World Bank Says East Asia Should Consider Stimulus Withdrawal to curb the risks of asset bubbles and inflation

World Bank Says East Asia Should Consider Stimulus Withdrawal

Asia’s emerging economies should consider reining in monetary stimulus to curb the risks of asset bubbles and inflation as policy easing in developed nations spur capital inflows, the World Bank said.

Demand-boosting measures that helped sustain growth “may now be counterproductive,” the Washington-based lender said in its East Asia and Pacific Economic Update released today. “As the global economy recovers, an emerging issue is the risk of overheating in some of the larger economies,” it said in a release accompanying the report.

The International Monetary Fund warned last week that risks from the easing policies of central banks around the world are increasing as the Bank of Japan (8301) joined its counterparts in the U.S. and Europe in unleashing monetary stimulus to end 15 years of deflation. Gross capital inflows into the East Asia and Pacific region surged 86 percent in the first quarter from a year earlier, the World Bank said in its report, adding to pressure on inflation and asset prices.

“Near-zero interest rates and new and protracted rounds of quantitative easing in the United States, European Union, and Japan are inducing large capital inflows into emerging markets including in East Asia,” the World Bank said. “The risk of an asset boom in the markets, in which global liquidity spills over is emerging, with asset valuations moving ahead of fundamentals and possibly a correction down the road.” Read more of this post

Made-in-Asia Luxury Sheds Fake Image Challenging Vuitton

Made-in-Asia Luxury Sheds Fake Image Challenging Vuitton

For decades, made-in-Asia luxury has been shorthand for “fake.” Now, companies from South Korean bag maker Couronne to Malaysian dressmaker Farah Khan are making a case for homegrown chic.

Couronne, Khan and brands such as Woo, a Shanghai-based producer of silk scarves, are winning clients with products that can rival goods made in Europe. Their growing popularity, amid slowing sales at Louis Vuitton and other European brands, shows how demand is changing in Asia, with consumers favoring fresh designs over ubiquitous logos. The trend may lead to more acquisitions in the region as companies such as LVMH Moet Hennessy Louis Vuitton (MC) SA and PPR SA (PP) seek to boost growth.

“Luxury brands of the 21st Century can come out of anywhere,” said Uche Okonkwo, executive director of consultancy Luxe Corp. For consumers who increasingly value craftsmanship over provenance, “what’s important is that a product is made by the best hands using the best materials.” Read more of this post

Hong Kong Pollution Reaches Severe Level as Pollutants Trapped

Hong Kong Pollution Reaches Severe Level as Pollutants Trapped

Hong Kong’s air pollution index reached the “severe” level for the third time this year, triggering a government warning, as the lack of air flow trapped pollutants in the city.

The Air Pollution Index (HKAICEMA) reached 203 at both the Central business district and the Mong Kok roadside-monitoring stations as of 11 a.m. local time, according to the Environment Protection Department. The index last registered similar readings in March.

“The high air pollution incident is caused by the trapping of pollutants,” the Environmental Protection Department said in a statement on its website today. “Air quality will start to improve gradually later tomorrow” after the wind picks up, according to the statement. Read more of this post

Bird Flu to Dead Hogs Curb China’s Soybean-Import Demand

Bird Flu to Dead Hogs Curb China’s Soybean-Import Demand

An eight-year surge in soybean imports by China, the biggest buyer, may come to an end this year as feed consumption drops following a bird-flu outbreak and the discovery of thousands of dead pigs floating in a river.

Imports, which more than tripled from 2004 to 59.2 million metric tons in the year to Sept. 30, will probably fall to 58 million tons this year, as consumers, wary of infectious diseases, shun poultry and pork, according to the median of a Bloomberg survey of four crushers and three analysts in China. Feed is mostly made with soybean meal and corn.

China’s 60 cases of H7N9 flu virus infections and 13 deaths are raising the specter of the 2003 global pandemic of severe acute respiratory syndrome that killed 774 people. Imports of soybeans plunged 21 percent in the 2003-2004 marketing year and an outbreak of H5N1 virus in 2006 also led to the slowest growth in shipments since the SARS outbreak.

“We believe this new avian flu will cut at least 500,000 tons of soybean-meal demand in the immediate future,” said Liu Xianwu, general manager at researcher China Cereals & Oils Business Net. “Soybeans will come down because at the current level, Chinese crushers don’t make money,” he said April 12. Read more of this post

India Convertible Sales Halt as Funds Bleed on Defaults

India Convertible Sales Halt as Funds Bleed on Defaults

Convertible debt sales in India have halted as investors shun the notes in Asia’s worst- performing stock market, with defaults extending 2012’s record.

Issuance of bonds that can be exchanged for shares was zero in 2013, compared with $600 million in 2012 and a record $7.5 billion in 2007, according to data compiled by Bloomberg. That’s the slowest start since 2000, the data show. Convertibles returned 0.27 percent last quarter, the worst performance in the Asia-Pacific after Singapore’s 0.8 percent loss, Barclays Plc indexes show. The region’s average return was 3.8 percent.

“Convertibles are generally issued in bull markets, when there is lot of appetite for equities,” U.R. Bhat, director at Dalton Capital Advisors India Pvt. in Mumbai, said by telephone on April 11. “There is no appetite now. Investors are not optimistic about the equity markets because the economic indicators are not good.” Read more of this post

N. Korea Celebrates Founder’s 101th Birth Anniversary Amid Heightened Tensions

North Korea Celebrates Founder’s Birth Amid Heightened Tensions

North Korea marks the 101st birth anniversary of state founder Kim Il Sung today, after the U.S. reached an agreement with China, Japan and South Korea to try to coax the reclusive regime back to talks.

“We’re prepared to reach out,” U.S. Secretary of State John Kerry said yesterday in Tokyo at the conclusion of an Asian tour that left the door open for a U.S. meeting with North Korea’s leader Kim Jong Un. Any meeting would have to be at the “appropriate moment, appropriate circumstance,” he said.

Kim early today paid his respects at the Kumsusan Palace of the Sun, which houses the tomb of both his grandfather Kim Il Sung and his father Kim Jong Il, the official Korean Central News Agency reported. Diplomats are now focused on whether Kim will mark the April 15 anniversary by testing another missile or nuclear device.

North Korea has repeatedly said the region is on the brink of war since its February nuclear test — the third at its Punggye-ri underground site — prompted stronger United Nations sanctions and the U.S. and South Korea began their joint annual military exercises last month. Read more of this post

Commodities: Tougher times for trading titans; Reaping the supercycle: the top 20 trading houses have posted almost $250bn of net profit over the past decade

April 14, 2013 7:46 pm

Commodities: Tougher times for trading titans

Reaping the supercycle: the top 20 trading houses have posted almost $250bn of net profit over the past decade

By Javier Blas

If you want to raise $10bn quickly, you need to know who to call. When Igor Sechin, chairman of Rosneft, decided to buy TNK-BP and create the world’s biggest listed oil producer, he faced a problem: banks would not be able to provide the full $55bn required.

So Mr Sechin went elsewhere. Late last year, he phoned two of the world’s trading titans: Ian Taylor and Ivan Glasenberg, the chief executives of Vitol and Glencore. In a matter of weeks, the trading houses offered a $10bn loan that the state-owned Russian company guaranteed with future supplies of crude. Vitol and Glencore were financing one of the largest deals in the history of the oil industry. “We have never seen the trading houses embarking on a deal of this scale,” says a banker who helped to put together the contract. “We are in new territory.” Read more of this post

Datuk Hashim, CEO of SME Corp Malaysia: Time to transform and win big

Time to transform and win big

Published: 2013/04/15

“If you’re really in love, appearances aren’t important. The best house is the one you build in each other’s heart.” 

Yu-jin, Winter Sonata

COMING from someone who is not blessed with good looks, flawless skin and model figure, of course, I would agree with Yu-jin! The South Korean drama series “Winter Sonata” has created a viral effect of sorts as an Asian modern classic drama since it made its debut about a decade ago. I am sure the beautiful melody of its ballad “From the Beginning until Now” still haunts most of us, as it does to me, till this day. Needless to say, people of all ages, not just the makcik and the aunts are tuning in to South Korean television dramas that have flooded the local market. Last year, K-Pop star Psy also introduced the world to his “Gangnam Style”, which went viral in August. The song, which was released in July as the lead single of his sixth studio album, debuted at number one on South Korea’s Gaon Chart. In September, “Gangnam Style” was recognised by the Guinness World Records as the most “liked” video on YouTube. By the end of 2012, the song had topped the music charts of more than 30 countries, including Australia, Canada, France, Germany, Italy, Russia, Spain and Britain. As of April 1 2013, the music video has been viewed more than 1.5 billion times on YouTube and it is the site’s most watched video, surpassing that of Justin Bieber’s “Baby”.

All these successes came from what used to be a third-world country torn by conflict with its former northern state. How did the Koreans do it? As we can clearly see, apart from technology and innovation that forms the pillar of strength of the South Korean economy, the country has also begun to tap into the creative industry and recognising its entertainment and cultural strength as one of the best-selling products. The diversification and resiliency of the South Korean economy is brought about by their domestic companies, largely their SMEs, which forms 99.9 per cent of enterprises in the country, providing 88 per cent of employment and contributing 47.6 per cent to national production.  Read more of this post

The riddle of Europe’s single currency with many values; The euro is not worth the same across the region – Spain and Germany have different currencies

April 14, 2013 6:36 pm

The riddle of Europe’s single currency with many values

By Wolfgang Münchau

The euro is not worth the same across the region – Spain and Germany have different currencies

AEuropean Central Bank survey shows that households in northern Europe have a much lower net wealth than those in southern Europe. Average German net assets per household are just under €200,000, while they are €300,000 in Spain and €670,000 in Cyprus. No, this not a typo.

German newspapers screamed that poor Germans are bailing out rich Cypriots. This interpretation is wrong but the truth behind these counter-intuitive findings is even more disturbing. What the survey shows is not wealth differentials but the de facto exchange rates between the eurozone economies. They are not measures of net wealth but of imbalances. And they are enormous. Read more of this post

Surging price of food blamed for anxiety disorder; Families with a household income of less than HK$10,000 a month are eight times more likely than others to suffer from inflation-linked anxiety

Surging price of food blamed for anxiety disorder

Winnie Chong

Monday, April 15, 2013

Families with a household income of less than HK$10,000 a month are eight times more likely than others to suffer from inflation-linked anxiety.

The finding by the Chinese University of Hong Kong points to food prices as the main worry among 84.8percent of 5,000 respondents to a survey who believe varying degrees of anxiety are set off by inflation.

One out of five with a family income of less than HK$10,000 month experience anxiety. And the risk of “generalized anxiety disorder” in those affected significantly by inflation is 7.9 times higher than for other income groups. Read more of this post

China’s smallest province – Hainan – became the first to defy the central government by declaring it has no intention to impose curbs on the property sector; “Our real estate market will fall apart if new cooling policies are implemented”

Hainan throws cold water on home curbs

Monday, April 15, 2013

China’s smallest province – Hainan – became the first to defy the central government by declaring it has no intention to impose curbs on the property sector.

“Our real estate market will fall apart if new cooling policies are implemented,” a local official told Shanghai Xinmin Evening News yesterday. Read more of this post

Singapore property market: From boom, to blowing bubbles

From boom, to blowing bubbles

Singapore’s property market has been framed as a success story. Prices have moved inexorably up since 2005 despite several rounds of cooling measures.

8 HOURS 45 MIN AGO

Singapore’s property market has been framed as a success story. Prices have moved inexorably up since 2005 despite several rounds of cooling measures.

The intervention of cooling measures is indicative that the Government has concerns that the market may be overheating, but also reflects political considerations from Singaporeans who feel they are being priced out of the “Singapore Dream”.

Property forms the largest asset within each household balance sheet. Judging by news reports of packed showrooms, it would seem that most Singaporeans feel positive about the future of the property market. Is the optimism justified or are they headed for a fall? Read more of this post

German ‘Wise Men’ push for wealth seizure to fund EMU bail-outs, marking a radical new departure for EMU crisis strategy

German ‘Wise Men’ push for wealth seizure to fund EMU bail-outs

Two top advisers to German Chancellor Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy.

Prof Bofinger told Spiegel Magazine that it was a mistake to target deposit holders in banks, the formula used in the EU-IMF Troika bail-out for Cyprus where those with savings above €100,000 at Laiki and Bank of Cyprus face huge losses

By Ambrose Evans-Pritchard

7:55PM BST 14 Apr 2013

Professors Lars Feld and Peter Bofinger said states in trouble must pay more for their own salvation, said arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bail-out costs. “The rich must give up part of their wealth over the next ten years,” said Prof Bofinger. The two economist are members of the Germany’s Council of Economic Experts or “Five Wise Men”, a body that advises the Chancellor on major issues. There is no formal plan to launch a wealth tax but the council is often used to fly kites for new policies.

Prof Bofinger told Spiegel Magazine that it was a mistake to target deposit holders in banks, the formula used in the EU-IMF Troika bail-out for Cyprus where those with savings above €100,000 at Laiki and Bank of Cyprus face huge losses. “The canny rich in southern Europe just shift their money to banks in Northern Europe to escape seizure,” he said. Read more of this post

The Secret To Sweden’s Brilliant Economic Comeback

The Secret To Sweden’s Brilliant Economic Comeback

Michael Moran, GlobalPost | Apr. 13, 2013, 9:20 AM | 8,250 | 49

STOCKHOLM, Sweden — As recently as the early 1990s, the idea that Sweden could be a model of anything except socialism gone awry would have been laughable.

Sweden’s debt-to-GDP was staggering when compared to other advanced industrial nations, topping 70 percent in 1992 and headed ever upward. Nearly 60 percent of all economic activity was generated by either government or government-owned enterprises. Meanwhile, the full employment mantra of its socialist model was coming apart at the seams as government simply could not borrow or print enough money to bridge the gap. The Swedish jobless rate shot from less than 2 percent in 1988 to more than 10 percent in 1993. Even renowned global brands — Saab, Volvo and Electrolux — were failing. By 1993, Sweden’s banks were effectively bankrupt.

But Sweden today barely resembles its former self. As the Economist magazine wrote last year, “The streets of Stockholm are awash in the blood of sacred cows.” A century of pursuing political neutrality and aggressive egalitarian socialism has more recently been leavened by economic reforms and market liberalizations, lighting a fire under the economy. After a modest dip during 2008, the economy has outperformed the US and even Germany since. Most importantly, the growth has not led to the kind of spike in income inequality that accompanied growth spurts in many other western countries since the 1980s. Sweden’s reforms caused inequality of income to grow over the past 20 years. As measured by the Gini coefficient, the world’s standard measure of household equality, Sweden went from a .21 to a .25 – still the best in the developed world. For the US, the numbers are staggering. From a Gini rating of .31 in 1975, the current ranking (adjusted for taxes and benefits) is .38.

How did Sweden do it? The answer is a mix of carefully introduced competitive pressures on services previously run by government, from schools to health to pensions, and an intelligent and forceful response to a banking crisis in the early 1990s that had a lot in common with the one that followed the collapse of Lehman Brothers. Read more of this post

‘Every excuse in the book’: When insurance companies don’t pay up

‘Every excuse in the book’: When insurance companies don’t pay up

Garry Marr | 13/04/13 | Last Updated: 13/04/12 2:12 PM ET
It’s the fear every consumer has buying insurance. When it comes time to make a claim, your insurer will have some reason not to pay out.

Garry Marr: In Canada, the dependence on this expensive source of credit is a closely guarded secret

The doomsday scenario isn’t just fantasy, it’s reality, say many people who fight insurance companies on a regular basis.

The issue was highlighted this week when a Saskatchewan judge awarded Luciano Branco $5-million, saying the actions of his insurance companies established “a pattern of abuse” — Justice Murray Acton noting he wanted to send a message to the industry.

The case could be a template for anyone paranoid about getting his or her claim cashed out. Read more of this post

Venture capitalists rethink big bets on China amid dismal returns

Venture capitalists rethink big bets on China

By Peter Delevett, San Jose Mercury News

Posted:   04/14/2013 09:32:20 AM PDT

Two years ago, it was one of the hottest areas in tech investing. Venture capitalists were lining up to throw money at it. But now, after disappointing IPOs, investors are fleeing. Social networking? Nope. China. In the past few years, virtually every venture shop worth its salt set up operations in the Middle Kingdom, home to one of the world’s fastest-growing economies and a billion-strong consumer marketplace. Defying the decades-old maxim that venture capitalists wouldn’t invest outside a 30-minute drive of Menlo Park’s Sand Hill Road, firms here and elsewhere rushed to join Chinese venture houses or send homegrown partners to China. But last year, venture capitalists largely abandoned China, in large part because of underwhelming stock offerings by Chinese firms on both domestic and U.S. exchanges. Read more of this post

The naivety of US investors stands out in a new academic study that highlights their sometimes dismal decisions about investments

April 14, 2013 3:07 am

Many US pension investors are gullible

By Ellen Kelleher

The naivety of US investors stands out in a new academic study that highlights their sometimes dismal decisions about investments.

Research from two University of Pennsylvania professors shows the mistakes Americans commit when they move money into their 401k retirement plans are numerous. They range from under-investment and making poor choices about how to diversify portfolios, to paying expensive fees to pick up underperforming mutual funds.

The study by Profs Jill Fisch and Tess Wilkinson-Ryan, to be published soon in the University of Pennsylvania Law Review, is the latest exposé of Americans’ terrible investing habits.

It follows a study by the regulator, the Securities and Exchange Commission, of financial literacy levels in the country last year, which came to the pessimistic conclusion that many US investors fail to understand concepts such as inflation, diversification, investment costs and compound interest.

Almost as unsettling, investors taking part in the Penn study found it difficult to identify and avoid inferior mutual funds. The results also reveal that “naive” diversification strategies drove many of their decisions about which mutual funds to buy. “Our study raises particular concern that investors and employers as well do not understand what they are supposed to do in investing for retirement,” write Profs Fisch and Wilkinson-Ryan. Read more of this post