Chairman of everything: Xi Jinping consolidates his power, and officials are quaking in their boots

Chairman of everything: Xi Jinping consolidates his power, and officials are quaking in their boots

Jul 5th 2014 | BEIJING | From the print edition

CHINA’S president appears to have killed two eagles with one arrow in bringing down one of the nation’s highest-ranking military men. On June 30th General Xu Caihou was stripped of his Communist-Party membership and handed over to prosecutors on corruption charges. State media said he took money and other loot in exchange for arranging promotions. Until last year, General Xu was one of the two dozen most powerful men in the country.

His fall helps consolidate Xi Jinping’s control over the army and at the same time burnishes his credentials as an anti-corruption crusader. The party announced the expulsion of six more figures this week, including a former vice-minister, a former senior manager at a state-owned oil firm and a former head of a government watchdog. All of them were connected to Zhou Yongkang, until 2012 the head of state security and formerly one of China’s nine most powerful men. In a separate announcement, the party dismissed Wan Qingliang, a rising star who was party boss of Guangzhou, one of China’s largest cities.

Read more at  http://www.economist.com/news/china/21606318-xi-jinping-consolidates-his-power-and-officials-are-quaking-their-boots-chairman-everything

Despite Democratic Endorsement, SBY Spares No Praise for Prabowo; “If you lead, you will have to lead everyone, including those who didn’t vote for you,” Yudhoyono said. “A leader should not keep his anger and grudges.”

Despite Democratic Endorsement, SBY Spares No Praise for Prabowo

By Ezra Sihite & Carlos Paat on 04:03 pm Jul 05, 2014

President Susilo Bambang Yudhoyono, right, meets with presidential candidate Prabowo Subianto at Yudhoyono’s private residence in Cikea, Bogor, on July 4, 2014. (Antara Photo/Setpres-Abror Rizki)

1.  President Susilo Bambang Yudhoyono met with Great Indonesia Movement (Gerindra) Party presidential candidate Prabowo Subianto and his coalition team on Friday evening at Yudhoyono’s house in Bogor.

“I received a letter from the Prabowo-Hatta campaign team saying they wanted to meet me,” Yudhoyono said at his residence in the Cikeas neighborhood. “It was directed to me as an individual, not as the president, so it was right and legal for me to meet them.”

The meeting was filmed by local TV stations, as President Yudhoyono said he wanted the encounter to be open to the public.

Read more at http://www.thejakartaglobe.com/news/despite-democratic-endorsement-sby-spares-praise-prabowo/

The Rise of China’s Shadow Banking System

It is hard to believe that just almost a decade ago, almost all types of lending made in China was done by conventional banks. Now, as Satyajit Das rightly puts, China’s burgeoning Shadow Banking system has exacerbated the worsening debt situation of China, where debt is 210% of China’s GDP as of 2013.

Easy credit has certainly helped to fuel China’s economy, and despite capital regulations imposed on banks earlier this year, all the regulations have done is to tip lending into the shadow banking system’s favour, where trusts and wealth management products (WMPs) can promise returns as high as 12%. While many analysts believe that the increasing debt would not translate into a harsh landing for China, the risk of the pricking of a property bubble in a nation where many properties serve as collaterals as loans and other forms of debts, would result in an alarming slowdown in China’s economy.

It looks like investors of China’s promise should look to increase their level of caution when it comes to investing in Chinese firms and always always, check on the management, any red flags in the annual report before pouring their money in.

Read the original article of how Shadow Banking has evolved at http://forbesindia.com/printcontent/38108

Customers Say Company Founders of Kexun, a P2P lending site which received a credit endorsement from Internet giant Baidu, Vanished with Money

Customers Say P2P Company Founders Vanished with Money

Kexun, a P2P lending site which received a credit endorsement from Internet giant Baidu Inc., has been hit by a string of fraud complaints. At least 958 people had filed complaints by the morning of June 25 for possible investment losses worth nearly 57 million yuan in total, China Business News reports. Several customers allege the owners of the company have disappeared with the company’s funds as the site has been closed under the name of maintenance since June 9. The highest single investment was more than 2 million yuan from a Zhejiang investor. “Kexun” was a platform rated by Baidu’s Credibility V Project, a network credit system that determines a website’s comprehensive credit by collecting data including its business entity qualification, authenticity and word of mouth evaluation.

Read more at http://www.yicai.com/news/2014/06/3977165.html

“The irony of Sarbanes-Oxley was that it was intended to prevent more Enrons and Worldcoms but it ended up being a gigantic tax on small companies.”

‘The Sarbane-Oxley Act has ironically made the stock market less attractive instead of a safe haven for the average investor.’ 

Gone are the days where companies are going public with cheap valuations. This article from AVC.com rightly states that following the regulatory acts, companies such as Facebook and Twitter would choose to wait for themselves to be worth multi-billions, before engaging in public offerings. Unlike that of the past, where we saw Microsoft, IBM and Apple with cheap valuations, companies such as Dropbox are moving towards private financing, with amounts as large as $10 billion.

Such a trend is definitely not healthy, and would definitely affect the options value investors would have in the market should it continue. Read the original article at http://avc.com/2014/06/the-law-of-unintended-consequences/

Tide turning against buybacks ahead of the market top

FT reports that there has been a change in corporate buyback behaviors, as companies prefer not to deploy their cash to buy back their stocks. While traditionally, companies that engage in buyback behaviors are often rewarded during post-crisis rally, it has been reported that TrimTabs, the US research group, shows that money spent on buying back stock in each of the last two months has been the lowest since January 2013.

And one possible reason is that companies fear that their own company’s stocks may be overvalued. This comes at a time when there are more new offerings in the market, with notable ones being GoPro’s IPO in recent weeks. This begs the question, how long more would the equity rally continue?

Read more at http://www.ft.com/intl/cms/s/0/da7af7d6-fe16-11e3-acf8-00144feab7de.html#axzz36CcgBUKt

Europe Is Closely Studying Lessons From Japan

Europe Is Closely Studying Lessons From Japan

They Fear Euro Zone Is Falling Into Similar Lethargy

MARCUS WALKER

Updated June 29, 2014 7:45 p.m. ET

BERLIN—If Europe is tilting toward becoming the next Japan, does that mean it needs its own version of Abenomics?

Japanese Prime Minister Shinzo Abe’s announcement last week of fresh measures to improve sluggish growth coincides with an intensified debate in Europe about whether the euro zone is sliding into similar long-term lethargy.

The euro zone’s stuttering recovery and rising dependence on spending elsewhere are a worry for global growth. The 18-country currency bloc, with its $13 trillion economy, is too big to be a passenger without weighing others down, too.

But how meaningful is the comparison with Japan, which has managed barely 1% annual growth for the past two decades, and how similar are the problems and potential cures? Japan famously fell into a self-perpetuating deflation in the 1990s, with falling prices leading consumers and business to delay spending, thus keeping growth weak.

Read more at http://online.wsj.com/articles/calls-mount-for-europe-to-adopt-abenomics-1404062899

Whatever it takes: Billionaire retail trader Solomon Lew has his Country Road revenge

Whatever it takes: Solomon Lew has his Country Road revenge

June 24, 2014 – 1:48PM

Elizabeth Knight

Business columnist

Solomon Lew has a long history with Woolworths and has fought a pitched battle with the South African retailer for nearly 20 years.

High stakes David Jones play could deliver Solomon Lew a $207m Country Road payday

Billionaire rag trader Solomon Lew has cemented his reputation as a master tactician – and one capable of using whatever it takes to achieve a commercial outcome.

He has just rung up $207 million on his personal cash register courtesy of his long time commercial nemesis, the South African retailing giant Woolworths and its chief executive Ian Moir.  Read more of this post

Korean credit agencies hit by allegations of favoritism

Updated : 2014-06-23 17:51

Korean credit agencies hit by allegations of favoritism

By Park Si-soo
Korean credit rating agencies are under fire for giving “overly favorable” assessments to domestic companies.
There are many companies, including Hyundai Motor, Kia Motors, KT, SK Telecom, S-Oil and POSCO, whose credit ratings assessed by Korean agencies are six notches or more higher than those given out by internationally recognized agencies such as Moody’s, Standard & Poor’s (S&P) and Fitch.
GS Caltex shows the biggest gap of eight places, raising questions about how seriously investors should take Korean agencies’ evaluations into consideration when making decisions, according to CEO Score, a business consulting firm that compared 33 Korean firms’ credit ratings suggested by major agencies at home and abroad. Read more of this post

European companies take on pre-crisis levels of debt

June 22, 2014 5:48 pm

European companies take on pre-crisis levels of debt

By Andrew Bolger

European companies that raise finance are taking on levels of debt not seen since the financial crisis as they adjust to the prospect of low interest rates for the foreseeable future.

The ratio of debt to company earnings, or “leverage multiples”, for all European transactions were 5.1 times earnings in the first quarter of 2014, above the 10-year average (4.8 times) for the first time since 2008. Read more of this post

Defining high-frequency trading’s US level of evil

June 20, 2014 7:28 pm

Defining high-frequency trading’s US level of evil

By John Dizard

John Dizard considers whether there is enough liquidity in equity markets

The Wall Street/Washington policy world tends to agree with its European counterparts that there is a worrying lack of liquidity in the credit markets. Most people do not worry much about that as long as the dryness goes along with rising prices; it is during the falling-price times that talking heads worry about liquidity. Read more of this post

India expects Narendra Modi-inspired equity spree

June 23, 2014 12:50 pm

India expects Narendra Modi-inspired equity spree

By James Crabtree in Mumbai

With stocks still close to record levels one month after the election of prime minister Narendra Modi, might India’s long-dormant equity markets be about to open up in earnest? So far, the signs are good. Read more of this post

Business needs to make the case for capitalism; ‘Profit’ is popularly understood as being taken from consumers

June 23, 2014 6:48 pm

Business needs to make the case for capitalism

By John McTernan

‘Profit’ is popularly understood as being taken from consumers, writes John McTernan

British businesses urgently need to become actively involved in politics. There are serious short and long-term political threats to them and their profitability. This should worry them but it should worry the country even more.

The short-term threats are easily described and understood.

If Scotland were to leave the UK it would badly damage a range of companies, particularly in the banking and financial services sector. But the social, economic and trade links between Scotland and the rest of the UK would mean the crisis caused by independence would spread quickly and widely. The silence of almost all businesses on the September referendum is a scandal. The few interventions made to date were driven by stringent financial reporting requirements rather than a desire to play a public role. But corporations are actors and they should not be afraid to speak. Read more of this post

If Finland is the best Europe can do we should be worried; The country’s plummeting productivity is down to bad luck and bad policies

June 23, 2014 7:11 pm

If Finland is the best Europe can do we should be worried

By Risto Penttila

The country’s plummeting productivity is down to bad luck and bad policies, writes Risto Penttila

Either the World Economic Forum is wrong or Europe is in deep trouble. The latest competitiveness rankings from the Swiss think-tank list Finland as the most competitive country in the EU. At first, the country’s business leaders thought someone was pulling their leg. But the news was real. If Finland is the best the EU can offer, we should all be very concerned. Read more of this post

Beijing accuses banks and developers over property market

June 23, 2014 8:30 am

Beijing accuses banks and developers over property market

By FT Reporters

China has signalled it will resist calls for aggressive measures to prop up its flagging property market, even as house prices continue to drop.

People’s Daily, the Communist party’s main mouthpiece, said in a commentary on Monday that the property market was in a “normal adjustment period” and accused domestic developers, speculators and foreign banks of exaggerating the slowdown in order to put pressure on authorities to adopt heavy-handed stimulus policies. Read more of this post

China Ting Group (3398), a garment maker, said two borrowers defaulted on entrusted loans it made through Ningbo Bank Corp. and Bank of Communications

China Ting Says Borrowers Default on Entrusted Loans

By Bloomberg News – Jun 23, 2014

China Ting Group Holdings Ltd. (3398), a garment maker, said two borrowers defaulted on entrusted loans it made through Ningbo Bank Corp. and Bank of Communications Ltd. The stock fell.

Zhongdou Group Holdings Ltd. and Hangzhou Zhongdou Shopping Centre Co. failed to make interest payments on schedule on loans worth 160 million yuan ($26 million), China Ting said in a Hong Kong exchange filing yesterday.

Entrusted loans, advances between companies arranged through banks, are part of China’s shadow banking system that regulators are seeking to rein in. Some of the entrusted funds, which totaled 8.2 trillion yuan as of the end of 2013, were being directed to industries that face lending curbs from the government, according to the People’s Bank of China. Read more of this post

Xi Jinping’s anti-corruption drive in China takes autocratic turn; President’s signature campaign appears to have spilled into something potentially destabilising

June 23, 2014 12:52 pm

Xi Jinping’s anti-corruption drive in China takes autocratic turn

By Jamil Anderlini in BeijingAuthor alerts

President’s signature campaign appears to have spilled into something potentially destabilising

Ever since Mao Zedong launched the devastating 1966-1976 Cultural Revolution that wiped out China’s intelligentsia and much of its traditional culture, scholars and China watchers have wondered what the lingering effects of that period would be.

A little over a year into his first term as president, China’s current leader, Xi Jinping, is providing the beginning of an answer. Read more of this post

Realizing the American Apparel Chief Isn’t Wearing Any Clothes; Dov Charney’s dismissal raises all sorts of thorny corporate-governance questions for investors and boards about iconic – and notorious – leaders, esp in creative fields

Realizing the American Apparel Chief Isn’t Wearing Any Clothes

By ANDREW ROSS SORKIN

JUNE 23, 2014 9:06 PM Comment

Ann Johansson for The New York TimesDov Charney at American Apparel’s Los Angeles headquarters in 2011. He was removed as chief executive last week by the company’s board.

American Apparel Founder Fights to Get His Job Back

Dov Charney is completely naked. He is dancing in what looks like an office or studio, talking on his cellphone while he jams to “This Must Be the Place” by Talking Heads. Two women are there with him, possibly employees. Read more of this post

Education Hampering Indonesia’s Preparations for AEC in 2015

Education Hampering Indonesia’s Preparations for AEC in 2015

By Nadine Sumedi on 08:45 am Jun 24, 2014

Jakarta. The Indonesian government is confident that it can sustain and even increase economic growth following regional economic integration next year that will open up the country’s borders to a freer flow of goods, services and labor from Southeast Asian neighbors, but doubts remain over the ability of the local workforce to compete.

“Indonesia is still growing, and with 240 million people we have more productive people who are economically active than those who are not,” Chairul Tanjung, the coordinating minister for the economy, told the Jakarta Globe recently.

“This will allow us to fund growth which will continue for the next 20 to 30 years,” he added. Read more of this post

Joko Ignites Flurry With Plan to Buy Back Indosat; Though Indosat is majority-owned by Ooredoo (Qatar Telecom), Indonesia still has red-white shares, which gives the country veto power that can be exercised in the national interest

Joko Ignites Flurry With Plan to Buy Back Indosat

By Carlos Paath on 08:20 am Jun 24, 2014

Jakarta. Communications and Information Minister Tifatul Sembiring said presidential hopeful Joko Widodo should first calculate the state’s funds before going ahead with his plan to buy back shares of telecommunications firm Indosat if he is elected the country’s next president.

“Do we [Indonesia] have the money to buy [back] Indosat? If we do, then please go ahead,” said Tifatul on Monday.

Tifatul added that Joko would need to consult with the State Enterprises Ministry if he wanted to go ahead with the plan.

“Regarding the plan, why not ask Dahlan Iskan [SOE minister] first?” he said. Read more of this post

In Indonesia’s Elections, Poll Machinations Gone Wild

In Indonesia’s Elections, Poll Machinations Gone Wild

By Pitan Daslani on 09:18 am Jun 24, 2014

If you arrive in a place where pots are calling kettles black, wait a minute: that is probably Indonesia. This is a painful assumption that I hate to draw, witnessing the political crossfire involving retired military generals ahead of the July 9 presidential election.

All of a sudden some retired generals are attacking each other, revealing their true feathers. When still in uniform they looked like heroes and exemplary models of statesmanship. Today they look like villains whose selfish pursuits behind the presidential candidates have unmasked their quality of pseudo patriotism. Read more of this post

Future expansion of special economic zones (KEK) in Indonesia should be located outside Java to boost industrial development in regional areas and eventually trigger greater economic growth, according to a minister

Minister says KEK too focused on Java

The Jakarta Post, Jakarta | Business | Fri, June 20 2014, 12:13 PM

Future expansion of special economic zones (KEK) in the country should be located outside Java to boost industrial development in regional areas and eventually trigger greater economic growth, according to a minister.
The expansion of the KEK to areas outside Java is also a logical response to dwindling land supply in Java.
“There are only around 31,000 hectares of land in the country that can be used for industrial purposes, 26,000 hectares of which have been sold. Around 70 percent of that land is located in Java, thus limiting the prevalence of industrial development nationwide,” Industry Minister MS Hidayat said at the Indonesian Industrial Estate Association (HKI) national working meeting at the Le Meridien Hotel in Jakarta on Thursday. Read more of this post

Indonesian firms to sell dollar bonds despite rising concerns over private debt

Indonesian firms to sell dollar bonds despite rising concerns over private debt

Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Sat, June 21 2014, 2:47 PM

Amid concerns of rising private sector debts, Indonesian companies are continuing to seek external funding in foreign currencies to support expansion or the refinancing of previous debts.
A number of companies have plans to sell dollar-denominated bonds, including the US$1.5 billion unsecured notes proposed by state-owned oil and gas giant PT Pertamina; $450 million bonds by coal miner PT Berau Coal Energy and $175 million bonds by property developer PT Pakuwon Jati, among others. Read more of this post

Prabowo’s capital control no different from today

Prabowo’s capital control no different from today

Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Mon, June 23 2014, 11:07 AM

Presidential candidate Prabowo Subianto may have said he intended to impose stricter control over the country’s monetary system during a discussion last week, but his campaign team said the rupiah would continue to be a floating currency.
Speaking at a discussion with the business community on Friday, Prabowo said a more rational method to manage the exchange rate of the rupiah, which is under pressure, was necessary.
However, Drajad H. Wibowo, a member of Prabowo’s campaign team, said the floating exchange rate regime would be kept intact and there was no plan to change it into a pegged system. Read more of this post

One in four European banks may need more capital

One in four European banks may need more capital

Geoffrey Smith

JUNE 23, 2014, 10:11 AM EDT

They’ve been saved by reluctant taxpayers from a eurozone breakup, they’ve been rescued by the ECB from death by bond markets, their economy has been growing for over a year, but over a quarter of European banks think they may still need more capital, according to a survey out Monday.

The survey, by consultants Ernst & Young, lays bare what officials and bankers have been privately acknowledging all year: six years after the financial crisis exploded, many of Europe’s banks are still relying on optimistic internal accounting and indulgent supervision from their national regulators. Read more of this post

The case for CEO term limits: The longer chief executives hold the job, a new analysis says, the higher their pay – and the more they take risks that hurt shareholders

The case for CEO term limits

Anne Fisher

JUNE 23, 2014, 11:22 AM EDT

The longer chief executives hold the job, a new analysis says, the higher their pay — and the more they take risks that hurt shareholders.

It’s pretty clear by now that many CEOs of public companiesmake more money than their performance warrants, and thatboards of directors often ignore shareholders who complain about it. But how much does paying the chief executive officer more than he (or, rarely, she) is worth really cost stockholders? Read more of this post

Indonesia’s Bumi Fails to Change Terms of Bonds as Default Looms

Indonesia’s Bumi Fails to Change Terms of Bonds as Default Looms

By Eveline Danubrata & Umesh Desai on 01:10 pm Jun 23, 2014

Jakarta/Hong Kong. Bumi Resources has failed to change the terms of $375 million of debt nearing its repayment deadline, raising the prospect of default and sending shares of the Indonesian coal miner to an 11-year low.

Asia’s biggest thermal coal exporter, controlled by Indonesia’s influential Bakrie family, said it proposed changing the terms of bonds due Aug. 5 at a meeting on Friday but not enough creditors attended to approve or reject.

Bumi is just one of many Indonesian companies to have funded expansion using debt. The miner’s current plight has highlighted the prospect of others having difficulty servicing debt as commodity prices fall and growth in Southeast Asia’s biggest economy slows. Read more of this post

World Bank Sounds Alarm for Indonesia to Avoid Middle-Income Trap

World Bank Sounds Alarm for Indonesia to Avoid Middle-Income Trap

By Ridho Syukra on 07:50 pm Jun 23, 2014

Jakarta. Indonesia needs economic growth of above 8 percent in order to escape the so-called “middle income trap,” and to provide jobs for 15 million new workers who will join Indonesia’s labor force by 2020, according to a World Bank report.

At the current 5 percent to 6 percent economic growth pace, Indonesians could be trapped in the condition characterized by a per capita income of below $12,000, low investment, slow manufacturing growth, limited industrial diversification and poor labor market conditions, the Washington-based lender explained in a report titled, “Indonesia: Avoiding the Trap,” which was released on Monday. Read more of this post