Starry-Eyed Budget Carriers in Southeast Asia Stare at Overcapacity

Starry-Eyed Budget Carriers in Southeast Asia Stare at Overcapacity

By Anshuman Daga on 2:08 pm February 10, 2014.
Singapore. Low-cost carriers are flying high in Southeast Asia on the back of sharp growth in air travel, but as hundreds of new jets swarm into the region concerns are rising about its ability to absorb the record numbers of planes on order. Read more of this post

Perils Mount As Debt Costs Swell in China; Dangers Include Slower Growth, Weaker Profits and Potential Defaults

Perils Mount As Debt Costs Swell in China

Dangers Include Slower Growth, Weaker Profits and Potential Defaults

SHEN HONG

Feb. 10, 2014 5:29 p.m. ET

SHANGHAI—Borrowing costs for Chinese companies are rising strongly, a shift that could herald weaker corporate profits, slower economic growth and even the first defaults by indebted corporations on the mainland. Read more of this post

Singapore comes late to the stock regulation party

Singapore comes late to the stock regulation party

UNA GALANI

HONG KONG — Reuters Breakingviews

Published Monday, Feb. 10 2014, 8:00 PM EST

Last updated Monday, Feb. 10 2014, 8:00 PM EST

Singapore’s overhaul of its stock market is overdue. The city-state has proposed a raft of new trading rules in response to last year’s painful crash in penny stocks. Though welcome, the joint proposals from the Singapore Exchange (SGX) and the Monetary Authority of Singapore (MAS) look mostly like playing catch-up with Hong Kong. Read more of this post

Tacit agreement that SGX’s dual role is untenable

Tacit agreement that SGX’s dual role is untenable

Business Times

11 Feb 2014

Michelle Quah

SINGAPORE’S market regulators seem to finally be in agreement with a position that The Business Times has taken for years – that having a profit-driven market regulator, one with dual roles of revenue generation and market oversight, is simply not tenable. Read more of this post

If Nestlé Sells Its Stake in L’Oréal… Chain Reaction of Share Sales Could Occur With Expiration of Pact in April

If Nestlé Sells Its Stake in L’Oréal… Chain Reaction of Share Sales Could Occur With Expiration of Pact in April

CHRISTINA PASSARIELLO and NOÉMIE BISSERBE in Paris and JOHN REVILL in Zurich

Feb. 10, 2014 12:39 p.m. ET

A knot tying three of Europe’s biggest corporations together could soon be untangled with billions of euros in share buybacks.

In late April, Nestlé SA NESN.VX -0.07% will be free to unwind its 30% stake in L’Oréal SA, and, according to people familiar with the matter, that is one of the options the Swiss food giant is studying. If Nestlé’s stake is up for grabs, L’Oréal wants to buy at least part of it, one of the people said. That could trigger L’Oréal selling its 9% stake in French pharmaceutical company Sanofi SA, SAN.FR +1.78% according to the person. Read more of this post

Asian Group Tries to Stem Rubber’s Swoon; Bangkok-Based Group Urges Members Not to Sell After Commodity’s Prices Drop on Signs of Economic Slowdown in China

Asian Group Tries to Stem Rubber’s Swoon

Bangkok-Based Group Urges Members Not to Sell After Commodity’s Prices Drop on Signs of Economic Slowdown in China

HUILENG TAN

Feb. 10, 2014 7:13 a.m. ET

LOOKING FOR A BOUNCE: The Bangkok-based International Rubber Consortium told members not to sellthe commodity, an effort to stem a plunge in the price of rubber. Above, a glove assembly line in Zibo, ChinaReuters Read more of this post

Can Indonesia Really Weather the Looming Economic Crisis?

Can Indonesia Really Weather the Looming Economic Crisis?

By Alexander Ugut on 9:56 pm February 10, 2014.
Ask the above question to policy makers or supervisory authorities and the most likely answer you will get is an affirmative one. Yes indeed, our banking sectors are better capitalized now, leverage of public and private sector including households are low, foreign exchange reserves are adequate for roughly six months of imports. Our exposure to potentially toxic securitized transactions or shadow banking activities is negligible. Bank Indonesia, the central bank, has also made significant preparations for a much worse situation by signing option contracts with China, Japan and South Korea that give it the right to execute cross currency swap contracts in the total amount of $49 billion. In addition to that, another $5.5 billion is ready in the form of standby loans from multilateral financial institutions. Read more of this post

Book Review: ‘The Contest of the Century,’ by Geoff Dyer; China can’t change its history as a regional hegemon. It can’t change its size and population. And it can’t change its location.

Book Review: ‘The Contest of the Century,’ by Geoff Dyer

China can’t change its history as a regional hegemon. It can’t change its size and population. And it can’t change its location.

ALI WYNE

Feb. 10, 2014 7:24 p.m. ET

There is a tendency to view China‘s policies as part of a long-term strategic design, first for restoring its historic centrality in Asia and ultimately for displacing the U.S. as the world’s top power. But as Geoff Dyer observes in his stellar book, “The Contest of the Century,” the likelier explanation is more banal: Given its rapid economic growth, China is adopting a more expansive vision of its national interests and modernizing its military to match that vision. The challenge is to distinguish between those policies of Beijing that any other rising power would develop and those that could fundamentally alter the postwar global order.

Chinese leaders insist that they will avoid the mistakes that Germany and Japan made in the first half of the 20th century: As Communist Party foreign-policy adviser Zheng Bijian wrote in a 2005 Foreign Affairs magazine article, Beijing would achieve a “peaceful rise” by transcending “ideological differences to strive for peace, development, and cooperation with all countries of the world.” Today that optimism seems misplaced. The more China attempts to push the U.S. back into the Pacific Ocean and resolve its territorial disputes, the more it stimulates the formation of a countervailing coalition in the Asia-Pacific.

Mr. Dyer, a journalist for the Financial Times, cites three recent events that have shaped China’s current strategic predicament. In May 2009, the regime resurrected its “nine-dash line”—a self-declared maritime border that encompasses some 80% of the South China Sea—in a communiqué to United Nations Secretary-General Ban Ki-moon. Then, in 2010, China stood on the sidelines after North Korea torpedoed a South Korean warship, killing 46 sailors. And when in the same year Tokyo detained the captain of a Chinese trawler that had collided with two Japanese military vessels in Japanese-controlled waters, Beijing imposed an embargo on the export of rare earths to Japan.

As Mr. Dyer shows, China’s embattled position within the region also stems from immutable factors. It can’t change its history as a regional hegemon, which continues to alarm its neighbors. It can’t change its size—though former Foreign Minister Yang Jiechiwas remiss to declare at a 2010 regional forum that “China is a big country, and other countries are small countries, and that is just a fact.” And it can’t change its location: Mr. Dyer notes that it is encircled by “successful and ambitious states who also believe this is their time.”

Enlarge Image

The Contest of the Century

By Geoff Dyer
(Knopf, 308 pages, $26.95)

Complicating matters is that numerous voices now shape China’s foreign policy. Its leaders confront “powerful vested interests within the party-state,” the author writes, as well as “an officer class that has its own hawkish take on global affairs” and the “nationalist views of a rising middle class.” There are marked divisions within these factions, and, because of the opaque nature of party decision-making, Beijing’s conduct can appear malign and conspiratorial even when it isn’t.

Momentum also undermines China’s regional charm offensives. After three and a half decades of torrid growth, it has the world’s second largest economy and is the largest trading country. Progress of such rapidity and scale is an invitation to scrutiny. China’s leaders are acutely aware, moreover, that their legitimacy depends in large part on continuing to improve their citizens’ livelihoods. The frenetic pace at which China is securing vital commodities around the world reflects this anxiety. As environmental degradation worsens, resource shortages grow and demographics deteriorate, China will become more dependent on outsiders to sustain its growth. Where its leaders discern vulnerability, however, many others see a Chinese dragon trying to buy the world.

But China’s myriad challenges don’t guarantee U.S. victory in the contest referred to by Mr. Dyer’s title. According to an “iron rule” that he says governs the region’s geopolitics, Washington will lose if it tries to enlist China’s neighbors in an effort to contain its rise. Instead, the U.S. must establish “a convincing long-term economic agenda” that binds theAmerican economy to that of the Far East. Thus stagnation in negotiations over the Trans-Pacific Partnership, he writes, “would be an enormous setback to the U.S.’s efforts to demonstrate that it has more to offer Asia than just its navy.” But demonstrating staying power carries a significant risk of its own: If China’s neighbors conclude that the U.S. will protect them no matter what contingency arises, they may opt to free-ride on U.S. security guarantees rather than develop their own capabilities.

Mr. Dyer is optimistic that the U.S. will “win”: that is, “retain its role at the center of international affairs.” But he doesn’t subscribe to unwarranted zero-sum logic. Given that China wasn’t too long ago an isolated, impoverished backwater, vulnerable to predation from without and collapse from within, becoming the second most important pillar of the international system would scarcely constitute a “loss.”

The real prize in U.S.-China competition would be the “new model of great-power relations” that President Obama and President Xi have proposed. One hopes that historians of a century hence will commend the two countries for inaugurating a new era of international relations, one in which a pre-eminent power and its principal challenger were able to both compete and collaborate in service of the global interest.

Mr. Wyne is an associate of the Belfer Center for Science and International Affairs at Harvard University’s Kennedy School of Government and a co-author of ” Lee Kuan Yew : The Grand Master’s Insights on China, the United States, and the World.”

Is Sweden Raising a Generation of Brats? Scandinavian country’s child-centric ways stir backlash

Is Sweden Raising a Generation of Brats?

Scandinavian country’s child-centric ways stir backlash

JENS HANSEGARD

Feb. 10, 2014 6:46 p.m. ET

Is Sweden raising a generation of brats?

The country has built a child-friendly reputation on its mandates for long parental leave and provision for state-funded day care from age 1. But a new book paints an ugly underbelly to Scandinavia’s child-centric ways. Youngsters here—deemed “competent individuals” by the state and legally protected from spanking—are becoming the chief decision makers in homes at very young ages in what some Swedes think is an alarming trend. Read more of this post

“It was very emotional, he hugged almost everyone”; Some of the beneficiaries of Sarawak Chief Minister Taib’s atypical show of affection looked surprised and a few even seemed uncomfortable.

Updated: Tuesday February 11, 2014 MYT 9:25:25 AM

So, who will be the next CM?

BY JOCELINE TAN

Abang Johari (left) Adenan Satem

Tan Sri Taib Mahmud’s priority is to choose a successor who can lead the ruling coalition into the next state polls.

SARAWAK Chief Minister Tan Sri Taib Mahmud is not a touchy feely type of politician. As such, journalists were astonished to see the normally reserved leader throwing his arms around one person after another at the PBB supreme council meeting. Read more of this post

GMO’s James Montier: How do you select the subjects on which you do research? Are there particular publications or information sources that offer good insight or inspirations for the topics you choose?

James Montier – What Worries Me Right Now

By Robert Huebscher
February 4, 2014

James Montier is a member of Grantham Mayo van Otterloo’s (GMO’s) Asset Allocation team. Prior to joining GMO in 2009, he was co-head of Global Strategy at Société Générale. Mr. Montier is the author of several books including Behavioral Investing: A Practitioner’s Guide to Applying Behavioral Finance; Value Investing: Tools and Techniques for Intelligent Investment; and The Little Book of Behavioral Investing. Mr. Montier is a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts. He holds a B.A. in Economics from Portsmouth University and an M.Sc. in Economics from Warwick University.

Advisors and retail investors can access GMO’s asset allocation by buying the Wells Fargo Advantage Absolute Return instead of the GMO Benchmark-Free Allocation Fund and the Wells Fargo Advantage Asset Allocation Fund instead of the GMO Global Asset Allocation Fund. The minimum investment for the GMO Funds is $10 million, while the minimum investment for the Wells Fargo Funds is $1,000.

I spoke with James on Jan. 28. Read more of this post

The top three Aussie franchises

The top three Aussie franchises

February 11, 2014

Adam Courtenay

If you’re researching franchises, you need to know why these are the best.

General manager of the Franchise Council of Australia Kym de Britt says franchises thrive on mutual benefit.

A company which has managed to wheel out 100 shops in 100 days was recently named the top franchisor in the country for 2013. Sounds like a simple business, easy to set up and quick to generate revenues? A passing fad perhaps? Not at all. Read more of this post

Banking on good sense and a prayer; As head of ICICI Bank, India’s biggest privately owned lender and the nation’s second largest by assets, 52-year-old Chanda Kochhar is a vastly influential figure in her native country.

Banking on good sense and a prayer

Tuesday, Feb 11, 2014

Ravi Velloor

The Straits Times

The global leaders and the famous who flock to the Swiss resort of Davos for their annual conclave in January have often spotted a slim Indian woman, draped in the traditional sari, glad-handing key decision-makers and customers between meetings. Read more of this post

China firms head for U.S. IPOs, not fussed by accounting flap

China firms head for U.S. IPOs, not fussed by accounting flap

4:09pm EST

By Denny Thomas and Elzio Barreto

HONG KONG (Reuters) – Chinese companies are flocking to the U.S. IPO market in their biggest numbers since 2010, drawn by soaring valuations for tech start-ups and undeterred by a flare-up in an accounting row between Washington and Beijing. Read more of this post

“Breathtaking” Corruption In Europe

“Breathtaking” Corruption In Europe

Tyler Durden on 02/10/2014 12:12 -0500

Submitted by Pater Tenebrarum of Acting-Man blog,

A recent article at the BBC discusses the findings of a report by EU Home Affairs commissioner Cecilia Malmstroem on corruption in the EU. According to the report, the cost of corruption in the EU amounts to €120 billion annually. We would submit that it is likely far more than that (in fact, even Ms. Malmstroem herself concurs with this assessment). This is of course what one gets when one installs vast, byzantine bureaucracies and issues a veritable flood of rules and regulations every year. More and more people are needed to administer this unwieldy nightmare of red tape, and naturally the quality of the hires declines over time due to the sheer numbers required. Read more of this post

A New World for Bonds: Time to sweep away an artificial distinction in the world of corporate debt issues

February 7, 2014

The Economist

A New World for Bonds: Time to sweep away an artificial distinction in the world of corporate debt issues.

Imagine that the stock market was divided into two. The big investment banks — Goldman Sachs, Morgan Stanley and Bank of America Merrill Lynch — would create lists of the shares that they liked. These approved shares would be classed as IB, for investment-bank-approved, and would trade on a higher valuation (i.e., lower yield) than equities they did not like, which would be lumped together in the BS, or bank-shunned, category. Some investors would be prevented from owning anything but the IB shares.

The idea sounds bizarre, but such an artificial distinction does exist in the bond markets, where the big ratings agencies class debt issues on a scale from AAA, the highest class, to D, for bonds in default. Bonds rated BBB- or higher are classified as investment grade (IG) whereas those rated BB+ or below are regarded as speculative, or more popularly, junk bonds. Some investors will not touch junk bonds at all; most bond funds focus on either IG bonds or junk.

But as Kevin Corrigan of Lombard Odier Investment Managers points out, this Manichean divide is rather odd. The difference between the BBB and BB categories is not that fundamental. Figures from Standard & Poor’s, one of the big ratings agencies, show that, of American corporate bonds rated BBB, 1.1 percent are in default three years later; for those rated BB, the figure is 4.8 percent. By contrast, 14.7 percent of bonds rated B have stopped paying within three years and 41.7 percent of those rated C or below. The figures for European bonds are similar (see chart).

A degentrification has been taking place in the bond market. The aristocrats of bonds — issuers of AAA-rated debt — have virtually disappeared. There is no longer much of an advantage in being rated AAA: shareholders instead want companies either to return the spare cash that might help earn them a high rating or to make their balance-sheets more “efficient” by borrowing more to take advantage of the tax deductibility of interest payments, thus jeopardizing an exalted status. Read more of this post