BRICS “Big Five” find it hard to run as a herd

Published: Thursday March 28, 2013 MYT 8:39:00 AM

BRICS “Big Five” find it hard to run as a herd

DURBAN: At a summit in South Africa on Wednesday, Vladimir Putin likened the BRICS nations – Brazil, Russia, India, China and South Africa – to Africa’s “Big Five” game beasts of trophy hunting lore – the lion, elephant, buffalo, leopard and rhinoceros.

The Russian president’s comparison captures the dilemma of these muscular emerging global powers, which together present a formidable potential economic and political counterweight to the developed West, but individually could hardly be more different.

The question is whether the BRICS five can run as a herd or hunt as a pack on the global stage, transforming their diverse but collective strength into real institutions and coordinating structures to project their voice in the world. Read more of this post

Three small Spanish banks post multi-billion euro losses

Three small Spanish banks post multi-billion euro losses

Wed, Mar 27 2013

MADRID (Reuters) – Three small Spanish banks reported multi-billion euro losses on Wednesday, showing the scale of the country’s problems with its property market.

The three banks – Banco CEISS, BMN and Caja 3 – which have all been rescued by the government, had to take big write-downs on bad property loans and assets.

Spain has forced its banks to recognize their property losses to try to clean up the sector after the country’s property boom collapsed in 2008.

Banks without a strong enough capital base, such as CEISS, BMN and Caja 3, turned to the state for support, forcing Spain to take 41 billion euros in European aid for its banking sector. Read more of this post

Analysis: Southeast Asia ready to build, but will investors come?

Analysis: Southeast Asia ready to build, but will investors come?

Wed, Mar 27 2013

By Stuart Grudgings and Neil Chatterjee

KUALA LUMPUR/JAKARTA (Reuters) – Indonesia is seeking European investors for $9 billion worth of water, road, air and seaport projects in what will be a litmus test of Southeast Asian countries’ ability to seize on ripe financial conditions to upgrade decrepit infrastructure.

Easy global liquidity and investors’ eagerness to tap one of the world’s few fast-growing regions should create a sweet spot for the region to fill the $600 billion in infrastructure needs the Asian Development Bank identifies over the next decade.

But infrastructure experts say a shortage of projects offering compelling returns, coupled with stifling bureaucracy and regulatory uncertainty, threatens to undermine the ambitious plans of Indonesia, Thailand and the Philippines. Read more of this post

South Koreans in Farm U-Turn as Chaebol Era’s Rapid Growth Ends

South Koreans in Farm U-Turn as Chaebol Era’s Rapid Growth Ends

Lee Geun Hong is a rare example of wealth in South Korea’s countryside, known for its shrinking population and decades-long farming slump. Driving a Mercedes rather than a Hyundai, the former Samsung Heavy Industries Co. executive says that may soon change.

“The future for farmers is very bright,” the 60-year-old Lee said while pruning trees in a greenhouse at his farm in Sangju, overlooking the Nakdong River about 160 kilometers (100 miles) southeast of Seoul. “But those who stick to conventional ways will remain poor.”

Lee moved to Sangju from Seoul in 2007 after 18 years at the world’s second-biggest shipbuilder and a stint running his own cafeteria. He earns about $180,000 a year, more than six times the average rural income, selling blueberries online to cut out the middleman, and grows organically to appeal to Korean consumers he calls “the pickiest in the world.”

The number of people leaving cities for rural areas is at a record high in South Korea, as government subsidies to boost agricultural production coincide with slowing economic growth. The most successful bring investment and skills that are boosting margins — the number of farmers and agricultural associations earning at least 100 million won ($90,000) rose for a fourth year to 17,291 in 2012, the farm ministry said.

“The trend may help the national economy by re-channeling surplus labor to rejuvenate farming areas,” said Jun Kwang Hee, a professor of sociology at Chungnam National University. “We now live in an era where the economy is growing without creating many jobs. Your career at companies ends at 50, but you are very young at 50 and even at 60 in the countryside.” Read more of this post

Saudi Riches Don’t Reach Entrepreneurs as Bankers Shun Startups

Saudi Riches Don’t Reach Entrepreneurs as Bankers Shun Startups

When Saleh Al-Zaid decided it was time to expand Twitmail.com, the Saudi Arabian entrepreneur figured it wasn’t even worth trying to get a bank loan.

“Saudi banks don’t want to take the risk with early stage startups,” Al-Zaid said over coffee and donuts in Riyadh. Instead, the 28-year-old obtained 1 million riyals ($267,000) from an investor in local venture-capital group Oqal, financing a trip to Silicon Valley for training. He left his part-time job, and now his website, which helps Twitter users share e- mails, has 400,000 visitors on a busy day.

The banking blind-spot may be an obstacle for King Abdullah’s efforts to create jobs and diversify the economy away from oil, which brings 90 percent of government revenue. The kingdom, the world’s biggest crude exporter, is investing $500 billion on industry, transportation and housing, a program Abdullah expanded after watching revolts sweep across other high-unemployment Arab countries two years ago.

The Saudi plan is for private business to take over the growth baton from government spending. Smaller companies may struggle to play their part so long as they’re constrained by a lack of financing. Just 2 percent of Saudi bank loans go to small and medium-sized businesses, compared with an 8 percent Middle East average that’s itself low by global standards, according to the International Finance Corp., the World Bank’s private lending arm.

“In a country like Saudi Arabia, where relationship banking is very important, there has been a tendency for banks to focus on big corporates,” said James Reeve, an economist at Samba Financial (SAMBA) Group in Riyadh. “Some observers feel the needs of small and medium-sized businesses have been overlooked.” Read more of this post

China Says Elected Hong Kong Leader Cannot Oppose Beijing Rule

China Says Elected Hong Kong Leader Cannot Oppose Beijing Rule

China won’t allow Hong Kong to choose a chief executive who opposes Chinese government rule, as some lawmakers in the former British colony demand universal suffrage earlier than planned in 2017.

The leader of Hong Kong “can’t plot to overthrow the rule of the Chinese Communist Party,” Qiao Xiaoyang, chairman of the law committee of the National People’s Congress, said in a March 24 speech, according to a transcript posted online today. “Opposition isn’t defined to mean criticizing Beijing. If it’s for the good for the country, any sort of criticism is allowed.” Read more of this post

SHILLER: ‘We’re Living In A Totally Artificial Real Estate Economy’; Shiller thinks a full housing recovery is a long way off. He thinks it could take 40 years before home prices rise to pre-2007 levels

SHILLER: ‘We’re Living In A Totally Artificial Real Estate Economy’

Drew Sandholm, CNBC | Mar. 26, 2013, 7:51 PM | 11,479 | 27

Housing data released Tuesday was mixed, showing home prices jumped while new home sales dropped, prompting renowned economist Robert Shiller to call the housing recovery positive in the short-term, but not without many headwinds. There might even be a bubble, he said.

“One thing that makes it very hard to forecast home prices right now is that we’re living in a totally artificial real estate economy,” said Shiller, co-creator of the Standard & Poor’s/Case-Shiller Index, a widely followed measure of housing prices.

Shiller pointed to the Federal Reserve, which last week reaffirmed its policies on bond purchases and record-low interest rates. In September, the Fed launched a third round of quantitative easing (QE), in which it has bought $40 billion of mortgage-backed securities per month, primarily in mortgage-backed bonds.

Meanwhile, Fannie Mae and Freddie Mac, the two largest U.S. home funding sources, remain in government conservatorship as Congress looks for ways to raise new tax revenues, Shiller noted.

“All of these things are weighing on the futures of housing,” Shiller said on CNBC‘s “Futures Now,” adding the recovery might even be a bubble. “One thing you learn from history is that bubbles can occur at any time.” Read more of this post

Global pool of triple A status shrinks 60%, forcing investors and financial regulators to rethink definitions of “safe” assets.

March 26, 2013 7:34 pm

Global pool of triple A status shrinks 60%

By Ralph Atkins and Keith Fray in London

The global pool of government bonds with triple A status from the three main rating agencies, the bedrock of the financial ­system, has shrunk more than 60 per cent since the financial crisis triggered a wave of downgrades across the advanced economies.

The expulsion of the US, the UK and France from the “nine-As” club has led to the contraction in the stock of ­government bonds deemed the safest by Fitch, Moody’s and Standard & Poor’s, from almost $11tn at the start of 2007 to just $4tn now, according to Financial Times analysis.

The shrinkage, largely a result of US’s downgrade by S&P in August 2011, is part of a dramatic redrawing of the world credit ratings map, which is encouraging investment flows into emerging markets and forcing investors and financial regulators to rethink definitions of “safe” assets. Read more of this post

BOE Says U.K. Banks Have a Capital Shortfall of $38 Billion; Banks need to set aside more money to cover bigger potential losses on commercial real estate and from the euro area, possible fines for mis-selling and stricter risk models

BOE Says U.K. Banks Have a Capital Shortfall of $38 Billion

By Ben Moshinsky and Jennifer Ryan – Mar 27, 2013

U.K. lenders were told by the Bank of England to raise 25 billion pounds ($38 billion) of additional capital, less than analyst estimates.

Banks need to set aside more money to cover bigger potential losses on commercial real estate and from the euro area, possible fines for mis-selling and stricter risk models, the Bank of England said following a report by the Financial Services Authority. The BOE didn’t identify or quantify the number of lenders that need to bolster capital and it said plans already announced by banks should cover about half the shortage.

“It’s a bit of a damp squib,” said Simon Maughan, an analyst at Olivetree Securities Ltd. in London. “The banks are going to have until the end of 2013, at least, to do it and there was no change to the message that they won’t need to raise fresh capital or restrict dividend payments.”

The BOE is pushing banks to increase resilience so they can boost lending and fund an economic recovery. The bank’s focus on loan losses could still hit Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc (LLOY) the most because of their commercial real-estate holdings, while Barclays Plc (BARC), with its investment banking unit, would be most affected by the changes to risk weights, Maughan said. RBS and Lloyds have announced asset sales this year to bolster capital, and Barclays plans to sell contingent convertible notes. Read more of this post

S. Korea’s debt-to-GDP ratio rises to record high in 2012; the rate of combined debts to the nominal GDP was 283 percent in 2012, higher than the 227 percent for the 1998-99 Asian foreign exchange crisis and the 278 percent in 2009 when the global financial crisis peaked

S. Korea’s debt-to-GDP ratio rises to record high in 2012

English.news.cn   2013-03-27

SEOUL, March 27 (Xinhua) — The ratio of South Korea‘s total debt to gross domestic product (GDP) rose to a record high last year, boosting concerns over lack of capabilities to repay massive debts, central bank data showed Wednesday. Combined debts of households, companies and the government were 3,607.3 trillion won (3.25 trillion U.S. dollars) as of the end of 2012, according to the Bank of Korea (BOK) data. The rate of combined debts to the nominal GDP was 283 percent in 2012, the highest since the related data began to be compiled. The figure was higher than the 227 percent for the 1998-99 Asian foreign exchange crisis and the 278 percent in 2009 when the global financial crisis peaked. The ratio continued to rise from 221 percent in 2003, 236 percent in 2006 and 274 percent in 2008. The rapid rise was attributed to a faster growth in debts than economic output, boosting concerns that the Asia’s No.4 economy may fail to pay back debts amid slowing economic growth and its consequent low income gain.

Korea’s National Pension Service (NPS) has increased its securities investment in the country’s top four conglomerates ― Samsung, Hyundai Motor, SK and LG ― by about four times over the past five years; he four firms accounted for as much as 58 percent of the NPS’s combined stock investment in 2012, compared with 34.6 percent in 2007

2013-03-26 17:54

NPS exposure to risk increasing

By Na Jeong-ju

The National Pension Service (NPS) has increased its securities investment in the country’s top four conglomerates ― Samsung, Hyundai Motor, SK and LG ― by about four times over the past five years. This is another indication that the state pension fund is making little effort to diversify its investment portfolio ― the No. 1 rule for risk-hedging. That also means the NPS is betting bigger money from pensioners on the four firms ― if they falter, people’s money will be at risk. According to the NPS, Tuesday, its investment in stocks and bonds issued by the four business groups and their affiliates totaled 51.7 trillion won ($46.6 billion) as of the end of 2012. That’s about 3.7 times larger than 13.5 trillion won in 2007. The four firms accounted for as much as 58 percent of the NPS’s combined stock investment in 2012, compared with 34.6 percent in 2007. Read more of this post