Bamboo Innovator

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.”