BlackRock secures US$400m China investment quota boost

BlackRock Inc has secured an additional US$400 million quota to invest in Chinese markets, in one of the largest one-time approvals granted by the authorities to invest in the mainland. 

PHOTO: BLOOMBERG

SEP 7, 20157:02 PM

[HONG KONG] BlackRock Inc has secured an additional US$400 million quota to invest in Chinese markets, in one of the largest one-time approvals granted by the authorities to invest in the mainland.

BlackRock, the world's biggest asset manager, said in a statement on Monday the move by China's State Administrator of Foreign Exchange would take the Qualified Foreign Institutional Investor (QFII) quota available to it to US$1.25 billion.

The quota boost for BlackRock comes at a time when China's stock market has seen a wave of unprecedented selling, which has resulted in the government stepping in to revive investor confidence.

China has allowed foreign investors to tap its largely closed stock and bond markets through QFII and Renminbi Qualified Foreign Institutional Investor schemes (RQFII).

The US$1.25 billion quote that BlackRock has is separate from the US$640 million under RQFII, BlackRock said.

REUTERS

ECB sets capital requirements for eurozone's top lenders

The European Central Bank's asset purchases last month slowed to the weakest since quantitative easing started in March as liquidity dried up during Europe's summer holiday period. 

PHOTO: AFP

SEP 7, 20155:07 PM

[FRANKFURT] The European Central Bank's supervisory arm has set the capital levels the eurozone's largest lenders have to hold and will communicate its draft decisions to the banks shortly, two sources with knowledge of the matter said on Monday.

The draft decisions on the minimum Common Equity Tier 1 capital cover most of the 123 banks under the ECB's supervision, one of the sources said.

"There was a supervisory board meeting on Thursday and Friday and the decisions were taken," the source said.

"They (banks) are given a deadline: here's a draft decision, please revert to us within two weeks if you have an issue."

REUTERS

ECB asset buying slows to weakest under QE in summer lull

The European Central Bank's asset purchases last month slowed to the weakest since quantitative easing started in March as liquidity dried up during Europe's summer holiday period. 

PHOTO: AFP

SEP 7, 201511:16 PM

[FRANKFURT] The European Central Bank's asset purchases last month slowed to the weakest since quantitative easing started in March as liquidity dried up during Europe's summer holiday period.

Holdings of government and agency debt, covered bonds and asset-backed securities rose by 51.6 billion euros (US$57.6 billion) in August, the ECB said on Monday. The increase compares with 61 billion euros in July and 63 billion euros in each of May and June.

While the Frankfurt-based central bank intends to buy 60 billion euros a month of debt through September 2016 to revive euro-area inflation, it has repeatedly said the program can be adjusted to take account of market conditions. Purchases were frontloaded before the summer and ECB President Mario Draghi has signaled that the same strategy may be used before December.

Draghi also said last week that the size, composition and duration of the QE program can be altered if needed for the ECB to reach its goal of returning medium-term inflation to just under 2 per cent. Consumer prices rose an annual 0.2 per cent in August and the euro-area recovery risks being undermined by a China-led slowdown in global growth, spurring speculation that the ECB may need to ease monetary policy further.

The ECB bought 42.8 billion euros of government and agency debt in August, the data on its website showed. Purchases of covered bonds were 7.5 billion euros and those of ABS were 1.3 billion euros.

In weekly data published Monday, the ECB also said holdings of public-sector debt rose by 11.9 billion euros in the period ended Sept 4, and covered bonds climbed by 1.1 billion euros. ABS holdings climbed by 382 million euros, after shrinking the previous week.

BLOOMBERG

    
 

China to cut dividend taxes for long-term shareholders

SEP 7, 201510:50 PM

[HONG KONG] China will remove personal income tax on dividends for shareholders who hold stocks for longer than a year, the ministry of finance, the securities regulator and the tax bureau said late on Monday.

Personal income tax on dividends will be reduced by 50 per cent if shareholders hold shares for less than a year but longer than a month, while full tax payment is required for shareholders who hold shares for less than a month, said the statement posted on the government's website.

The new measures will come into effect on Sept 8, the statement added.

REUTERS

China said to group state firms as commercial or not for profit

SEP 7, 20158:23 PM

[BEIJING] China has issued new guidelines for state- owned enterprises, splitting them into two main groups - those that are commercially orientated, and others that are focused on not-for-profit operations, people familiar with the matter said.

Commercial enterprises in competitive industries will sell equity stakes to other investors and seek stock listings, while SOEs related to national security will be remain in state control, the people said.

Separately, the State-owned Assets Supervision and Administration Commission - the agency overseeing the government's companies - said the reform guidelines will be released soon. SASAC didn't reply to a fax from Bloomberg seeking comment on the plans.

In the country's largest overhaul of its bloated businesses since the late 1990s, China's various government branches will next start to map out detailed plans that potentially affect tens of thousands of companies with estimated assets of about US$16 trillion. A quicker pace of SOE reform may intensify speculation over which will be reorganized, potentially adding to what's already been a volatile year for stock markets in Shanghai and Hong Kong.

Current state owned-asset supervisors should shift from managing individual enterprises to state capital management, according to people briefed on the proposal.

As part of the reforms, one principal is to enhance leadership of the communist party in the state-owned enterprises, the people said.

JPMorgan Chase & Co estimates there are more than 150,000 SOEs across the country, accounting for 17 per cent of urban employment and almost 80 per cent of the CSI 300 Index in China.

The last time China made a big push to reform its industries was in the 1990s under then-Premier Zhu Rongji. That drive resulted in more than 60,000 business closures and 30 million layoffs, according to JPMorgan.

BLOOMBERG

    
 

French 2015 growth may top 1%, not strong enough: Hollande

SEP 7, 20156:52 PM

[PARIS] French economic growth is recovering and may top the 1.0 per cent gross domestic product (GDP) rise officially forecast for 2015 but is not sufficiently strong to tackle the country's high unemployment rate, President Francois Hollande said on Monday.

Speaking at a broad-ranging news conference, Mr Hollande stood by targets for deficit reduction and said plans for more than 2 billion euros (US$2.23 billion) of tax cuts in the 2016 budget would be funded by savings elsewhere in the budget bill due to be unveiled in the coming weeks.

"Growth is coming back, not sufficiently so," he said. "We will most probably have more than 1 per cent" growth in GDP this year, he said.

REUTERS

China's offshore yuan slides after record-high drop in forex reserves

Offshore yuan softened to around 6.49 per dollar on Monday after official data showed China's foreign exchange reserves dropped by a record US$93.9 billion in August, trading at the deepest discount to the onshore rate since September 2011. 

PHOTO: AFP

SEP 7, 20156:16 PM

[SHANGHAI] Offshore yuan softened to around 6.49 per dollar on Monday after official data showed China's foreign exchange reserves dropped by a record US$93.9 billion in August, trading at the deepest discount to the onshore rate since September 2011.

Offshore yuan was trading more than 1,200 pips away from the onshore yuan, a discount of 1.89 per cent to the onshore close of 6.3659, implying that offshore investors expect further depreciation.

The drop in foreign exchange reserves was widely anticipated as the central bank stepped up intervention to stabilise the yuan currency after a surprise devaluation last month.

China's foreign exchange reserves, the world's largest, have been falling from a record US$3.99 trillion in June 2014 due to a wave of capital outflows fuelled by jitters about its economic slowdown and an expected move by the U.S. Federal Reserve to raise interest rates.

REUTERS

Indonesia's forex reserves fall to US$105.35b by end-August

Indonesia's foreign exchange reserves fell to US$105.346 billion at the end of August from US$107.55 billion at the end of July, Bank Indonesia said on Monday. 

PHOTO: AFP

SEP 7, 20156:13 PM

[JAKARTA] Indonesia's foreign exchange reserves fell to US$105.346 billion at the end of August from US$107.55 billion at the end of July, Bank Indonesia said on Monday.

The central bank used the reserves to defend the fragile rupiah, emerging Asia's second worst performing currency, last month, it said in a statement.

Additional inflows from the government's samurai bond issue buffered some of the losses, Bank Indonesia said.

The reserves in August were equivalent to 7.1 months of imports.

REUTERS

Bangkok blast suspect confesses to possession of explosives: Police

One of the two men arrested over last month's deadly Bangkok bombing has admitted to a charge of possessing explosives, police said on Monday, in the first confession over the unprecedented attack on Thailand. 

PHOTO: AFP

SEP 7, 20156:12 PM

[BANGKOK] One of the two men arrested over last month's deadly Bangkok bombing has admitted to a charge of possessing explosives, police said on Monday, in the first confession over the unprecedented attack on Thailand.

Thai police say the suspect, Yusufu Mieraili, was arrested last week near the border with Cambodia."We have informed him of the charge. He acknowledged and confessed to the charge," national police spokesman Prawut Thavornsiri told reporters.

Police have not revealed his nationality, although he was caught in possession of a Chinese passport with a birthplace listed as Xinjiang - home to the country's oppressed Uighur Muslim minority.

A second man identified as Adem Karadag has already been charged over the crime after he was caught in a flat in a Bangkok suburb with bomb-making paraphernalia and dozens of fake Turkish passports.

Police have said neither man is thought to have physically planted the bomb on Aug 17 at a religious shrine in downtown Bangkok that killed 20 people.

But they are confident the pair are involved in the network blamed for the attack, which rocked the capital and dented faith in Thailand's key tourist sector.

Mystery surrounds the alleged bombers' motive but speculation has hardened on links to China's Turkic-speaking Uighur minority.

Thailand deported scores of Uighur refugees to China early in the summer, prompting protests in Turkey where some nationalists hold a deep affinity with the minority group.

AFP

    
 

China exchanges plan circuit-breaker to "stabilise market"

China's Shanghai and Shenzhen Stock Exchanges and the China Financial Futures Exchange plan to introduce a 'circuit breaker' on one of the country's benchmark stock indexes to "stabilise the market", the Shanghai exchange said in a statement on its website late on Monday. 

PHOTO: REUTERS

SEP 7, 20159:05 PM

[BEIJING] China's Shanghai and Shenzhen Stock Exchanges and the China Financial Futures Exchange plan to introduce a 'circuit breaker' on one of the country's benchmark stock indexes to "stabilise the market", the Shanghai exchange said in a statement on its website late on Monday.

The exchange is proposing that a 5 per cent rise or fall in the CSI300 index from the previous day's close would trigger a 30-minute suspension of all the country's equity indexes if the move occurs before 2:30 pm. After that time, a 5 per cent move would prompt a suspension until the market close.

Moves of 7 per cent from the previous close would trigger a trade suspension for the rest of the day.

The exchanges are seeking comment from market participants on the proposals before Sept 21.

The CSI300 index comprises the largest listed companies in Shanghai and Shenzhen.

REUTER
S

Emerging currencies drop as ambiguity on Fed timing hurts stocks

Emerging-market currencies weakened and stocks fell to a two-week low as investors grappled with the prospect for higher US interest rates. 

AFP

SEP 7, 20157:50 PM

[LONDON] Emerging-market currencies weakened and stocks fell to a two-week low as investors grappled with the prospect for higher US interest rates. Malaysia's ringgit tumbled to a 17-year low and a bomb attack in Turkey sent the lira plunging to a record.

A gauge tracking 20 developing-nation currencies declined for a fifth day, losing 0.3 per cent to a record, as the ringgit depreciated 1.6 per cent and the lira slid as much as 1.2 per cent to 3.0465 per US dollar.

Investors have dumped riskier assets since China's shock devaluation almost a month ago worsened the outlook for trade with the world's second-largest economy, while also making a Federal Reserve interest-rate increase this month less certain.

"The momentum remains weak ahead of the Fed meeting" on Sept 16-17, said Martial Godet, the head of Europe and emerging-market equities and derivatives strategy at BNP Paribas SA in Paris, who recommends avoiding energy and commodity producers, while focusing on Taiwan, Korea, Poland and, for those prone to taking risks, China.

"With most markets already losing money in 2015, the appetite for risk is low." While small-cap stocks in Shanghai rose after a People's Bank of China official said the rout that wiped out US$5 trillion of the nation's equities was nearing an end, China's biggest companies plunged on speculation state-backed funds had stopped buying.

PT Perusahaan Gas Negara sank 11 per cent in Jakarta on a government plan to lower industrial gas prices. The Borsa Istanbul 100 Index retreated for a second day as President Recep Tayyip Erdogan vowed to escalate the government's campaign against Kurdish separatists after a roadside bomb killed Turkish soldiers.

The MSCI Emerging Markets Index decreased 1.3 per cent to 778.42 by 12:30 pm in London, pushing its price-to-earnings ratio for the next 12 months to 10.3 times, a 31 per cent discount to developed-country stocks on the MSCI World Index. The 2.6 per cent slump in the Jakarta Stock Exchange Composite Index led declines in emerging markets, while shares in Saudi Arabia, Nigeria and Kuwait gained at least 0.8 per cent.

The odds that the Fed will raise rates for the first time since 2006 this month rose to 32 per cent on Monday from 30 per cent on Friday after data showed US unemployment fell to the lowest level since April 2008. The likelihood was 48 per cent on Aug 10, the day before the yuan devaluation.

"While concerns over the Fed rate can lead to outflows from emerging markets, the sooner they do it the better as it will remove huge uncertainties," said Jeffrosenberg Tan, a money manager at PT Sinarmas Asset Management. "Once the uncertainties about the rate are gone, it would be a good time to buy stocks."

All 10 of the MSCI Emerging Markets Index's industry gauges dropped on Monday, led by telecommunications and health-care stocks. Among currencies, the South Korean won, Indian rupee and Indonesian rupiah weakened at least 0.5 per cent.

As Brent crude declined for a second day, the ruble strengthened 0.1 per cent on speculation the Bank of Russia will decide not to lower interest rates at a meeting on Friday. The Russian currency has lost 18 per cent of its value in the past three months, the most after Brazil's real among 24 developing countries.

"If markets would sell-off further, we would add some emerging-market risk," said Michael Ganske, who helps manage about US$4.5 billion as head of emerging markets at Rogge Global Partners Plc in London. Ganske said he favors the Indian rupee, Mexican peso and ruble, while staying away from the Malaysian ringgit, Taiwanese dollar and Thai baht.

The ChiNext gauge of smaller Chinese companies climbed 2.1 per cent from a seven-month low. Officials attending the Group of 20 gathering in Turkey over the weekend predicted stabilisation in the currency and stock markets in the coming weeks. People's Bank of China Governor Zhou Xiaochuan said state intervention prevented systemic risk and stopped a free-fall.

Perusahaan Gas Negara slid to the lowest level since September 2011. Indonesia plans to lower gas prices sold to industrial users by reducing government revenues from gas sales, said IGN Wiratmaja Puja, a director general at the energy ministry.

BLOOMBERG

    
 

Hong Kong, Shanghai: Stocks end lower as data eyed

SEP 7, 20154:30 PM

[HONG KONG] Stock markets in Shanghai and Hong Kong gave up early gains to end lower Monday as dealers await fresh Chinese economic data this week, amid fears weak figures will spark more turmoil.

Shanghai's benchmark index fell 2.52 per cent, or 79.75 points, to 3,080.42. However, the Shenzhen Composite Index, which tracks stocks on China's second exchange, edged up 0.20 per cent, or 3.38 points, to 1,677.33.

Mainland markets were closed on Thursday and Friday for a public holiday.

In Hong Kong the Hang Seng Index shed 1.23 per cent, or 257.09 points, to close at 20,583.52.

AFP

How far and for how long can central banks keep kicking the can?

By

R Sivanithysivan@sph.com.sg@RSivanithyBT

Write on the Money

The Singapore stock market observed.

      

SEP 7, 20154:22 PM

In my last blog posting, I wrote that a lot of the market's current woes can be traced to the "easy money'' policies pursued by central banks everywhere. I didn't know at the time that other commentators were thinking exactly the same thing. BT's Europe correspondent Neil Berhmanm for example, in our 2 Sep edition wrote an article headlined "Blame the top central bankers for the financial casino'' in which he said "officials of the Fed, BOE and BOJ who just met in Jackson Hole, Wyoming, should look into a mirror and chide themselves for the historically untested experiment of unprecedented monetary-ease and zero interest rate policies''. On the Fed, Neil writes "Former Fed chairman Ben Bernanke's initial liquidity injection helped ease the 2008 credit crunch, but he and his successor Janet Yellen's subsequent quantitative easing programme have recent years have created a host of global problems, including fickle foreign money pouring into Asian and other emerging markets and then fleeing again''.

Also on 2 Sep in Straits Times, William D Cohan in his "The Fed should show some spine'' wrote that the Fed should forget about the impact a rate hike would have on stocks and just do it. "The case for raising rates is straightforward. Like any commodity, the price of borrowing money - interest rates - should be determined by supply and demand, not by manipulation by a market benemoth. QE caused a widespread mispricing of risk, deluding investors into underestimating risk of the financial assets they were buying. The only way to return the assessment of risk to something resembling normalcy is to stop the manipulation''. Sadly, Mr Cohan notes that the Fed doesn't seem to have to "intestinal fortitude'' to do this and looks like it will cave in to Wall St's demands. 

I could go on but I think readers have gotten the message. You have to ensure the economy does well and then watch risky assets rise because the economy is doing well,  not inflate risky assets for years and hope for a trickle down to the economy. 

Put differently,  you can kick the can down the road time and again, but eventually you'll reach the end of the road. Then what?

      

To lure Chinese shoppers, luxury brands up their game in Seoul

SEP 7, 20154:10 PM

[SEOUL] Move over, Hong Kong, Tokyo and Singapore. Seoul is emerging as Asia's new fashion showcase, with the world's top luxury firms seeking to cash in on the regional trend-setting popularity of South Korean pop culture.

Fast-growing Asia is a key market driving the global luxury industry, with purchases by Chinese consumers accounting for one third of global sales, according to market researcher Bain & Company.

And those consumers often take their style pointers from elsewhere, which is why many brand companies are increasingly focusing on the country described by Bain as Asia's "trendsetter and influencer for fashion and luxury".

Over the past year, leading global fashion houses have upped their game in South Korea in a bid to reach those well-heeled Asians who take their fashion cues from popular Korean television and pop stars.

French powerhouse Chanel held its 2015/16 Cruise Collection in Seoul in May - its first show in South Korea.

And in June, Christian Dior opened a six-storey flagship store - the largest in Asia - in the upscale district of Gangnam, made famous by Korean rapper Psy's hit, Gangnam Style.

The world's top luxury group LVMH, which owns Dior and Louis Vuitton, has gone a step further by directly investing in the thriving K-pop industry.

Last August, L Capital Asia - the investment fund arm of LVMH - bought shares worth about US$80 million in YG Entertainment, a major K-pop agency.

The deal made the French luxury empire the second-largest shareholder in YG, whose roster includes Psy and boyband BigBang."Global luxury firms have begun to realise that what's popular in South Korea soon becomes popular across Asia," said Lie Sang Bong, a prominent fashion designer and head of the Council of Fashion Designers of Korea.

He said luxury brands that had previously favoured Hong Kong or Singapore as the centre of their Asia business started to turn to Seoul about three years ago.

China's influence as a trendsetter will eventually catch up with its importance as a market, but for now "Seoul is where they look to see the next big trend," he said.

Famed fashion critic Suzy Menkes picked Seoul as next year's host for what will be only the second edition of the annual Conde Nast International Luxury Conference."I think that (luxury brands) are thinking of this country as a hub, this city in particular as a hub, where people will go and buy things," Menkes, the international fashion editor for Vogue, said during a visit to Seoul in July.

The real attraction for the brand names is the promotional reach into the rest of Asia and beyond provided by the Korean Wave of Korean TV shows and pop music.

The power of the phenomenon was most recently demonstrated by the 2014 hit drama My Love From The Star which was enormously popular in China.

A pair of US$625 Jimmy Choo shoes worn by the show's star, Gianna Jun, sold out in shoe stores across Asia, while an Yves Saint Laurent lipstick she was rumoured to be wearing experienced a similar run in China.

Rapper G-Dragon - a style icon followed by millions of fans across Asia and beyond on social media - is considered a poster child of the Korean Wave boom.

His favourite items, from Yves Saint Laurent jackets to Christian Louboutin sneakers, earn instant recognition among his followers and are discussed on dozens of websites dedicated to the styles of K-pop artists.

Now the 27-year-old has become a front-row fashion show fixture not just in Asian cities, but also Paris and London.

Korean dramas have also proved to be a striking marketing device for the cosmetics industry, according to a May report by market researcher Euromonitor.

Beauty products featured in top-rated shows or favoured by their stars fuel "rocketing demand for the relevant colour cosmetics and skin care products" in other Asian countries, especially China, the report said.

And it isn't only foreign brands that are benefiting from exposure in the South Korean shop window.

A "cushion-compact" - a sponge soaked with liquid foundation - developed by AmorePacific has proved a major hit in Asia, prompting Dior to form a strategic partnership with the Korean cosmetics giant to use the "cushion" technology.

Kate Ahn, Seoul representative for British consumer research firm Stylus, said South Korea had effectively become a "springboard" for luxury brands to test consumer sentiment in the Asian market."It's a small country but a perfect starting point to tap into the Chinese market and beyond," she said, adding she had been bombarded with proposals from European and American firms hoping to invest in Seoul cosmetics makers in recent years."They even want to invest in relatively small, little-known cosmetics firms...because they know many Asian women, especially Chinese, are closely watching beauty trends in Seoul," she said.

AFP