Bond Investors Turn to Cash; Investors are cashing out of bonds but remain hesitant to plunge into stocks

July 24, 2013, 8:28 p.m. ET

Bond Investors Turn to Cash

Investors are cashing out of bonds but remain hesitant to plunge into stocks

CHRIS DIETERICH

Investors are cashing out of bonds but remain hesitant to plunge into stocks, preferring instead to buy money-market mutual funds despite their low returns. The surprise move highlights persistent investor anxiety with equities even as stock indexes reach new highs. Investors withdrew an estimated $43 billion from taxable bond mutual funds last month, the largest-ever monthly outflow, according to the Investment Company Institute. The debt-market swoon was fueled by worries that the Federal Reserve was softening its commitment to keeping interest rates low. Rising interest rates mean lower bond prices. Read more of this post

Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state

9K units of private property could be forced sold if interest rates rise

July 24th, 2013 |  Author: Contributions

Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state, according to an analyst report published today.

On the back of news that up to 10 percent of Singapore households may have already over-leveraged their private property purchases beyond the new 60 percent limit that was recently imposed by the Monetary Authority of Singapore (MAS), wealth management firm Religare Enterprises has cautioned its clients to avoid investing in Singapore property developers. Read more of this post

Stalled Project Shows Why China’s Economy Is Wobbling; The $91 Billion Caofeidian Industrial Zone in Beijing Is Mired in Debt and Unfulfilled Promise

July 24, 2013, 5:41 p.m. ET

Stalled Project Shows Why China’s Economy Is Wobbling

The $91 Billion Caofeidian Industrial Zone Is Mired in Debt and Unfulfilled Promise

By DINNY MCMAHON and BOB DAVIS

Buildings, some incomplete, in China’s Caofeidian industrial park.

CAOFEIDIAN, China—A $91 billion industrial project here, mired in debt and unfulfilled promise, suggests part of the reason why China’s economy is wobbling – and why it will be hard to turn around. The steel mill at the heart of Caofeidian, which is outside the city of Tangshan, about 225 kilometers (140 miles) southeast of Beijing, is losing money. Read more of this post

Is China’s debt nightmare a province called Jiangsu?

Is China’s debt nightmare a province called Jiangsu?

5:16pm EDT

By Koh Gui Qing

WUXI, China (Reuters) – The nightmare scenario for China’s leaders as they try to wean the country off a diet of easy credit and breakneck expansion is a local government buckling under the weight of its own debt. Few provinces fit that bill quite like Jiangsu, home to China’s most indebted local government.

Hefty borrowings through banks, investment trusts and the bond market by Jiangsu’s provincial, city and county governments have saddled the province north of Shanghai with debt far higher than its peers, public records show.

Read more of this post

Inner Mongolia Property Mogul Bites the Dust; The real estate empire Li Guomin built in Bayan Nur has withered in the heat of a corruption scandal

07.24.2013 19:13

Inner Mongolia Property Mogul Bites the Dust

The real estate empire Li Guomin built in Bayan Nur has withered in the heat of a corruption scandal

By staff reporter Wang Heyan

Bayan Nur is a city nestled in the crook of a crescent-shaped valley, between the Yellow River and a desert, and surrounded by productive farms. It’s name is Mongolian for “fertile lake,” owing to the swampy Lake Wuliangsu on the crescent’s eastern edge. Bayan Nur is also an economic hub for north-central Inner Mongolia Autonomous Region that’s prospered in recent years on the back of a local real estate boom. But these days, unlike the fertile crescent’s well-watered farms, Bayan Nur’s real estate industry as well as its economy are gathering dust in the dry heat of a corruption scandal. Read more of this post

Private Retirement Funds Find Malaysia a Tough Sell

July 24, 2013, 9:40 a.m. ET

Private Retirement Funds Find Malaysia a Tough Sell

People Are Slow to Sign Up to Program Meant to Supplement Government Pension Plan

JASON NG

Malaysia’s voluntary private-retirement savings program has gotten off to a slow start since being launched last year, despite lures of tax breaks for contributions and a high overall savings rate in the country. Employees in Malaysia are required by law to contribute to the separate Employees Provident Fund, or EPF, which holds assets valued at more than 536 billion ringgit ($169 billion). Returns on that government-run pension fund have been at least 4.5% annually over the past decade, while one-year fixed deposits in banks earn up to 3.2%. Read more of this post

IMAX to Build Up to 120 New Theaters in China

July 25, 2013

IMAX to Build Up to 120 New Theaters in China

Deal With Dalian Wanda Follows Pact With South Korean Partner

BEIJING—IMAX Corp. IMX.T -0.15% is joining with China’s largest cinema chain to build as many as 120 new theaters in the country, dwarfing a deal that the company announced with a Korean partner last week. The Chinese deal is IMAX’s latest to target Asian consumers’ increasing demand for watching Hollywood blockbusters on bigger, more immersive screens. Under the agreement, IMAX will add between 40 and 120 theaters. At most, it would bring to 381 the number of IMAX theaters open or planned in China, with Wanda Cinema Line Corp. running up to 210 of them. Read more of this post

Corporate investment: A mysterious divergence; Experts are struggling to explain a great puzzle of the US economy

July 24, 2013 7:09 pm

Corporate investment: A mysterious divergence

By Robin Harding

Experts are struggling to explain a great puzzle of the US economy, writes Robin Harding

Robert Grant made a solid career out of Botox and breast implants. With a broad smile, he looks like Hollywood’s version of a US corporate executive, perhaps because he admits to using some of the rejuvenating products he sold. Treatments to tauten an ageing population are the quintessential – and highly profitable – products of the US economy in the 21st century. Mr Grant has flown high at some of the industry’s top companies, such as Allergan and Bausch & Lomb, which have operations, together with their most ardent customers, in California’s Orange County. Read more of this post

Banks should keep out of mines and warehouses; When Goldman Sachs bought the commodity trading house J Aron in 1981, it also took on Lloyd Blankfein, then a salesman of silver coins

July 24, 2013 6:49 pm

Banks should keep out of mines and warehouses

By John Gapper

When Wall Street launches into unlikely enterprises, it is time, once again, to start worrying

When Goldman Sachs bought the commodity trading house J Aron in 1981, it also took on Lloyd Blankfein, then a salesman of silver coins. Thirty-two years later, Mr Blankfein is Goldman’s chairman and chief executive and the bank owns, among other commodity assets, some aluminium warehouses near the ailing city of Detroit.

The process by which some of the biggest US banks came to own not only physical commodities but infrastructure such as oil tankers and pipelines is a fine example of mission creep since they were split up by the Glass-Steagall Act of 1933. One can see how they got there, but it is a peculiar – and not very desirable – outcome. Read more of this post

Monumental ambitions: Efforts are afoot to tackle the poor planning that busts budgets and wastes time on big projects

July 24, 2013 5:26 pm

Monumental ambitions

By Andrew Hill

Thinking ahead: better Olympics planning has cut budget over-runs, although the London games overshot by 100%

Frank Gehry, the architect, does not like project managers, but over his career he has learnt a lot about project management. His acclaimed Walt Disney Concert Hall in Los Angeles, completed in 2003, fell into a mire of lawsuits about cost overruns, settled five years later with none of the parties admitting blame. The Guggenheim Museum in Bilbao, however, came in 18 per cent under budget and, as important, has yielded greater benefits for the Spanish city than forecast. Mr Gehry urges fellow architects to take more control of the execution of their work: “Don’t be the baby, be the parent and better things will happen,” he said in a 2010 lecture in Oxford. Read more of this post

To avoid paying taxes, the rich are emptying their bank accounts in Switzerland and investing in art. This has spawned a new business of storing such works tax- and duty-free in warehouses across the world

07/24/2013 12:10 PM

(Sm)art Investing

Rich Move Assets from Banks to Warehouses

By Christoph Pauly

To avoid paying taxes, the rich are emptying their bank accounts in Switzerland and investing in art. This has spawned a new business of storing such works tax- and duty-free in warehouses across the world.

One of the world’s most valuable art treasures is being stored in an extremely ugly place, a six-story concrete building known as the Geneva free port. Instead of windows, much of the façade of this giant safe for the world’s wealthy is covered with gray panels. Anyone hoping to get into the walk-in lock boxes of this very special Swiss tax haven must first surmount a number of hurdles. At the first door, an employee has to type the right combination of numbers into a small screen. The next hurdle is a large steel barrier that has to be rotated counter-clockwise until it snaps into place, followed by a heavy steel door that resembles a submarine bulkhead. Behind it is a drab corridor with doors on both sides. Only the renters have keys to these doors. Read more of this post

Chinese films gain box office edge with reality-based films

Chinese films gain box office edge with reality-based films

Xinhua

2013-07-25

Already topping US box office charts, action sequel Fast & Furious 6 and sci-fi flick Pacific Rim are also poised to cash in on the flourishing Chinese film market. These Hollywood blockbusters, which are scheduled to debut in Chinese theaters on July 26 and July 31, respectively, will face fierce competition from their Chinese counterparts, including a sequel to a popular coming-of-age drama Tiny Times that will hit screens early next month. Tiny Times, a film inspired by author-turned-director Guo Jingming’s novel of the same name, has raked in 475.6 million yuan (about US$77.5 million) in the Chinese mainland since its debut on June 27, according to figures released by China Film News on Tuesday. Read more of this post

Japan’s Temples, Universities, Hospitals Haunted By Yen Bets; Ryusho Soeda, 66, has taken on a job for which his career as a Buddhist priest never prepared him: forensic accounting

Japan’s Temples, Universities, Hospitals Haunted By Yen Bets

By Hideyuki Sano on 1:36 pm July 24, 2013.
Koya, Japan. Ryusho Soeda, 66, has taken on a job for which his career as a Buddhist priest never prepared him: forensic accounting.

Soeda’s temple is the 1,200-year-old Koyasan, a World Heritage site deep in the mountains of western Japan and long prized as a haven for quiet contemplation. But in recent months monks here have been debating a very worldly question: How did a complex bet on the yen go so horribly wrong?

Soeda, who was picked to head Koyasan in June after his predecessor was forced out, has promised a full accounting of the temple’s losses, which at one point last year threatened to wipe out half of its endowment. Read more of this post

As growing numbers of Indonesians become frustrated with the rising price of basic foods, such as chili, onion, chicken and eggs, the government faces scrutiny

Hot Seat on Chili Cost

By Yanto Soegiarto on 9:40 am July 24, 2013.
As growing numbers of Indonesians become frustrated with the rising price of basic foods, such as chili, onion, chicken and eggs, the government faces scrutiny.

Not only are citizens upset, but President Susilo Bambang Yudhoyono also recently expressed anger over the public outcry and incapability of his ministers to stabilize food prices.

Based on official statistics obtained from the Central Statistics Bureau (BPS) during the first week of July, the price of red chili (bird’s eye chili) went up to Rp 41,000 ($4) a kilogram — nearly 50 percent higher than the normal price. Read more of this post

Tide Turns Against Private Equity in India

Jul 24, 2013

Tide Turns Against Private Equity in India

By Kenan Machado

The rupee’s slump to a record low is adding to the woes of foreign private-equity firms invested in India even as they deal with slowing economic growth and a big drop in initial public offerings this year. Those firms piled into the country in 2007 and 2008, when the economy was expanding at 8% to 9%. Since then, growth has fallen, sliding to a 10-year low of 5% in the fiscal year that ended in March. The rupee has fallen by around 52% since hitting a multiyear high in late 2007. It reached a record low of 61.20 to the dollar this month before strengthening to trade at around 59.40 on Wednesday. Read more of this post

No Menstrual Hygiene For Indian Women Holds Economy Back

No Menstrual Hygiene For Indian Women Holds Economy Back

Sushma Devi, a mother of three in Northern India, stores her “moon cup” on the window sill of the mud-brick veranda that shelters the family goats.

In a village where few have indoor toilets and the Hindi word for her genitals is a profanity, 30-year-old Sushma struggles to talk about how she manages her period and the changes brought by the bell-shaped device she inserts in her vagina to collect menstrual blood.

“It’s a thing from hell,” she says of the malleable, silicone cup, which she received from a Massachusetts Institute of Technology research group. “I have to keep it far from the house, from where I pray.” Read more of this post

China Wrings Price Cuts in Public Campaign on Graft-to-Collusion

China Wrings Price Cuts in Public Campaign on Graft-to-Collusion

When GlaxoSmithKline Plc (GSK) sent a top executive to Beijing this week to apologize in person for alleged corruption, he delivered a second pledge: cheaper drugs.

“We fully support the efforts of the Chinese authorities in their reforms of the medical sector,” Abbas Hussain, the London-based drugmaker’s president overseeing emerging markets, said in a statement on the website of the Ministry of Public Security, the country’s top law enforcer. Any savings in the way Glaxo operates, he said, will be passed to consumers, “ensuring our medicines are more affordable to Chinese patients.” Read more of this post

What about the workers … and their share of income?

What about the workers … and their share of income?

10:33am EDT

By Alan Wheatley, Global Economics Correspondent

LONDON (Reuters)- Nothing lasts forever but a global trend that set in 30 years ago shows no sign of ending: a steep rise in the share of income that goes to profits and a corresponding decline in labor’s slice of the economic pie.

The imbalance, which is driven by technical change, the waning clout of unions and the rise of financial markets, raises issues that are primarily political.

At what point will public opinion decide that the pendulum has swung too far towards the owners of capital? Should taxes and transfers be tweaked to redistribute income more fairly? Read more of this post

Australia’s CBA Seeks Property Withdrawal With Plan to Exit REITs Management

CBA Seeks Property Withdrawal With Plan to Exit REITs Management

Commonwealth Bank of Australia (CBA) is seeking to exit its property management business by proposing that its three listed property funds set up their own management teams.

CFS Retail Property Trust (CFX) and Commonwealth Property Office Fund (CPA), now managed by CBA’s funds management division, and Kiwi Income Property Trust in New Zealand have received a conditional proposal from the bank to internalize their management, the trusts said in separate regulatory filings. The bank is also proposing that CFS Retail acquire the wholesale property funds management and retail property and development business from CBA, the trust said. Read more of this post

Americans Gambling on Rates With Most ARMs Since 2008

Americans Gambling on Rates With Most ARMs Since 2008

Jung Lim plans to offset the cost of rising mortgage rates by using an adjustable-rate loan to buy a home for his expanding family. For the California endodontist, the money he’ll save makes up for the ARM’s risky reputation.

Lim, 38, whose wife is expecting a second child in December, is leaving a two-bedroom condo in Los Angeles’s Hancock Park to buy a four-bedroom house in the city’s Sherman Oaks neighborhood for $1.12 million. His lender offered him a rate for an adjustable mortgage that is about a percentage point cheaper than a fixed loan. Read more of this post

Angolan Capital Overtakes Tokyo as Most Costly City for Expats

Angolan Capital Overtakes Tokyo as Most Costly City for Expats

The Angolan capital Luanda has overtaken Tokyo to become the world’s most expensive city for expatriates in a survey of 214 cities by Mercer, which cited security for pushing up costs.

“Despite being one of Africa’s major oil producers, Angola is a relatively poor country yet expensive for expatriates since imported goods can be costly,” Barb Marder, a senior partner at Mercer, said in a statement with the company’s annual Worldwide Cost of Living Survey. “In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly.” Read more of this post

Humans Beating Robots Most in Currency Trading Since ’08 as Trends Shift

Humans Beating Robots Most Since ’08 as Trends Shift: Currencies

By Ye Xie and Liz Capo McCormick – Jul 23, 2013

Humans are proving more adept than computers in reacting to the Federal Reserve’s mixed messages on when policy makers will reduce their unprecedented stimulus.

Currency funds that use computer models for trading decisions made 0.9 percent this year through May, compared with 2.5 percent for those that don’t, the biggest margin since 2008, according to the latest data from Parker Global Strategies LLC. Hong Kong-based Ortus Capital Management Ltd.’s $1.1 billion computer-model fund lost 13.8 percent in the first half, while the FX Concepts Global Currency Fund, which employs a similar strategy, fell 3.3 percent, Barclay Hedge Ltd. data show. Read more of this post

Starbucks and Danone team up to take on growing $7 billion US yogurt market

Starbucks and Danone team up to take on growing US yogurt market

Wednesday, Jul 24, 2013

Reuters

Starbucks Corp and Danone SA said on Tuesday they will sell a co-branded yogurt through Starbucks cafes and in grocery stores as yogurt makers and food companies battle for market share in the US$7 billion (S$.8.8 billion) US market. The partnership comes as Starbucks pushes into the “health and wellness” category and as Danone, owner of the Dannon brand, and other yogurt makers seek to conquer the US market, where yogurt consumption per capita lags Europe. Financial terms were not disclosed. Their first product will be ready-to-eat Greek yogurt parfaits, to be sold in US Starbucks stores in spring 2014. Read more of this post

Chinese Not Impressed by World’s Future Tallest Building

Chinese Not Impressed by World’s Future Tallest Building

As recently as July 1, cattle apparently grazed in the fields intended for the world’s tallest skyscraper in the rural outskirts of Changsha, in China’s Hunan province. That wasn’t the original plan: Sky City, as the concept is known, was scheduled for completion earlier this year after a mere 90 days of construction.

Understandably, few people inside or outside China believed such a deadline was possible. It wasn’t. Work never even started on the project, which was delayed in part by the government-approval process. Read more of this post

Watch revenue when parsing western vs emerging bonds

Watch revenue when parsing western vs emerging bonds

1:53am EDT

By Mike Dolan

LONDON (Reuters) – Watch governments’ revenues, and not just how much their economies produce, to see if they can support their debt piles. For investors choosing between bonds of heavily-indebted governments of recessionary European nations and those of the seemingly tidier national accounts in the fast-growing developing world, the point is increasingly poignant. For over three years at least, the decision was simple. But after months of shocks to emerging markets and their previously buoyant bond universe in particular, lots of that recently assumed wisdom has come into question. Read more of this post

Investing When Opportunities Are Limited; Ben Inker, an associate of famed investor Jeremy Grantham, argues that both stocks and bonds are overvalued. So what’s an investor to do?

TUESDAY, JULY 23, 2013

Investing When Opportunities Are Limited

By BEN INKER | MORE ARTICLES BY AUTHOR

Ben Inker, an associate of famed investor Jeremy Grantham, argues that both stocks and bonds are overvalued. So what’s an investor to do?

Editor’s Note: Jeremy Grantham has decided to take a break from his scheduled summer quarterly missive to investors. But we’re happy to share the latest commentary of Ben Inker, who works alongside Grantham at GMO, the Boston-based money management firm. A longer version of this commentary, along with charts, is available on the GMO Website.

To investors focused on U.S. equities, it may be easy to forget the investing excitement of this spring, but for others, particularly anyone running a portfolio predicated on asset class correlations being low, this has been a pretty shocking couple of months. From May 22 to June 24, the S&P 500 lost 5.6%, MSCI EAFE lost 10.1%, MSCI Emerging Markets fell 15.3%, the Dow Jones/UBS Commodity index fell 4.5%, the U.S. 10-year T-Note fell 4.4%, and the Barclays U.S. TIPS index fell 7.1%. For good measure, the J.P. Morgan Emerging Debt Global index fell 10.8%, the German 10-year Bund fell 5.2%, the UK 10-year Gilt fell 3.4%, and the Australian 10-year bond fell 6.5%. Equity markets have made a fairly sharp recovery since then, with the S&P 500 actually hitting new highs, but lots of other asset classes are still licking their wounds. In light of the generally negative correlations between stocks and bonds of the last decade, the universality of the declines looks pretty weird. For those schooled in thinking that the only “risks” that matter for investors are growth shocks and inflation shocks, it’s significantly more than just weird. To anyone of that mind, it’s a bit of a soul-searching moment, and it forces you to either treat the episode as a one-off event that will hopefully not happen again anytime soon or as a challenge that requires you to rethink your risk model. Not surprisingly, at GMO we believe it to be the latter, and that most investor risk models are missing an important piece of the puzzle. Read more of this post