Aging Chinese Face a Bleak Picture; High Rates of Poverty, Disability and Mental Illness Haunt Elderly, Pose Growing Economic Challenge

Updated May 30, 2013, 11:43 p.m. ET

Aging Chinese Face a Bleak Picture

High Rates of Poverty, Disability and Mental Illness Haunt Elderly, Pose Growing Economic Challenge

By TOM ORLIK

BEIJING—China’s elderly are poor, sick and depressed in alarming numbers, according to the first large-scale survey of those over 60, an immense challenge for Beijing and one of the greatest long-term vulnerabilities of the Chinese economy.

The survey of living conditions for China’s 185 million elderly paints a bleak picture that defies the efforts of the government to build what it calls a “harmonious society,” one dedicated to human welfare rather than simply economic growth. Of the generation that built China’s economic boom, 22.9%—or 42.4 million—live in poverty with consumption of less than 3,200 yuan a year ($522).

The fear of being old and poor, which prompts many Chinese to stash away their earnings, also cuts against another of Beijing’s priorities: to rebalance the economy toward stronger consumption. Read more of this post

Promising African Development Fund Collapses; A program financed by the Agency for International Development is dissolving because of mismanagement, insider dealings and a lack of federal oversight.

Promising African Development Fund Collapses

By BARRY MEIER and RON NIXON

Published: May 30, 2013

The initiative began two decades ago, with the best of intentions, after apartheid fell and southern Africa’s future brightened.

Today that program, the Southern Africa Enterprise Development Fund, is in its death throes, apparently victimized by mismanagement, insider dealings and a lack of oversight by federal officials. Current and former fund officials are fighting over money, and the eventual cost to American taxpayers of the fund’s missteps could run into the tens of millions of dollars, public filings indicate.

On one level, the plight of this obscure fund is a common tale involving the hazards of foreign aid. But on another level, experts say, it points to wider problems bedeviling the federal agency that financed the fund, the United States Agency for International Development, orU.S.A.I.D. In fiscal 2013, the agency had a budget of $1.6 billion and helped administer more than $40 billion in foreign assistance. Read more of this post

Americans have rebuilt less than half of wealth lost to the recession, study says

Americans have rebuilt less than half of wealth lost to the recession, study says

By Ylan Q. Mui, Friday, May 31, 12:00 AM

American households have rebuilt less than half of the wealth lost during the recession, leaving them without the spending power to fuel a robust economic recovery, according to a new analysis from the Federal Reserve.

From the peak of the boom to the bottom of the bust, households watched a total of $16 trillion in wealth disappear amid sinking stock prices and the rubble of the real estate market. Since then, Americans have only been able to recapture 45 percent of that amount on average, after adjusting for inflation and population growth, according to the report from the St. Louis Fed released Thursday.

In addition, the report showed most of the improvement was due to gains in the stock market, which primarily benefit wealthy families. That means the recovery for other households has been even weaker. Read more of this post

Indian power shortage is Achilles heel of economy

May 30, 2013 11:07 am

Indian power shortage is Achilles heel of economy

By Victor Mallet in Noida, India

Electricity, 24 hours a day, is a service taken for granted in industrialised economies. But not in the industrial zone of Noida on the outskirts of New Delhi – and especially not in the baking heat of summer. “We hardly get 50 per cent of our requirement,” says S. Singhvi, finance director of Ginni Filaments, a textiles and clothing company with 5,000 employees across India. “Compared to last year, it’s getting worse.” With daytime temperatures reaching nearly 50C, and householders and farmers demanding ever more power for air conditioners and water pumps, he complains that Ginni’s Noida garment factory must deal with repeated power disruptions and run its own generators to produce electricity at five times the cost of the supply from the grid.

Read more of this post

“What do you know about making cars?” President Park Chung-hee asked Hyundai’s founder Chung Ju-yang at the opening ceremony. According to legend, Chung replied: “I can do it.”

May 30, 2013 6:46 pm

Hyundai: Changing the mould

By Simon Mundy

The carmaker focuses on forging a premium brand

Snaking over 266 miles from Seoul to the port city of Busan, the Gyeongbu Expressway was one of the proudest achievements of Hyundai Group founder Chung Ju-yung. But when it opened in 1970, some ridiculed South Korea’s decision to build an eight-lane motorway across two mountain ranges, because the poor country only had 60,000 cars.

“What do you know about making cars?” President Park Chung-hee asked Chung at the opening ceremony. According to legend, Chung replied: “I can do it.”

In fact, he had already been assembling cars for two years but no one expected the scale of Hyundai’s transformation over the next four decades. Chung’s expressway is now thronged with millions of cars each year, most of them made by the automotive group he founded. Millions more Hyundai vehicles are now an increasing presence around the world, proof of the company’s evolution into the world’s fifth-biggest carmaker by unit sales. Read more of this post

China: a bubble in the tea market?

China: a bubble in the tea market?

May 30, 2013 11:05am by Julie Zhu

Commodity markets may have lost their lustre as many investors have gone elsewhere. But there’s often a chance of a profit for those who know where to look.

Pu’er, a strong, earthy tea produced in China’s Yunnan province has seen its price rise by as much as 80 per cent over the past six months – even as prices for other Chinese teas have remained stable. Pu’er traders have seen it before – in a speculative bubble that burst six years ago. This time the run-up in prices has been more modest – so far.

In Kunming, capital of Yunnan province, Old Banzhang, a type of the finest Pu’er, last year went for Rmb5,000 a kilo in the form of tea leaves pressed into cakes. Now it commands almost Rmb9,000 a kilo, according to China Securities Journal, citing a local tea shop manager.

Zhou Chonglin, a Kunming-based tea expert and co-author of “War of Tea”, believes the price surge of Pu’er could have been predicted. He told beyondbrics that Pu’er investors, who left the market in 2007, started to come back late last year, in response to the increasing demand from the public for the tea, which is widely believed to have medicinal value. Read more of this post

The political scandal and criminal investigation that has accompanied the shutdown of the Hong Kong Mercantile Exchange has created more drama than the exchange ever did trading gold and silver futures.

Updated May 30, 2013, 2:21 p.m. ET

Inquiry Into Bourse Widens

Sixth Person Arrested Amid Closure of the Hong Kong Mercantile Exchange

By TE-PING CHEN

HONG KONG—The political scandal and criminal investigation that has accompanied the shutdown of the Hong Kong Mercantile Exchange has created more drama, including a sixth arrest on Thursday, than the small, struggling exchange ever did trading gold and silver futures.

The exchange’s closure after two years of trading was a blow to the ambitions of its backers, including a close ally to Hong Kong’s top official and Russian billionaire Oleg Deripaska, whose EN+ Group took a 10% stake in the exchange to help launch it in 2010. They had hoped the HKMEx would capitalize on China’s voracious appetite for commodities, but it failed to survive stiff competition from better-established players in Hong Kong and Shanghai, as well as in the West. Read more of this post

South Korea Can’t Just Order Up Creative Economy

South Korea Can’t Just Order Up Creative Economy

South Korea’s economy has yet to catch up to its people. They are the world’s most-wired citizenry and the most advanced at using smartphones. Korean stars are Asia’s most popular; Korean gadgets and fashions the coolest.

Yet at home, huge manufacturing conglomerates, or chaebol, such as Hyundai Motor Group (005380), Samsung Group (005930) and LG Group (066570) remain the mainstays of an export-focused system established after the Korean War by strongman Park Chung Hee. In fact, as the July edition of Bloomberg Markets magazine points out, the chaebols have become even more dominant. Sales of the top 30 conglomerates accounted for 82 percent of South Korea’s gross domestic product in 2012, compared with 53 percent in 2002.

As in other parts of Asia, in Korea a top-heavy system no longer delivers for ordinary citizens. Wage growth has slowed, while the costs of housing and education have jumped: According to the McKinsey Global Institute, most middle-income Korean households are now cash-flow constrained. The ranks of the middle class have shrunk from more than three-quarters of the population to about two-thirds. Read more of this post

Swoon in Bonds Puts Eye on Fed

May 30, 2013, 8:06 p.m. ET

Swoon in Bonds Puts Eye on Fed

Investors Debate: Bubble, Confusion or Sign of Health?

By DAVID WESSEL and VICTORIA MCGRANE

The bond market’s monthlong plunge has pushed long-term interest rates on mortgages and U.S. Treasurys to their highest levels in more than a year, sparking a debate: Is this a bursting bubble, the aftereffect of clumsy Federal Reserve communication or a welcome sign the U.S. economy is, at last, on the mend.

Yields on the benchmark 10-year U.S. Treasury note now stand above 2.1%—still low by historic standards, but nearly half a percentage point higher than at the start of May.

Rates on 30-year fixed-rate mortgages rose a hair above 4% this week, according to HSH Associates. Six months ago, they were below 3.5%. Read more of this post

NYC Pension Chief Seeks $500,000 Managers Not Wall Street

NYC Pension Chief Seeks $500,000 Managers Not Wall Street

New York City’s $140 billion retirement system pays Wall Street money managers about $360 million a year, the only one of the 11 biggest U.S. public-worker pensions that refuses to manage any assets internally. Larry Schloss, the city’s chief investment officer, says the practice must end.

Schloss, 58, points to Ontario’s C$130 billion ($126 billion) teachers’ pension fund, which has returned an average 9.6 percent annually on its investments since 2003 — 1.6 percentage points better than New York’s funds. The Canadian system reaped those gains mostly without paying outside asset managers. Schloss says the same in-house approach could work in New York.

“I’m not looking for John Paulson,” said Schloss, who earns $224,000 a year, referring to the billionaire hedge-fund manager. “I’m just looking for a VP at MetLife (MET) who makes 500,000 bucks.” Read more of this post

Oil Fields Under Olive Groves Offer Italy Economic Boost

Oil Fields Under Olive Groves Offer Italy Economic Boost

Underneath the groves that make southern Italy the world’s second-largest olive oil producer, geologists have found a more lucrative liquid: Europe’s biggest onshore crude oil fields.

Basilicata, a mountainous, sparsely populated province that sits in the arch of Italy’s boot, holds more than 1 billion barrels, offering the country a weapon to fight a two-year recession. Rome-based Eni SpA (ENI) and France’s Total SA (FP) plan to double production raising Italy’s output to almost 200,000 barrels a day, making the country Europe’s third-largest oil producer behind the U.K. and Norway.

Since the field started production in the 1990s, its development has been held back by environmental campaigns and bureaucratic delays. Those impediments are falling away, analyst Carlo Stagnaro said, because the priority for Italy’s government is kickstarting an economy that’s shrunk for six straight quarters and where more than 35 percent of young people are unemployed. Read more of this post

Dividend stocks lose shine as U.S. bond yields rise

Analysis: Dividend stocks lose shine as U.S. bond yields rise

7:08pm EDT

By Chuck Mikolajczak

NEW YORK (Reuters) – As the S&P 500 stormed to a gain of 16 percent for the first five months of the year, the run was fueled by investors searching for yield.

With central banks driving interest rates lower, slower-growth sectors with big dividends like utilities and telecom were attractive because they offered better returns over government debt along with the possibility of price appreciation.

Those sectors led stocks higher for several months – but that outperformance appears to have come to an end as U.S. Treasury bond yields climbed to 13-month highs this week. The economic outlook in the United States has improved, and rumblings of a pullback in the Federal Reserve’s massive bond-buying program have caused investors to pull away from the big dividend payers. Read more of this post

Running out of cash, Australian miners get creative to survive

Running out of cash, Australian miners get creative to survive

6:51pm EDT

By James Regan

SYDNEY (Reuters) – From pooling office space to paying bills with company stock, small and mid-sized Australian miners are finding new ways to stay afloat during one of the sector’s worst downturns. China’s slowdown has helped cool a decade-long commodities boom that pushed gold, copper, iron ore and coal prices to record highs, leaving Australian miners facing a painful transition to lower margins and weak investment interest. Only a year ago, with miners flush with cash and desperate to retain staff, six-figure salaries and executive-style perks for everyone from truck drivers to kitchen help were commonplace. Now, with traditional funding drying up, smaller miners are devising novel ways to keep from going broke. Unable to pay bills in cash, some are offering drill rig operators, caterers and even public relations firms company stock to keep them on the job – acts of desperation last seen at the height of the 2008-2009 financial crisis. Read more of this post

Sallie Mae Shocks Bondholders in Asset Strip

Sallie Mae Shocks Bondholders in Asset Strip: Corporate Finance

SLM Corp. (SLM) dealt bondholders a blow as the student loan company prepares to move cash-generating assets out of their reach and rely more heavily on secured funding as it seeks to split into two separate entities.

Fitch Ratings cut the company known as Sallie Mae to speculative grade yesterday, citing the new structure’s weaker credit profile while Standard & Poor’s and Moody’s Investors Service said they may reduce the credit as well. Newark, Delaware-based SLM’s bonds lost more than $200 million in value after the disclosure, according to data compiled by Bloomberg.

Sallie Mae is separating its education loan business from its consumer lending operation, following legislation in 2010 that cut companies out of the government-guaranteed student loan market. The lender’s $17.9 billion of unsecured bonds will be serviced by the company housing Sallie Mae’s $118 billion portfolio of U.S.-backed loans that it’s winding down, while the earnings, cash flow and equity of the newly formed SLM Bank will be moved out of bondholders’ reach, according to Moody’s.

“Anytime you split a company up like this and some portion of the cashflows that could have been available to support debt payments is no longer available, it is incrementally negative for bondholders,” Sameer Gokhale, an analyst at Janney Montgomery Scott LLC, said in a telephone interview. “The question is: how negative?” Read more of this post

Trend Towards In-House Investing Is Growing

Trend Towards In-House Investing Is Growing

29 MAY 2013 – ASHBY MONK

My morning ritual of drinking an unseemly amount of coffee and then scouring the interwebs for any and all Giant-related news unearthed something rather interesting: Four separate stories about large institutional investors shifting assets away from external managers and giving them to internal teams of direct investment professionals. Read more of this post