Bamboo Innovator

The London market only needs transparent and ethical companies; A continuing flow of bad news from former FTSE favourites, ENRC and Bumi, is raising significant questions about London’s future as stockmarket to the world’s leading growth companies

The London market only needs transparent and ethical companies

A continuing flow of bad news from former FTSE favourites, ENRC and Bumi, is raising significant questions about London’s future as stockmarket to the world’s leading growth companies.

In the eyes of some, recent developments at ENRC and Bumi are symptomatic of the LSE being too aggressive in its efforts to attract foreign companies Photo: AFP

By Dr Roger Barker

5:05PM BST 09 May 2013

The London Stock Exchange’s ambitious vision has been to attract dynamic enterprises from emerging economies onto the London market, where they can benefit from the UK’s respected corporate governance regime. This combination of growth and good governance should, in theory, represent a compelling proposition for investors.

But in the eyes of some, recent developments at ENRC and Bumi are symptomatic of the LSE being too aggressive in its efforts to attract foreign companies. Perhaps inevitably, there has been a call for tighter regulation. In contrast to most UK-listed firms, emerging market enterprises typically have large controlling shareholders rather than dispersed ownership. Such shareholders can potentially use their voting power to overrule the board of directors and disadvantage minority shareholders, particularly through related party transactions which may favour their wider business interests. This type of conflict has been at the heart of recent boardroom disputes at ENRC and Bumi. Read more of this post

Too Much Trust in Local Finances: It would seem Chinese local governments didn’t get the memo about reining in credit risks

May 9, 2013, 5:57 PM

Too Much Trust in Local Finances

It would seem Chinese local governments didn’t get the memo about reining in credit risks.

According to data issued Wednesday by the China Trustee Association, a government-backed industry body, trust companies funneled 461 billion yuan ($75.2 billion) worth of new funding to infrastructure projects in the first three months of 2013 (here in Chinese http://www.xtxh.net/sjtj/15547.html)–-more than in the preceding six months combined.

In the third and four quarters of 2012, trusts — a type of wealth management company common in China – provided a total of 458.3 billion yuan worth of new infrastructure financing.

The massive expansion in lending to infrastructure projects – most of which likely went to investment platforms backed by local governments – comes as Beijing grows increasingly uneasy about the level of local government debt. Read more of this post

China’s Fiddled Figures: It’s hard to reform an economy you don’t fully understand

May 9, 2013, 12:49 p.m. ET

China’s Fiddled Figures

It’s hard to reform an economy you don’t fully understand.

Trade data released Wednesday painted a rosy picture of the Chinese economy. But the closer everyone looks, the more doubts emerge.

Officially, exports picked up enough to create a trade surplus worth $18.2 billion, compared to a deficit of $900 billion in March. Total exports supposedly increased 14.7% compared to April 2012, up from the 10% year-on-year growth notched in March. This sparked hopes in some quarters that disappointing GDP growth in the first three months of the year was a blip.

Yet China’s export data don’t match what other countries report they import from China. That’s because Chinese exporters overstate the value of goods to conceal the repatriation of earnings stockpiled overseas. Firms are circumventing capital controls to speculate on the rising yuan, and also to seek higher returns on risky wealth management products offered by banks at home. This inflow shows up as artificially inflated exports. Read more of this post

$58Bln Hot Money Channeled into Mainland From Hong Kong Disguised as Trade Payments

Analysis: $58Bln Hot Money Channeled into Mainland From Hong Kong Disguised as Trade Payments

05-10 13:18 Caijing

Details of April trade report and anecdotal evidence have prompted many to believe that China’s trade data was significantly inflated by companies fiddling their invoices to bring funds onshore to chase yield.

Alleged distortions on China’s export data may have dented hopes for markets starved for upbeat Chinese data, with analysis showing speculative capital inflows disguised as trade payments could hit 58 billion U.S. dollars. Details of April trade report and anecdotal evidence have prompted many to believe that China’s trade data was significantly inflated by companies fiddling their invoices to bring funds onshore to chase yield. Official data showed Wednesday that April exports grew by 14.7 percent from a year earlier, beating a market consensus of 9.2 percent gain and March’s 10.0 percent increase. Exports to Taiwan rose 49.2 percent to $4.26 billion in April, the customs said, while Taiwan data indicates imports from the Chinese mainland fell 2.7 percent year-on-year to $3.57 billion.

Read more of this post

China Should Ditch Shanzhai or the culture of knock-offs

China Should Ditch Shanzhai  

Economic Observer Online – In-depth and Independent

By EO’s Editorial Board
Issue 618, May 6, 2013
After a five-year court battle, Adidas has finally settled with Adivon (阿迪王), a Chinese sportswear company with a name and logo that is very similar to that of the global brand. Adivon has agreed to transfer its Chinese trademarks and triangular logo to the German multinational and has agreed to never use them again.

Meanwhile, another unfinished lawsuit has aroused even more attention. This one is between Qiaodan Sports Company Limited (乔丹体育) and former NBA basketball player Michael Jordan. The pronunciation of the two names in Chinese is the same. The Chinese sportswear company maintains that is has not infringed upon the Air Jordan trademark and isactually now suing Jordan for suing them two years ago just as Qiaodan was set to debut on the stock market. Qiaodan Sports argues that the Chinese name Qiaodan (乔丹) is only a translation of the common surname “Jordan.” The company also argues that the brand actually chose the name because it means “plants in the south” (南方之草木) in Chinese. As one online commentator put it, Qiaodan’s attempts to justify their use of the brand was “ridiculous” (神解释) or to put it another way, the company was “speaking blindly with eyes wide open” (睁着眼说瞎话). This kind of explanation shows both a lack of respect for the facts and is also an insult to the intelligence of consumers. For most people familiar with sport, the Chinese word “qiaodan” is clearly linked to Michael Jordan. That a Chinese company can be so bold as to claim that there is not relation is connected to the fact that up until now, Chinese culture has given too much leeway to a culture of knock-offs or shanzhai (山寨) as it’s referred to in Chinese. Read more of this post

China’s bond market regulator closed off a loophole that allowed banks that sell high-yielding wealth management products (WMPs) to evade regulatory requirements by moving money between the WMP accounts they manage and their own prop accounts

China issues new rules targeting wealth management fund pools: sources

2:30am EDT

By Yong Xu and Pete Sweeney

SHANGHAI (Reuters) – China’s bond market regulator closed off a loophole on Friday that allowed banks that sell high-yielding wealth management products (WMPs) to evade regulatory requirements by moving money between the WMP accounts they manage and their own proprietary accounts, bond traders at four Chinese banks told Reuters. The four traders, who spoke on condition of anonymity because they are not authorized to speak to media, told Reuters the China Government Securities Depository Trust & Clearing Co Ltd (CDC) and the Shanghai Clearing House had jointly notified commercial banks they could no longer trade bonds between their own proprietary accounts and the WMPs they manage for clients. The rules will go into effect Friday afternoon, the sources said. “Yesterday we could do it, today everybody has to undo it; it’s new regulation after new regulation,” said one of the traders. Read more of this post

Tough Times Ahead for 100-Yen Stores

May 9, 2013, 3:13 p.m. ET

Tough Times Ahead for 100-Yen Stores

By MAYUMI NEGISHI

TOKYO—Japanese investors and exporters may be cheering the dollar’s return to the ¥100 mark, but for the thousands of “100 Yen” discount stores around the country, it signals tough times ahead.

The 100-yen shops have become representative of a deflationary Japan, thriving by astonishing customers with the purchasing power of the ¥100 coin. They offer everything from cellphone chargers to fake eyelashes for the same low price. Their business model has centered on a strong yen pushing down prices of the imported goods that fill their shelves.

But now the Bank of Japan has declared a new war on deflation, and a primary side effect of its primary weapon—a massive monetary easing—has been a vastly cheaper yen. That is starting to erode already razor-thin profit margins for the discounters.

“A five yen difference is huge,” said Yasuaki Ikeda, manager of two US.Mart 100-yen stores in Tokyo. He imports 90% of his products, 80% of them from China. “When the cost of 100 chopsticks moves from ¥80 to ¥85, I have to ask suppliers to pack fewer chopsticks,” he said. Read more of this post

Berkshire Sells Debt to Buyers Buffett Pities; “Berkshire issuing debt is effectively an efficient way to short the bond market.”

Berkshire Sells Debt to Buyers Buffett Pities: Corporate Finance

Berkshire Hathaway Inc.’s $1 billion note sale shows that while Chief Executive Officer Warren Buffett may pity investors who’ve stuck with bonds as yields fall to record lows, he’ll sell them as much debt as they want.

The company’s Berkshire Hathaway Finance Corp. sold five-and 30-year securities offering the company’s lowest coupons for those maturities ever. Berkshire, whose holdings span insurance, railroads, newspapers and manufacturing, has reduced its bond investments to $28.6 billion from $34.1 billion in the last three years, regulatory filings show.

Berkshire isn’t buying corporate bonds, Buffett, 82, said during a May 4 interview with Bloomberg Television’s Betty Liu after the company’s annual meeting in Omaha, Nebraska. With the average yield on U.S. corporate debt having fallen to a record low 3.35 percent this month from more than 11 percent in 2008, the second-richest American said at the meeting he has empathy for savers who depend on bond interest.

“Buffett’s views on current interest rates are pretty clear,” said Richard Cook, co-founder of Cook & Bynum Capital Management LLC in Birmingham, Alabama, which oversees about $270 million including Berkshire shares. “Berkshire issuing debt is effectively an efficient way to short the bond market.” Read more of this post

Insight: New York authorities in wave of pension payment deferrals

Insight: New York authorities in wave of pension payment deferrals

9:28am EDT

By Edward Krudy

NEW YORK (Reuters) – For Niagara Falls, a city in New York staring at the prospect of insolvency in the face of a weak local economy and soaring employee costs, diverting money earmarked for pensions to cover short-term spending needs seemed like the only option. “We don’t like doing it, so this is sort of a last ditch strategy for us,” Mayor Paul Dyster told Reuters in an interview. Postponing pension payments was the way to avoid cutting back on town services, he said. Dyster is not alone. A poster child for the struggling upstate economy, Niagara Falls is now one of around 200 New York municipalities, counties and other public employers that delayed more than $1 billion in pension contributions last year as they struggled to plug budget shortfalls. The delay in contributions mirrors steps taken some years ago in other states like New Jersey and Illinois, both now grappling with massive pension funding troubles. The problem is national. Nearly half of all public plans did not make their required contributions last year and had self-declared unfunded liabilities of around $834 billion, according to Wilshire Consulting. Read more of this post

Keep on, or enough already? Fed officials spar over QE3

Keep on, or enough already? Fed officials spar over QE3

Thu, May 9 2013

By Ann Saphir, Luciana Lopez and Jonathan Spicer

SAN FRANCISCO/NEW YORK (Reuters) – Little over a week after U.S. Federal Reserve policymakers overwhelmingly endorsed a plan to keep buying bonds to spur economic growth and hiring, they are airing their differences over their super-easy policy.

“I think we should try as hard as we can” to turn things around, Chicago Federal Reserve Bank President Charles Evans said in an interview on Bloomberg TV, in a forceful defense of the bond-buying program, known as QE3 because it is the Fed’s third round of quantitative easing since the Great Recession. Read more of this post

“Bond God” Gundlach says yield-seekers at risk if interest rates rise; “If interest rates rise up to 5 percent on the 10-year Treasury, you are going to get killed in a lot of these types of vehicles”

Gundlach says yield-seekers at risk if interest rates rise: CNBC

Filed 12 hours ago

NEW YORK – Jeffrey Gundlach, star bond investor and the head of DoubleLine Capital LP, said on Thursday that investors who are fleeing bonds in favor of alternatives offering higher yields could suffer losses if interest rates rise.

“If interest rates rise up to 5 percent on the 10-year Treasury, you are going to get killed in a lot of these types of vehicles,” Gundlach, the chief executive and chief investment officer of DoubleLine Capital, told cable television network CNBC. Using master limited partnerships as an example, he said such investments have a lot of leverage and interest-rate risk.

Los Angeles-based DoubleLine Capital has $59 billion in mostly fixed-income assets. Read more of this post

Paying for the great urbanization of China

Paying for the great urbanization of China

BY HAL HARVEY | 8 MAY 2013

Article Highlights

• China is in a historic transformation, adding hundreds of millions of people to its urban centers, but its new cities have been built in ways that waste energy and create congestion.
• It is in the interest of other countries that Chinese urban development decisions be well made, because they will affect resource markets and climate change worldwide.
• To support the design, transportation and other reforms needed to create livable and healthy cities, China must change its method of financing urban infrastructure.

Consider the impact Pierre L’Enfant had when he laid out Washington, DC, or when Robert Moses worked his plans for New York, or when Daniel Burnham designed Chicago. These planners set patterns that have affected us ever since: They significantly determined how we get around, how our work and home lives connect, whether we live in welcoming neighborhoods, how much traffic congestion we suffer, and more. Their influence reaches into the industrial metabolism as well, as design choices affect our energy and material consumption. And the patterns persist for many decades. Read more of this post

Is There Political Peril in Letting China’s Cities Grow? China’s Vision for a ‘New’ Urbanization

May 9, 2013, 10:05 PM

Is There Political Peril in Letting China’s Cities Grow?

Chinese leaders since Mao Zedong have been wary of letting China’s largest cities reach megacity proportion. The usual reason cited is the fear of turning Beijing, Shanghai and other such cities into Latin American-style slums. But Ohio State University political scientist Jeremy Wallace says there may be another reason: regime survival. In a study of authoritarian regimes between 1946 and 2004 (pdf), he finds that “regimes with capital cities that dominate the urban landscape fail nearly four years sooner and face 60% greater death rates.” Read more of this post

Girl power: As the supply of female factory-workers dwindles, blue-collar women gain clout

Girl power: As the supply of female factory-workers dwindles, blue-collar women gain clout

May 11th 2013 | SHENZHEN |From the print edition

SITTING around a restaurant table, six workers discuss the progress of their labour action. Five of them are women, as are most of their several hundred colleagues who have been occupying the toy factory since mid-April. They have been sleeping on floors, braving rats and mosquitoes, to stop the owner shutting down the factory without giving them fair compensation. Those at the table are all migrants from the countryside. A couple are tearful. All are angry and determined not to give way. In Guangdong province, where nearly 30% of China’s exports are made, women usually far outnumber men on labour-intensive production lines such as those at the toy factory in the city of Shenzhen, next to Hong Kong. Rural women are hired for their supposed docility, nimble fingers and attention to mind-numbing detail. But in recent years Guangdong’s workforce has changed. The supply of cheap unskilled labour, once seemingly limitless, has started to dry up. Factory bosses are now all but begging their female workers to remain. At the same time the women who have migrated to the factory towns have become better-educated and more aware of their rights. In labour-intensive factories, stereotypes of female passivity are beginning to break down.

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