In Asia, private-equity firms are cashing out of the Asian companies they own by adding debt to those businesses

May 14, 2013

In Asia, Private-Equity Buyers Borrow to Cash Out

By Fiona Law

Some private-equity firms are cashing out of the Asian companies they own by adding debt to those businesses. The fact that borrowers can raise cheap funds and use the cash to pay dividends to shareholders is more proof that debt markets in Asia are booming. But by leaving the companies with more borrowings and less cash, the tactic also makes the debt riskier for investors who buy it. In a recent example, school operator Nord Anglia Education raised $475 million through two bonds sold this year and last year. One-third of the first $325 million issue was used to repay a loan to Baring Private Equity Asia, which owns the company. The second $150 million issue was used to finance Baring’s and Nord Anglia’s purchase of WCL Group Ltd., which runs international schools in the U.S., Spain and Qatar. In such deals, known as dividend recapitalizations, private-equity-owned companies raise cash by issuing debt. Part, or all, of the proceeds are distributed in the form of dividends to buyout groups. Bond buyers usually prefer that companies use funds raised by borrowing for projects that will generate cash, or to pay down existing debt.

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China’s Premier Li Keqiang said the economy is facing downwards pressure but warned that there is little room for stimulus or official investment to take up the slack

TUESDAY, MAY 14, 2013 – 19:26

China’s Li Warns Econ Under Pressure; Little Room For Stimulus

BEIJING (MNI) – China’s Premier Li Keqiang said the economy is facing downwards pressure but warned that there is little room for stimulus or official investment to take up the slack. He said the economic situation remains “complicated” and said market forces will be needed to support growth. Li’s comments were posted in a statement about reforming the structure of the State Council on the government’s main website late Tuesday.

Li Signals Reluctance on Stimulus to Boost China Growth

Chinese Premier Li Keqiang signaled policy makers are reluctant to use stimulus to counter a slowdown in the world’s second-largest economy because the risks outweigh the benefits. “To achieve this year’s targets, the room to rely on stimulus policies or government direct investment is not big — we must rely on market mechanisms,” Li said in a May 13 speech broadcast to officials around the country, according to a transcript published last night on the central government’s website. Relying on government-led investment for growth “is not only difficult to sustain but also creates new problems and risks,” he said.

The comments indicate China may be unlikely to boost government spending or follow central banks across Asia in cutting interest rates as Li tries to pare the state’s role in the economy. Bank of America Corp. and JPMorgan Chase & Co. this week lowered 2013 growth estimates to 7.6 percent after April industrial production and investment trailed forecasts. Read more of this post

Urban rail transit projects across China costing 800 billion yuan are going to weigh heavily on the already high level of local government debt.

More debt trouble is rolling along rails
Wednesday, May 15, 2013
Urban rail transit projects across the mainland costing 800 billion yuan (HK$1.01 trillion) are going to weigh heavily on the already high level of local government debt. The warning about funding challenges presented by subway projects in 24 cities is from the state’s China Economic Weekly. It follows on from US-based Fitch Ratings last month cutting China’s long-term local-currency debt rating, citing rising risks to financial stability given a lack of transparency in the increased borrowing of local governments. It estimated this debt was 12.85 trillion yuan at the end of 2012. On the rail projects, the fear is that 24 cities simply lack the means to pay for the schemes. Guo Tianyong, a professor at the Central University of Finance and Economies in Beijing, pointed to the projects as making the local debt crisis more acute. New projects on the move include Harbin, Changsha, Ningbo and Zhengzhou laying 387 kilometers of track, and eight cities are extending existing networks. Guangzhou Metro Corp executive Ye Zichuan said most subway operators can expect to see greater losses this year. CATHY WU

Billionaires Juan Roig and Hortensia Herrero, the husband-and-wife team that controls Mercadona SA, Spain’s largest supermarket chain, created thousands of jobs last year as their country’s economy crumbled

Spanish Billionaires Hire 4,000 Amid Country’s Job Slump

Billionaires Juan Roig and Hortensia Herrero, the husband-and-wife team that controls Mercadona SA, Spain’s largest supermarket chain, created thousands of jobs last year as their country’s economy crumbled. Revenue at the closely held operation rose 7 percent to 19.1 billion euros ($24.5 billion) in 2012, according to its annual report, as demand for its low-priced, private-label goods lured cash-strapped Spanish shoppers. Net income also jumped 7 percent to 508 million euros, a performance that helped allow the company to hire 4,000 new workers. Roig, the country’s fourth-richest person and a well-known figure in the Spanish press for his economic commentary and pronouncements, controls 51 percent of Mercadona. He has a $4.5 billion fortune, according to the Bloomberg Billionaires Index.

“Mercadona, under the Roigs’ instruction, has posted extraordinary growth over the last 10 years,” said David Bain, the London-based head of research at Campden Wealth, a networking community for the world’s wealthiest family businesses. “Roig is a big believer in the family business model, and is strict about his family actually contributing rather than providing a nice place to hang out in a high-paying non-job.” Herrero, 62, is vice president of the Valencia, Spain-based company, which commands 14 percent of all food retail space in the country, according to the annual report. She controls a 28 percent stake in the company and has a net worth of at least $2.6 billion. Read more of this post

India’s demographic challenge: India will soon have a fifth of the world’s working-age population. It urgently needs to provide them with better jobs

India’s demographic challenge

Wasting time

India will soon have a fifth of the world’s working-age population. It urgently needs to provide them with better jobs

May 11th 2013 | PATNA, BIHAR |From the print edition

ONE of India’s bigger private-sector employers can be found in Patna, the capital of Bihar, a poor, populous state in the east of the country. Narendra Kumar Singh, the boss, has three gold rings on his right hand and arms big enough to crush rocks. His firm, Frontline, has 86,000 people on its books. They are mostly unskilled men from rural areas in poor states like Bihar; thanks to Mr Singh they have jobs in cities all over India.

There is lots to celebrate about this. Mr Singh’s business has sales of $185m and its employee base has grown by 1,600% since 2000. He is looking for a Western partner and wants to expand to Sri Lanka and Bangladesh. He is providing paid work for part of the large cohort of young people now entering the workforce. And by shifting people from farms to cities he is helping urbanisation of the sort that underpinned startling progress elsewhere in Asia.

Yet Frontline is also a symptom of a colossal failure. For it is not supplying labour for a manufacturing boom of the kind that helped so many in China, South Korea and Taiwan out of poverty, or for the IT services at which India has excelled. Instead it offers relatively unproductive service-sector jobs—in particular, security guards. It has become de rigueur for every ATM, office, shop and apartment building to have guards. Across India millions of young men now sit all day on plastic seats in badly fitting uniforms with braids and epaulettes, unshaven and catatonically bored as the economic miracle passes by. This isn’t how East Asia got rich. Read more of this post

Water With Some Pop to It: New Drinks Go After People Who Don’t Like the Bland Taste; Controlling the Flavor

May 14, 2013, 7:43 p.m. ET

Water With Some Pop to It

New Drinks Go After People Who Don’t Like the Bland Taste; Controlling the Flavor

By SARAH NASSAUER

With soda and diet soda sales in decline, drinks companies are coming up with waters that look more like soda than water. Sarah Nassauer joins Lunch Break with a look.

When is water actually soda? As bottled-water sales boom and traditional soda sales slump in an almost decade-long decline, companies are marketing water that hints it could taste like soda. The consumer targets: People who know they should drink more water but don’t always like the taste. These water-fussy drinkers are a quiet but large group—about 20% of Americans, say drinks companies and consumer research firms. Some complain water tastes metallic or chlorinated. Others say water is too boring. The products becoming popular with these folks aim to mimic water: They have no calories and market themselves as natural, though some have artificial sweeteners and colorings, or other ingredients that help deliver a soda-like fix. The makers of these drinks hope people who like water or soda but want more variety will also buy the products. Read more of this post

European authorities raid Shell, BP and Statoil offices to probe suspected manipulation of oil prices

Published: Wednesday May 15, 2013 MYT 9:27:00 AM

European authorities raid Shell, BP and Statoil offices to probe suspected manipulation of oil prices

LONDON/OSLO: European authorities have raided offices of oil majors Shell, BP and Statoil in an investigation of suspected manipulation of oil prices, one of the biggest cross-border actions since the Libor rigging scandal. Authorities have sharpened scrutiny of financial benchmarks around the world since slapping large fines on some of the world’s biggest banks for rigging interest rate benchmarks. On Tuesday, the European Commission said it was investigating major oil companies over suspected anti-competitive agreements related to submission of prices to leading oil pricing agency Platts, a unit ofMcGraw Hill Group. “Officials carried out unannounced inspections at the premises of several companies active in and providing services to the crude oil, refined oil products and biofuels sectors,” the Commission said. The inspections took place in two EU member states and one non-EU country, it said. “The Commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” it said.

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Why Foxconn’s Switch to Robots Hasn’t Been Automatic

05.14.2013 17:43

Why Foxconn’s Switch to Robots Hasn’t Been Automatic

With the wages of workers rising, the huge manufacturer has pursued increased automation, but the effort has not gone smoothly

By staff reporter Li Xuena

(Beijing) – In the face of rising labor costs in recent years, manufacturing companies at home and abroad have tried to find new ways to control spending and improve productivity. At the same time, Foxconn International Holdings, the original equipment manufacturer for companies such as Apple Inc. and its iPhones and iPads, has been at the center of controversy over its labor practices since a spate of worker suicides at its facilities in 2010. This prompted the company to give employees a raise. In June 2010, Foxconn said that starting from October 1, 2010 its entry-level workers’ wages would be increased to 2,000 yuan per month from 1,200 yuan after a three-month probation. It also spurred Foxconn to speed up its pursuit of automation. The company’s president, Terry Guo, said in 2010 that it would produce 1 million Foxbots, a mechanical arm researched and developed by Foxconn to perform dull and dangerous jobs. The robots would be implemented from 2012 to 2015 to increase the rate of automation and productivity. However, a poor financial showing in 2012 has become an obstacle realizing the plan. Foxconn’s net loss in 2012 was US$ 316 million, the biggest loss it has suffered since listing in Hong Kong in 2005, the company’s financial report shows. Read more of this post

Errors of Aggression Catch up with Underwriter; Ping An Securities pursued IPOs with abandon for two years, but sloppy work has resulted in heavy punishment from the regulator

05.14.2013 18:24

Errors of Aggression Catch up with Underwriter

Ping An Securities Co. pursued IPOs with abandon for two years, but sloppy work has resulted in heavy punishment from the regulator

By staff reporters Zhang Bing, Fu Yanyan and Zheng Fei

(Beijing) – Ping An Securities Co. has been slapped with a fine by the securities regulator and will lose its stock underwriting license for three months because of its sloppy work in underwriting the initial public offering of a company that turned out to be a fraud.

This is not the first time the leading underwriter had to swallow a bitter pill for its overly aggressive approach to IPO underwriting in 2010 and 2011, when it beat all other brokerage firms in the country in underwriting revenue. Read more of this post

China: High and dry; Water shortages put a brake on economic growth and stir political discontent

Last updated: May 14, 2013 9:12 pm

China: High and dry

By Leslie Hook

Water shortages put a brake on economic growth and stir political discontent

Holed beneath the waterline: China’s droughts and water shortages are pushing people to leave their homes and join an exodus to the cities

Wang Fuguo, a 63-year-old cotton farmer, does not know when his ancestors began tilling the land in the dusty village of Weijie. But he is fairly sure he will be the last of his family to do so. “They’ve all fled,” he says, looking out from his gate at the abandoned houses that line the village’s only street. The reason is simple. “There’s just no water here,” he says. “If you don’t have water you can’t survive.” His household gets running water for one hour every five days, barely enough to feed a tiny patch of aubergines and supply his family and their dozen sheep. In the face of China’s rapid economic expansion and growing presence on the global stage, it is often forgotten that the country is running out of water. In per capita terms, China’s water resources are just a quarter of the world average. Eight of China’s 28 provinces are as parched as countries in the Middle East such as Jordan and Syria, according to China Water Risk, a consultancy based in Hong Kong. Read more of this post

Why Investors Can’t Imagine a Collapse of the Bond Market

May 14, 2013

Why Investors Can’t Imagine a Collapse of the Bond Market

By Jason Zweig

For years on end, pundits have been predicting the collapse of the bond market, and recently such calls have reached a crescendo – with bond king Bill Gross of Pimco being the latest to sound the death knell.

But investors show almost no inclination to avoid the impending doom: A new survey of investors by BlackRock found that 57% are “worried about rising interest rates” and 53% think bonds are riskier today than a decade ago. Yet fewer than 7% said that “identifying the bond investments that are right for you” would be a major focus for them over the coming year – and 60% said they wouldn’t focus on it at all.

Meanwhile, even as the stock market has shot almost straight up for the past four years, investors appear to be turning their backs on equities. The proportion of Americans who will admit to owning stocks has sunk to 52%, down from 65% in 2007, according to a new Gallup survey.

In short, investors are the prisoners of their past. Read more of this post

James Montier’s Presentation at London Value Conference: GMO Now 50% in Cash

Monday, May 13, 2013

James Montier’s Presentation at London Value Conference: GMO Now 50% in Cash

Continuing our notes from the London Value Investor Conference 2013, the next speaker is James Montier of GMO.  He presented an update on their latest asset allocation model.
GMO Now 50% in Cash
James Montier said that GMO’s 7 year asset allocation model for US stocks is now predicting  negative returns. GMO are now 50% in cash.  While they’ve been known to hold higher levels of cash than most investors, this seems to be taking things a step further.  They still hold some investments in Japan but he  indicated that they are likely to be selling over the next couple of months.
He said that a year ago the model was indicating good returns in Europe but now it only suggests  2.5% real return per annum. He said that they are a bit frightened to follow the model in Europe  because of the leverage at the company level, particularly in the financial sector.
Their model suggests that the best value is in emerging markets where 6% real is forecast. However,  he mentioned that the research by his colleague, Edward Chancellor, which has identified an asset  bubble in Chinese real estate, has made GMO cautious and led them to allocate less to EM than the  model would suggest.
It is clear that at certain times GMO are prepared to overrule their  quantitative asset allocation models when other evidence suggests caution.

Brokers Go Gray as Youth Unsustainable Without Cold Calls

Brokers Go Gray as Youth Unsustainable Without Cold Calls

Alex Freemon was so eager to be a stockbroker after graduating from the Georgia Institute of Technology last year that he said he was happy to go door to door selling mutual funds for Edward Jones & Co.

The brokerage flew him to St. Louis, where he practiced knocking on a model door in a classroom of would-be brokers at the company’s headquarters, then sent him back to Atlanta to walk the streets for 10 hours a day for about $30,000 a year plus commissions. Freemon said he quit in March after realizing he would have to spend five years struggling to meet sales goals before he could focus on helping clients make financial plans.

“Until you actually go out and hit the pavement, it doesn’t really sink in,” said Freemon, 23, who now works as a business analyst at a software company in Atlanta. “It’s not impossible, but it’s definitely not sustainable if you have a family or anything to do besides knocking on doors.”

Breaking into the brokerage business is getting tougher as declining fees make small accounts less profitable and government restrictions on unsolicited calls make phone sales taboo. That’s leaving big firms struggling to replace a retiring generation of advisers who helped accumulate trillions of dollars of assets and generated steady profits for years.

“The only way you can do it is if your dad is rich and he’s got country-club buddies he can send you or you’re a psycho who can work 20 hours a day,” said Josh Brown, who helps oversee about $350 million at Fusion Analytics Investment Partners LLC in New York. Read more of this post

The Resistible Fall of Europe: An Interview with George Soros

George Soros is Chairman of Soros Fund Management and Chairman of the Open Society Foundations. A pioneer of the hedge-fund industry, he is the author of many books, including The Alchemy of Finance and The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means.

The Resistible Fall of Europe: An Interview with George Soros

14 May 2013

Editor’s note: On May 12, George Soros was awarded the Tiziano Terzani Prize for his 2012 book Financial Turmoilpublished in Italy by Hoepli. The following interview is adapted from a press conference held in Udine, Italy, on that occasion.

INTRODUCTION
SOROS: I have been very concerned about Europe. The euro is in the process of destroying the European Union. To some extent, this has already happened, in the sense that the EU was meant to be a voluntary association of equal states. The crisis has turned it into something that is radically different: a relationship between creditors and debtors. And, in a financial crisis, the creditors are in charge. It is no longer a relationship between equals. The fate of Italy, for example, is no longer determined by Italian politics – which is in a crisis of its own, I would say – but rather by the creditor/debtor relationship. That is really what dictates policies.

QUESTION: But the stock markets are apparently in good condition. Why do you think we are in a crisis? Do you think this kind of honeymoon will go on for a long time?

SOROS: The answer is no. We are in what I call a far-from-equilibrium situation. Therefore, it cannot last. But I am not in a position to predict the future. Read more of this post

Malaysian Pension Fund Sold Stocks on Poll Rally: Southeast Asia

Malaysian Pension Fund Sold Stocks on Poll Rally: Southeast Asia

Malaysia’s biggest pension fund sold about 331 million ringgit ($110 million) of shares in the country’s benchmark index as Prime Minister Najib Razak’s election victory sparked the largest rally since 2008.

Employees Provident Fund, which oversees $176 billion for more than 13 million Malaysians, reduced stakes in 20 of the 30 stocks in the FTSE Bursa Malaysia KLCI Index (FBMKLCI) as the gauge jumped 3.4 percent on May 6, regulatory filings compiled by Bloomberg show. The fund’s net sales of UEM Land Holdings Bhd. (ULHB) were the biggest on record for a single day, while the reduction in Public Bank Bhd. (PBK) was the largest in three months.

EPF sold even as Najib’s win in the May 5 election eased concern the first change in leadership since 1957 would disrupt his plans to narrow the budget deficit and boost infrastructure spending. The fund may have taken advantage of foreign purchases to lock in higher prices on its holdings as the KLCI index rose as much as 7.8 percent to a record, said ABN Amro Private Bank’s Daphne Roth. Trading volumes on May 6 were 87 percent higher than the 12-month average, data compiled by Bloomberg show.

“The local funds went in before the election so they are just lowering their holdings and they just want to take profit,” Roth, the Singapore-based head of Asia equity research at ABN Amro Private Bank, which oversees about $207 billion, said by phone yesterday. “They are hoping to come back in when the prices are down.” Read more of this post

The ASEAN bid: policy risk to the fore

Updated: Tuesday May 14, 2013 MYT 1:54:54 PM

The ASEAN bid: policy risk to the fore

SINGAPORE: Investors are becoming increasingly picky about which bonds and stocks they buy in Southeast Asia’s fast-growing economies as the risk of policy bungling makes them more discerning. The ebb and flow of cash from money managers and retail investors into Indonesia, the Philippines, Thailand and Malaysia is still on balance an inflow into these markets. The dynamics have however changed, with marked differences between countries. Unlike in 2011 or 2012 when the simple risk-on and risk-off switches could trigger flows in and out of the region, investors are a lot more discriminating.  Read more of this post

Unfinished Asia’s biggest amusement park in Beijing demolished after 15 years of abandonment

Unfinished Asia’s biggest amusement park demolished

2013-05-14 01:31:22 GMT2013-05-14 09:31:22(Beijing Time)  SINA English

Most of the unfinished Wonderland Amusement Park in Beijing’s Changping district has been demolished after 15 years of abandonment.

The Reignwood Group launched construction of the park, which was going to the biggest amusement park in Asia, in the mid-1990s. However, construction was stopped in 1998, leaving the park uncompleted. An Feng, the chief inspector of the investment supervision department of Reignwood Group, said that construction was suspended because most land covered by the park is forestry land, and the policy to protect such land changed after major floods in 1998, forcing the company to review its plans. Even though the park was unfinished, the fairytale castles there and other facilities still attracted many visitors every year. Demolishment operations started on April 20 and most buildings are now gone. There are only some foundations left. “In 2005, the local government of Changping district got the usage rights for part of the land covered by the park back when it was doing the planning for its new town. However, we can use only 15 hectares now,” An said. “A comprehensive luxury product supermarket will be built on the site, but we are still going through the planning permission formalities,” An added.

Investment Company Asks: Is it legal in China to short a company’s shares and then publicly question its financials with prepared research reports?

05.13.2013 16:20

Investment Company Asks: Can We Legally Short Sell?

Zhongneng Xingye’s research reports can hammer a listed companies’ share prices, but CSRC refuses to say whether it regards the activity as legal

By staff reporters Liu Ran and Wang Shenlu

(Beijing) – Is it legal in China to short a company’s shares and then publicly question its financials with prepared research reports? This is the question a domestic investment company formally asked China Securities Regulatory Commission (CSRC) in a letter in March.

The matter drew attention because of the significant weight it carries in the country’s nascent short-selling industry. The method in question is practically the same as that used by American short seller Muddy Waters Research, which has made a name for itself by attacking U.S.-listed Chinese companies in recent years and making big money out of the ensuing share collapses. Read more of this post

An odd corporate vehicle in China; The experience of carmakers reveals the challenges of joint ventures

May 13, 2013 4:21 pm

An odd corporate vehicle for doing business in China

By Andrew Hill

In 2010, seven managers from PSA Peugeot Citroën and five from Chang’an Automobile met in Shenzhen, southern China, to lay the groundwork for a new car factory. Three years later, Capsa, a 50-50 joint venture between the French and Chinese companies, is in the final stages of preparing a 1m square metre plant for the September launch of Chinese-made premium cars under the DS brand. “Because we were beginning from a blank sheet, people wanted to make it as perfect as possible,” says Gilles Boussac, Capsa’s president, between meetings with his team of mostly Chinese managers. “So often in China, if you’re trying to rework or improve something, it takes years to achieve.” But the people who built Capsa have not started from scratch. Their shared enterprise is based on three decades of global car companies’ experience working with Chinese partners. International car executives are confident such ventures will continue to be the best way to reach Chinese customers, who now buy more than 20m new vehicles annually, making it the world’s largest automobile market. But their enthusiasm for these awkward corporate vehicles, with their unique management challenges, obscures the fact that the path of co-operation has been bumpy. Read more of this post

Without constitutional rule, China will struggle to avoid turbulence

Last updated: May 13, 2013 7:07 pm

Reform can end loose talk of a Chinese revolution

By Deng Yuwen

Without constitutional rule, the country will struggle to avoid turbulence, says Deng Yuwen

There are few books as popular among Chinese intellectuals and officials these days as Alexis de Tocqueville’s L’Ancien Régime et la Révolution. The 19th-century historian postulated that the unprecedented prosperity France enjoyed under Louis XVI, its final pre-revolt king, actually hastened the 1789 French revolution.

This seems to have relevance for China. Many people say there is a possibility of revolution in China in the next 10 years. That revolution is being discussed again at all – an idea to which China’s intelligentsia bade farewell in the 1990s – shows how enormously our country has changed over the past decade.

Indeed, when we discuss revolution today, the target is the ruling Communist party – an irony given that the party long monopolised the definition of revolution. The renewed talk of revolution also shows that without constitutional rule, China will struggle to break free from the cycles of turbulence that have dominated its history. Read more of this post

Emerging markets turn sour for global banks; Muddy Waters’ Carson Block Says He’s Shorting Standard Chartered Debt

May 13, 2013 5:54 pm

Inside Business: Emerging markets turn sour for global banks

By Patrick Jenkins

As growth has stagnated or gone into reverse across much of the western world in recent years, banks have understandably been burnishing their emerging markets credentials. Any lender with a credible plan to tap into the most dynamic markets of the world has been duly rewarded. It is no coincidence that the archetypal emerging markets bank, UK-based Standard Chartered, has seen its share price increase more than 130 per cent since its low point in early 2009 – outperforming the FTSE global banks index by 38 per cent. Rewind a few weeks, though, and that outperformance was all the more dramatic. Until the start of March, this was an unadulterated boom stock, with outperformance topping 65 per cent. The latest dip came as a result of some disappointing results last week. The bank only publishes skeletal quarterly information, but the disclosure that profits fell “slightly” in the first three months of the year has been enough to push its share price down more than 10 per cent over the four trading days since. The reason is simple enough. The bank’s core operations are no longer performing as they once did – high-risk emerging markets are delivering the same near-zero growth as lower-risk developed markets. StanChart is not alone. Other global banks with big operations in Asia and Latin America suffered a disappointing first-quarter performance, too. Read more of this post

Bank recruitment runs into red-faced factor; Only 2% of students considering career in finance; More than a quarter of students would be too embarrassed to admit to their friends that they were taking up a job in banking

May 13, 2013 8:05 pm

Bank recruitment runs into red-faced factor

By James Pickford, London and South-East Correspondent

More than a quarter of students would be too embarrassed to admit to their friends that they were taking up a job in banking, according to research that underlines the failure of banks to win over public opinion following the financial crisis. António Horta-Osório, chief executive ofLloyds Banking Group, said the result – in which only 2 per cent of students surveyed said they were considering embarking on a career in banking – was “very worrying”.  Read more of this post

Investors bracing for slower growth in China are turning to a formerly little-used currency trade: selling Australian dollars and buying Mexican pesos

Updated May 13, 2013, 7:53 p.m. ET

Currency Investors Turn to Unlikely Pair

By ERIN MCCARTHY and MATTHEW WALTER

Investors bracing for slower growth in China are turning to a formerly little-used currency trade: selling Australian dollars and buying Mexican pesos. The bet is that Australia’s economy, and its currency, will suffer as Chinese demand cools for raw materials like iron and coal. Mexico, with closer ties to the resurgent U.S. economy, is seen as more insulated if commodities prices fall. Read more of this post

Melting Ice Cap Draws China, Japan to Seek Arctic Riches

Melting Ice Cap Draws China, Japan to Seek Arctic Riches

Japan, China and South Korea are seeking to expand their influence in the Arctic as melting ice caused by global warming offers potentially lucrative access to resources and shipping shortcuts in the region.

Asia’s biggest economies are among 14 applicants seeking observer status on the eight-nation Arctic Council, which holds its biennial ministerial meeting in Sweden on May 15. Member countries include the U.S., Russia, Canada, Denmark, Finland, Iceland and Norway.

Winning approval would mean greater sway in international discussions over a region estimated to contain 90 billion barrels of oil, according to the U.S. Geological Survey. With climate change resulting in an Arctic that will be almost ice-free in the summer by 2050, according to a U.S. government study, the organization is facing an increase in maritime traffic and environmental disruption. Read more of this post

Chinese Power Consumption Collapses: Economic Growth Slowest Since Early 2009

Chinese Power Consumption Collapses: Economic Growth Slowest Since Early 2009

Tyler Durden on 05/13/2013 11:52 -0400

Not much to add here. If there still is any confusion why China is desperately manipulating its economic data, so balatantly in fact that virtually everyone has now noticed, this chart should put all doubt to rest. According to CLSA’s Chris Wood using NEA data, China’s monthly power consumption (the most accurate proxy for underlying economic strength according to the current premier) growth slowed from 5.5% YoY in Jan-Feb 2013 to 1.9% YoY in March, the slowest growth rate since May 2009 (as discussed in-depth here). And just to make CNBC’s life easier, we will prespin this data: the lack of growth merely shows there is much pent up growth on the sidelines, even if the country is now injecting more debt to just maintain the flatline, than ever.

Institutional Investors Need to Stop Abdicating Their Responsibilities

Institutional Investors Need to Stop Abdicating Their Responsibilities

08 MAY 2013 – ASHBY MONK

Allow me to channel Winston Churchill by saying that capitalism is the single worst economic coordination system in the world … except for all the other models that have been tried. In short, capitalism’s got its problems but it’s still better than any of the alternatives. And that means it’s worth our while to spend some time thinking about how to improve it (rather than replacing it with something silly).

I’m clearly not alone in thinking this, as a growing army of finance and business people look to render capitalism more “inclusive” and “conscientious.” As evidence of this enlightened perspective, witness sustainable development initiatives, impact investing, community based investing, SRI, ESG, CSR, SEE, PRI, OMG, LOL, WTF, and all the other random combinations of letters that will transform icy-veined capitalists into… this guy.

I think all those initiatives are great. Expanding the number of risks that investors price in their investment decision-making can only create value in the long run, if done with rigor and routine. But it hasn’t seemed to be enough to meaningfully change the system because these strategies operate at the margin. To really transform capitalism for the better, there’s a more basic approach that could be very significant: empowering the ultimate sources of capital to be better stewards of their capital. Let me explain (and reiterate something I’ve argued for a long time now). Read more of this post

China “shadow banking” growing fast, having risen nearly 70 per cent over the past two years and now total more than half the size of the world’s second-largest economy

China “shadow banking” growing fast

POSTED: 13 May 2013 7:36 PM

AFP/fl
China’s shadow banking activities have risen nearly 70 per cent over the past two years and now total more than half the size of the world’s second-largest economy.

BEIJING: China’s shadow banking activities have risen nearly 70 per cent over the past two years and now total more than half the size of the world’s second-largest economy, ratings agency Moody’s said on Monday. Shadow banking includes private lending, off-balance-sheet vehicles and trusts, and allows borrowers to circumvent banks’ formal underwriting standards, as well as official regulation. Such lending has surged 67 per cent since the end of 2010, Moody’s said in a report, reaching an estimated total of 29 trillion yuan (US$4.7 trillion) at the end of last year, or 55 per cent of China’s GDP. The rapid growth was partly due to some borrowers having difficulties obtaining regular bank loans, according to the report, and threatened the health of the banking system and the overall economy. “Shadow banking may encourage excessive financial leverage in the broad economy and add to credit bubble concerns,” Moody’s said. “Given the substantial scale and growth of shadow banking activities in China, we are doubtful of the banks’ ability to isolate themselves from a significant increase in defaults in the shadow banking domain.” China’s banking regulator has sought to rein in non-transparent lending activities and in March ordered banks to step up checks on wealth management products as part of a bid to boost risk control and openness. But Moody’s said: “The impact from shadow banking on banks will depend on the amount and timing of losses and how they are allocated, variables that are difficult to assess at this point, given the lack of transparency and fast-evolving nature of shadow banking in China.”