In the latest sign, Bluestar Adisseo Nutrition Group Ltd., a Chinese maker of animal nutrition products 20% owned by U.S. private-equity firm Blackstone Group LP, scrapped plans to raise as much as US$1.56 billion in a Hong Kong IPO on Wednesday.
A day earlier, China Datang Corp. Renewable Power Co. postponed roadshows for its US$1 billion offering in Hong Kong indefinitely. Earlier this month, CJ Land Holdings Ltd. called off an US$619 million IPO.
Analysts said that sentiment toward new deals in all sectors has soured in recent days. 'The IPO market is cooling down,' said Francis Lun, general manager at Fulbright Securities.
This year, companies have raised more money on the Hong Kong Stock Exchange than on any other venue globally, an indication of the rush of global capital into emerging markets and away from developed ones. Its exchange offers foreign investors the greatest exposure to plays on China's growth at a time when China is viewed as an engine of the global economy.
But risk aversion among some investors is starting to build again after several months in which the appetite for emerging-market investments seemed limitless. While none of these events have provoked a selloff on their own, a deadly border clash between North and South Korea on Tuesday, a massive European Union bailout for Ireland and rising inflationary pressures in China are all starting to weigh on sentiment.
On Wednesday, Bluestar Adisseo blamed 'continued and excessive market volatility' for the deal's cancellation. It was the biggest deal to be shelved since Agricultural Bank of China Ltd.'s US$22.1 billion record IPO in July.
The blue-chip Hang Seng Index, though up 5.3% for the year, is down 2.8% in the past week and has slid 7.8% from its high point for the year on Nov. 8. On Wednesday, it closed at 23023.86, up 0.6% from Tuesday.
The changing sentiment could affect other companies pushing to get their listings approved before the end of the year. Four are working on deals to raise a total of more than $4 billion ahead of the Christmas holidays.
These include Huaneng Renewables Corp., which wants to raise as much as US$1.5 billion, and Russian electricity producer EuroSibEnergo, which is controlled by Russian magnate Oleg Deripaska and is targeting around the same amount. Sateri Holdings Ltd., a maker of specialty cellulose with forests in Brazil and China, is seeking as much as US$597 million, and China Zhengtong Auto Services Holdings Ltd. is looking to raise US$554 million.
Ben Kwong, associate director of KGI Asia, said investors have become more cautious after several recent listings traded below their offer prices, including two that listed this month.
Hong Kong's stock market took a beating in April after the outbreak of the European debt crisis, leading to the cancellation of IPOs such as Swire Properties Ltd.'s US$3.09 billion offering.
Thursday, November 25, 2010
Tuesday, November 23, 2010
German Chancellor Angela Merkel delivered an unusually negative assessment of Europe's effort to overcome its debt crisis
The remarks, delivered in a speech to a German employers' association, accelerated a selloff in the euro, which hit its lowest level in two months.
The tone of Ms. Merkel's comments, coming less than 48 hours after Ireland buckled to pressure to accept a bailout from European institutions and the International Monetary Fund, offered a surprising contrast to the efforts of other European leaders in recent days to bolster confidence in the euro.
Her remarks will likely fuel criticism that Germany's tough rhetoric on bailouts in recent weeks has undermined efforts to allay concerns over the future of the euro and Europe's ability to resolve its credit crisis. Germany's position as Europe's largest economy and most populous country lend particular weight to its leaders' views, both in other European capitals and among investors.
Ms. Merkel's speech drew a rebuke from Ewald Nowotny, a member of the European Central Bank's governing council. Mr. Nowotny, president of Austria's central bank, told Austrian state television that the chancellor's remarks were 'irritating.' Individual countries within the euro zone might be in peril, but not the common currency itself, he said. To suggest otherwise was 'reckless,' he said.
Ms. Merkel said she didn't want to overdramatize the situation, but added that a year ago, no one would have anticipated the steps the European Union has been forced to take to shore up the euro.
Despite the uncertainties surrounding the euro, Ms. Merkel reiterated Germany's call for bond investors to share some the pain in European bailouts following the expiration of the current rescue facility in 2013, a stance critics blame for unnerving markets in recent weeks.
The tone of Ms. Merkel's comments, coming less than 48 hours after Ireland buckled to pressure to accept a bailout from European institutions and the International Monetary Fund, offered a surprising contrast to the efforts of other European leaders in recent days to bolster confidence in the euro.
Her remarks will likely fuel criticism that Germany's tough rhetoric on bailouts in recent weeks has undermined efforts to allay concerns over the future of the euro and Europe's ability to resolve its credit crisis. Germany's position as Europe's largest economy and most populous country lend particular weight to its leaders' views, both in other European capitals and among investors.
Ms. Merkel's speech drew a rebuke from Ewald Nowotny, a member of the European Central Bank's governing council. Mr. Nowotny, president of Austria's central bank, told Austrian state television that the chancellor's remarks were 'irritating.' Individual countries within the euro zone might be in peril, but not the common currency itself, he said. To suggest otherwise was 'reckless,' he said.
Ms. Merkel said she didn't want to overdramatize the situation, but added that a year ago, no one would have anticipated the steps the European Union has been forced to take to shore up the euro.
Despite the uncertainties surrounding the euro, Ms. Merkel reiterated Germany's call for bond investors to share some the pain in European bailouts following the expiration of the current rescue facility in 2013, a stance critics blame for unnerving markets in recent weeks.
The top U.S. envoy for North Korean policy said he met with Foreign Minister Seiji Maehara and other top Japanese officials during his two day visit to Japan
Before departing for Beijing Tuesday morning Stephen Bosworth reiterated that 'we regard this development with great seriousness,' but added 'we do not consider it a crisis.'
The U.S. dispatched Mr. Bosworth in the aftermath of a new report by Stanford scientist Siegfried Hecker over the weekend revealing the North's new uranium-enrichment capabilities following a trip to Pyongyang. Mr. Bosworth said the U.S. was in contact with the scientist before his visit to the North and has been in contact with him 'very frequently' since as the U.S. attempts to gauge the extent of the North's nuclear technology.
Mr. Bosworth is in Asia to discuss the new information with members of the six-party talks and to reinforce a unified front against the North, which Mr. Bosworth said is in violation of several agreements it entered into with the members â ' Japan, South Korea, China, Russia and the U.S. â ' and of U.N. resolution 1874. Mr. Bosworth, who arrived from Seoul Monday morning, said that 'several initiatives are underway' to reach out to Russia. As one of the key allies in the North Korean denuclearization process with the U.S., Mr. Bosworth said he completed 'very important and useful consultations' with the Japanese government. During his brief visit he met with top officials including Foreign Minister Maehara, Vice Foreign Minister Kenichiro Sasae and Deputy Cabinet Secretary Tetsuro Fukuyama.
He also said that he has discussed various preconditions that the North would have to meet to resume the six party talks that have been stalled since 2008, but declined to disclose details. While Japan and South Korea share the same positions as the U.S. in regards to the North â ' all three nations have implemented various extensive economic sanctions against the hermit country â ' negotiations with China have produced mixed views in the past. China has supported the North's position to restart the talks, but the U.S., Japan and South Korea have maintained a hard line, citing Pyongyang's unwillingness to fulfill its pledge to denuclearization.
'China also adheres to the joint statement of September 2005 and I think without question we are prepared to keep moving forward in the implementation of that,' said Mr. Bosworth but would not comment on what he expects his consultations with China will produce.
The U.S. dispatched Mr. Bosworth in the aftermath of a new report by Stanford scientist Siegfried Hecker over the weekend revealing the North's new uranium-enrichment capabilities following a trip to Pyongyang. Mr. Bosworth said the U.S. was in contact with the scientist before his visit to the North and has been in contact with him 'very frequently' since as the U.S. attempts to gauge the extent of the North's nuclear technology.
Mr. Bosworth is in Asia to discuss the new information with members of the six-party talks and to reinforce a unified front against the North, which Mr. Bosworth said is in violation of several agreements it entered into with the members â ' Japan, South Korea, China, Russia and the U.S. â ' and of U.N. resolution 1874. Mr. Bosworth, who arrived from Seoul Monday morning, said that 'several initiatives are underway' to reach out to Russia. As one of the key allies in the North Korean denuclearization process with the U.S., Mr. Bosworth said he completed 'very important and useful consultations' with the Japanese government. During his brief visit he met with top officials including Foreign Minister Maehara, Vice Foreign Minister Kenichiro Sasae and Deputy Cabinet Secretary Tetsuro Fukuyama.
He also said that he has discussed various preconditions that the North would have to meet to resume the six party talks that have been stalled since 2008, but declined to disclose details. While Japan and South Korea share the same positions as the U.S. in regards to the North â ' all three nations have implemented various extensive economic sanctions against the hermit country â ' negotiations with China have produced mixed views in the past. China has supported the North's position to restart the talks, but the U.S., Japan and South Korea have maintained a hard line, citing Pyongyang's unwillingness to fulfill its pledge to denuclearization.
'China also adheres to the joint statement of September 2005 and I think without question we are prepared to keep moving forward in the implementation of that,' said Mr. Bosworth but would not comment on what he expects his consultations with China will produce.
Monday, November 22, 2010
Japanese stocks are back in vogue, at least for now, despite lingering worries over dismal economic prospects and the strong yen
At least part of that newfound popularity is coming at the expense of Asian neighbors, as global funds look beyond China and other emerging markets. The big question for investors in Japanese stocks is how long the trend will last.
Last week, the Nikkei Stock Average climbed above 10000, capping a 14% climb since the end of August to close Friday at 10022.39.
The rally stood out amid flagging shares in most other Asian markets in recent weeks, particularly in China. Investor sentiment in Japan has improved even as the fragile economy looks likely to remain at a standstill or even face another downturn.
'Foreign funds that have been selling Japanese stocks to buy [other] Asian shares are now taking profits in Asian stocks and buying back the Japanese shares,' said Kenichi Hirano, an operating officer at Tachibana Securities.
The reversal in Japan's fortunes came after the Nov. 3 rollout of a $600 billion bond-buying program by the U.S. Federal Reserve, sparking fears of a flush of liquidity into the already bubbly emerging markets.
Since then, the Nikkei has gained 7.1% versus a 6.4% drop in China's Shanghai Composite Index as of last Friday's close.
Over the same period, South Korea's Kospi is down 0.1%, Hong Kong's Hang Seng Index is 3.8% lower, and the Dow Jones Industrial Average is off 0.1%.
For China, a strong economy has created its own woes. After the consumer-price index jumped 4.4% in October from a year earlier, worries about monetary tightening sparked sharp selloffs in equities and commodities. Late Wednesday, Beijing said it was ready to impose price controls on staple goods to rein in inflation, and on Friday it raised the level of reserves that banks must hold by half a percentage point to 18%.
Japan has been seen as dependent on its now-larger rival for its own economic growth. But moves to slow China's growth may not be a negative for Japan, according to Goldman Sachs chief Japan strategist Kathy Matsui.
'Paradoxically, the more policy tightening [there is] in China, the greater the chance that global investors may opt to focus on Japanese stocks instead,' Ms. Matsui wrote in a recent report, as the brokerage raised its position on Japan to neutral from underweight.
She cited a similar pattern of Japan's outperformance between December 2009 and April, when the Chinese government also took tightening measures to stem rising prices.
During that period, the Nikkei rose 18% while the Shanghai Composite shed 10%.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said, 'Funds are flowing into undervalued Japanese stocks as share prices weaken in Asia due to inflation and monetary-tightening concerns.'
Helping to fuel the buying has been cheap share valuations even as many big companies posted strong earnings in the just-ended half-year results. An estimated 64% of all the companies on the first section of the Tokyo Stock Exchange have been trading below their book value.
'Japan will likely see its best phase next year,' said UBS Securities Chief Strategist Shoji Hirakawa. The Nikkei index may rise to 10250 by year-end, and at least to 13000 by next year, outperforming the U.S. market, he said.
But many investors also caution that the current market rise isn't necessarily for the long term, given Japan's poor economic fundamentals, shrinking population and structural problems.
Last week, the Nikkei Stock Average climbed above 10000, capping a 14% climb since the end of August to close Friday at 10022.39.
The rally stood out amid flagging shares in most other Asian markets in recent weeks, particularly in China. Investor sentiment in Japan has improved even as the fragile economy looks likely to remain at a standstill or even face another downturn.
'Foreign funds that have been selling Japanese stocks to buy [other] Asian shares are now taking profits in Asian stocks and buying back the Japanese shares,' said Kenichi Hirano, an operating officer at Tachibana Securities.
The reversal in Japan's fortunes came after the Nov. 3 rollout of a $600 billion bond-buying program by the U.S. Federal Reserve, sparking fears of a flush of liquidity into the already bubbly emerging markets.
Since then, the Nikkei has gained 7.1% versus a 6.4% drop in China's Shanghai Composite Index as of last Friday's close.
Over the same period, South Korea's Kospi is down 0.1%, Hong Kong's Hang Seng Index is 3.8% lower, and the Dow Jones Industrial Average is off 0.1%.
For China, a strong economy has created its own woes. After the consumer-price index jumped 4.4% in October from a year earlier, worries about monetary tightening sparked sharp selloffs in equities and commodities. Late Wednesday, Beijing said it was ready to impose price controls on staple goods to rein in inflation, and on Friday it raised the level of reserves that banks must hold by half a percentage point to 18%.
Japan has been seen as dependent on its now-larger rival for its own economic growth. But moves to slow China's growth may not be a negative for Japan, according to Goldman Sachs chief Japan strategist Kathy Matsui.
'Paradoxically, the more policy tightening [there is] in China, the greater the chance that global investors may opt to focus on Japanese stocks instead,' Ms. Matsui wrote in a recent report, as the brokerage raised its position on Japan to neutral from underweight.
She cited a similar pattern of Japan's outperformance between December 2009 and April, when the Chinese government also took tightening measures to stem rising prices.
During that period, the Nikkei rose 18% while the Shanghai Composite shed 10%.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said, 'Funds are flowing into undervalued Japanese stocks as share prices weaken in Asia due to inflation and monetary-tightening concerns.'
Helping to fuel the buying has been cheap share valuations even as many big companies posted strong earnings in the just-ended half-year results. An estimated 64% of all the companies on the first section of the Tokyo Stock Exchange have been trading below their book value.
'Japan will likely see its best phase next year,' said UBS Securities Chief Strategist Shoji Hirakawa. The Nikkei index may rise to 10250 by year-end, and at least to 13000 by next year, outperforming the U.S. market, he said.
But many investors also caution that the current market rise isn't necessarily for the long term, given Japan's poor economic fundamentals, shrinking population and structural problems.
Saturday, November 20, 2010
It's not a good sign, or portent, or whatever
Part 1' proves to be the emancipated elf Dobby, a bandy-legged, floppy-eared, scrawny-necked and mostly digital creature -- based on Toby Jones's performance -- who yanks really hard at your heartstrings in his hour of distress. Nor is it much help that Dobby's big moment comes almost two hours into this ponderous film adaptation of the seventh and last book in J.K. Rowling's series. Part 2 will unfold as another full-length feature.
Then what of Harry, Ron and Hermione? Well, they're on a climactic mission to defeat the evil and essentially noseless Voldemort by finding and destroying all the Horcruxes, failing which we might never get to Part 2. Along the way, you may find yourself obsessing about exactly how many Horcruxes must still be found, since the dark and doomy mission is relieved only by a cheerful wedding, a pleasant dance and a beautiful stretch of animation. What's worse, some mysterious movie curse has turned the three once-lively adventurers into wood.
Daniel Radcliffe, as Harry, spends a great deal of time looking pensive, or worried. At one point he says, with exasperation, 'This is completely mental!' Yes, and you wish it were emotional. Hermione is still the brains of the operation, yet the appealing young actress Emma Watson is called upon to wear a bleak expression that ill becomes her. Did the director, David Yates, forget that at least some of this stuff was supposed to be fun?Rupert Grint has grown up to be a skillful actor who knows the value of a slow burn, but the book dictates that Ron be afflicted by jealousy and anger, so, here again, what you read is what you get, and not one smile more.
The book dictates a vast assortment of details, interludes and ancillary characters; that's the nature, and the pleasure, of literary density. Their presence in the movie, which was adapted by Steve Kloves, may well be obligatory, as well as gratifying to the book's fans, but they take an awful toll on narrative momentum -- every two minutes the action whooshes sideways to someone somewhere else.
Those characters include multiple Harrys as decoys, a device that's handled joylessly. The interludes include a long -- and I mean long -- stay in a forest, where Hermione uses an extension charm not that the movie needed extension to turn her small bag into a cornucopia containing, among other things, a camping tent. Many of the production's deficits are baffling -- the commonplace chases, the murky look, the indifferent effects -- but none more so than the interior of the tent, which looks like a big and banal stage set before the enchantment sets in.
Then what of Harry, Ron and Hermione? Well, they're on a climactic mission to defeat the evil and essentially noseless Voldemort by finding and destroying all the Horcruxes, failing which we might never get to Part 2. Along the way, you may find yourself obsessing about exactly how many Horcruxes must still be found, since the dark and doomy mission is relieved only by a cheerful wedding, a pleasant dance and a beautiful stretch of animation. What's worse, some mysterious movie curse has turned the three once-lively adventurers into wood.
Daniel Radcliffe, as Harry, spends a great deal of time looking pensive, or worried. At one point he says, with exasperation, 'This is completely mental!' Yes, and you wish it were emotional. Hermione is still the brains of the operation, yet the appealing young actress Emma Watson is called upon to wear a bleak expression that ill becomes her. Did the director, David Yates, forget that at least some of this stuff was supposed to be fun?Rupert Grint has grown up to be a skillful actor who knows the value of a slow burn, but the book dictates that Ron be afflicted by jealousy and anger, so, here again, what you read is what you get, and not one smile more.
The book dictates a vast assortment of details, interludes and ancillary characters; that's the nature, and the pleasure, of literary density. Their presence in the movie, which was adapted by Steve Kloves, may well be obligatory, as well as gratifying to the book's fans, but they take an awful toll on narrative momentum -- every two minutes the action whooshes sideways to someone somewhere else.
Those characters include multiple Harrys as decoys, a device that's handled joylessly. The interludes include a long -- and I mean long -- stay in a forest, where Hermione uses an extension charm not that the movie needed extension to turn her small bag into a cornucopia containing, among other things, a camping tent. Many of the production's deficits are baffling -- the commonplace chases, the murky look, the indifferent effects -- but none more so than the interior of the tent, which looks like a big and banal stage set before the enchantment sets in.
Friday, November 19, 2010
The Irish government all but buckled to pressure to accept a historic international bailout Thursday
Ireland's central-bank governor and finance minister acknowledged for the first time Thursday that the country needs help rescuing its banking industry, which has been crippled by losses on sour loans.
The Irish government is in talks with the International Monetary Fund and European officials about a loan package that is likely to amount to 'tens of billions' of euros, the central-bank governor, Patrick Honohan, said. 'It will be a large loan because the purpose . . . is to show Ireland has sufficient firepower to deal with any concerns of the market.'
Ireland's grudging decision to accept foreign aid, after insisting it didn't need help, is a bitter moment for a country that won its independence from Britain decades ago. Already, some lawmakers and editorial writers are bemoaning what they see as the inevitable loss of sovereignty that will accompany a foreign bailout.
It is an equally pivotal point for the 16 nations that use Europe's common currency. After rescuing Greece in the spring, European leaders are now betting that if they extinguish the financial crisis engulfing Ireland, it won't spread to other euro-zone weak spots. But with bond markets continuing to punish those countries, new bailouts may be needed soon -- a prospect that some believe will call into question the durability of the euro as a common currency.
In Ireland, fears that the government won't be able to rescue its troubled banks have obliterated market confidence in the country's financial viability.
It has become almost impossible for Ireland's banks or government to drum up funding through traditional market sources. That has prompted them to lean heavily for financing on the European Central Bank, which has grown wary of its growing exposure to Ireland.
The Irish capitulation underscores the hazards of placing separate countries under a single monetary regime.
The ECB's low-interest policy exacerbated Ireland's bubble during the boom decade. Today, the central bank's anti-inflation bent accelerated Ireland's demise: According to several people familiar with the matter, it was the ECB -- nervous to be lending so heavily to troubled Irish banks -- that led the charge to push Ireland to find liquidity elsewhere.
The 750 billion euros bailout fund from which Ireland likely will draw was established just this spring, and European officials hoped never to use it. It was meant to reassure financial markets that they need not fear lending to a euro-zone country, because its fellows stood behind it.
This week, a team of officials from the IMF, the ECB and the European Commission arrived in Dublin to assess the scale of the problem and gauge how much assistance Ireland is likely to require.
Until Thursday, Irish government officials had rejected any suggestion that a bailout was necessary. But that position is wilting as leaders gently prepare the public for the idea of a politically unpopular bailout.
The Irish government is in talks with the International Monetary Fund and European officials about a loan package that is likely to amount to 'tens of billions' of euros, the central-bank governor, Patrick Honohan, said. 'It will be a large loan because the purpose . . . is to show Ireland has sufficient firepower to deal with any concerns of the market.'
Ireland's grudging decision to accept foreign aid, after insisting it didn't need help, is a bitter moment for a country that won its independence from Britain decades ago. Already, some lawmakers and editorial writers are bemoaning what they see as the inevitable loss of sovereignty that will accompany a foreign bailout.
It is an equally pivotal point for the 16 nations that use Europe's common currency. After rescuing Greece in the spring, European leaders are now betting that if they extinguish the financial crisis engulfing Ireland, it won't spread to other euro-zone weak spots. But with bond markets continuing to punish those countries, new bailouts may be needed soon -- a prospect that some believe will call into question the durability of the euro as a common currency.
In Ireland, fears that the government won't be able to rescue its troubled banks have obliterated market confidence in the country's financial viability.
It has become almost impossible for Ireland's banks or government to drum up funding through traditional market sources. That has prompted them to lean heavily for financing on the European Central Bank, which has grown wary of its growing exposure to Ireland.
The Irish capitulation underscores the hazards of placing separate countries under a single monetary regime.
The ECB's low-interest policy exacerbated Ireland's bubble during the boom decade. Today, the central bank's anti-inflation bent accelerated Ireland's demise: According to several people familiar with the matter, it was the ECB -- nervous to be lending so heavily to troubled Irish banks -- that led the charge to push Ireland to find liquidity elsewhere.
The 750 billion euros bailout fund from which Ireland likely will draw was established just this spring, and European officials hoped never to use it. It was meant to reassure financial markets that they need not fear lending to a euro-zone country, because its fellows stood behind it.
This week, a team of officials from the IMF, the ECB and the European Commission arrived in Dublin to assess the scale of the problem and gauge how much assistance Ireland is likely to require.
Until Thursday, Irish government officials had rejected any suggestion that a bailout was necessary. But that position is wilting as leaders gently prepare the public for the idea of a politically unpopular bailout.
Wednesday, November 17, 2010
Oil bulls are known to get excited about wars
These days, they're more likely to cheer whenever Ben Bernanke opens his mouth. But the Federal Reserve chairman's commitment to another round of quantitative easing isn't a one-way bet.
The most obvious drawback to relying on QE2 to boost oil prices is that the Fed might not go as far as expected. Indeed, contradictory noises about this from various Fed officials are one reason oil has suddenly given up most of the anticipatory gains it had made since late August.
Another fear of oil bulls is QE2's impact on China. Loose Fed policy has boosted the price of dollar-denominated commodities, including oil. This isn't helpful in an economy as energy- and metals-intensive as China's, and where there are 1.3 billion mouths to feed.
The rising inflation that prompted Wednesday's announcement that China could impose price controls on certain staples can't be laid wholly at the door of QE. Similar to U.S. authorities, China opened the monetary spigots in 2009, when broad money expanded by the equivalent of almost 40% of gross domestic product, compared with between 20% and 25% annually in the five years previously, according to Lombard Street Research.
With Beijing fearful of potential social unrest arising from inflation, investors can expect further measures such as increasing bank reserve requirements and interest rates. Those are aimed at curbing liquidity, ultimately cooling industrial activity and demand for the raw materials that feed it.
Despite recent falls, U.S. oil inventories remain high compared with history, and demand is weak. For oil bulls, the Fed might have the printing presses, but it is ultimately China that burns the incremental barrel.
The most obvious drawback to relying on QE2 to boost oil prices is that the Fed might not go as far as expected. Indeed, contradictory noises about this from various Fed officials are one reason oil has suddenly given up most of the anticipatory gains it had made since late August.
Another fear of oil bulls is QE2's impact on China. Loose Fed policy has boosted the price of dollar-denominated commodities, including oil. This isn't helpful in an economy as energy- and metals-intensive as China's, and where there are 1.3 billion mouths to feed.
The rising inflation that prompted Wednesday's announcement that China could impose price controls on certain staples can't be laid wholly at the door of QE. Similar to U.S. authorities, China opened the monetary spigots in 2009, when broad money expanded by the equivalent of almost 40% of gross domestic product, compared with between 20% and 25% annually in the five years previously, according to Lombard Street Research.
With Beijing fearful of potential social unrest arising from inflation, investors can expect further measures such as increasing bank reserve requirements and interest rates. Those are aimed at curbing liquidity, ultimately cooling industrial activity and demand for the raw materials that feed it.
Despite recent falls, U.S. oil inventories remain high compared with history, and demand is weak. For oil bulls, the Fed might have the printing presses, but it is ultimately China that burns the incremental barrel.
Tuesday, November 16, 2010
Banks' Exposure Stirs EU Contagion Worries
One reason why Ireland's problems could ripple throughout Europe is that banks across the continent are holding huge quantities of loans, bonds and other debt issued by Irish companies, individuals and national and local governments.
All told, European banks were sitting on more than $650 billion of exposure to Ireland as of March 31, according to the Bank for International Settlements.
The U.K. banks are the international lenders with the most at stake. As of March 31, the latest data available, the banks had exposure of about $222 billion to a variety of Irish institutions, according to BIS. That is about one-fourth of the world's exposure to Ireland. About $42 billion of the U.K. banks' exposure is in the form of lending to Ireland's battered banking sector.
German banks aren't far behind the U.K. They had a total of almost $206 billion in exposure to Ireland, according to the BIS, including $46 billion of exposure to the country's banks.
Among U.K. banks with exposure to Ireland, Royal Bank of Scotland PLC is at the head of the pack, largely through its retail and commercial Irish unit Ulster Bank, but also due to investment-banking holdings of government debt. According to analysts and people close to the bank, RBS's total exposures to Ireland stand at GBP 54.4 billion ($86.4 billion), with GBP 53.3 of retail and commercial exposure, a third of which is residential mortgages.
The bank also has about GBP 1 billion in exposures to Irish sovereign and other debt in its investment-banking trading book.
RBS's share price tumbled Tuesday as EU and Irish officials tussled over a rescue package, closing down 3.45%, at 40.86, on the London Stock Exchange.
Yet some analysts dismissed investor concerns.
'We believe that these worries are overdone with RBS's direct exposure to Irish [government] debt at very modest levels and other exposures being actively managed,' wrote UBS AG analyst John-Paul Crutchley late last week.
Lloyds Banking Group PLC has the second-largest exposure to Ireland of the U.K. banks. It has GBP 27 billion of Irish loans outstanding, including GBP 11 billion of problem loans, largely related to the property and corporate sectors.
As of June 30, the bank had set aside GBP 5 billion against that troubled portfolio.
According to the Committee of European Bank Supervisors, which conducted stress tests on all Europe's banks in July, Lloyds has minimal sovereign exposure.
All told, European banks were sitting on more than $650 billion of exposure to Ireland as of March 31, according to the Bank for International Settlements.
The U.K. banks are the international lenders with the most at stake. As of March 31, the latest data available, the banks had exposure of about $222 billion to a variety of Irish institutions, according to BIS. That is about one-fourth of the world's exposure to Ireland. About $42 billion of the U.K. banks' exposure is in the form of lending to Ireland's battered banking sector.
German banks aren't far behind the U.K. They had a total of almost $206 billion in exposure to Ireland, according to the BIS, including $46 billion of exposure to the country's banks.
Among U.K. banks with exposure to Ireland, Royal Bank of Scotland PLC is at the head of the pack, largely through its retail and commercial Irish unit Ulster Bank, but also due to investment-banking holdings of government debt. According to analysts and people close to the bank, RBS's total exposures to Ireland stand at GBP 54.4 billion ($86.4 billion), with GBP 53.3 of retail and commercial exposure, a third of which is residential mortgages.
The bank also has about GBP 1 billion in exposures to Irish sovereign and other debt in its investment-banking trading book.
RBS's share price tumbled Tuesday as EU and Irish officials tussled over a rescue package, closing down 3.45%, at 40.86, on the London Stock Exchange.
Yet some analysts dismissed investor concerns.
'We believe that these worries are overdone with RBS's direct exposure to Irish [government] debt at very modest levels and other exposures being actively managed,' wrote UBS AG analyst John-Paul Crutchley late last week.
Lloyds Banking Group PLC has the second-largest exposure to Ireland of the U.K. banks. It has GBP 27 billion of Irish loans outstanding, including GBP 11 billion of problem loans, largely related to the property and corporate sectors.
As of June 30, the bank had set aside GBP 5 billion against that troubled portfolio.
According to the Committee of European Bank Supervisors, which conducted stress tests on all Europe's banks in July, Lloyds has minimal sovereign exposure.
Monday, November 15, 2010
Mexico celebrates 200 years with huge fiesta
Tens of thousands of Mexicans thronged into the streets on Wednesday to celebrate the bicentenary of Mexico's fight for independence from Spain.
Planes painted the sky with the national colors of green, white and red as thousands of Mexico City residents watched a huge parade down the main Reforma avenue heading to a nighttime fireworks display at the huge Zocalo central square.
Hundreds of smaller celebrations took place across the country to the sounds of mariachi music, fireworks and with streets lined with Mexican flags.
Some revelers wore straw sombreros and stick-on mustaches, poking fun at a national stereotype, while the government sought to promote a more serious side with an open-air philharmonic orchestra.
Shortly before midnight, President Felipe Calderon gave the famous cry of the call to arms, known as "El Grito," in Mexico City, echoed by state governors and mayors in desert and jungle towns and cities across Mexico.
"Viva Mexico!" is a current-day twist on rebel priest Miguel Hidalgo's original call to arms in 1810. Mexicans eventually achieved their independence from Spain in 1821.
Despite a slow recovery from last year's deep recession, many cities organized dazzling celebrations, with eight metric tons of fireworks for Mexico City alone, which lit up the city center. Mexican media put the party's cost at $40 million.
Planes painted the sky with the national colors of green, white and red as thousands of Mexico City residents watched a huge parade down the main Reforma avenue heading to a nighttime fireworks display at the huge Zocalo central square.
Hundreds of smaller celebrations took place across the country to the sounds of mariachi music, fireworks and with streets lined with Mexican flags.
Some revelers wore straw sombreros and stick-on mustaches, poking fun at a national stereotype, while the government sought to promote a more serious side with an open-air philharmonic orchestra.
Shortly before midnight, President Felipe Calderon gave the famous cry of the call to arms, known as "El Grito," in Mexico City, echoed by state governors and mayors in desert and jungle towns and cities across Mexico.
"Viva Mexico!" is a current-day twist on rebel priest Miguel Hidalgo's original call to arms in 1810. Mexicans eventually achieved their independence from Spain in 1821.
Despite a slow recovery from last year's deep recession, many cities organized dazzling celebrations, with eight metric tons of fireworks for Mexico City alone, which lit up the city center. Mexican media put the party's cost at $40 million.
Sunday, November 14, 2010
Money-saving tips to the inflation
Growing inflationary pressure on the Chinese mainland, led by rising food prices, is driving mainland buyers to Hong Kong to fill their shopping carts. More and more residents in Guangdong province, especially Shenzhen, have in the past few weeks been queuing to cross the border into Hong Kong to buy sugar, salt, soybean sauce and even tissue paper in bulk to cushion increasing pressure from rising food prices at home.While prices are rising so fast, many people are worrying out ways to cut down their expenditures.
Du Zhenqi, an 80-year-old resident in Beijing`s Chaoyang district, expressed his sympathy for the people who took away his towel gourds without permission.
Every year Du plants towel gourds in the community yard for ornament. But this year, before they turned ripe, they were all picked by his neighbors for food.
"The prices of many kinds of vegetables, not only the towel gourds, have gone up dramatically," said Du. "So I understand those people and it pleased me to offer my help to them."
The food price surge in China has made residents with low incomes feel serious financial pressure and forced them to spend wisely.
An online collection of practical money-saving hints is thus becoming increasingly popular among Chinese netizens. If you search "money-saving strategies" in Baidu, China`s most popular search engine, you will find 4.27 million entries in 0.19 seconds.
The collection provides tips such as choosing local and seasonal products, avoiding buying vegetables on rainy or snowy days when higher transport costs increase prices, using e-commerce websites for purchases, and planting vegetables on the balcony.
Some netizens consider buying in bulk to stay within a tight budget.
Fei Yuqin, who lives in Jiading district in Shanghai, frequently hurries to a farmers` market before 6 am to buy large amounts of vegetables for her family and neighbors. "Instead of buying small amounts, I buy large amounts of vegetables at the market and get a 50-percent discount."
With these online tips, many people have become experts in cutting household expenses. However, financial pressure caused by the current round of price hikes still afflicts many Chinese people, just like the situation described in a popular song called China`s Price.
"A student surnamed Guo spent 60,000 yuan ($8,996) for college education. He earned 1,000 yuan per month after graduation. No house and no car, let alone get married."
Du Zhenqi, an 80-year-old resident in Beijing`s Chaoyang district, expressed his sympathy for the people who took away his towel gourds without permission.
Every year Du plants towel gourds in the community yard for ornament. But this year, before they turned ripe, they were all picked by his neighbors for food.
"The prices of many kinds of vegetables, not only the towel gourds, have gone up dramatically," said Du. "So I understand those people and it pleased me to offer my help to them."
The food price surge in China has made residents with low incomes feel serious financial pressure and forced them to spend wisely.
An online collection of practical money-saving hints is thus becoming increasingly popular among Chinese netizens. If you search "money-saving strategies" in Baidu, China`s most popular search engine, you will find 4.27 million entries in 0.19 seconds.
The collection provides tips such as choosing local and seasonal products, avoiding buying vegetables on rainy or snowy days when higher transport costs increase prices, using e-commerce websites for purchases, and planting vegetables on the balcony.
Some netizens consider buying in bulk to stay within a tight budget.
Fei Yuqin, who lives in Jiading district in Shanghai, frequently hurries to a farmers` market before 6 am to buy large amounts of vegetables for her family and neighbors. "Instead of buying small amounts, I buy large amounts of vegetables at the market and get a 50-percent discount."
With these online tips, many people have become experts in cutting household expenses. However, financial pressure caused by the current round of price hikes still afflicts many Chinese people, just like the situation described in a popular song called China`s Price.
"A student surnamed Guo spent 60,000 yuan ($8,996) for college education. He earned 1,000 yuan per month after graduation. No house and no car, let alone get married."
Wednesday, November 10, 2010
China's control of the global rare-earth industry is surging toward the top of the global policy agenda. But what should be done?
U.S. Secretary of State Hillary Clinton is raising the issue ahead of this week's meeting of the Group of 20 nations in South Korea, as are business groups around the world. Some have said China should face international pressure at the G-20 to export more rare-earth minerals. There are also suggestions that the U.S., Germany or Japan should file a complaint over China's export quotas at the World Trade Organization. Meanwhile, Japanese users of the metals are already scrambling for alternative supplies.
But, as important as rare earths may be for high tech and military applications, is all this fuss worthwhile for an industry only worth some $2 billion annually? And if it is, then is confrontation the best strategy?
In an interview with The Wall Street Journal in Hong Kong on Wednesday, Molycorp Inc. (MCP) Chief Executive Mark Smith revealed that his company, which occasionally imports metals from China, has experienced extra scrutiny of documents by China Customs that add 'just a couple of days' to shipment times.
The main issue, Smith said, is likely a 'desire to make sure what is being exported from the Chinese ports is being legally exported' as the government pinches smugglers. New Customs questions, he said, are usually related to proving quota allocation and price for the goods.
Smith said the global priority should be to get alternative producers going, including mines from Australia's Lynas Corp. (LYSDY, LYC.AU) and Molycorp that are due to restart production in 2011 and 2012, respectively.
Globally activity is already ramping up quickly, as old industries such as the oil sector and new ones such as battery makers clamor for answers. As this production outside China comes online, supply will actually outstrip demand by around 20,000 metric tons in 2015, according to a presentation by two of the world's leading rare-earth analysts reviewed by The Wall Street Journal.
In their joint presentation for an industry event, the analysts, Judith Chegwidden, managing director of Roskill Information Services, and Dudley Kingsnorth, executive director of Industrial Minerals Co. of Australia, put global demand at 185,000 metric tons in 2015, up from 125,000 metric tons in 2010.
A California investor, commenting on the presentation, said such figures suggest the idea that China's lock on rare earths will constrict global industry is mostly hype. 'Now there's a larger [looming] disparity between supply and demand,' he said.
A U.S.-based rare-earth trader who is bullish on the sector in the short term quipped about a recent jump in rare earth prices: 'It's overdone, but it's not done.'
Others said demand is merely delayed as a result of uncertainty about what China will do. That may give impetus to find alternative technologies in industries such as oil refining and as new applications such as magnetic refrigeration get delayed.
'I wouldn't take away the fact that they are reducing demand. They are only reducing demand because they can't secure supply,' said James Tuer, president of Hudson Resources Inc. (HUDRF, HUD.V), which is developing a rare-earth production base in Greenland.
Production takes years to come online. A presentation by Nicholas Curtis, CEO of Lynas and posted to the Australian Stock Exchange website on Wednesday, underscored the challenge in man-hours for one of its projects: 300,000 for engineering and four million for construction.
Molycorp's Smith said leaders, whether at the G-20 or elsewhere, do need to discuss rare earths, which are 'at the very base of almost every manufacturing sector,' but in a collaborative, rather than, combative way. Technology exchanges, primarily to help China clean up its industry, could be at the heart of any international efforts as well as better international exchange of information about the sector.
But, as important as rare earths may be for high tech and military applications, is all this fuss worthwhile for an industry only worth some $2 billion annually? And if it is, then is confrontation the best strategy?
In an interview with The Wall Street Journal in Hong Kong on Wednesday, Molycorp Inc. (MCP) Chief Executive Mark Smith revealed that his company, which occasionally imports metals from China, has experienced extra scrutiny of documents by China Customs that add 'just a couple of days' to shipment times.
The main issue, Smith said, is likely a 'desire to make sure what is being exported from the Chinese ports is being legally exported' as the government pinches smugglers. New Customs questions, he said, are usually related to proving quota allocation and price for the goods.
Smith said the global priority should be to get alternative producers going, including mines from Australia's Lynas Corp. (LYSDY, LYC.AU) and Molycorp that are due to restart production in 2011 and 2012, respectively.
Globally activity is already ramping up quickly, as old industries such as the oil sector and new ones such as battery makers clamor for answers. As this production outside China comes online, supply will actually outstrip demand by around 20,000 metric tons in 2015, according to a presentation by two of the world's leading rare-earth analysts reviewed by The Wall Street Journal.
In their joint presentation for an industry event, the analysts, Judith Chegwidden, managing director of Roskill Information Services, and Dudley Kingsnorth, executive director of Industrial Minerals Co. of Australia, put global demand at 185,000 metric tons in 2015, up from 125,000 metric tons in 2010.
A California investor, commenting on the presentation, said such figures suggest the idea that China's lock on rare earths will constrict global industry is mostly hype. 'Now there's a larger [looming] disparity between supply and demand,' he said.
A U.S.-based rare-earth trader who is bullish on the sector in the short term quipped about a recent jump in rare earth prices: 'It's overdone, but it's not done.'
Others said demand is merely delayed as a result of uncertainty about what China will do. That may give impetus to find alternative technologies in industries such as oil refining and as new applications such as magnetic refrigeration get delayed.
'I wouldn't take away the fact that they are reducing demand. They are only reducing demand because they can't secure supply,' said James Tuer, president of Hudson Resources Inc. (HUDRF, HUD.V), which is developing a rare-earth production base in Greenland.
Production takes years to come online. A presentation by Nicholas Curtis, CEO of Lynas and posted to the Australian Stock Exchange website on Wednesday, underscored the challenge in man-hours for one of its projects: 300,000 for engineering and four million for construction.
Molycorp's Smith said leaders, whether at the G-20 or elsewhere, do need to discuss rare earths, which are 'at the very base of almost every manufacturing sector,' but in a collaborative, rather than, combative way. Technology exchanges, primarily to help China clean up its industry, could be at the heart of any international efforts as well as better international exchange of information about the sector.
Tuesday, November 9, 2010
Bush Orders Airlift of Supplies for Darfur Mission
U.S. President George Bush has authorized an American airlift of equipment for African Union and United Nations peacekeepers in Sudan's troubled Darfur region.
The president has spoken for some time of his resolve to help the peacekeeping mission in Darfur.
Now he has told the State Department to start the airlift immediately without reimbursement from the United Nations.
"I have provided a waver to the State Department so they can begin to move 240 containers worth of heavy equipment into Darfur, and that the Defense Department will be flying Rwandan equipment into Darfur to help facilitate the peacekeeping missions there," said President Bush.
Mr. Bush spoke after talks with Salva Kiir, a former south Sudanese rebel leader who is now the First Vice President of Sudan. He is part of a national unity government established as a result of a 2005 peace agreement that ended 22 years of civil war between northern and southern Sudan.
Salva Kiir also holds the title of president of semi-autonomous southern Sudan. And Mr. Bush invited him to the White House to get a status report on developments both in his region, and nationally as well.
"And the vice president brought me up to date on what had been accomplished and what still remains to be accomplished," said Mr. Bush.
The Bush administration has been relentless in its criticism of Sudanese President Omar Bashir - blaming him for the humanitarian crises in Darfur and elsewhere.
Salva Kiir has indicated he plans to run for the nation's top job when Sudan holds elections later this year. President Bush referred to him as a leader, who is trying to bring all the rebel groups in Darfur together for peace talks with the government.
The Bush White House has come under some criticism lately for its handling of the Sudan crisis - particularly in the New York Times newspaper.
In a written statement on the airlift, the president's national security advisor - Stephen Hadley - went to the unusual step of singling out Times columnist Nicholas Kristof, who has called for military pressure on Sudan to end the killing in Darfur. Hadley, who defended the administration's Sudan policy, said human-rights groups oppose military action.
The president has spoken for some time of his resolve to help the peacekeeping mission in Darfur.
Now he has told the State Department to start the airlift immediately without reimbursement from the United Nations.
"I have provided a waver to the State Department so they can begin to move 240 containers worth of heavy equipment into Darfur, and that the Defense Department will be flying Rwandan equipment into Darfur to help facilitate the peacekeeping missions there," said President Bush.
Mr. Bush spoke after talks with Salva Kiir, a former south Sudanese rebel leader who is now the First Vice President of Sudan. He is part of a national unity government established as a result of a 2005 peace agreement that ended 22 years of civil war between northern and southern Sudan.
Salva Kiir also holds the title of president of semi-autonomous southern Sudan. And Mr. Bush invited him to the White House to get a status report on developments both in his region, and nationally as well.
"And the vice president brought me up to date on what had been accomplished and what still remains to be accomplished," said Mr. Bush.
The Bush administration has been relentless in its criticism of Sudanese President Omar Bashir - blaming him for the humanitarian crises in Darfur and elsewhere.
Salva Kiir has indicated he plans to run for the nation's top job when Sudan holds elections later this year. President Bush referred to him as a leader, who is trying to bring all the rebel groups in Darfur together for peace talks with the government.
The Bush White House has come under some criticism lately for its handling of the Sudan crisis - particularly in the New York Times newspaper.
In a written statement on the airlift, the president's national security advisor - Stephen Hadley - went to the unusual step of singling out Times columnist Nicholas Kristof, who has called for military pressure on Sudan to end the killing in Darfur. Hadley, who defended the administration's Sudan policy, said human-rights groups oppose military action.
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