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Hong Kong and Singapore as Asia´s Financial Gateways

Celent predicts a paradigm shift around access to Asia. There is likely to be two gateways, providing access to different Asian regions, with Singapore emerging as the preferred gateway to Southeast Asia and Hong Kong becoming the gateway to Mainland China.

In a new report, the third of a series looking at the financial markets in Hong Kong and Singapore, Celent aims to provide a comparative analysis of Asia’s two main financial gateways, focusing particularly on derivatives. Asia’s Tale of Two Cities: Hong Kong and Singapore as Financial Gateways begins by noting that Western governments have emerged from the financial crisis in a weakened state, with economic prosperity blunted by high unemployment and an emerging debt crisis. The question is no longer when or if we need to enter the Asian markets, but how to best think about the issues of accessibility, entering the market, developing products, and forming strategic partnerships. The fundamental question that needs to be asked now is: “Where do we go from here, Hong Kong or Singapore?”

Although the HKEx and SGX may not be the biggest derivatives players in Asia-Pacific, they tend to be the most accessible for segments located outside the region. Taking advantage of their geographic location, political climate, and internal strengths, these city-states are poised to become hubs for trading of Asia’s regional products while also being easily accessed by US traders via retail trading accounts.

There are several factors that are likely to continue to drive growth in the derivatives market. These include:

• A relatively muted response to regulating over-the-counter markets as compared with the US and Europe. The type of products that led to the financial crisis in the West are not widely established throughout Asia, and as a result, the regulatory structure governing OTC markets are unlikely to change significantly.

• Continued desire to manage foreign exchange risk.

• Continued enhancement of processes of structuring derivatives risk management policies.

“We are seeing changes in relation to access to Asia. Hong Kong is no longer destined to become the sole hub to Southeast Asia,” says Alexander Camargo, Analyst and coauthor of the report. “Inherent strengths in Singapore are making it an extremely attractive financial gateway. Both English and Chinese are frequently spoken in Singapore, making it an ideal cross-roads for East and West. Furthermore, Singapore is viewed by most Asian countries as a neutral party and less politically tied to China than Hong Kong. This is likely to entice Indian investors and even Japanese and Korean investors to Singapore’s shores.”

However, this does not mean that Hong Kong will recede as a major financial center in Asia. Hong Kong residents are often fluent in both English and Chinese; contract laws are strong; and there remain strong historical ties to the West. As a Special Administrative Region of the People’s Republic of China, Hong Kong has stronger political ties to China. Hong Kong has also been busy integrating its financial markets with mainland China. These factors make it likely that Hong Kong will become a key gateway to mainland China.

This report begins with an overview of each country’s financial infrastructure and regulations, providing an introduction to the countries’ various demand market segments, followed by a look at the main exchanges, HKEx and SGX. A summary of HKEx and SGX focuses on derivatives trading, providing a brief description of products offered, market access, alliances, and clearing on the exchanges. The report then looks at each country’s fixed income markets, OTC derivatives, and FX markets. It concludes with a discussion of market supremacy and also the countries’ ongoing efforts to improve market structure and access.

Source: Bobsguide, 10.02.2012

Filed under: Asia, China, Exchanges, Hong Kong, Indonesia, Japan, Korea, Malaysia, News, Singapore, Thailand, Vietnam, , , , , , , , , , , , , ,

ASEAN Exchanges plans on track to promote ASEAN as an asset class

Following the November 2011 ASEAN Exchanges CEOs meeting, the ASEAN Exchanges CEOs today announced that the collaboration framework is on track towards meeting its goals of collectively promoting ASEAN as a highly investable asset class.

The Philippine Stock Exchange President and CEO, Hans Sicat said, “the marketing of the ASEAN Stars and the work on an ASEAN index series continues as planned with the ASEAN Exchanges collaboration members. The 2012 marketing activities for ASEAN Exchanges will be finalised at our scheduled CEOs meeting on December 2nd in Hanoi.”

The seven ASEAN Exchanges have a combined market capitalization of approximately USD2.0 trillion and more than 3,600 companies listed on their exchanges. Some of these companies are the largest and most dynamic companies in the world, including leaders in finance and banking, energy, telecommunications, commodities, automotive manufacturing and other industrial sectors.

The CEOs also announced the awaited roll-out plan of the ASEAN Trading Link which will see the participation of member exchanges taking place progressively in stages. The first stage will see the connectivity of Singapore Exchange and Bursa Malaysia in June 2012 and the Stock Exchange of Thailand added in August 2012 after its new trading engine goes live. The participation dates of the other ASEAN Exchanges collaboration members, namely, Hanoi Stock Exchange, HoChiMinh Stock Exchange, Indonesia Stock Exchange and The Philippines Stock Exchange will be announced at a future date.

Tajuddin Atan of Bursa Malaysia Berhad said, “The three bourses that will participate in the first stage of the ASEAN Trading Link represent approximately 70% of the market capitalization of the 7-member collaboration, thus offering substantial investment opportunities for investors.”

Source: MondoVisione, 17.11.2011

Filed under: Exchanges, Indonesia, Malaysia, Singapore, Thailand, Vietnam, , , , , , , , , , , ,

NYSE Euronext Accelerates Growth in Asia with Strategic Acquisition of Metabit, a Leading Provider of Market Access Products

– Strategically complements NYSE Technologies’ product portfolio and Asian offerings

– Addresses growing customer interest and expanding Asian financial marketplace

– In-line with NYSE Technologies’ strategy of building a global liquidity network

 New York and Tokyo – August 1, 2011 – NYSE Euronext (NYX) announced today it has entered into a definitive agreement to acquire Metabit, a leading Tokyo-based provider of high performance market access products throughout Japan and Asia. Metabit will operate as a product line within the NYSE Technologies portfolio. The transaction is expected to close in third quarter of 2011. Terms of the acquisition were not disclosed.

Skilled with in-depth experience and understanding of financial markets in Asia, Metabit specializes in streamlined, low-latency technology solutions that enable industry-leading access to financial markets across Asia. Metabit’s products connect buy-side order flow with sell-side exchange participants and are designed exclusively for low latency direct market access (DMA) and exchange connectivity to markets through-out Asia. The company is headquartered in Tokyo, with offices in Australia and Hong Kong. Metabit has built a trading community of more than 140 trading firms in Asia.

“Metabit’s products are built in Asia for Asia, and this combination fits our strategy, our connectivity business and our customer interests,” said Stanley Young, CEO of NYSE Technologies. “Metabit has a highly experienced and respected management team, and we recognize and value the success Metabit has had in Asia, especially in Japan. We will continue the further development of this local focus while also maximizing the value of the NYSE Euronext brand and relationships.”

Mr. Young continued: “Furthermore, Japan and Asia are priorities for NYSE Euronext and we believe this is absolutely the right time to further invest in the region. We fully expect this transaction to accelerate our efforts as a leading technology provider across the Asia-Pacific region. We look forward to welcoming Metabit and its customers to NYSE Euronext, and to delivering the benefits of Metabit to our customer community.”

Daniel Burgin, CEO of Metabit, said: “Our combination with NYSE Technologies will be highly beneficial to delivering innovative solutions to our customers and to accelerate achieving our long-term business goals. We remain committed to our local business focus and service quality in Japan and throughout Asia, whilst being strengthened by NYSE Technologies’ product suite that is highly synergetic to our local solutions. The people and products of our combined companies will provide significant expertise and scale to NYSE Technologies’ business in the region. Joining forces represents a truly exceptional opportunity to build on our local success in order to increase our value proposition to our Japan and Asia customer base. We now have the opportunity to leverage our assets with NYSE Technologies and move to the next level. For the benefit of Asia-based customers, we will now expand our reach and capabilities globally.”

 Metabit’s Asia franchise has seen excellent growth as a result of a persistent product and client strategy and investments into Asia. Today, Metabit covers all DMA sectors outside Japan, ranging from China (“B” shares), India, Hong Kong, Korea, Singapore, Taiwan, Thailand, Philippines, Malaysia, Indonesia, Pakistan, Australia and New Zealand. Metabit’s products, being built in Asia for Asia, focus to connect the local broker community in each country, in combination with the traditional group of global trading firms. Metabit will continue to resell and provide support to users of CameronFIX as they have since 2002.

 Upon closing, Mr. Burgin will head the NYSE Technologies Asia business and report to Mr. Young. Peter Tierney, Managing Director of NYSE Technologies will become the Chief Operating Officer of the combined business in Asia, and together they will lead the business operations.

Source; NYSE Tech, 01.08.2011

Filed under: Asia, Australia, China, FIX Connectivity, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Trading Technology, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Asia Trader & Investor Conference, Singapore 07-08 May 2011

ATIC @Singapore 2011 will feature more than 40 seminars conducted by international and local gurus and experts.  The Asian Trader and Investment Convention – Singapore
Covering topics like:

Futures | Equities | Options | ETF | CFD | Commodities | FOREX | Warrants | Alternative Investment | Property | Insurance | Managed Funds

Event Highlights

  • First in bringing breakthrough and new methods of trading
  • Over 50 investment educational seminars
  • A Specialised Panel of top analysts who will conduct real-time analyses of the same stock
  • Special Trading Focus Workshops on Stocks, Futures, Commodities, Gold, ETFs, Options and Warrants
  • Stock Analysis on Regional Markets by International Traders
  • Investor Clinics that help them improve trading
  • Investment Network Platform with different market segment experts
  • Property Investment Showcase – with property investment education and special panel discussion on Property vs Stock Investments
  • The largest Finance and Investment Book fair

First launched in 2006, Asia Trader and Investor Convention (ATIC) event has travelled to 7 Asian Cities, i.e., Singapore, Kuala Lumpur, Bangkok, Ho Chi Minh City, Mumbai, Shenzhen and Tokyo. With participation by over 300 financial services companies, including securities exchanges, retail and consumer banks, securities brokerage firms, asset/fund management firms, listed companies and other financial services providers, ATIC events have attracted over 100,000 active traders and serious investors across Asia.

Source: The ATIC, 05.05.2011

Filed under: Asia, China, Events, Exchanges, Indonesia, Japan, Malaysia, News, Singapore, Vietnam, , , , , , , , , , , , , , , , , , , , , ,

Metabit Expands Asian Trade Connectivity

Tokyo/Hong Kong, 29 March 2011: In the past year, Tokyo-based Metabit has concentrated on building its connectivity across Asia.  The company aims to be the local face of execution destinations in Asia and over the past eight months, it has added an extra 13 domestic DMA destinations, expanding domestic and cross-border access to Asian markets.

“Metabit is at the heart of  connectivity in Asia” comments Daniel Burgin, CEO of Metabit, “not just for providing access to Asia for global players, but also in particular for the local and domestic  industry in this region.”

“For example, in India we have 20 execution destinations of which 10 are domestic Indian brokers.  We are similarly successful with increased connectivity in other countries such as Korea and Taiwan.”

Overall, Metabit’s trading access has been extended to many markets ranging from Indonesia to Pakistan and Mainland China to Australia.  The company now has access to over 250 execution destinations, across all active DMA markets in Asia, including Japan.

“We want to maximise connectivity to and within Asia for our client base, who can directly access all execution destinations across the major and emerging markets in Asia either through Metabit’s intuitive XiliX trading platform, or through our MLH via a single FIX connection.”

Burgin adds a final comment, “Situated where we are in Tokyo, with offices in Hong Kong, Dalian and Sydney, we understand the needs of Asia market players, whether they want to trade globally or locally. You could say the mindset of Asia is in our blood – we think Asia, so our clients can trade Asia.”

About Metabit

Uniquely placed in Asia, with global experience and a real knowledge of Asian markets, Metabit provides the technology and support to help clients trade and connect effortlessly and efficiently.  The company delivers an intuitive trading platform that encompasses a well-established trading community and unrivalled exchange connectivity solutions.

Metabit provides ultra low latency DMA trading solutions for Asian markets, serving buy side and sell side clients.  It specialises in comprehensive compliance controls, whilst reducing transaction times and facilitating trading opportunities across all major markets across 14 Asian countries, including Japan.

Metabit’s flagship solutions are XiliX intuitive buy side trading platform and MLH a vendor neutral Market Liquidity Hub.  Alpha provides ultra-low latency exchange connectivity and Exsim simulates Asian and Japanese exchanges.  All Metabit’s products are powered by the CameronFIX engine.

Source: Metabit, 29.03.2011

Filed under: Asia, Australia, China, FIX Connectivity, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Singapore, Thailand, Trading Technology, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

ETF Landscape: Industry Highlights de February/Febrero 2011 – En/Sp – BlackRock

ETF – 02.2011 Report/Reporte

English

At the end of February 2011, the global ETF industry had 2,557 ETFs with 5,802 listings and assets of US$1,367.4 Bn, from 140 providers on 48 exchanges around the world. This compares to 2,091 ETFs with 3,998 listings and assets of US$1,001.9 Bn from 115 providers on 40  exchanges, at the end of February 2010.

We expect global AUM in ETFs and ETPs1to increase by 20–30% annually over the next three years, taking the global ETF/ETP industry to approximately US$2 trillion in AUM by early 2012. Considering ETFs separately, AUM should reach US$2 trillion globally by the end of 2012, US$1 trillion in the United States in 2011 and US$500 billion inEurope in 2013.

Taking ETFs and ETPs together, United States AUM should reach US$2 trillion in 2013, with European AUM reaching US$500 billion in 2012.

In Latin America, the ETF sector remains with 26 ETFs, 365 listings and assets of USD $10.2 billion of four providers on three Exchanges. Compares 20 ETS, 223 listings and assests of USD$ 9.3 billions and three providers  at three exchanges in february 2010.

Español:

El reporte ETF Landscape: Industry Highlights da a conocer la situación de los Exchange Traded Funds (ETFs) y Exchange Traded Products (ETPs) en el mes de febrero.

Se espera que los activos globales bajo administración de los ETFs y ETPs se incrementen de 20 a 30% anualmente durante los próximos tres años, llegando a aproximadamente USD $2 billones (trillion dollars) a principios de 2012.  A escala global, el sector de ETFs tuvo 2,557 ETFs con 5,802 listados y activos por USD $1,367.4 millones, de 140 proveedores en 48 mercados bursátiles en el mundo a finales de febrero de 2011, comparado con 2,091 ETFs con 3,998 listados y activos por USD $1,001.9 millones de 115 proveedores en 40 mercados a fines del mismo periodo del año pasado.

En Latinoamérica el sector de ETFs permanece con 26 ETFs, 365 listados y activos por USD $10.2 mil millones, de cuatro proveedores en tres bolsas, comparado con 20 ETFs, 223 listados y activos por USD$9.3 mil millones de tres proveedores en tres mercados a fines de febrero de 2010.

Source:BlackRock, March 10, 2011

Filed under: Asia, Australia, Brazil, Chile, China, Exchanges, Hong Kong, India, Indonesia, Japan, Korea, Latin America, Malaysia, Mexico, News, Services, Singapore, , , , , , , , , , ,

BlackRock lista 7 nuevos ETF de indices de Asia, Polonia, Brazil y renta fija International en Mexico

Ciudad de México, 26 de diciembre de 2010 – El pasado jueves 23 de diciembre, empezaron a negociarse en el Sistema Internacional de Cotizaciones (SIC) de la Bolsa Mexicana de Valores (BMV) 7 nuevos ETFs iShares internacionales, patrocinados por Deutsche Securities, S.A. de C.V., Casa de Bolsa y administrados por BlackRock, en lo que constituye el cuarto paquete de ETFs iShares listados en el SIC el presente año.

Los 7 ETFs iShares que integran este paquete brindan exposición a índices de renta variable internacional de mercados emergentes y de Asia no emergente, así como de renta fija internacional.

Los ETFs iShares listados en el SIC son:

Nombre Clave de pizarra % Gastos Aprobado por CONSAR
Instrumentos de renta variable
iShares MSCI China Small Cap Index Fund ECNS 0.65 No
iShares MSCI Indonesia Investable Market Index Fund EIDO 0.65 No
iShares MSCI New Zealand Investable Market Index Fund ENZL 0.55 No
iShares MSCI Poland Investable Market Index Fund EPOL 0.65 No
iShares MSCI Brazil Small Cap Index Fund EWZS 0.65 No
Instrumentos de renta fija
iShares FTSE Gilts UK 0-5 IGLS 0.20 No
iShares DEX Short Term Bond Index Fund XSB 0.25 No

Estos 7 ETFs iShares permiten tener acceso a un perfil de inversión representado por el dinámico sector de empresas de baja capitalización de economías que han tenido desempeños recientes interesantes, como la china, indonesia, neozelandesa, polaca o brasileña.

Por ejemplo, el iShares MSCI China Small Cap Index Fund mantiene una posición diversificada en empresas chinas de baja capitalización del sector automotriz, minero, tecnológico, de bienes raíces, energético, cementero y de materias primas, entre muchos otros.

Las carteras, desempeños recientes, retornos históricos, prospectos y otros datos de interés de estos nuevos ETFs pueden ser consultados en www.iShares.com.mx.

“Con este cuarto paquete de ETFs iShares listados en el SIC este año, culmina un 2010 de intensa actividad para BlackRock en México, pues arrancamos con 126 ETFs, y estamos cerrando con un total de 168: 146 ETFs listados en el Sistema Internacional de Cotizaciones y 12 ETFs listados en el mercado local de la Bolsa Mexicana de Valores (BMV). Asimismo, pasamos de 10 mil millones a 14 mil millones de dólares en activos bajo administración para clientes en México a través de los ETFs iShares, en cuentas segregadas y clientes institucionales. Ambos indicadores ratifican nuestra posición de liderazgo en esta industria”, indicó Isaac Volin, Director Ejecutivo de BlackRock México.

A escala internacional, BlackRock también mantuvo su liderazgo este año con un total de activos gestionados globalmente por 3.45 billones de dólares (trillion dollars), al 30 de septiembre de 2010.

Con los ETFs iShares de BlackRock, los inversionistas mexicanos tuvieron por primera vez en 2004 acceso desde México a una amplia gama de vehículos de inversión con exposición a diferentes clases de activos internacionales, que les han permitido conformar portafolios mejor diversificados para optimizar rendimientos ajustados por riesgo.

BlackRock está firmemente comprometido a poner al alcance de los inversionistas mexicanos la familia más completa y diversificada de vehículos de inversión para tener acceso a todas las clases de activos disponibles a escala global. A su vez, ofrece acceso a inversionistas internacionales a instrumentos de activos mexicanos que contribuyen al financiamiento y desarrollo de México.

Source: BlackRock 26.12.2010

Filed under: BMV - Mexico, Brazil, China, Indonesia, Mexico, News, , , , , , , , , , ,

ETF: BlackRock ETF Landscape Industry Review November 2009

BlackRock has just published the November 2009 edition of its monthly ETF Landscape Industry Review. This report is a review of the Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) industry through the end of October 2009.

At the end of October 2009 the global ETF industry had 1,859 ETFs with 3,327 listings and assets of US$941.85, from 97 providers on 40 exchanges around the world.

Download report hereBlack Rock ETF Lamdscape November 2009

Source: MondoVisione, 11.12.2009

Filed under: Argentina, Asia, Brazil, China, Hong Kong, India, Indonesia, Japan, Korea, Latin America, Library, Malaysia, Mexico, News, Risk Management, Singapore, Thailand, , , , , , , , , , , , ,

Asia:NPLs and SMEs to provide distressed opportunities

Distressed specialists define their terminology and give their take on the market at the second AsianInvestor/FinanceAsia Distressed and Troubled Asset Investing Summit, held in Tokyo.

“What exactly is distress?” reflected AsianInvestor editor Jame DiBiasio at a panel he moderated on Monday at the Tokyo Distressed and Troubled Asset Investing Summit. “Is it a good asset from a distressed seller, or an asset itself that is in bad shape?”

The panel of distressed experts plumped for the former — they want good assets that are being flogged off by an imperilled owner.

“We prefer something that requires re-engineering, assuming that there is some enterprise value left,” said Steve Moyer, a portfolio manager at Pimco. “Banks couldn’t afford to take the losses on clearing portfolios of loans until they rebuild capital. That accomplished, they can begin the process.”

Edwin Wong, a former distressed-investing managing director at Lehman Brothers, and regarded by some in those halcyon days as the finest exponent of distressed investing practice in the hemisphere, recently started his own fund management company, SSG Capital Management.

“Unlike the Asian crisis of the late 1990s, in which all sizes of companies went bankrupt, we’re not seeing it this time around so much with the big companies,” he said. “However, private companies and smaller corporates have built up a lot of leverage, and that’s where we see the main opportunity in China, India and Indonesia.”

In answer to the old conundrum ‘what is the most famous thing that Belgium has ever produced?’, perhaps Michel Lowy will be a contender, if his new firm SC Lowy succeeds.

Lowy says distressed investors have been sharpening their pencils for the past 18 months, expecting lots of deals, only to be disappointed by the available opportunities. He hopes that will change as commercial banks finally bite the bullet and sell off non-performing portfolios.

He also perceives differences geographically in the structure of opportunities on offer. “In North Asia and other sophisticated Asian economies, there is a weighting towards public companies,” Lowy says. “Elsewhere in Asia, there are more family-owned companies. The latter are often in places where the creditor has more limited rights. It’s going to be harder to gain control of a company there by converting debt to equity.”

Source: AsianInvestor.net, 18.11.2009

Filed under: Asia, Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Risk Management, Services, Singapore, Thailand, Vietnam, , , , , ,

Global warming threat for Asia financial hubs – Yangtze ‘facing climate threat’

The report, produced by WWF, the environmental pressure group, puts the two financial hubs in the top 10 cities threatened by climate change in Asia, the region widely believed to be most vulnerable to rising global temperatures.

It warns that Hong Kong is in danger from higher sea levels, which are likely to rise 40cm-60cm in China’s Pearl River delta by 2050, increasing the area of coastline that is vulnerable to flooding by up to six times.

Costs imposed by typhoons are also likely to rise dramatically, the report says, noting that 14 of the 21 extreme storm surges between 1950 and 2004 occurred after 1986.

The number of nights when Hong Kong temperatures rise above 28°C has risen almost fourfold since the 1960s, while the number of winter nights when the temperature falls below 12°C is predicted to fall from an average of 21 to zero within 50 years.

For Singapore, the report says, the sea level is forecast to rise by 60cm by the end of the century, eroding coastal protection and decreasing the shoreline of the city state, making it more vulnerable to storm surges and flooding.

The report says climate change could also increase the prevalence of dengue fever. The number of cases has been rising in periodic outbreaks and the last significant peak, in 2007, saw the third highest number of outbreaks ever.

Dhaka, the Bangladeshi capital, heads the list of the most vulnerable cities, mainly because of its position in a big river delta already subject to periodic flooding, its low average height above sea level and its poverty, which makes protection and adaptation more difficult.

Other cities at risk include Jakarta and Manila, which rank equal second, Calcutta and Phnom Penh, which are equal third, Ho Chi Minh and Shanghai, equal fourth, Bangkok, fifth, and Kuala Lumpur, which ties with Hong Kong and Singapore for sixth place.

The report calls on developed countries to agree to shoulder the bulk of the costs required to reduce greenhouse gas emissions, to finance an adaptation fund to pay for changes required in developing countries, and to provide recompense for losses and damage caused by climate-related catastrophes.

However, the report also says that vulnerable cities and national governments should take action themselves, including better management of coastal habitats and ecosystems.

The report is timed to influence the 21 heads of government attending this week’s Asia Pacific Economic Co-operation summit in Singapore, before the global climate change summit in Copenhagen next month.

Source: FT, 11.11 2009 by Kevin Brown in Singapore

The Yangtze river basin is being increasingly affected by extreme weather and its ecosystems are under threat, environmentalists say.

In a new report, WWF-China says the temperature in the basin area of China’s longest river has risen steadily over the past two decades.

This has led to an increase in flooding, heat waves and drought.

Further temperature rises will have a disastrous effect on biodiversity in and along the river, the report says.

The WWF – formerly known as the World Wildlife Fund – predicts that in the next 50 years temperatures will go up by between 1.5C and 2C.

The group’s report is the largest assessment yet of the impact of global warming on the Yangtze River Basin, where about 400 million people live.

Data was collected from 147 monitoring stations. The report’s lead researcher, Xu Ming, said the forthcoming Copenhagen negotiations on climate change would have an obvious and direct influence on the Yangtze.

“Controlling the future emissions of greenhouse gases will benefit the Yangtze river basin, at the very least from the perspective of drought and water resources,” he said.

The report says the predicted weather events and temperature rises will lead to declines in crop production, and rising sea levels will make coastal cities such as Shanghai vulnerable.

Some of the problems could be averted by strengthening river reinforcements, and switching to hardier crops, its authors suggest.

Source: BBC, 10.11.2009

Filed under: Asia, China, Energy & Environment, Hong Kong, India, Indonesia, Japan, Malaysia, News, Risk Management, Singapore, Thailand, Vietnam, , , , , , , , , , , , , , , , , , , , , , , , , ,

Why China and Japan Need an East Asia Bloc

Withering exports and asset bubbles have forced Asians – especially China and Japan — to work harder at free trade pacts.

All kinds of proposals have been floated about creating an Asian bloc a la European Union. Bilateral and multilateral free trade agreements (FTA) have been suggested for various combinations of Asian countries. Lately, there’s been a flurry of new ideas as Japan’s recently installed DPJ government seeks to differentiate from the ousted LDP.

By promoting ideas that lean toward Asia, DPJ’s leadership is signaling that Japan wants less dependence on the United States. This position offers a hope for the future to Japanese people, whose economy has been comatose for two decades. Closer integration with Asian neighbors could restore growth in Japan.

Whenever global trade gets into trouble, Asian countries talk about regional cooperation as an alternative growth driver. But typically these talks die out as soon as global trade recovers. Today’s chatter is following the same old pattern, although this time global trade is not on track to recover to previous levels and sustain East Asia’s export model. Thus, some sort of regional integration is needed to revive regional growth.

Which regional organization is in a position to lead an integration movement? Certainly not ASEAN, which is too small, nor APEC, which is too big. Something more is needed – like a bloc rooted in a trade pact between Japan and China.

ASEAN’s members are 10 countries in Southeast Asia with a population exceeding 600 million and a combined GDP of US$ 1.5 trillion in 2008. The group embraced an FTA process called AFTA in 1992, which accelerated after the 1997-’98 Asian Financial Crisis and competition with China heated up. When AFTA began, few gave it much chance for success, given the region’s huge disparities in per capita income and economic systems. Today AFTA is almost a reality, which is certainly a miracle.

ASEAN has succeeded beyond its wildest dreams. These days China, Japan, and South Korea join annual meetings as dialogue partners, while the European Union and United States participate in regional forums and bilateral discussions.

China and ASEAN completed FTA negotiations last year, demonstrating that they can function as an economic bloc. Now, China is ASEAN’s third largest trading partner. Indeed, there is a great upside for economic cooperation between the two.

Before the Asian Financial Crisis, the ASEAN region was touted as a “miracle” by international financial institutions for maintaining high GDP growth rates for more than two decades. But some of that growth was built on a bubble that diverted business away from production and toward asset speculation. This developed after credit expansion, driven by the pegging of regional currencies to the U.S. dollar, encouraged land speculation. ASEAN’s emerging economies absorbed massive cross-border capital due to a weak dollar, which slumped after the Federal Reserve responded to a U.S. banking crisis in the early 1990s by maintaining low interest rates.

Back then, I visited companies in the region that produced goods for export. I found that, despite all the talk of miracles, many were making money on financial games — not business. At that time, China was building an export sector that had started exerting downward pressure on tradable goods prices. Instead of focusing on competitiveness, the region hid behind a financial bubble and postponed a resolution. Indeed, ASEAN’s GDP was higher than China’s before the Asian financial crunch; now China’s GDP is three times ASEAN’s.

China today faces challenges similar to those confronting ASEAN before the crisis. While visiting manufacturers in China, I’ve often been discovering that their profits come from property development, lending or outright speculation. While asset prices rise, these practices are effectively subsidizing manufacturing operations – an asset game that can work wonderfully in the short term, as the U.S. experience demonstrates. When property and stock markets are worth more than twice GDP, 20 percent appreciation would be equivalent to four years of business profits in a normal economy. You can’t blame businesses for shifting their attention to the asset game in a bubbly environment. Yet as they focus on finance rather than manufacturing, their competitiveness erodes. And you know where that leads.

I digress from the main focus for this article — regional integration, not China’s bubble challenge.

So let’s look again at ASEAN’s success. In part, this reflects its soft image: Other major players do not view ASEAN as a competitive threat. Rather, the FTA with China has put pressure on majors such as India and Japan to pursue their own FTAs with ASEAN. Another dimension is that the region’s annual meetings have become important occasions for representatives from China, Japan and South Korea to sit down together.

In contrast to ASEAN’s success, APEC has been an abject failure.
Today, it’s simply a photo opportunity for leaders of member countries from the Americas, Oceania, Russia and Asia. APEC was set up after the Soviet bloc collapsed, and served a psychological purpose during the post-Cold War transition. It was reassuring for the global community to see leaders of former enemy countries shaking hands.

However, APEC is just too big and diverse to provide a foundation for building a trade structure. So general is the scope that anything APEC members agree upon would probably pass the United Nations. Now, two decades after end of the Cold War, APEC has clearly outlived its usefulness and is withering, although it may never shut down. APEC’s annual summit still offers leaders of member countries a venue for meetings on the sidelines to discuss bilateral issues. Maybe the group is useful in this way, offering an efficient venue for multiple summits concurrently.

Although ASEAN has succeeded with its own agenda, and achieved considerable success in relation to non-member countries, it clearly cannot assume the same role as the European Union. Besides, should Asia have an EU-like organization? Asia, by definition, clearly cannot. It’s a geographic region that includes the sub-continent, Middle East and central Asia. Any organization that encompasses Asia as a whole would be as unwieldy as APEC.

I am always puzzled by the word “Asia,” which the Greeks coined. In his classic work Histories, it seems ancient Greek historian Herodotus primarily referred to Asia Minor — today’s Turkey, and perhaps Syria — as Asia. I haven’t read much Greek, but I don’t recall India being included in ancient Greek references. So as far as I can determine, there is no internal logic to treating Asia as a region. It seems to encompass all places that are neither European nor African. Africa is a coherent continent, and Europe has a shared cultural past. Asia belongs to neither, so it shouldn’t be considered an organic entity.

Malaysia’s former prime minister Tun Mahathir bin Mohamad Mahathir was a strong supporter of an East Asia Economic Caucus (EAEC) which would have been comprised of ASEAN nations plus China, Japan and South Korea. But because Japan refused to participate in an organization that excluded the United States, the idea failed.

Yet there is some logic to Mahathir’s proposal. East Asia has a shared history, and intra-regional trade goes back centuries. Population movements have been significant, and as tourism takes off, regional relations should strengthen. One could envision a future marked by free-flowing capital, goods and labor in the region.

Yet differences among the region’s countries are much greater than in Europe. ASEAN’s overall per capita income is US$ 2,000, while it’s US$ 3,500 in China and US$ 40,000 in Japan. China, Japan, South Korea and Vietnam share Confucianism and Mahayana Buddhism, while most Southeast Asian countries embrace Islam or Hinayana Buddhism, and generally are more religious. I think an EU-like organization in East Asia would be very hard to establish, but something less restrictive would be possible.

Because Japan turned down Mahathir’s EAEC idea, there was a lot of interest when recently elected Prime Minister Yukio Hatoyama’s proposed something similar – an East Asia Community — at a recent ASEAN summit. Hatoyama failed to clarify the role of the United States in any such organization. If the United States is included, it would not fly, as it would be too similar to APEC. Nor could such an organization be like the EU. But if Japan is fully committed, the new group could assume substance over time.

The Japanese probably proposed the community idea for domestic political reasons. Yet the fundamental case for Japan to increase integration with the rest of Asia and away from the United States grows stronger every day. Despite high per capita income, Japan remains an export-oriented economy, having missed an opportunity to develop a consumption-led economy in the 1980s and ’90s. In the foolish belief that rising property prices would spread wealth beyond the industrial heartland in the Tokyo-Osaka corridor, the government of former Prime Minister Kakuei Tanaka pursued a high-price land policy, discouraging the middle class from pursuing a consumer lifestyle as they saved for property purchases.

Even more seriously, high property prices have been a major reason for Japan’s rapidly declining birth rate, as land prices inflated living costs. Now, facing a declining population and public debt twice GDP, Japan has few options for rejuvenating the economy by promoting domestic demand. It needs trade if it hopes to achieve any growth at all. Without growth, Japan will sooner or later suffer a public debt crisis.

Japan’s property experience offers a major lesson for China. Every Chinese city is copying the Hong Kong model — raising money from an increasingly expensive land market to fund urban development, leading to rapid urbanization. But this is borrowing growth from the future. Rising land prices lead to rising costs and, hence, slower growth and the same rapid decline in the birth rate that Japan experienced. Unless China reverses its high-land price policy, the consequences will be even more disastrous than in Japan or Hong Kong, as China shifted to the asset game much earlier in its development.

Yet I digress again. The point is that Japan has a strong and genuine case that favors more integration with East Asia. The United States is unlikely to recover soon and with enough strength to feed Japan’s export machine again. There is no more room for fiscal stimulus. Devaluing the yen to gain market share is not an option as long as Washington pursues a weak dollar policy. Without a new source of trade, Japan’s economy is doomed. Closer integration with East Asia is the only way out.

In addition to Hatoyama’s EAC proposal, a study jointly sponsored by China, Japan and South Korea is considering the possibility of a FTA. Of course, ASEAN could offer a template for any new East Asian bloc. ASEAN has signed an FTA with China and is talking with Japan and South Korea. If they all sign, regional integration would be halfway completed.

Whatever proposals for East Asian integration, the key issue is a possible FTA between China and Japan. Adding other parties avoids this main issue. China and Japan together are six times ASEAN’s size and 10 times South Korea’s. Without a China-Japan FTA, no combination in East Asia would truly support regional integration.

Five years ago, I wrote an op-ed piece for the Financial Times entitled China and Japan: Natural Partners. At the time, a prevailing sentiment was that China and Japan were antithetical: Both were still manufacturing export-led economies and could only gain at the other’s expense. I saw complementary demographics and capital: Japan had a declining labor force and China needed to employ tens of millions of youths migrating to cities from the countryside. China needed capital and Japan had surplus capital. And their trade relations indeed tightened, as Japan had increased the Chinese share of its overall trade to 17.4 percent in 2008 from 10.4 percent in ’04.

Today, the situation has changed. China has a capital surplus rather than a shortage. Demographic complementarity is still good and could last another decade. As China shifts its development model from resource intensive to environmentally friendly, a new complementarity is emerging. Japan has already made the transition, and its technologies that supported the transition need a new market such as China’s. So even without a new trade agreement, bilateral trade will continue growing.

An FTA between China and Japan would significantly accelerate their trade, resulting in an efficiency gain of more than US$ 1 trillion. Japan’s aging population lends urgency to increasing the investment returns. On the other hand, as China prepares to make a numerical commitment to limiting greenhouse gas emissions at the upcoming Copenhagen summit on global warming, heavy investment and rapid restructuring are needed for its economy. Japanese technology could come in quite handy.

More importantly, a China-Japan FTA would lay a foundation for an East Asian free trade bloc. The region has a population of 2.1 billion and a GDP of US$ 13 trillion, rivaling the European Union and United States. Blessed with a low base, plenty of capital, sound technology and a huge market, the region’s GDP could easily double in a decade.

Trade and technology are twin engines of growth and prosperity. No boom is sustained without one or the other. And when they come together, the boom can be massive. Prosperity seen over the past decade, for example, is due to information technology along with the opening up of China and other former planned economies. But these factors have been absorbed, forcing the world to find another engine. An integration of East Asian economies would be significant enough to play this role.

The best approach would be for China and Japan to negotiate a comprehensive FTA that encompasses free-flowing goods, services and capital. This task may appear too difficult, but recent changes have made it possible. The two countries should give it a try.

It would be wrong to begin by working out an FTA that includes China, Japan and South Korea. That would triple the task’s level of difficulty, especially since South Korea doesn’t have a meaningful FTA with any country. To imagine that the Seoul government would cut a deal with China or Japan is naive. China and Japan should negotiate bilaterally.

A key issue is that China and Japan should put economics before politics. If the DPJ government wants to gain popularity by increasing international influence rather than boosting the economy, then all the current speculation and discussion about an East Asia bloc would be for nothing. But if DPJ wants to sustain power by rejuvenating Japan’s moribund economy, chances for a deal are good.

While Japan is talking, China should be doing. China should aggressively initiate the FTA process with Japan. Regardless of China’s current difficulties, its growth potential and vast market are what Japan will never have at home nor anywhere else. Hence, China would be able to compromise from a position of strength.

Some may say a free trade area for East Asia is beyond reach. However, history belongs to the daring. The world has changed enough to make it possible. China and Japan should seize the opportunity.

Source: Caijing, 10.11.2009 by Andy Xie, guest economist to Caijing and a board member of Rosetta Stone Advisors Ltd.

Full article in Chinese

Filed under: Asia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Singapore, Thailand, Vietnam, , , , , , , , , , , , , , , , , , , , , , , , ,

ASEAN markets cross trading links in demand – TABB Group

In new equity markets research published today, TABB Group says US and European demand for electronic linkage to Association of Southeast Asian Nations (ASEAN) exchanges is strong and primed to expand, as seamless access will attract brokers already trading in other parts of Asia. However, there is a wide range of needs across the different market segment, including direct market access (DMA), low-cost versus real-time market data, advanced order types, and reliable trading platforms.

TABB’s senior analyst Kevin McPartland, who authored the ASEAN Equity Markets Pinpoint report, an industry update on equity trading in the ASEAN region covering the Indonesia, Philippines, Thailand, Vietnam, Malaysia and Singapore exchanges, says the global financial crisis had little impact on growing buy-side demand for trading in ASEAN markets.

“More seamless access will drive brokers already operating in other parts of Asia to begin trading in the ASEAN markets,” he says, with the sell side set to benefit most from that seamless access. Explaining that the availability of real-time market data is crucial for all trading in the ASEAN markets, and that real time data is a requirement for the sell side even when trade volumes are low or non-existent, he adds, “High costs and time zones do tend to limit buy-side market data usage outside of the region.”

Addressing the relationship between the buy side and sell side, McPartland says that although no single broker currently dominates across all Asian markets, over 90% of buy-side firms are unwilling to give brokers full discretion over their orders. However, while the buy side does look to their brokers for market access, they agree that more seamless access would lower costs for execution and market data. There is also significant support for the idea of central ASEAN execution venue, McPartland adds.

The report’s in-depth coverage includes 24 charts:

  • Support for a central ASEAN venue
  • Improving ASEAN trading
  • Sell-side interest in ASEAN linkage
  • % of bulge-bracket participants trading in each market
  • Impact of the financial crisis on ASEAN interest
  • Roadblocks to sell-side trading in ASEAN markets
  • Buy-side broker usage – all Asia ·
  • Buy-side broker usage – ASEAN markets
  • Top brokers by country (by # of mentions)
  • Bulge-bracket participants trading in each market
  • Mid-tier participants trading in each market
  • Buy-side interest in a seamless ASEAN linkage
  • Roadblocks to buy-side access of ASEAN markets
  • Average number of buy-side orders per week
  • Average blended commission rates (bps)
  • % for which counterparty risk is an issue
  • Importance of each component when trading in ASEAN markets
  • Markets providing real-time market data to sell side
  • Market data sources for sell side
  • Markets providing real-time market data to buy side
  • Reasons for buy side’s lack of market data
  • How the buy side trades ASEAN markets
  • % of buy side using multiple data providers ·
  • Sell-side and buy-side market data providers

TABB Group collected data through interviews with heads of electronic trading from 12 top global broker-dealers, 9 hedge funds and 14 institutional asset managers. On the buy side, participants had combined global assets under management (AuM) of approximately $6 trillion and are currently trading in Asia from slightly under $10 million to over $5 billion monthly.

Source: MondoVisione, 23.10.2009

Filed under: Asia, Data Management, Exchanges, Indonesia, Malaysia, Market Data, News, Singapore, Thailand, Trading Technology, Vietnam, , , , , , , , , , , , , , , , , , , , , ,

Patsystems Selected As Technology Provider For Indonesia Commodity And Derivatives Exchange

Patsystems is pleased to announce that it has been selected as the preferred technology supplier for the newly established Indonesia Commodity and Derivatives Exchange (ICDX). Patsystems will provide ICDX with the complete exchange solution which includes the trade matching engine, clearing and settlement platform, pre-trade risk management and the front-end execution platform.

Using Patsystems’ robust and scalable exchange platform, ICDX will run on advanced, low-latency technology. The flexible, internet deployable front-end trading platform will be easy-to-use and suitable for all types of traders. ICDX will benefit from Patsystems’ global network of customers, which will automatically bring thousands of traders to the ICDX market.

Operating from a country renowned for being amongst the world’s largest producers of agricultural commodities and industrial raw materials, the ICDX is poised to serve as a major venue for price discovery, benchmark pricing and risk management. The Patsystems’ exchange solution will facilitate the integration of electronic trading among this multitude of domestic producers and traders, and provide access to international customers who want to participate in this deep marketplace.

Megain Widjaja, Managing Director of ICDX, said: “Patsystems empowers ICDX to provide open connectivity, which enables global market access to ICDX and the ability to collaborate with other exchanges around the world. Together, we are confident that we can create a successful marketplace.”

Barry White, Regional Director of Asia Pacific, said: “Being selected as the key technology provider for ICDX fully illustrates the breadth of Patsystems capabilities with the provision of exchange, clearing, trading, and risk management technology. Our systems are flexible enough to be used independently, or in this case, integrated into one comprehensive front to back turnkey solution.”

Source: Patsystems, 08.09.2009

Filed under: Asia, Exchanges, Indonesia, News, Risk Management, Trading Technology, , , , , , , , , ,

ConvergEx Rolls Out Five Additional DMA Connections to Emerging Markets

ConvergEx, a provider of investment technology solutions and global agency brokerage services, has added five new direct market access (DMA) connections: NASDAQ Dubai, the Indonesia Stock Exchange, the Taiwan Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

With these additional markets, ConvergEx now offers DMA connections in 65 destinations around the world, as well as over 110 global markets through its portfolio and sales trading businesses. Clients can access these electronic connections through any ConvergEx supported front-end trading system, including all major order management (OMS) and execution management (EMS) platforms, the company explained. “These new connections keep our clients at the forefront of rapidly growing and increasingly important emerging marketplaces,” said William Capuzzi, president of ConvergEx’s G-Trade Services.

“Our clients appreciate the unique investment opportunities these markets offer as well as the ease of access our connections provide. ConvergEx understands the importance of building and maintaining state-of-the-art technology and lightning fast connections so we always keep one step ahead of client demand.”

Source: Securities Industry News, 11.08.2009

Filed under: Asia, China, Indonesia, News, Trading Technology, , , , , , , , , , ,

Beware of rising Asian stock markets

Investors who were bold enough to stay invested in Asian equities from the latter part of last year onwards are reaping the rewards of their bravado. The closely watched MSCI Asia ex-Japan Index was, after all, up 41% in the three-month period ending May 15. The sharp gains in Asian shares have, not surprisingly, triggered a bandwagon effect of investors trying to get in on the action and hoping that they’re not too late to cash in later on.

The notion that Asian companies have strong balance sheets is great, if you’re a bondholder.

For investors who are looking for a quick buck, Asian equities — or equities in any market for that matter — isn’t the place to find it. Short-term, Asian stock markets remain volatile and the fact that they have risen by so much in such a short span of time make it even more dangerous ground. If anything, the markets look poised for a correction. It may come later rather than sooner, because the momentum chasers are keeping markets afloat for now, but it will come.

“The global economy has not yet recovered to a healthy state,” says Nick Scott, Hong Kong-based CIO for Asian equities at BlackRock. “The rally in March and April is based upon investor relief that things may not be as bad as was predicted, rather than concrete evidence that the worst is over and a recovery is imminent.”

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For investors who are in this for the long haul — with one year being the minimum investment horizon — then the scenario is vastly different. Asian stock markets are generally expected to outperform US and European markets over the long run. The reasons for this optimism is plentiful, including the region’s relatively strong domestic consumption, sound fiscal position, ability to counteract external shocks with central bank reserves and fiscal spending, less dependence on exports, stronger financial systems, and so on and so forth.

Halbis Capital Management, for one, has kept its bullish long-term view of Asian equities intact.

“Overall, we believe the market is showing signs of stabilisation that should allow bottom-up investors such as ourselves to focus once again on picking the right stocks,” says Ayaz Ebrahim, Hong Kong-based CEO of Halbis Capital Management. “In the last few months of turbulence, investors have focused more on shifting between defensive and cyclical sectors rather than assessing the fundamentals of the companies themselves.”

Still, even for long-term investors, fund managers and analysts are sounding out the alarm bells and warning against chasing the momentum. Waiting for that correction is seen as the best option.

“It is very hard to predict how equities will perform over the next 12 months, particularly following such a strong rally,” says Peter Elston, Singapore-based Asian strategist at Aberdeen Asset Management. “We are still in a period of economic turbulence, in which conditions in the short- to medium-term may either improve or deteriorate unpredictably.”

Alex Ingham, a London-based emerging markets fund manager at Aviva Investors, believes that a pause in the current rally is “almost certain”.

What investors should be mindful at the present are the changes in fundamentals of listed companies, risk tolerance of investors and company-specific outlook. These are the factors that will shape the investment landscape going forward.

“We are beginning to see some discrimination emerging in the markets, different sectors and businesses are starting to demonstrate their ability to either recover more quickly or improve their cost competitiveness,” says Colin Ng, the Hong Kong-based regional head for Asia-Pacific equities at MFC Global Investment Management, the asset management arm of Manulife Financial.

Structural return on equity and earnings growth potential remains higher in Asia than in the world’s developed markets, says BlackRock’s Scott, who like many fund managers is particularly optimistic on the long-term prospects of China and India.

“China of course is the focal point,” says Victor Lee, Hong Kong-based regional investment manager at JP Morgan Asset Management. “We may indeed see China outperforming global markets as the fiscal packages continue to gain traction. It has strong deposit base and fiscal power to keep its economy on track.”

Scott says the strengthening links between China and Taiwan may also throw up some interesting opportunities as mainland companies acquire stakes across the Strait. He believes that India’s economy has cooled as foreign funding has dried up, but that has created some insulation from the collapse in global demand.

Not everyone’s a fan of China.

Desmond Tjiang, Hong Kong-based CIO for Asia ex-Japan equities at Fortis Investments, is wary of the rally in Chinese shares and doubts it is sustainable.

“The consensus overweight in China is a risk because that market is overcrowded,” says Tjiang, who is bullish instead on Indonesia. He believes that the strong domestic consumption in Indonesia, citing that country’s urbanisation, infrastructure, and domestic consumption trends.

Rajiv Jain, managing director for international equities at Vontobel Asset Management in New York, says the notion that Chinese domestic demand is going to rescue the region in fiction.

“Chinese domestic consumption is less than that of the UK,” Jain notes. “An increase there isn’t going to move the needle.”

Worse, it’s in China where the greatest overcapacity exists in areas such as steel and cement. China’s infrastructure spending program is good at boosting GDP figures by adding capacity, but does nothing to help corporate profitability.

Moreover, Jain is sceptical about the ability of government stimulus programs to ultimately boost corporate earnings.

“We don’t trust any government. Why do investors have such confidence in Beijing? Chinese steel companies are being instructed to produce more and not lay off workers, at a time when capacity utilisation rate are at their lowest in 50 years.”

Too many investors are mesmerised by the Asian growth story, but Jain calculates that over the long term, Chinese corporate earnings growth rates have been about the same as America’s — but Chinese stocks are priced far more ambitious.

Jain says the past five years were a bubble and have clouded investors’ expectations about growth in China and other Asian markets. The argument that Asian corporate balance sheets are strong is fine for bondholders but doesn’t equate to earnings growth.

Source:AsianInvestor, 03.07.2009 by Rita Raagas De Ramos

This is an excerpt from a story that originally appeared in the June edition of AsianInvestor magazine. To learn more about the content in the magazine, please contact Stephen Tang at stephen.tang@asianinvestor.net

Filed under: Asia, China, Hong Kong, Indonesia, Korea, News, Risk Management, , , , , , , , , , ,

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