver and Song Jung-a,
www.FT.com
The U.S. has long sought faster and sustained appreciation of the renminbi but Beijing has consistently resisted specific targets.
In order to break this impasse, Timothy Geithner, U.S. Treasury secretary, said G20 finance ministers, meeting in the South Korean city of Gyeongju on Friday, should commit to limit trade deficits and surpluses that create imbalances in the global economy.
"G20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand," Mr Geithner wrote in a letter to G20 ministers that was circulated among reporters.
Still, much of Mr Geithner's language was tailored to the challenge posed by the renminbi. By building up domestic demand and increasing imports, China would be inclined to allow a faster strengthening of its currency.
"Emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals," he added.
G20 officials on Friday said the U.S. initially proposed that trade surpluses should be capped at 4 per cent of gross domestic product.
One senior G20 official said the letter, drafted after a proposal from South Korea, would not come as a shock to the Chinese because financial officials had been sounding out Beijing in earlier meetings.
The G20 official said the Chinese had cautiously welcomed the suggestion of shifting the debate away from the narrow focus on currency and could even be open to the 4 per cent target because it chimed with their own forecasts.
"I do not know whether the Chinese fully agreed in advance or not, but if the Americans decided to circulate the letter, it should be a sign they have already agreed something. The bigger worry is opposition from Germany and Japan."
China gave no immediate reaction. Cui Tiankai, Beijing's representative to the G20, last week said any U.S.-led offensive on Chinese currency would be "wrong" but said he was "cautiously optimistic" a final deal could be done if it took broad macroeconomic factors into account.
He said asking China to set targets on currency was tantamount to asking it to manipulate the renminbi. He repeated Beijing's assertions that it was already doing enough to stimulate domestic demand and that it was unfair to expect a sudden change in consumers' habits.
Jim Flaherty, Canada's finance minister, said Mr Geithner's proposal was helpful and added that it could be regarded as part of an action plan to be agreed by a summit of G20 leaders in Seoul on November 11. A French official told reporters that Paris was also sympathetic to the suggestion, which echoed its complaints about Germany's surpluses.
However, Yoshihiko Noda, Japan's finance minister, told reporters that numerical targets would be difficult to implement. A senior German official also reacted negatively, telling Deutsche Presse-Agentur that Germany's surplus could not be likened to that of China. He argued that Berlin's surpluses were unrelated to the euro and were simply a sign of trading strength.
Mr Flaherty held out hopes that an initial compromise could be reached by the end of the Gyeongju meeting on Saturday.
"No one wants to walk out from here without an agreement on an action plan," he told reporters.
It was unclear whether a demand for action on current accounts would be any more acceptable to Beijing as it argues it is already taking sufficient steps to stimulate domestic demand. "We are not just an exporter," Mr Cui told a conference in Seoul. "We are making our best efforts to diversify our economy to base economic growth on domestic consumption and we are going to import more."
Despite the growing divisions, Lee Myung-bak, South Korea's president, joked he would not let any of the ministers leave until a deal was done.
"If you do not reach an agreement, when you come to leave, we may not operate buses, trains or planes," he said.
By Christian Oliver and Song Jung-a,
www.FT.com
Friday, October 22, 2010
IMF Sees Strong Growth in Asia Continuing, Further Policy Tightening Needed
Press Release No. 10/393
October 21, 2010
Asia remains firmly in the lead of the global economic recovery and strong growth in the region is set to continue, the International Monetary Fund (IMF) said today in its latest Regional Economic Outlook (REO) for Asia and the Pacific which was released in Jakarta, Indonesia.
The expansion in Asia exceeded expectations in the first half of the year, the IMF said, prompting the Fund to revise up its 2010 growth forecast for the region to 8 percent, nearly 1 percentage point higher than its April forecast. Economies across the region are expanding strongly. China and India are leading the way with projected 2010 growth rates of 10.5 percent and 9.7 percent, respectively, while Indonesia is expected to grow by 6 percent. In Japan, growth is now projected at 2.8 percent. In 2011, regional growth is expected to moderate to a more sustainable pace of 6.8 percent.
Strong economic growth is leading to new policy challenges, according to the REO analysis. Inflationary pressures are continuing to build, while prices in some property markets are growing at double-digit rates. With Asia set to remain an attractive destination for foreign investment given the sluggish recovery in the U.S. and Europe, capital inflows could add further to domestic price pressures in the period ahead.
The time has therefore come for countries in the region to normalize monetary and fiscal policy stances, according to Mr. Anoop Singh, Director of the IMF’s Asia and Pacific Department. “We welcome the steps so far taken by policymakers to control inflation risks and limit the build-up of financial sector vulnerabilities, but more now needs to be done given the continued strong growth in the region,” Mr. Singh said.
The REO points to the need for further tightening of monetary policy in many countries in Asia, including through greater exchange rate appreciation. A faster withdrawal of the fiscal stimulus put in place during the global financial crisis would also help guard against the risks of overheating. The REO notes, however, that should a worsening of global economic conditions negatively affect Asia, there is room to return to a more stimulative policy stance.
Managing capital inflows into the region is a difficult challenge. These inflows present many opportunities, but they also pose potential risks to financial stability. Macro-prudential measures have appropriately been taken in many regional economies to minimize risks, but more action may be needed. These important issues were recently discussed at a high-level conference on “Macro-Prudential Policies: An Asian Perspective” hosted by the People’s Bank of China and the IMF in Shanghai.
Rebalancing Asia’s growth remains the top policy priority over the medium term. With external demand from advanced economies unlikely to return to pre-crisis levels in the foreseeable future, Asia will need stronger domestic demand in order to continue along a robust growth path. A broad range of reforms are needed to support domestic consumption and investment, including strengthening social safety nets, ensuring access to credit, easing restrictions in service sectors, and improving infrastructure. Exchange rate appreciation is an important part of rebalancing. “It is only natural that as Asian economies grow stronger so too will their currencies,” said the IMF’s Singh. “This is very much a sign of Asia’s success.”
Source: International Monetary Fund
www.imf.org
October 21, 2010
Asia remains firmly in the lead of the global economic recovery and strong growth in the region is set to continue, the International Monetary Fund (IMF) said today in its latest Regional Economic Outlook (REO) for Asia and the Pacific which was released in Jakarta, Indonesia.
The expansion in Asia exceeded expectations in the first half of the year, the IMF said, prompting the Fund to revise up its 2010 growth forecast for the region to 8 percent, nearly 1 percentage point higher than its April forecast. Economies across the region are expanding strongly. China and India are leading the way with projected 2010 growth rates of 10.5 percent and 9.7 percent, respectively, while Indonesia is expected to grow by 6 percent. In Japan, growth is now projected at 2.8 percent. In 2011, regional growth is expected to moderate to a more sustainable pace of 6.8 percent.
Strong economic growth is leading to new policy challenges, according to the REO analysis. Inflationary pressures are continuing to build, while prices in some property markets are growing at double-digit rates. With Asia set to remain an attractive destination for foreign investment given the sluggish recovery in the U.S. and Europe, capital inflows could add further to domestic price pressures in the period ahead.
The time has therefore come for countries in the region to normalize monetary and fiscal policy stances, according to Mr. Anoop Singh, Director of the IMF’s Asia and Pacific Department. “We welcome the steps so far taken by policymakers to control inflation risks and limit the build-up of financial sector vulnerabilities, but more now needs to be done given the continued strong growth in the region,” Mr. Singh said.
The REO points to the need for further tightening of monetary policy in many countries in Asia, including through greater exchange rate appreciation. A faster withdrawal of the fiscal stimulus put in place during the global financial crisis would also help guard against the risks of overheating. The REO notes, however, that should a worsening of global economic conditions negatively affect Asia, there is room to return to a more stimulative policy stance.
Managing capital inflows into the region is a difficult challenge. These inflows present many opportunities, but they also pose potential risks to financial stability. Macro-prudential measures have appropriately been taken in many regional economies to minimize risks, but more action may be needed. These important issues were recently discussed at a high-level conference on “Macro-Prudential Policies: An Asian Perspective” hosted by the People’s Bank of China and the IMF in Shanghai.
Rebalancing Asia’s growth remains the top policy priority over the medium term. With external demand from advanced economies unlikely to return to pre-crisis levels in the foreseeable future, Asia will need stronger domestic demand in order to continue along a robust growth path. A broad range of reforms are needed to support domestic consumption and investment, including strengthening social safety nets, ensuring access to credit, easing restrictions in service sectors, and improving infrastructure. Exchange rate appreciation is an important part of rebalancing. “It is only natural that as Asian economies grow stronger so too will their currencies,” said the IMF’s Singh. “This is very much a sign of Asia’s success.”
Source: International Monetary Fund
www.imf.org
Japan business: No rare earths coming from China
(CNN) – China can publicly deny that it has halted exports of rare earth. But Shigeo Nakamura knows what he is seeing: no rare earth has come into his company from his Chinese suppliers.
“Nothing, nothing at this moment. Nothing,” said Nakamura, president of Advanced Material Japan Corporation, a Tokyo-based rare earth and metal trading house.
Nakamura said his company has a year’s supply stockpiled, but he is worried.
“This,” he said, pointing to a tiny, two millimeter cylinder, “is a micro-motor from a mobile phone. If China stops supply of the raw material, you will not use the mobile phone. You will not see the TV. And you will not see any refrigerator.”
Rare earths are minerals used in small amounts on virtually every electronic item for sale around the world.
China has 30 percent of the world’s reserve of rare earths, but mines it cheaply and effectively. More than 90 percent of the world’s available supply is currently mined in China.
That control became clear last month to Japanese rare earth importers, exporters and the government.
In the wake of a collision at sea between a Chinese fishing vessel and the Japan coast guard in September, multiple Japanese rare earth importers tell CNN that China dramatically slowed exports of rare earth.
China denies it stopped exports in retaliation.
But Beijing has been curbing international exports for the last few years amid concerns about supply and growing demand.
Whatever the reason behind the slowdown in rare earth exports, Mizuho Research Institute senior economist Jun Inoue says it highlights what Japanese economists call “China risk.”
That risk involves the world relying too heavily on China, a country whose communist government can rapidly affect the global economy.
“The world is heavily relying on China not only in finance and trade, but also natural resources,” said Inoue. “In the market economy, each economic entity makes decisions by individual will. But under the controlled market economy (like China), the government has plans and targets. There is a risk that such national plans and targets influence the world economy.”
China on Wednesday denied that it has halted export of rare earth materials amid news reports that Beijing started blocking shipments of the crucial minerals to the United States and Europe following similar measures against Japan.
"China will continue to provide rare earth to the rest of the world," the ministry of commerce said in a statement faxed to CNN. "At the same time, to protect exhaustible resources and achieve sustainable development, China will also continue to implement restrictive measures on the mining, production and export of rare earth."
Nakamura said his company has a year of rare earth stockpile. He remains optimistic that Beijing will loosen exports, saying China stands to lose too much money if developed economies like Japan and the U.S. mine for rare earth elsewhere.
“Maybe two weeks” before Chinese exports resume, said Nakamura. “Two weeks, I hope.”
Posted by: CNN Correspondent, Kyung Lah
Source: cnn.com
“Nothing, nothing at this moment. Nothing,” said Nakamura, president of Advanced Material Japan Corporation, a Tokyo-based rare earth and metal trading house.
Nakamura said his company has a year’s supply stockpiled, but he is worried.
“This,” he said, pointing to a tiny, two millimeter cylinder, “is a micro-motor from a mobile phone. If China stops supply of the raw material, you will not use the mobile phone. You will not see the TV. And you will not see any refrigerator.”
Rare earths are minerals used in small amounts on virtually every electronic item for sale around the world.
China has 30 percent of the world’s reserve of rare earths, but mines it cheaply and effectively. More than 90 percent of the world’s available supply is currently mined in China.
That control became clear last month to Japanese rare earth importers, exporters and the government.
In the wake of a collision at sea between a Chinese fishing vessel and the Japan coast guard in September, multiple Japanese rare earth importers tell CNN that China dramatically slowed exports of rare earth.
China denies it stopped exports in retaliation.
But Beijing has been curbing international exports for the last few years amid concerns about supply and growing demand.
Whatever the reason behind the slowdown in rare earth exports, Mizuho Research Institute senior economist Jun Inoue says it highlights what Japanese economists call “China risk.”
That risk involves the world relying too heavily on China, a country whose communist government can rapidly affect the global economy.
“The world is heavily relying on China not only in finance and trade, but also natural resources,” said Inoue. “In the market economy, each economic entity makes decisions by individual will. But under the controlled market economy (like China), the government has plans and targets. There is a risk that such national plans and targets influence the world economy.”
China on Wednesday denied that it has halted export of rare earth materials amid news reports that Beijing started blocking shipments of the crucial minerals to the United States and Europe following similar measures against Japan.
"China will continue to provide rare earth to the rest of the world," the ministry of commerce said in a statement faxed to CNN. "At the same time, to protect exhaustible resources and achieve sustainable development, China will also continue to implement restrictive measures on the mining, production and export of rare earth."
Nakamura said his company has a year of rare earth stockpile. He remains optimistic that Beijing will loosen exports, saying China stands to lose too much money if developed economies like Japan and the U.S. mine for rare earth elsewhere.
“Maybe two weeks” before Chinese exports resume, said Nakamura. “Two weeks, I hope.”
Posted by: CNN Correspondent, Kyung Lah
Source: cnn.com
Wednesday, October 20, 2010
China's interest rate balancing act
(CNN) – There’s an old joke about economics: “If I have a foot in a bucket of hot water and a foot in a bucket of cold water, on average I’m warm!” Well that same economic principal could be applied to China right now.
The government is proud of its continuing rapid growth; it needs a strong economy to continue modernizing, providing employment and evening out social inequality. But it has to be the right kind of growth, growth that distributes the wealth across the society.
The problem right now is that money has been too cheap and too readily available. That’s led to speculation and investment in the property market that has seen rapidly escalating prices; in other words a good old unsustainable bubble.
This may be good for the cashed-up speculators but it also leads to a spike in inflation. That hurts the vast majority of people who have to pay more for essential goods: clothes, food, power and water.
The government has now decided to hike interest rates with the hope of pricking the bubble and reigning in prices.
By boosting both the lending and savings rates it hopes to encourage people to put their money in the bank for a better return rather than chasing the quick riches of real estate. It needs that bucket to cool.
The hot water bucket is GDP. The government doesn’t want growth to cool too rapidly. It wants to calibrate the economy to get the money flowing into the “real economy” where more people get a share.
There’s a leadership change looming in 2012 and the incoming president hardly wants to be the one left standing when the music stops!
Then there’s the ongoing pressure for China to let its currency, the yuan, increase in value. This, say China’s critics, will level the playing field, making China’s exports more expensive.
It would also help China by making imports cheaper, thus reducing that pesky high inflation. Ordinarily, a rise in interest rates would put more upward pressure on the value of the yuan, but China closely regulates its currency rate and doesn’t want any rapid moves.
There are still so many unanswered questions: Will there be more rate rises? Will the currency value increase? If so: then by how much? Will speculators be lured even further by a greater interest rate return on their investment?
Hot and cold; it’s a delicate balancing act. Right now China needs it feet in two warm buckets.
The government is proud of its continuing rapid growth; it needs a strong economy to continue modernizing, providing employment and evening out social inequality. But it has to be the right kind of growth, growth that distributes the wealth across the society.
The problem right now is that money has been too cheap and too readily available. That’s led to speculation and investment in the property market that has seen rapidly escalating prices; in other words a good old unsustainable bubble.
This may be good for the cashed-up speculators but it also leads to a spike in inflation. That hurts the vast majority of people who have to pay more for essential goods: clothes, food, power and water.
The government has now decided to hike interest rates with the hope of pricking the bubble and reigning in prices.
By boosting both the lending and savings rates it hopes to encourage people to put their money in the bank for a better return rather than chasing the quick riches of real estate. It needs that bucket to cool.
The hot water bucket is GDP. The government doesn’t want growth to cool too rapidly. It wants to calibrate the economy to get the money flowing into the “real economy” where more people get a share.
There’s a leadership change looming in 2012 and the incoming president hardly wants to be the one left standing when the music stops!
Then there’s the ongoing pressure for China to let its currency, the yuan, increase in value. This, say China’s critics, will level the playing field, making China’s exports more expensive.
It would also help China by making imports cheaper, thus reducing that pesky high inflation. Ordinarily, a rise in interest rates would put more upward pressure on the value of the yuan, but China closely regulates its currency rate and doesn’t want any rapid moves.
There are still so many unanswered questions: Will there be more rate rises? Will the currency value increase? If so: then by how much? Will speculators be lured even further by a greater interest rate return on their investment?
Hot and cold; it’s a delicate balancing act. Right now China needs it feet in two warm buckets.
Wednesday, October 13, 2010
Delhi's shame could be the catalyst to unclog the economy
In our technology-driven world, no metric is rawer than that of human bodily functions. Sadly for India, it's one that keeps cropping up. Toilet shortages mean all too many of India's 1.2 billion people relieve themselves outside.
Illness, lost productivity and other consequences of fouled water and inadequate sewage treatment are cutting gross domestic product.
Advertisement: Story continues below
Toilets have also played a role in the Commonwealth Games, ending today. India's Prime Minister, Manmohan Singh, wanted the event to ''signal to the world that India is rapidly marching ahead with confidence''. The media focused instead on filthy bathrooms in the athletes' village and 100-roll packs of toilet paper for $80.
We're talking about a nation in which 828 million people live on less than $2 a day. An Indian making that could buy two rolls of Commonwealth Games toilet paper with a day's wages. The mess shines a bright spotlight on the shortcomings that hold back a $US1.3 trillion ($1.32 trillion) economy.
Yet all this bad press might be exactly what India needs. It could shame officials in New Delhi to get serious about fixing the economy. It also may just be the shove in the direction of private-sector leadership that India so clearly lacks.
Shoddy construction, excessive work delays, claims of tainted swimming pools that some athletes say caused ''Delhi belly'' and a dengue fever outbreak are products of the forces squandering the benefits of India's 8.8 per cent growth. Smart and well-intentioned as he is, Singh has made little progress since 2004. Is that about to change?
The tale of Delhi's new airport terminal, run by a company called GMR Infrastructure Ltd, shows not only why it must change but also how it can. It was finished on schedule in March. Now contrast that with government-built stadiums such as New Delhi's weightlifting hall. It was among 17 arenas that also were supposed to be finished by March.
Worse than running behind schedule, the roof at the weightlifting leaked and required frantic rebuilding efforts before the Games. After a smooth opening, the airport terminal began handling flights on July 28.
As India battles poverty, the private sector outshines the public one. Homegrown technology companies, for example, put India firmly on the global business map. The industry blossomed partly because it developed around India's political system as opposed to within it. In the beginning, there was no overbearing government ministry stifling growth. Microcredit lenders also have done far more to help the poor than the government.
India needs more of this dynamic, now, because politicians aren't up to the task. Few examples prove the point better than the Commonwealth Games, a $US4.6 billion undertaking attended by 71 nations and territories. Its staging contrasts in cartoonish ways with Beijing's hosting of the 2008 Olympics, which cost $US70 billion with 204 countries participating. Delhi's efforts have been mired in ridiculous delays and accusations of rampant corruption and mismanagement.
There's a silver lining. India must improve infrastructure to accelerate growth and broaden its benefits. Growth has averaged 8.5 per cent over the past five years but poor transport and other facilities could cost 1.1 percentage points of growth or $US200 billion by 2017-18, McKinsey & Co said in a report last year.
India needs to spend about $US1 trillion on highways, ports, airports and utilities from April 2012 to March 2017, twice the amount the nation's Planning Commission recommended in the previous five years. Given the government's missteps, the private sector can expect a far bigger share of that business.
Asia's third-biggest economy would be better off for it. It's naive to think letting companies such as GMR and Reliance Infrastructure Ltd play a bigger role in building efforts is a panacea for what ails India. It's a great start, though.
Transparency International ranked India behind Guatemala, El Salvador and Serbia in its 2009 corruption perceptions index - and six places behind China. Clearly, Indian companies have more than their fair share of crony capitalism. Yet getting politicians' hands out of the economy is the key to India's long-term prosperity.
Doing so will help create the hundreds of millions of well-paid jobs India needs to harness its enviable demographics. Thirty per cent of the population is under 15, in sharp contrast with ageing China. A young, English-speaking workforce is only useful if it has opportunities.
India has seen several false big-change moments. One came in May 2004 when voters tossed the then prime minister, Atal Bihari Vajpayee, out of office.
Another came in May last year, when Singh was re-elected with a solid mandate to retool the economy.
The ''Commonfilth Games'', as they were called, could be the real turning point. Ignoring such a cringe-inducing spectacle is impossible for Singh, his nation's people and the high-profile entrepreneurs who congregate at World Economic Forum confabs in Davos, Switzerland.
India has great potential and its economy may even outpace China's in the years ahead. Yet India desperately needs to clear the layers of dysfunction that are clogging progress. Embarrassment over toilets might just be the catalyst.
Source: www.smh.com.au
Illness, lost productivity and other consequences of fouled water and inadequate sewage treatment are cutting gross domestic product.
Advertisement: Story continues below
Toilets have also played a role in the Commonwealth Games, ending today. India's Prime Minister, Manmohan Singh, wanted the event to ''signal to the world that India is rapidly marching ahead with confidence''. The media focused instead on filthy bathrooms in the athletes' village and 100-roll packs of toilet paper for $80.
We're talking about a nation in which 828 million people live on less than $2 a day. An Indian making that could buy two rolls of Commonwealth Games toilet paper with a day's wages. The mess shines a bright spotlight on the shortcomings that hold back a $US1.3 trillion ($1.32 trillion) economy.
Yet all this bad press might be exactly what India needs. It could shame officials in New Delhi to get serious about fixing the economy. It also may just be the shove in the direction of private-sector leadership that India so clearly lacks.
Shoddy construction, excessive work delays, claims of tainted swimming pools that some athletes say caused ''Delhi belly'' and a dengue fever outbreak are products of the forces squandering the benefits of India's 8.8 per cent growth. Smart and well-intentioned as he is, Singh has made little progress since 2004. Is that about to change?
The tale of Delhi's new airport terminal, run by a company called GMR Infrastructure Ltd, shows not only why it must change but also how it can. It was finished on schedule in March. Now contrast that with government-built stadiums such as New Delhi's weightlifting hall. It was among 17 arenas that also were supposed to be finished by March.
Worse than running behind schedule, the roof at the weightlifting leaked and required frantic rebuilding efforts before the Games. After a smooth opening, the airport terminal began handling flights on July 28.
As India battles poverty, the private sector outshines the public one. Homegrown technology companies, for example, put India firmly on the global business map. The industry blossomed partly because it developed around India's political system as opposed to within it. In the beginning, there was no overbearing government ministry stifling growth. Microcredit lenders also have done far more to help the poor than the government.
India needs more of this dynamic, now, because politicians aren't up to the task. Few examples prove the point better than the Commonwealth Games, a $US4.6 billion undertaking attended by 71 nations and territories. Its staging contrasts in cartoonish ways with Beijing's hosting of the 2008 Olympics, which cost $US70 billion with 204 countries participating. Delhi's efforts have been mired in ridiculous delays and accusations of rampant corruption and mismanagement.
There's a silver lining. India must improve infrastructure to accelerate growth and broaden its benefits. Growth has averaged 8.5 per cent over the past five years but poor transport and other facilities could cost 1.1 percentage points of growth or $US200 billion by 2017-18, McKinsey & Co said in a report last year.
India needs to spend about $US1 trillion on highways, ports, airports and utilities from April 2012 to March 2017, twice the amount the nation's Planning Commission recommended in the previous five years. Given the government's missteps, the private sector can expect a far bigger share of that business.
Asia's third-biggest economy would be better off for it. It's naive to think letting companies such as GMR and Reliance Infrastructure Ltd play a bigger role in building efforts is a panacea for what ails India. It's a great start, though.
Transparency International ranked India behind Guatemala, El Salvador and Serbia in its 2009 corruption perceptions index - and six places behind China. Clearly, Indian companies have more than their fair share of crony capitalism. Yet getting politicians' hands out of the economy is the key to India's long-term prosperity.
Doing so will help create the hundreds of millions of well-paid jobs India needs to harness its enviable demographics. Thirty per cent of the population is under 15, in sharp contrast with ageing China. A young, English-speaking workforce is only useful if it has opportunities.
India has seen several false big-change moments. One came in May 2004 when voters tossed the then prime minister, Atal Bihari Vajpayee, out of office.
Another came in May last year, when Singh was re-elected with a solid mandate to retool the economy.
The ''Commonfilth Games'', as they were called, could be the real turning point. Ignoring such a cringe-inducing spectacle is impossible for Singh, his nation's people and the high-profile entrepreneurs who congregate at World Economic Forum confabs in Davos, Switzerland.
India has great potential and its economy may even outpace China's in the years ahead. Yet India desperately needs to clear the layers of dysfunction that are clogging progress. Embarrassment over toilets might just be the catalyst.
Source: www.smh.com.au
Asian Markets Rise on Gold and Property
In Asia Monday, China's Shanghai Composite Index surged 2.5% to 2,807 and Hong Kong's Hang Seng Index rose 1.1% to 22,207. The Tokyo Stock Exchange was closed for Physical Fitness Day.
Commodities were the talk of the town in Shanghai today. In London and New York, the price of copper has soared and gold and silver are trading at near record highs. Investors are gambling that the U.S. government will soon have no alternative than to announce more stimulus moves to jump start the sluggish economy and stem the loss of jobs. This could weaken the dollar and send investors flocking to valuable commodities as a place to park their cash. Reuters reports that UBS is already recommending that their richest clients put 7% to 10% of assets in precious metals like gold.
In China, mining companies led gains with Jiangxi Copper surging 10% and Yunnan Copper Industry climbing 4.7%. Gold mining specialist Zijin Mining rallied 7.6%, with gold trading at $1,355.65 -- just off last week's record high. Steel producers also made headway with Baoshan Iron & steel shooting up 4.7% and Maanshan Iron & Steel advancing 3.2%, and Yanzhou Coal Mining gained 10%, hitting the daily limit.
The Chinese airline sector saw big gains with Air China shooting up 4.5%, China Eastern Airlines rising 2.9% and China Southern Airlines gaining 2.7%.
Chinese banks gained value today, even after the central bank announced it was temporarily raising the reserve ratio for some of the large commercial banks to 17.5% from the current 17%. One Morgan Stanley economist told Reuters, "I don't think this is a tightening move. It's just part of liquidity management." Today Industrial & Commercial Bank of China rose 2.2%, Bank of Communications climbed 2%, China Construction Bank advanced 1.9% and Agricultural Bank of China added 1.1%.
Even while the government clamps down on banks and liquidity, Chinese developers continue to rise. Today Poly Real Estate shrugged off the new banking policies rocketing up 5.5%, Gemdale racked up a 3.9% gain and China Vanke climbed 4.7%.
Hong Kong-listed commodities shares boosted the Hang Seng with China Coal rallying 4.5% and Aluminum Corp. of China, affectionately known as Chalco, surging 4.3%. Cnooc, Hong Kong's oil exploration darling, shot up 4.5% on news of a deal with Chesapeake Energy, and PetroChina soared 3.6%. Real Gold Mining followed gold prices higher, advancing 2.7%.
An upcoming property auction spurred gains among developers, with Hang Lung rising 2.8%, China Overseas gaining 1.4% and Sino Land up 1%. Henderson Land and Sun Hung Kai both added 0.8%. Property companies are expected to bid as much as HK$1.5 billion ($193 million) for a plot of land in Kowloon Tong. A popular area that boasts the Festival Walk shopping center and is located only eight stops away from Central on the city's MTR subway system. Kerry Properties, which already owns the property next door, is also expected to bid for the land, according to China Knowledge. Today Kerry rose 2.4%.
The opening bid for the property will be HK$1.053 billion ($136 million), but judging from the astronomical prices at last week's Southeby's jewelry auction in Hong Kong, where Bloomberg reports that a buyer paid $7.7 million for a pink diamond Van Cleef & Arpels ring, it doesn't seem like there's a shortage of cash among the ultra-rich in Hong Kong.
Source: www.dailyfinance.com
Commodities were the talk of the town in Shanghai today. In London and New York, the price of copper has soared and gold and silver are trading at near record highs. Investors are gambling that the U.S. government will soon have no alternative than to announce more stimulus moves to jump start the sluggish economy and stem the loss of jobs. This could weaken the dollar and send investors flocking to valuable commodities as a place to park their cash. Reuters reports that UBS is already recommending that their richest clients put 7% to 10% of assets in precious metals like gold.
In China, mining companies led gains with Jiangxi Copper surging 10% and Yunnan Copper Industry climbing 4.7%. Gold mining specialist Zijin Mining rallied 7.6%, with gold trading at $1,355.65 -- just off last week's record high. Steel producers also made headway with Baoshan Iron & steel shooting up 4.7% and Maanshan Iron & Steel advancing 3.2%, and Yanzhou Coal Mining gained 10%, hitting the daily limit.
The Chinese airline sector saw big gains with Air China shooting up 4.5%, China Eastern Airlines rising 2.9% and China Southern Airlines gaining 2.7%.
Chinese banks gained value today, even after the central bank announced it was temporarily raising the reserve ratio for some of the large commercial banks to 17.5% from the current 17%. One Morgan Stanley economist told Reuters, "I don't think this is a tightening move. It's just part of liquidity management." Today Industrial & Commercial Bank of China rose 2.2%, Bank of Communications climbed 2%, China Construction Bank advanced 1.9% and Agricultural Bank of China added 1.1%.
Even while the government clamps down on banks and liquidity, Chinese developers continue to rise. Today Poly Real Estate shrugged off the new banking policies rocketing up 5.5%, Gemdale racked up a 3.9% gain and China Vanke climbed 4.7%.
Hong Kong-listed commodities shares boosted the Hang Seng with China Coal rallying 4.5% and Aluminum Corp. of China, affectionately known as Chalco, surging 4.3%. Cnooc, Hong Kong's oil exploration darling, shot up 4.5% on news of a deal with Chesapeake Energy, and PetroChina soared 3.6%. Real Gold Mining followed gold prices higher, advancing 2.7%.
An upcoming property auction spurred gains among developers, with Hang Lung rising 2.8%, China Overseas gaining 1.4% and Sino Land up 1%. Henderson Land and Sun Hung Kai both added 0.8%. Property companies are expected to bid as much as HK$1.5 billion ($193 million) for a plot of land in Kowloon Tong. A popular area that boasts the Festival Walk shopping center and is located only eight stops away from Central on the city's MTR subway system. Kerry Properties, which already owns the property next door, is also expected to bid for the land, according to China Knowledge. Today Kerry rose 2.4%.
The opening bid for the property will be HK$1.053 billion ($136 million), but judging from the astronomical prices at last week's Southeby's jewelry auction in Hong Kong, where Bloomberg reports that a buyer paid $7.7 million for a pink diamond Van Cleef & Arpels ring, it doesn't seem like there's a shortage of cash among the ultra-rich in Hong Kong.
Source: www.dailyfinance.com
Asian Stocks Advance as Japan Machinery Orders, Intel Sales Beat Estimates
Asian stocks rose, sending the regional equity benchmark to its biggest gain in five days, as reports from China, Japan and Australia showed the economic recovery is strengthening.
Fanuc Ltd. in Tokyo and Anhui Conch Cement Co. in Hong Kong gained at least 2.3 percent after Japanese machinery orders rose more than expected and the Chinese government said it will promote sales of construction material in rural areas. Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, advanced 3.5 percent as Intel Corp. predicted fourth-quarter sales that beat analysts’ estimates. Chinese banks in Hong Kong gained after data showed lending last month unexpectedly increased.
The MSCI Asia Pacific Index rose 0.6 percent to 129.50 as of 7:28 p.m. in Tokyo, with all 10 industry groups increasing. About two stocks advanced for each that fell on the nearly 1,000-member gauge. The measure has advanced 2.4 percent this month on speculation central banks around the world will increase efforts to boost economic growth.
“The Asian market is determined by the stability of China’s economy and the data seems to suggest that China’s economy in the fourth quarter will be stable, so the outlook overall for Asia is pretty good,” said Steve Tse, a Hong Kong- based research manager at BEA Union Investment Management, which oversees $4.5 billion.
Hong Kong Advances
The S&P/ASX 200 Index gained as much as 0.8 percent in Sydney after Australian consumer confidence rebounded in October, according to a Westpac Banking Corp. and Melbourne Institute survey today.
Japan’s Nikkei 225 Stock Average climbed 0.2 percent while the broader Topix index declined 0.2 percent toward the end of the trading session as pessimism over Japan’s domestic economic outlook overshadowed gains by exporters on expectations the U.S. Federal Reserve will act to shore up the economy.
Hong Kong’s Hang Seng Index rose 1.5 percent to the highest level since June 2008 as China’s central bank showed the country’s banks extended 595.5 billion yuan ($89 billion) of new loans last month. The gauge fell by as much as 0.4 percent earlier, led by developers, after Chief Executive Donald Tsang said the city would act to make housing more affordable.
Futures on the Standard & Poor’s 500 Index climbed 0.5 percent. The U.S. equity benchmark rose 0.4 percent to 1,169.77 yesterday after minutes of the Federal Reserve’s meeting last month showed the central bank was prepared to buy more government debt to stabilize the recovery.
Machinery Orders
“If the Fed takes more steps to spur the U.S. economy, it will also boost the export-driven Asian economy and markets in the region,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $65 billion globally.
Fanuc, Japan’s No. 1 maker of industrial robots, gained 2.3 percent to 11,010 yen. Komatsu Ltd., a maker of heavy machinery, climbed 0.9 percent to 1,909 yen.
Japanese machinery orders rose 10.1 percent from July, the largest increase since December, the Cabinet Office said today in Tokyo. The median forecast of 28 economists surveyed by Bloomberg News was for a 3.9 percent decline. The data is an indicator of business investment in three to six months.
Anhui Conch Cement, a Chinese maker of construction materials, rallied 7.8 percent to HK$36.50 in Hong Kong. China National Building Material Co., a producer of fiberglass and dry wall, jumped 10 percent to HK$19.92.
China Exports
China will start trials of a program to promote sales of construction materials in rural areas, the Ministry of Housing and Urban-Rural Development said in a statement on its website yesterday. The trials, focusing on cement, are taking place in the provinces of Shandong and Ningxia, according to a statement dated Sept. 29 and posted to its website today.
Exports in China, the world’s fastest growing major economy, rose 25.1 percent from a year earlier and imports climbed 24.1 percent, the customs bureau said on its website today.
Hynix increased 3.5 percent to 23,400 won in Seoul and Advanced Semiconductor Engineering Inc. rose 3.3 percent to NT$24.75 in Taipei. Tokyo Electron Ltd., the world’s No. 2 semiconductor-equipment maker, gained 1.3 percent to 4,550 yen.
Intel, the world’s biggest chipmaker, said revenue for the fourth quarter will be $11.4 billion, plus or minus $400 million. Corporations and households in less developed markets bought more computers, helping the company weather slumping demand among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.
‘Sustainable Rally’
Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, gained 1.3 percent to NT$114.50 in Taiwan. The Commercial Times reported that the company raised manufacturing prices from this month for its largest clients including Apple Inc., Nokia Oyj, Microsoft Corp. and Sony Ericsson Mobile Communications AB.
The MSCI Asia Pacific Index has risen 7.5 percent this year on speculation growth in profit will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound. Stocks in the gauge trade at 14.2 times estimated profit on average, compared with 13.9 times for the S&P 500 and 12 times for the Stoxx Europe 600 Index.
Chinese banks rose in Hong Kong today after the People’s Bank of China said new local-currency lending was 595.5 billion yuan last month. That compared with the median 500 billion yuan forecast in a Bloomberg News survey of 18 economists.
Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, rose 2 percent to HK$6.05. China Construction Bank Corp., the country’s second-largest bank, advanced 2.6 percent to HK$7.17. Bank of China Ltd., the nation’s fourth- largest bank by assets, increased 2.6 percent to HK$4.36.
“The growth in the Chinese lending data helped boost sentiment in the banks,” said Derrick Tan, a sales trader at Citic Securities Hong Kong Co. “The rally in Hong Kong looks sustainable even with the index above 23,000 due to prospects of further quantitative easing.”
Source: www.bloomberg.com
Fanuc Ltd. in Tokyo and Anhui Conch Cement Co. in Hong Kong gained at least 2.3 percent after Japanese machinery orders rose more than expected and the Chinese government said it will promote sales of construction material in rural areas. Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, advanced 3.5 percent as Intel Corp. predicted fourth-quarter sales that beat analysts’ estimates. Chinese banks in Hong Kong gained after data showed lending last month unexpectedly increased.
The MSCI Asia Pacific Index rose 0.6 percent to 129.50 as of 7:28 p.m. in Tokyo, with all 10 industry groups increasing. About two stocks advanced for each that fell on the nearly 1,000-member gauge. The measure has advanced 2.4 percent this month on speculation central banks around the world will increase efforts to boost economic growth.
“The Asian market is determined by the stability of China’s economy and the data seems to suggest that China’s economy in the fourth quarter will be stable, so the outlook overall for Asia is pretty good,” said Steve Tse, a Hong Kong- based research manager at BEA Union Investment Management, which oversees $4.5 billion.
Hong Kong Advances
The S&P/ASX 200 Index gained as much as 0.8 percent in Sydney after Australian consumer confidence rebounded in October, according to a Westpac Banking Corp. and Melbourne Institute survey today.
Japan’s Nikkei 225 Stock Average climbed 0.2 percent while the broader Topix index declined 0.2 percent toward the end of the trading session as pessimism over Japan’s domestic economic outlook overshadowed gains by exporters on expectations the U.S. Federal Reserve will act to shore up the economy.
Hong Kong’s Hang Seng Index rose 1.5 percent to the highest level since June 2008 as China’s central bank showed the country’s banks extended 595.5 billion yuan ($89 billion) of new loans last month. The gauge fell by as much as 0.4 percent earlier, led by developers, after Chief Executive Donald Tsang said the city would act to make housing more affordable.
Futures on the Standard & Poor’s 500 Index climbed 0.5 percent. The U.S. equity benchmark rose 0.4 percent to 1,169.77 yesterday after minutes of the Federal Reserve’s meeting last month showed the central bank was prepared to buy more government debt to stabilize the recovery.
Machinery Orders
“If the Fed takes more steps to spur the U.S. economy, it will also boost the export-driven Asian economy and markets in the region,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $65 billion globally.
Fanuc, Japan’s No. 1 maker of industrial robots, gained 2.3 percent to 11,010 yen. Komatsu Ltd., a maker of heavy machinery, climbed 0.9 percent to 1,909 yen.
Japanese machinery orders rose 10.1 percent from July, the largest increase since December, the Cabinet Office said today in Tokyo. The median forecast of 28 economists surveyed by Bloomberg News was for a 3.9 percent decline. The data is an indicator of business investment in three to six months.
Anhui Conch Cement, a Chinese maker of construction materials, rallied 7.8 percent to HK$36.50 in Hong Kong. China National Building Material Co., a producer of fiberglass and dry wall, jumped 10 percent to HK$19.92.
China Exports
China will start trials of a program to promote sales of construction materials in rural areas, the Ministry of Housing and Urban-Rural Development said in a statement on its website yesterday. The trials, focusing on cement, are taking place in the provinces of Shandong and Ningxia, according to a statement dated Sept. 29 and posted to its website today.
Exports in China, the world’s fastest growing major economy, rose 25.1 percent from a year earlier and imports climbed 24.1 percent, the customs bureau said on its website today.
Hynix increased 3.5 percent to 23,400 won in Seoul and Advanced Semiconductor Engineering Inc. rose 3.3 percent to NT$24.75 in Taipei. Tokyo Electron Ltd., the world’s No. 2 semiconductor-equipment maker, gained 1.3 percent to 4,550 yen.
Intel, the world’s biggest chipmaker, said revenue for the fourth quarter will be $11.4 billion, plus or minus $400 million. Corporations and households in less developed markets bought more computers, helping the company weather slumping demand among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.
‘Sustainable Rally’
Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, gained 1.3 percent to NT$114.50 in Taiwan. The Commercial Times reported that the company raised manufacturing prices from this month for its largest clients including Apple Inc., Nokia Oyj, Microsoft Corp. and Sony Ericsson Mobile Communications AB.
The MSCI Asia Pacific Index has risen 7.5 percent this year on speculation growth in profit will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound. Stocks in the gauge trade at 14.2 times estimated profit on average, compared with 13.9 times for the S&P 500 and 12 times for the Stoxx Europe 600 Index.
Chinese banks rose in Hong Kong today after the People’s Bank of China said new local-currency lending was 595.5 billion yuan last month. That compared with the median 500 billion yuan forecast in a Bloomberg News survey of 18 economists.
Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, rose 2 percent to HK$6.05. China Construction Bank Corp., the country’s second-largest bank, advanced 2.6 percent to HK$7.17. Bank of China Ltd., the nation’s fourth- largest bank by assets, increased 2.6 percent to HK$4.36.
“The growth in the Chinese lending data helped boost sentiment in the banks,” said Derrick Tan, a sales trader at Citic Securities Hong Kong Co. “The rally in Hong Kong looks sustainable even with the index above 23,000 due to prospects of further quantitative easing.”
Source: www.bloomberg.com
Singapore Economy Probably Slowed, Reducing Scope for Faster Currency Gain
Singapore’s economy probably cooled after a record first-half expansion as manufacturing growth eased, reducing pressure on the central bank to allow a faster pace of currency appreciation.
Gross domestic product growth slowed to 10.8 percent in the three months ended Sept. 30 from a year earlier, from 18.8 percent in the second quarter, according to the median estimate of 24 economists surveyed by Bloomberg. The economy shrank an annualized 15.7 percent from the previous three months, after expanding 24 percent in the April-to-June period, the median of 19 estimates showed. The data is due at 8 a.m. tomorrow.
Japan has taken steps in the past month to cool gains in the yen and China has restrained the yuan’s advance, making it harder for Singaporean exporters to compete with regional rivals. Forgoing a faster appreciation in the island’s currency may help support overseas sales by companies including Hi-P International Ltd. amid signs global growth is slowing.
“There is little impetus for the central bank to act” as Singapore’s economic momentum moderates, said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. “Monetary tightening, capacity constraints and to a lesser degree, withdrawal of fiscal support, will soon bring growth down to a slower but more sustainable level across the region.”
The Singapore dollar has gained 7.2 percent against the U.S. currency this year, making it the third-best performer in Asia excluding Japan.
Balancing Risks
The Monetary Authority of Singapore, which uses the currency rather than a benchmark interest rate as its main tool to manage inflation, will refrain from allowing faster gains at tomorrow’s twice-yearly review, according to 13 out of 14 economists in a Bloomberg survey.
At its April monetary policy review, the central bank said it would shift the Singapore dollar to a stronger range to trade in and allow a gradual appreciation.
The Asian Development Bank said last month governments in the region should sustain their economic expansion by refraining from tightening fiscal and monetary policies “too quickly.” The Bank of Japan on Oct. 5 unexpectedly cut its benchmark rate for the first time since 2008, while Australia and Indonesia left their key rates unchanged on the same day.
Singapore’s manufacturing increased in August by less than a sixth of the pace in April, when the MAS tightened its policy. The International Monetary Fund last week lowered its 2011 forecast for world growth, citing high unemployment, public debt and fragile banking systems as risks.
Europe, U.S.
Europe’s services and manufacturing industries grew at a slower pace while the U.S. Institute for Supply Management’s factory index fell to a 10-month low in September.
Singapore’s economy is still likely to grow within the government’s forecast range of 13 percent to 15 percent this year, even after the slowdown in the third quarter, said Vishnu Varathan, an economist at Capital Economics (Asia) Pte in Singapore. That pace would put Singapore in the running to be the world’s fastest-growing nation in 2010, after a record 17.9 percent expansion in the first half.
“The economic upswing is just slowing to a pace that is more normal and can be sustained in 2011,” Varathan said. “Exports and manufacturing growth will inevitably ease further in the coming quarters but the pick-up in the services sector should stay rapid.”
Lure of Casinos
Singapore’s services industry may support the economy as the two casino resorts opened by Genting Singapore Plc and Las Vegas Sands Corp. this year attract tourists. More financial companies are also setting up offices in the city amid government efforts to make the nation a hub from which banks and asset managers can serve clients across Asia and the Middle East.
New York-based buyout and hedge-fund firm Fortress Investment Group LLC, which managed $41.7 billion as of June 30, will have an investment team of about 10 people in its new office in Singapore, according to Adam Levinson, its co-chief investment officer of global macro funds. Levinson will also move to Singapore to lead the company’s expansion in Asia.
Gross domestic product growth slowed to 10.8 percent in the three months ended Sept. 30 from a year earlier, from 18.8 percent in the second quarter, according to the median estimate of 24 economists surveyed by Bloomberg. The economy shrank an annualized 15.7 percent from the previous three months, after expanding 24 percent in the April-to-June period, the median of 19 estimates showed. The data is due at 8 a.m. tomorrow.
Japan has taken steps in the past month to cool gains in the yen and China has restrained the yuan’s advance, making it harder for Singaporean exporters to compete with regional rivals. Forgoing a faster appreciation in the island’s currency may help support overseas sales by companies including Hi-P International Ltd. amid signs global growth is slowing.
“There is little impetus for the central bank to act” as Singapore’s economic momentum moderates, said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. “Monetary tightening, capacity constraints and to a lesser degree, withdrawal of fiscal support, will soon bring growth down to a slower but more sustainable level across the region.”
The Singapore dollar has gained 7.2 percent against the U.S. currency this year, making it the third-best performer in Asia excluding Japan.
Balancing Risks
The Monetary Authority of Singapore, which uses the currency rather than a benchmark interest rate as its main tool to manage inflation, will refrain from allowing faster gains at tomorrow’s twice-yearly review, according to 13 out of 14 economists in a Bloomberg survey.
At its April monetary policy review, the central bank said it would shift the Singapore dollar to a stronger range to trade in and allow a gradual appreciation.
The Asian Development Bank said last month governments in the region should sustain their economic expansion by refraining from tightening fiscal and monetary policies “too quickly.” The Bank of Japan on Oct. 5 unexpectedly cut its benchmark rate for the first time since 2008, while Australia and Indonesia left their key rates unchanged on the same day.
Singapore’s manufacturing increased in August by less than a sixth of the pace in April, when the MAS tightened its policy. The International Monetary Fund last week lowered its 2011 forecast for world growth, citing high unemployment, public debt and fragile banking systems as risks.
Europe, U.S.
Europe’s services and manufacturing industries grew at a slower pace while the U.S. Institute for Supply Management’s factory index fell to a 10-month low in September.
Singapore’s economy is still likely to grow within the government’s forecast range of 13 percent to 15 percent this year, even after the slowdown in the third quarter, said Vishnu Varathan, an economist at Capital Economics (Asia) Pte in Singapore. That pace would put Singapore in the running to be the world’s fastest-growing nation in 2010, after a record 17.9 percent expansion in the first half.
“The economic upswing is just slowing to a pace that is more normal and can be sustained in 2011,” Varathan said. “Exports and manufacturing growth will inevitably ease further in the coming quarters but the pick-up in the services sector should stay rapid.”
Lure of Casinos
Singapore’s services industry may support the economy as the two casino resorts opened by Genting Singapore Plc and Las Vegas Sands Corp. this year attract tourists. More financial companies are also setting up offices in the city amid government efforts to make the nation a hub from which banks and asset managers can serve clients across Asia and the Middle East.
New York-based buyout and hedge-fund firm Fortress Investment Group LLC, which managed $41.7 billion as of June 30, will have an investment team of about 10 people in its new office in Singapore, according to Adam Levinson, its co-chief investment officer of global macro funds. Levinson will also move to Singapore to lead the company’s expansion in Asia.
Monday, October 4, 2010
Asia DayAhead: World Economy Decoupling From U.S. Returns as Wall St. View
About 85 percent of men reported in a study that their partner had an orgasm during their most recent sexual event. The number dropped to 64 percent when women were asked whether they reached climax their last time.
Europe Beats U.S. 14 1/2 to 13 1/2 to Win Ryder Cup (Update3)
Europe defeated the U.S. 14 1/2 to 13 1/2 to regain golf’s Ryder Cup at Celtic Manor in Newport, Wales.
U.S. Stocks Drop Before Earnings Start; Emerging Markets Gain
U.S. stocks fell, pushing the Standard & Poor’s 500 Index to its biggest drop in a month, as analyst ratings cuts and a drop in American factory orders triggered caution before the start of the earnings season. Two- year Treasury yields declined to a record, while emerging markets shares rose to the highest level since 2008.
World Economy Decoupling From U.S. Returns as View (Update1)
Wall Street economists are reviving a bet that the global economy will withstand the U.S. slowdown.
MAIN ECONOMIC RELEASES: Figures are based on Bloomberg survey of economists:
Australia’s Central Bank May Raise Benchmark Rate to 4.75% Australian Business Confidence Probably Rose in September Australia May Report Trade Surplus in August Australian Services Probably Shrank in September India’s Services Growth May Accelerate, Indicates Strong Demand Indonesia May Hold Interest Rates as Inflation Remains Benign N.Z. Business May Be More Pessimistic on Sales, Institute Says Taiwan Consumer Prices May Rise in September on Storm Philippine Inflation May Hold Near 7-Month Low, Support Rates BOJ Expands Credit Program, Signals May Take More Actions
MAIN ANALYST UPGRADES/DOWNGRADES: *Asustek Computer Cut to ‘Neutral’ at UBS *KDDI Raised to ‘Overweight’ at HSBC *NTT DoCoMo Raised to ‘Neutral’ at HSBC *Henderson Group Raised to ‘Hold’ at Numis Securities *Bharat Heavy Cut to ‘Underweight’ at HSBC *PTC India Ltd Raised to ‘Overweight’ at HSBC *NTPC Raised to ‘Neutral’ at HSBC *Caltex Australia Cut to ‘Sell’ at Deutsche Bank *Sun Pharmaceutical Raised to ‘Hold’ at Deutsche Bank *Suntech Power Holdings Cut to ‘Sell’ at Canaccord Genuity
ASIAN MARKETS
The Nikkei 225 futures contract due in December fell 30 to 9,355. The Hang Seng Index futures contract for October rose 302 to 22,630. The S&P/ASX 200 Index futures contract due in December rose 52 to 4,638 at 6:59 a.m. in Sydney.
U.S. Stocks Retreat as Analysts Turn Cautious Before Earnings
U.S. stocks fell for the third time in four days as analysts’ rating downgrades of companies including Microsoft Corp. and Macy’s Inc. triggered caution before the start of the third-quarter earnings season.
Treasuries Advance Amid Factory-Order Decline, Outlook for Fed
Treasuries rose, pushing two-year yields to a record low, as government data showing U.S. factory orders declined more than forecast fueled speculation the Federal Reserve will increase asset purchases.
Dollar Rises as Economic Concern Saps Demand for Riskier Assets
The dollar advanced against most of its major counterparts as investors avoided higher-yielding assets after reports on U.S. factory orders and home sales failed to relieve concern that the recovery is stalling.
European Stocks Decline for Sixth Day; VW, Daimler Lead Drop
European stocks declined for a sixth day, the longest stretch of losses since January 2009, as reports on U.S. home sales and factory orders failed to ease concern about the strength of the world’s largest economy.
German Bonds Open Little Changed; 10-Year Bund Yield at 2.28%
German government bonds opened little changed, with the 10- year yield at 2.28 percent as of 7:05 a.m. in London. The two- year note yield was at 0.85 percent.
Capital Gold Corp Raised to ‘Hold’ at Octagon
Capital Gold Corp (CGC CN) was raised to “Hold” from “Sell” at Octagon Capital by equity analyst Hendrik Visagie. The target price is $4.70 per share.
HIGHLIGHTS FROM NEWSPAPERS:
Qantas in Talks on W.A. Charter Service, Financial Review Says
Qantas Airways Ltd. is in talks to buy West Australian charter airline Network Aviation in a deal worth about A$30 million, the Australian Financial Review reported, without saying where it got the information. Network Aviation services mining towns and sites, the report said. Qantas is conducting due diligence, according to the newspaper.
Europe Beats U.S. 14 1/2 to 13 1/2 to Win Ryder Cup (Update3)
Europe defeated the U.S. 14 1/2 to 13 1/2 to regain golf’s Ryder Cup at Celtic Manor in Newport, Wales.
U.S. Stocks Drop Before Earnings Start; Emerging Markets Gain
U.S. stocks fell, pushing the Standard & Poor’s 500 Index to its biggest drop in a month, as analyst ratings cuts and a drop in American factory orders triggered caution before the start of the earnings season. Two- year Treasury yields declined to a record, while emerging markets shares rose to the highest level since 2008.
World Economy Decoupling From U.S. Returns as View (Update1)
Wall Street economists are reviving a bet that the global economy will withstand the U.S. slowdown.
MAIN ECONOMIC RELEASES: Figures are based on Bloomberg survey of economists:
Australia’s Central Bank May Raise Benchmark Rate to 4.75% Australian Business Confidence Probably Rose in September Australia May Report Trade Surplus in August Australian Services Probably Shrank in September India’s Services Growth May Accelerate, Indicates Strong Demand Indonesia May Hold Interest Rates as Inflation Remains Benign N.Z. Business May Be More Pessimistic on Sales, Institute Says Taiwan Consumer Prices May Rise in September on Storm Philippine Inflation May Hold Near 7-Month Low, Support Rates BOJ Expands Credit Program, Signals May Take More Actions
MAIN ANALYST UPGRADES/DOWNGRADES: *Asustek Computer Cut to ‘Neutral’ at UBS *KDDI Raised to ‘Overweight’ at HSBC *NTT DoCoMo Raised to ‘Neutral’ at HSBC *Henderson Group Raised to ‘Hold’ at Numis Securities *Bharat Heavy Cut to ‘Underweight’ at HSBC *PTC India Ltd Raised to ‘Overweight’ at HSBC *NTPC Raised to ‘Neutral’ at HSBC *Caltex Australia Cut to ‘Sell’ at Deutsche Bank *Sun Pharmaceutical Raised to ‘Hold’ at Deutsche Bank *Suntech Power Holdings Cut to ‘Sell’ at Canaccord Genuity
ASIAN MARKETS
The Nikkei 225 futures contract due in December fell 30 to 9,355. The Hang Seng Index futures contract for October rose 302 to 22,630. The S&P/ASX 200 Index futures contract due in December rose 52 to 4,638 at 6:59 a.m. in Sydney.
U.S. Stocks Retreat as Analysts Turn Cautious Before Earnings
U.S. stocks fell for the third time in four days as analysts’ rating downgrades of companies including Microsoft Corp. and Macy’s Inc. triggered caution before the start of the third-quarter earnings season.
Treasuries Advance Amid Factory-Order Decline, Outlook for Fed
Treasuries rose, pushing two-year yields to a record low, as government data showing U.S. factory orders declined more than forecast fueled speculation the Federal Reserve will increase asset purchases.
Dollar Rises as Economic Concern Saps Demand for Riskier Assets
The dollar advanced against most of its major counterparts as investors avoided higher-yielding assets after reports on U.S. factory orders and home sales failed to relieve concern that the recovery is stalling.
European Stocks Decline for Sixth Day; VW, Daimler Lead Drop
European stocks declined for a sixth day, the longest stretch of losses since January 2009, as reports on U.S. home sales and factory orders failed to ease concern about the strength of the world’s largest economy.
German Bonds Open Little Changed; 10-Year Bund Yield at 2.28%
German government bonds opened little changed, with the 10- year yield at 2.28 percent as of 7:05 a.m. in London. The two- year note yield was at 0.85 percent.
Capital Gold Corp Raised to ‘Hold’ at Octagon
Capital Gold Corp (CGC CN) was raised to “Hold” from “Sell” at Octagon Capital by equity analyst Hendrik Visagie. The target price is $4.70 per share.
HIGHLIGHTS FROM NEWSPAPERS:
Qantas in Talks on W.A. Charter Service, Financial Review Says
Qantas Airways Ltd. is in talks to buy West Australian charter airline Network Aviation in a deal worth about A$30 million, the Australian Financial Review reported, without saying where it got the information. Network Aviation services mining towns and sites, the report said. Qantas is conducting due diligence, according to the newspaper.
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