Doubts Over Returns Hit Fundraising in China

February 26, 2013, 5:36 PM

Doubts Over Returns Hit Fundraising in China

By Chao Deng

Investors are growing skeptical that private equity in China can keep giving them high returns, and local funds are bearing the brunt of their reluctance to pump in more cash.

The reasons: China’s market for initial public offerings has stalled, making it harder for private-equity firms to cash out of investments, and investors are growing disillusioned with the idea that China’s economy is in line for continued spectacular growth. Growth has already slowed slightly from previous years. Read more of this post

Mao’s $300 Red Army Liquor Suffers Before China Congress: Retail

Mao’s $300 Red Army Liquor Suffers Before China Congress: Retail

By Bloomberg News – Feb 26, 2013

Kong Guoqing hasn’t seen a quieter Chinese New Year in the 12 years his family has been running their small liquor and tobacco shop in downtown Shanghai.

They didn’t sell a single bottle of the high-end spirit made by Kweichow Moutai Co. (600519) that has become synonymous with banquets and gift-giving during China’s national holiday. Kong blames the vanished sales on incoming President Xi Jinping’s crackdown on extravagant spending by officials: Moutai’s sorghum spirit can fetch $300 a bottle — about a third of an average weekly wage in China’s financial hub.

“Demand for the most expensive liquors and cigarettes this New Year seemed to have just dried up,” said Kong, pointing to red boxes of cigarettes costing about $10 a pack, or more than six times the price of regular brands. “People are afraid to accept gifts.” Read more of this post

CBC Raises Deposit Rates, First Among Big State Lenders; significant move reflects building pressures even on the powerful state-owned banks as they scramble for deposits to meet regulatory requirement following a lending spurt at the beginning of the year

CBC Raises Deposit Rates, First Among Big State Lenders

02-26 19:25 Caijing

The significant move reflects building pressures even on the powerful state-owned banks as they scramble for deposits to meet regulatory requirement following a lending spurt at the beginning of the year.

Read more of this post

Leaked conversation reveals insiders’ secret A-share pessimism; “China no longer has any resilience as it has become a heavily indebted economy”

Leaked conversation reveals insiders’ secret A-share pessimism

The recording of two financial professionals sharing a bearish outlook during a private chat is made public.

By Lillian Liu | 27 February 2013

The leak of two industry experts’ private conversation about the outlook for A-shares has spooked the market, with retail investors waking up to the fact that domestic stocks may not be as attractive as many Chinese professionals would publicly claim.

The supposedly off-the-record chat between Cheng Dinghua, a well respected strategist at Essence Securities, and Xu Xiang, an influential fund manager at Zexi Investment, was recorded by a third party and released on the internet last week.

The conversation offers a rare opportunity into the true sentiment of Chinese industry professionals towards a market where only those with the right connections are able to make big profits, while the majority of retail investors are at the mercy of market conditions. Read more of this post

China turns to all-boys classes as girls progress

China turns to all-boys classes as girls progress
By Bill Savadove | Posted: 26 February 2013 1242 hrs

SHANGHAI: Teenage boys in a Shanghai school are on the front line of teaching reform after the world’s top-scoring education system introduced male-only classes over worries they are lagging girls.

Rows of white-shirted boys are put through their paces as they are called up individually to complete a chemical formula by teacher Shen Huimin, who hopes that a switch to male-only classes will help them overcome their reticence.

“We give boys a chance to change,” she said.

The Shanghai school system topped the Organisation for Economic Co-Operation and Development’s (OECD) worldwide assessment tests of 15-year-olds in 2009, the most recent available, ahead of Korea, Finland, Hong Kong and Singapore. Read more of this post

India: Government borrowing generates inflation, widens the external deficit and crowds out much-needed investment. Can India now overcome its debt addiction?

India’s public finances

A walk on the wild side

Government borrowing generates inflation, widens the external deficit and crowds out much-needed investment. Can India now overcome its debt addiction?

Feb 23rd 2013 | MUMBAI |From the print edition

INDIA has grappled with its public finances for long enough. When presenting its first budget after independence in 1947, the finance minister of the day insisted that the country was not living beyond its means. Yet every budget since has failed to produce a surplus. India borrows more heavily than typical big emerging economies and faces more periodic crises. Palaniappan Chidambaram is the latest to try to tame the fiscal beast. He became finance minister, for the third time, last July. On February 28th he will present his budget, possibly the last one before the ruling Congress Party goes to the polls, which must take place by mid-2014.

India’s economy is a concern. Growth is running at about 5%, nearly half what it once was. The external deficit is at a record, while inflation remains stubbornly high. Last year India faced the threat of a downgrade of its credit rating to “junk” status. Thankfully, Mr Chidambaram has shaken Congress from its stupor. The party is to blame for the present budget mess, having launched a pre-election spending spree in 2008 that continued. Subsidies, mainly of fuel, almost doubled, to 2.4% of GDP. The central government’s deficit has been 5-6.5% of GDP. Add in spending by the states, and India’s overall budget deficit has been running at a wild 8-10% of GDP. Read more of this post

Indonesia: Gloomy politics, so how long can the bright economics last?

Indonesia’s economy

Gloomy politics, so how long can the bright economics last?

Feb 23rd 2013 | JAKARTA |From the print edition

ITS public life is dismal, but Indonesia’s economy is, for now, among the brighter performers in Asia. The corruption scandals engulfing the ruling Democratic Party underscore the disappointment of Susilo Bambang Yudhoyono’s second and final term. The president exercises only a weak grip on the helm, and conservatives in government have manoeuvred economic modernisers to the sidelines. Yet the economy zips along. It grew by 6.2% last year, and the government now aims for growth of 6.8% in 2013.

After a decade of painful restructuring for banks and companies, Indonesian businesses are ramping up spending on new factories and infrastructure. Investment now accounts for nearly a third of GDP. Annual imports of things like machinery and mechanical equipment are growing at double-digit rates.

Yet Indonesia’s investment-led boom is now posing problems. Exports are weak, because of depressed global demand and lower prices for many of the natural resources that the country sells to the world. Merchandise imports are growing strongly. The result is a collapse in the trade balance. After a surplus of almost $26 billion in 2011, Indonesia posted a trade deficit last year—its first annual deficit since the late 1960s. The current account, too, swung into deficit in 2012, ending a 14-year run of surpluses (see chart). It has all put pressure on the rupiah, recently one of Asia’s worst-performing currencies. Read more of this post

Bernanke’s efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the central bank’s books if interest rates rise abruptly from recent levels

Fed Faces Explaining Billion-Dollar Losses in Stress of QE3 Exit

Federal Reserve Chairman Ben S. Bernanke’s efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the central bank’s books if interest rates rise abruptly from recent levels.

That sum is the difference between the value of securities in the Fed’s portfolio on Dec. 31 and what they may fetch in three years, according to data compiled by MSCI Inc. of New York for Bloomberg News. MSCI applied scenarios devised by the Fed itself for stress-testing the nation’s 19 largest banks.

MSCI sees the market value of Fed holdings shrinking by $547 billion over three years under an adverse scenario that includes an economic contraction and rising inflation. MSCI puts the Fed’s mark-to-market loss at less than half that, or $216 billion, if the economy performs in line with consensus forecasts of gradually rising growth, inflation and interest rates.

The potential losses are unprecedented in the Fed’s 100- year history, and Bernanke has never used congressional testimony to give a detailed explanation of the consequences of shifting hundreds of billions in interest-rate risk from private portfolios onto the Fed’s balance sheet. Today, Bernanke appears before senators who oversee the Fed and may face questions on how the $3.1 trillion balance sheet will affect an exit from the stimulus program, remittances to taxpayers, and its ability to stabilize inflation expectations. Read more of this post

Abenomics Risks Deepening Global Financial Turmoil, HSBC Says

Abenomics Risks Deepening Global Financial Turmoil, HSBC Says

Japanese Prime Minister Shinzo Abe’s policies aimed at ending deflation could distort trade, drive up asset prices in other nations and lead to global financial instability, according to HSBC Holdings Plc.

“The world seemingly has yet to find a way of coping with periods during which the Japanese have attempted to kick-start their economy,” Stephen King, the London-based chief economist at HSBC, wrote in a research report today. “The big risk for the years ahead lies in a mix of rapidly widening current account deficits, hot money inflows and a proliferation of capital controls.”

Moves by Japan to revive growth have raised concern over a so-called currency war as central bankers from New Zealand to Norway signal they’re ready to stem exchange rate swings. Group of 20 finance chiefs this month signaled Abe has scope to keep stimulating the economy as long as officials stop endorsing the yen’s more than 10 percent slide in the past three months.

“If Mr. Abe’s policies work primarily through a weaker yen, Japan’s main export competitors will find themselves in the firing line,” King wrote. “The most vulnerable include Germany, South Korea and China.” Read more of this post

Singapore Trading Hub May Reduce World’s Costliest LNG, IEA Says

Singapore Trading Hub May Reduce World’s Costliest LNG, IEA Says

Singapore is the most likely hub for trading liquefied natural gas and reducing the government interference that keeps Asia’s prices higher than anywhere else in the world, according to the International Energy Agency.

A new LNG terminal in Singapore, set to receive its initial cargo from Qatar in the first quarter, will serve a wide array of tankers and boost import capacity “far beyond” domestic consumption, the IEA said today in a report. The city-state, Asia’s oil-trading center, is also creating an example for Asia by unbundling transmission from other gas and power infrastructure and taking a “hands off” approach, according the IEA, an adviser to 28 nations.

“Singapore is establishing itself as an LNG trading hub even before the physical infrastructure to import LNG is in place,” the IEA said. “Natural gas companies have begun to set up trading desks in Singapore. The presence of various international oil companies secures the availability of financial services to cater to natural gas trading.”

Gas buyers in Asia now pay about five times as much as U.S. consumers. They will be stuck with higher costs and insufficient facilities for receiving, processing and transporting LNG as long as governments promote state-owned companies and try to restrict imports, the IEA said. Lower prices in the U.S. and Europe reflect competitive and deregulated markets as much as better access to low-cost supplies, the group said. Read more of this post

Lee Kuan Yew’s China

Graham Allison, Robert D. Blackwill, Ali Wyne

Lee Kuan Yew’s China

25 February 2013

CAMBRIDGE – On the question of how the evolving relationship between the United States and China will influence the international order, there are few individuals whose observations receive equal attention on both sides of the Pacific. Henry Kissinger is one; Singapore’s founding father, Lee Kuan Yew, is another. In profiling Lee for Time magazine’s 2010 list of the world’s 100 most influential people,Kissinger observed: “There is no better strategic thinker.” Read more of this post

China’s ‘House sister’ case exposes flaws in underground financial market

‘House sister’ case exposes flaws in underground financial market

Staff Reporter

2013-02-26

On the eve of Chinese New Year, Gong Aiai, the vice president of an agricultural and commercial bank in Shenmu county in northwestern China’s Shaanxi province, was taken into custody for forging public documents and government seals following the disclosure on the internet that she illegally owns dozens of properties worth a total of 1 billion yuan (US$160 million) in Beijing and making her known nationally as the infamous “house sister.” Read more of this post

Korea’s New President Can’t Be Daddy’s Girl; The education system must be less about exams, cram schools and striving for a job at one of the chaebol and more about critical thinking, questioning authority and fostering an entrepreneurial spirit

Korea’s New President Can’t Be Daddy’s Girl

The life of Park Geun Hye, South Korea’s just-inaugurated first female president, has so far been bookended by two larger-than-life men of debatable success.

The first is her father, Park Chung Hee, the dictator who ruled the nation for 18 years until his assassination in 1979. The second is Lee Myung Bak, her predecessor who spent the last five years in the Blue House, Korea’s presidential residence, and a fellow member of her New Frontier Party.

Park must deal with their shortcomings in reverse. The immediate challenge is to be truer to her party’s name than Lee ever was. Lee left office this week with an approval rating in the 20s, an economy burdened by record household debt, a widening income gap, a strong currency that is hurting export competitiveness, relations with Japan frayed and North Korea raising hell around the globe.

Park also must eventually reckon with the legacy of her father’s era. The rapid growth of his time was fueled by cheap exports, easy credit, protection from foreign markets and the family-led conglomerates that still dominate. Today’s voters are clamoring for a more balanced and egalitarian economy and an exit strategy from the past. They literally want a new frontier. Read more of this post