Europe just took another dive

• Will Martin
 

• 5h
• 1,188
 
• 1

So much for the start of a recovery.

European markets dived into the red at the open on Tuesday morning, after another massive sell off in Asian markets

All major stock indexes on the continent opened substantially lower, with all but a handful down around 1.5%. The FTSE MIB in Italy, and the CAC 40 in France were the biggest losers early in the day.

Fifteen minutes after the open, Italy's benchmark index was down by 1.67% to 18,329 points, while the CAC dropped 1.64%, or 70 points. Here's how the FTSE MIB looks:

Investing.com

The CAC 40 also responded pretty poorly to China's newest struggles. Here's the French blue-chip index's day so far:

Investing.com

Since the open, European stocks have pared most of their losses, and as of 10:30 a.m. GMT (5:30 a.m. ET) the FTSE MIB is 0.2% in positive territory, while the CAC is down just 0.67%. Other major indexes have also recovered somewhat. Here's the league table right now:

• Britain's FTSE100 — down 0.78%
• Germany's DAX 30 — down 0.58%
• Spain's IBEX35 — down 0.14%
• Euro Stoxx 50 — down 0.52%
• The Netherlands' AEX – down 0.90%
• Russia's RTSI — down 2.02%

The collapse was down to a cocktail of a market bloodbath in Asia and another day of sliding oil prices. China's benchmark index, the Shanghai Composite finished down a massive 6.43%, hitting 13-month lows.

The Chinese stock slump pushed markets across Asia downwards, with the Nikkei 225 in Japan a prominent faller, down 2.35%.

Oil has also continued its losses, which resumed on Monday, with both major benchmarks down substantially. At 8:15 a.m. GMT (3:15 a.m ET), Brent was down 2.21%, hovering just above $30.25 per barrel, while WTI was down nearly 3.2% and is trading at $29.38. Like equities, oil has recovered and both benchmarks are down around 0.7%.

China: The fear is back

• Ben Moshinsky
 

• 8h
• 6,132
 
• 8

It's happening again.

Chinese stocks sold off overnight on concerns policymakers are struggling to stop the tide of capital outflows.

The benchmark Shanghai Composite index dropped 6.42% to hit 13-month lows, dragging other Asian markets down with it. Japan's Nikkei fell 2.35%.

Here's Bloomberg (emphasis ours):

Outflows jumped in December, with the estimated 2015 total reaching a record $1 trillion,more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006.

And here's the chart:Investing.com

As outflows accelerate, pressure is put on China's currency to devalue. To support the currency, policymakers have been burning through the country's foreign reserves at a rate of about $100 billion a month.

When China devalued its currency by just a few percent in the summer, it led to a market rout in August known as Black Monday. The Shanghai index collapsed by more than 8% and kicked off a month of market turmoil in global share markets.

Meanwhile, oil also fell back below $30 a barrel after a brief but strong bull run to $32, pushed lower by falling Chinese demand and a supply glut.

Here are Barclays analysts on the drop (emphasis ours):

The fall in price comes on reports of declining diesel demand by China and of Saudi Arabia maintaining investment in energy projects. The supply glut shows no sign of abating, and OPEC's general secretary Abdalla El-Badri called for non-OPEC producers to assist in curbing global production. Other commodities underperformed as well while precious metals registered gains for the day.

And here's the chart:

China's economy has been slowing down for years — but it's still growing like it's 2007

• Elena Holodny
 
•  

• 19h
• 992

 More Charts

 
•  
 

China started 2016 with mini stock crashes and a currency devaluation.

Ever since, people have been extra-worried about the slowdown of the Chinese economy.

Or, more accurately, people have been worried about what slower Chinese growth would mean for the rest of the global economy.

However, Capital Economics' Julian Jessop argues that much of the recent panic over China looks "increasingly over done."

In a recent note to clients, he outlined three key points that fear-mongers have glossed over:

1. No one really thought that China could maintain double-digit growth forever — especially as incomes started catching up with the West. "Some slowdown was both inevitable as the economy matured, and desirable as part of rebalancing away from over-investment towards consumption," wrote Jessop.
2. China's growth has actually been slowing down for some time now. Growth in China peaked in 2007, and has been on a downward trend since 2011. "Crucially, this has not prevented advanced economies from picking up, or global growth from stabilizing," adds Jessop.
3. The larger size of China's economy means that even slower growth can mean big increases in demand and global growth. "Indeed, on the official data at least, the increase in China's GDP in 2015 was practically the same as in 2007, even though the annual growth rate had more than halved," points out Jessop.

To illustrate the second two points together, Jessop also included a chart showing the GDP growth year-over-year (the black line) and the change in GDP (the purple bars). As mentioned above, growth peaked in 2007, and has been slowing down.

However, the actual increase to China's GDP every year from 2010 to 2015 (except 2012) has been roughly equal to that of 2007. 

Now, there are still some serious worries about China in the medium term, including the high and rising levels of debt and the damage to credibility caused by interference with the stock market, he concedes.

"But despite some genuine risks, China's economy is not collapsing," argues Jessop.

"Nor is there much to justify fears that the turmoil in China's equity or currency markets will cause major problems in the rest of the world."

Sony to buy chipmaker altair in Internet of Things push

Sony Corp agreed to buy Altair Semiconductor for US$212 million, acquiring technology to power the next generation of smart appliances as the firm looks for growth beyond chips for smartphone cameras.

PHOTO: REUTERS

JAN 26, 20163:21 PM

[JERUSALEM] Sony Corp agreed to buy Altair Semiconductor for US$212 million, acquiring technology to power the next generation of smart appliances as the firm looks for growth beyond chips for smartphone cameras.

Altair, with modem chips for fourth-generation cellular technology, will help the company make component devices featuring both sensing and communication capabilities, Sony said in a statement Tuesday. Altair, based in Hod Hasharon, Israel, makes chipsets that can connect security systems, power meters and cars to the Web with the deal due to close next month.

Chief executive officer Kazuo Hirai is moving the Tokyo- based company away from consumer electronics to focus on growth in image sensors, video games and movies. It agreed to buy Toshiba Corp's image sensor operations last year to build up its chip business with growth in its devices unit contributing to the company's return to profit.

"More and more 'things' are expected to be equipped with cellular chipsets, realizing a connected environment in which 'things' can reliably and securely access network services that leverage the power of cloud computing," Sony said in the statement.

See who is talking about SONY

Last 30 days:

• 58
• 4
• 14

30 days avg

HOT COMPANIES

Kingfisher +82% messages

• GlaxoSmithKline +72%
• BT Group +42%
• Barclays +41%
• Tesco +41%
• ARM Holdings +36%
• Lloyds Banking +32%
• Diageo +31%
• Anglo American +27%
• ITV +19%

• GlaxoSmithKline +72%
• BT Group +42%
• Barclays +41%
• Tesco +41%
• ARM Holdings +36%
• Lloyds Banking +32%
• Diageo +31%
• Anglo American +27%
• ITV +19%

Global companies are increasingly looking to Israel for innovation and the country has been seeking to promote stronger trading ties with Japan. Honda Motor Co has partnered with Israeli crowdfunding startup OurCrowd to find applications for connected cars, Nick Sugimoto, a senior program director for Honda, said in an interview Monday.

"Japanese companies are more active in looking for innovative and disruptive Israeli technology," said Avi Hasson, the head of the Office of the Chief Scientist, which promotes and invests in the technology industry. "The Sony deal is a good example of that." In October, the Israeli economic ministry arranged for Hitachi Ltd to visit local companies and discuss areas where companies from the two countries could collaborate on technology for connected devices.

Sony reports fiscal third quarter results on Friday.

BLOOMBERG

    
 

Moneylenders Registry issues directions to curb abuses on short-term loans, split loans

By

Nisha Ramchandaninishar@sph.com.sg@Nisha_BT

      

JAN 26, 20162:37 PM

THE Registry of Moneylenders has released a set of directions to all licensed moneylenders to prevent abuses relating to short-term and split loans.

The directions, which serve as a supplement to the Moneylenders Act and Rules, aim to address the certain practices; namely, misleading borrowers into believing they can only be granted weekly loans under a new law, dividing a single loan into different parts so that late fees can be slapped on each component, as well as offering short-term loans of under a month. In the third instance, borrowers end up having to repeatedly re-finance the loan by paying an administrative fee.

Those who have been granted such loans can lodge a formal complaint with the Registry of Moneylenders.

Under the Moneylenders Act and Rules, licensed moneylenders have to inform borrowers of the terms and conditions of the loan, including how interest and fees are calculated and when these will be levied.

To ensure borrowers don't accept such loans, all licensed moneylenders will have to provide borrowers with a cautionary statement in writing before any loan can be given.

The Ministry of Law said in a release on Tuesday: "The directions stress to licensed moneylenders that they must cease offering loans to borrowers who are unlikely to be able to keep up with the repayment plans and as a result, incur multiple administrative or late payment fees. This is to prevent the snowballing of debts, which borrowers might have difficulty repaying."

It added that any breach of the directions will be investigated and dealt with accordingly.

      

China-inspired fear of global recession is overstated, BofA says

Whatever does cause the next global recession, it likely won't be China.

PHOTO: BLOOMBERG

JAN 26, 20162:48 PM

[HONG KONG] Whatever does cause the next global recession, it likely won't be China.

That's according to Bank of America Merrill Lynch, who gathered its top experts on the nation to mull the "34 questions about China that you were afraid to ask." They concluded the world's second-largest economy will steer clear of a hard landing and the government will contain the risks arising from its financial market turbulence. While its slowdown will weigh investor confidence, it won't cause major negative spillovers to the global economy based on an analysis of trade, portfolio and commodity channels.

"We don't view the slowing in Chinese growth as having sizable spillovers into developed markets generally, but certain economies will be harder hit than others," Michael Hanson, senior global and US economist wrote in a note.

Hardest Hit Concerns around China's impact center around its growing contribution to global growth which reached 1.3 percentage points in 2015, BofA said. Hardest hit will be major exporters to China, such as South Korea, and commodity exporters like Australia.  Southeast Asian economies could feel the brunt through soured loans from borrowers that are heavily dependent on China, such as commodity exporters.  In their analysis, the bank noted that neither the US nor European economies suffered a sizable contraction from the 1997 to 1998 Asian financial crisis.

"China is larger today than the collection of crisis countries back then, but what matters is not the size of the economic region experiencing a shock but the size and details of the shock itself," Mr Hanson wrote. "Today's smaller shock should be absorbed without major issues." It's a relatively upbeat outlook from the US lender, given that recent economic data continues to be mixed at best while the nation's stock exchanges and currency have had a rough start to the year. On Tuesday, China's stocks fell to the lowest levels in 13 months amid worries that capital outflows will accelerate.  Outflows hit a record US$1 trillion in 2015, more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006. Much of that is being pinned on fears that the yuan will weaken further. The currency fell to a five-year low earlier this month, bringing its drop over the past year to more than 5 percent.

There's potential bad news on the jobs front too. China's plan to slash crude steel production capacity could eliminate 400,000 jobs and may fuel social instability, according to the state-run metals industry consultancy.

The gloomy outlook inspired billionaire investor George Soros to last week predict China's economy is headed for a hard landing that will worsen global deflationary pressures. And Willem Buiter, chief economist at Citigroup Inc., said his base case is for the world to suffer recession-like growth of less than 2 per cent this year, thanks to China.

To avoid a slump, China's government will need to push through tough reforms to the services and financial sectors, Bank of America Merrill Lynch said. And although China's battered benchmark stock index is set for further losses of around 30 per cent by year end, the overall economy should hold up, according to the analysis.

"Our baseline case for 2016 is 'muddling through' for growth," the economists said. "We think the government will manage to contain the risk from financial market turbulence and avoid hard landing."

BLOOMBERG